The Department of Energy and Climate Change has released details of £6m of funding to develop heating and cooling networks in England and Wales.
The money can also be used to develop existing networks, according to the DECC.
Funding will be granted to local authorities submitting proposals that use “renewable, sustainable or recoverable sources”, where possible.
Examples quoted by the DECC include waste heat from industry, energy-from-waste plant and biomass-powered combined heat and power.
The bidding process for funding began last week and will continue for 18 months, including six rounds, with bids examined for low-carbon benefits, commercial potential and robust project management.
The DECC states that advice will be offered to those bids that fall short of expectations where applicable.
The number of district heating systems is predicted to grow in the future, with an increasing number of projects including the use of energy centres and heating and cooling networks.