CORRECTED (OFFICIAL)-UPDATE 1-EU opens in-depth inquiry into UK coal plant conversion

(Removes Russia in para 5 following amended statement)

* Lynemouth coal plant wants to convert to biomass

* Commission concerned Britain paying too much support

BRUSSELS, Feb 19 (Reuters) - The European Commission has opened an in-depth investigation into Britain's plan to use public funds to pay for the conversion of a coal plant at Lynemouth, northern England, to biomass, saying it is concerned Britain may be paying too much.

The Commission said it would also check to ensure the project was in line with EU energy and environmental objectives.

The coal-fired plant is operated by Lynemouth Power, a subsidiary of RWE Supply and Trading.

It would have the capacity to generate 420 megawatts of renewable energy running exclusively on wood pellets and would get support from the British government in the form of a financial instrument known as a contract-for-difference.

It would require approximately 1.5 million tonnes of wood pellets per year, sourced mainly from the United States and Canada.

"We remain hopeful the matter will be resolved, but this is disappointing as it further delays our ability to make an investment decision on the project," a spokeswoman for RWE (Swiss: RWE.SW - news) Supply and Trading told Reuters.

A spokeswoman for the UK's Department of Energy and Climate Change said the inquiry was a normal part of the Commission's process and the government would work to resolve its concerns.

A Commission decision on whether to approve contracts is also still pending on another biomass project: Drax Group (LSE: DRX.L - news) 's third biomass conversion unit (called Unit 1) at its coal plant in Yorkshire.

Environment campaigners have been lobbying the European Commission to control the extent to which forests are chopped down to provide wood pellets to replace coal, saying the impact on the climate can be at least as damaging as burning coal, the most polluting fossil fuel.

The Commission said subsidising a large volume of wood pellets could significantly distort competition in the biomass market and it was concerned the negative impacts could outweigh the positive effect on increasing the share of renewable energy used in Europe. (Reporting by Barbara Lewis and Foo Yun Chee; Additional reporting by Nina Chestney in London; Editing by David Holmes)