Developer Air Products is building two advanced EfW plants in a £300m scheme at North Tees Chemical Complex in Billingham.
However, work has been halted on the second plant 18 months into construction due to technical issues with the first plant.
The original Tees Valley 1 plant was started last year by Foster Wheeler Energy and was due to begin operations.
However, according to union GMB, 700 workers have now been suspended due to a 'technology failure'.
In a statement, Air Products said: "After careful consideration we have made a decision to temporarily suspend construction of our second energy from waste project (TV2) in Tees Valley, UK. This decision does not reflect on the performance of our 700 highly-professional contractor colleagues currently working on the TV2 project, who will sadly be impacted by the suspension in work.
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"The duration of the suspension is yet to be determined but we remain committed to completing both facilities as soon as possible. We will work with our contactors to wind down TV2 construction activity in a controlled way."
However, GMB said the news seven weeks before Christmas was 'devastating'.
"This is yet another crushing blow for the workers on Teesside," Michael Blench, GMB Regional Officer for construction said.
"Seven weeks away from Christmas 700 workers are told they are no longer required.
"This project was being built by the client Air Products who decided to also undertake the role of Engineering Procurement and Construction (EPC) management. It was duly signed up to category 1 of the National Agreement for the Engineering Construction industry (NAECI). It is 75% completed with excellent productivity and very good Industrial relations.
"All workers on site were told due to the problems with the TV 1 project that all work would now stop on TV 2 and they were that as of 1.30pm on 05 November they were finished on the project.
Mr Blench added GMB are now currently in talks with Air Products to try and resolve the situation.
Once completed, the £300m scheme will be the largest advanced gasification renewable energy facility in the world.
(LM/CD)
