A total of £320m will be invested across the country’s towns and cities to warm buildings with low carbon heat.
The Government is consulting on how best to deploy funding allocated in the Spending Review for investment in heat networks.
This new project will support combined heat and power schemes while promoting the more innovative use of recovered waste heat sources.
The Government said the investment could reduce heating costs by more than 30% for some households.
Heat networks already exist in the UK but there are far fewer networks operating than in other European countries. Extensive networks delivering cheap and lower carbon heat to thousands of buildings connected to networks are deployed in France, Germany and Scandinavian countries.
Secretary of state for energy and climate change, Amber Rudd, said:
“This is an important next step in developing more home-grown energy, which is a vital part of our plan to ensure long-term energy security and affordable energy for our families and businesses.
The funding we’re consulting on today will enable these schemes to provide affordable low carbon energy to thousands of homes and businesses across Britain’s town and cities.”