The Department of Energy and Climate Change said yesterday it is looking "very closely" at how to encourage the use of more district heating systems.

As part of its review of UK heat policy, it is looking into how to encourage investment in local pipework networks to deliver low-carbon heat to entire communities of homes and businesses.

Hergen Haye, head of distributed energy and heat policy in the Department, said yesterday that new research his Department had commissioned suggested one in five households could benefit from joining community heating systems.

Mr Haye said: "Our research showed there are 5.5 million properties that could connect, representing 20% of overall heat demand. This compares to less than 2% of the UK getting its heat in this way at the moment."

Mr Haye is currently leading work to devise both a Renewable Energy Strategy (RES) for the government and a Heat and Energy Savings Strategy. The RES document is set to be published this summer as part of a major consultation on how the UK will meet its renewable energy targets for 2020.

Regarding the complex area of heat, Mr Haye told yesterday's Renewable Heat conference in London that new policies would take longer to work out, since heat was an area that has not been controlled by UK legislation before.

Heat is responsible for 47% of UK carbon emissions, and the DECC official pointed out that moving to more renewable or low carbon forms would be essential for the UK to meet its legally-binding target to cut greenhouse gas emissions by 80% before 2050.

Michael Feliks, who works with Mr Haye as part of DECC's distributed energy and heat team, said the 2050 climate change target would need a "significant decarbonisation of heat" and that "business as usual will not deliver on the scale required".

The government is developing a Renewable Heat Incentive that could offer financial support for some schemes, but only those that use renewable energy sources, for example biomass systems.

The Department's research, carried out by consultants Poyry, looks at countries like Austria, Denmark and Finland, where district heating accounts for up to 60% of their heat supplies - or even 90% as in the case of Iceland.

The Poyry report said even on current market conditions, district heating could displace electric heating on economic grounds - but only enough to see 0.3% of national heat demand switching.

"Unless there is a shift in the market or regulatory environment we conclude there will be no significant additional take-up of district heating for the existing building stock, particularly the domestic sector," the report concluded.

Risk is one of the major barriers to more district heating schemes, the report suggests, with investors perceiving a lack of experience and knowledge in this country, along with concerns about financial viability and potential redundancy of networks if other heating options were to emerge.

DECC believes the viability of district heating also depends on improving the awareness of benefits across a wide range of potentially interested parties - investors, operators, consumers, and the public sector.

Local authorities could be a driving force in developing more district heating schemes, it was suggested, with the DECC official hinting that support would be given for feasibilities studies.

Mr Haye said councils could help to draw up heat maps of local areas, showing developers where there was potential demand for heat. He said there was a need for a "much more robust evidence base" for the UK to switch to more low carbon heating options.

The official suggested that switching to low carbon heat would eventually become similar in scale to the digital switchover of televisions or the switch to gas heating.

"We can't leave this to chance," he said. "This needs to be done street by street, region by region."

Industry delegates warned that the so-called Merton Rule was "getting in the way" of nearby developments making use of their waste heat. The Rule, where local planners require a certain percentage of a new development's energy to come from on-site renewable energy equipment like solar panels, meant developers were not interested in nearby industrial sources of waste heat "because it is not renewable".

Mr Haye said: "We need to be careful to balance this properly. The challenge of the renewable energy target for 2020 is there, but we also have the legally binding target for 2050, and we will be struggling with that without this kind of low-carbon heat."