More than 700 households and a leisure centre in Islington are heated by the Bunhill Heat and Power district network.
A joint project between Islington Council, UKPN and Transport for London is to extend the network to a further 500 homes, harnessing waste heat from a Northern Line ventilation shaft and a high voltage substation.
The scheme, which has got a £1 million grant from the European Union as well as £2.7 million funding from Islington Council, is expected to save 500 tonnes of carbon dioxide emissions a year.
Martin Wilcox, head of future networks at UK Power Networks, said: “If it is successful, there could be potential to replicate this and increase access to low carbon, low cost energy in other parts of the capital.”
Mayor Boris Johnson has a target to supply a quarter of London’s energy demand from decentralised sources by 2025. A study by Buro Happold in July found environmental or industrial heat could meet “the majority” of that target.