A pig farming business has won High Court permission to challenge the exclusion of a planned £25m power plant from the Renewable Heat Incentive scheme.
AA McGuckian was granted leave to seek a judicial review over being told the facility envisaged for its site in Cloughmills, Co Antrim was not eligible for subsidy.
Proceedings against the Department for the Economy will now advance to a full hearing before the end of October.
The agri-food company planned a major combined heat and power (CHP) plant accredited to the RHI scheme.
Bosses say they spent more than £500,000 in securing planning permission, employing consultants and obtaining finance for a project with an estimated cost of £20-£25m.
Subsidies were to be provided under 2015 regulations dealing with CHP installations, according to the McGuckians case.
But in June last year the company was informed that their plans would not be eligible for RHI funds.
Financial assistance could not be provided because there was no European Union approval for the regulations.
Paying subsidies in those circumstances would breach state aid rules, the department contends.
Lawyers representing the McGuckians went to court seeking a declaration that situation is unlawful.
Stewart Beattie QC claimed the department was operating in a "twilight zone" where legislation was not properly brought into force.
Counsel representing the department responded by describing the firm's case as fundamentally flawed.
Paul McLaughlin insisted it would be a breach of European law to grant accreditation without the necessary EU state aid approval.
However, Mr Justice McLaughlin held that the company had established an arguable case.
He identified issues about the legal power to accredit as being the "elephant in the courtroom".
Outside court the the McGuckians' lawyer Brian Moss, of Worthingtons Solicitors, said they were delighted at clearing the first hurdle in the legal challenge.
Mr Moss added: "At the heart of this case there's an issue about the the department making a law passed by resolution of the Assembly which has no force or effect." ends