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Building work on a groundbreaking £6.2million energy scheme which will see waste heat from the Northern tube line piped into homes will start this month.

As first revealed in the Tribune last year, the project – the first of its kind in Europe – will harness heat from the underground and help keep energy bills in 500 council homes on the King Square estate in Finsbury up to 10 per cent cheaper.

The Town Hall is also seeking to cut carbon emissions and show London and other European cities how to make the best use of urban waste heat sources.

Environment chief Councillor Claudia Webbe said: “This project is about extracting waste heat from London underground to directly heat 500 homes on the King Square estate, reducing their fuel bills by around 10 per cent.

“We are challenging the Big Six energy companies by producing an alternative and this is all about investment at a local level, by using locally produced heat to warm people’s homes.

“If it works, and we are confident it will, this can be rolled out across London.”

The tube heat scheme will be linked to the Bunhill Heat and Power Network, launched in Nov­ember 2012, which is fed by a gas-powered energy centre in Central Street producing electricity and heat. It brings cheaper energy to more than 700 homes, Ironmonger Row Baths and Finsbury Leisure Centre.

This month, work will start on a new, four-storey energy centre at the junction of Moreland Street and City Road, on the east side of Kestrel House, as the Town Hall extends the Bunhill heating pipe network to capture heat from a tube line ventilation shaft.

The underground provides access to natural heat stored within the ground. Both the trains and the nearby electrical sub-station produce waste heat, which will be captured and piped to the combined heat-and-power unit in Central Street.

Phase two of the network is a partnership between the Town Hall, Mayor of London Boris Johnson, Transport for London and UK Power Networks. The construction cost of the project is funded by a combination of a £1m EU grant and the council’s internal capital. London Underground is funding the upgrade to the ventilation system within the shaft.

A new network of pipes will be connected to the existing boiler house – currently gas-powered – on the King Square estate, free of charge to residents.

There will be no change to the heat and power people receive at home, and little or no disruption to energy supplies, the council said. Residents will not be charged for the cost of building the energy centre.

In addition to the 500 homes, some private, charitable and public sector companies will also benefit. Six trees outside Kestrel House will have to be removed but will be replaced elsewhere, the council said.

As part of Bunhill phase three, Regent’s Canal could become a source of heat for homes if a new study concludes it would be viable.

The Town Hall has obtained a government grant to support a feasibility study for extending the heat network. This work is due to be completed in the spring.

The first study would investigate whether heat from sunlight absorbed by water in the canal could be captured and upgraded to a temperature of 70°C or more using a heat pump. It could then be used to heat nearby homes.

A second study is looking into whether waste heat from a privately-run computer data centre could be channelled in the same way.