The Government has approved plans to build England’s first carbon-neutral village, near Bristol. Instead of wind turbines and solar panels, such as the ones installed at the homes of David Cameron and Gordon Brown, a central generator fired by wood chips will provide all the electricity and heat needed to power the 200 eco-homes.

English Partnerships, the Government’s land quango, selected Barratt Developments to build the eco-village on the site of the old Hanham Hall Hospital, after a bidding war that was disclosed in The Times.

Underground rainwater collection tanks that will supply water for lavatories, a communally owned farm shop and storage for bicycles are included in the village. The aim is to reduce the carbon footprint produced by inhabitants of an existing, equivalent-sized community by 60 per cent.

The Bristol site is expected to provide a blueprint for the long-term plans of the Government to build up to 100,000 super-energy-efficient homes in ten eco-towns. The homes at Hanham Hall are expected to be on the market by 2010 and will be exempt from stamp duty under current tax guidelines. The Government wants the housebuilding industry to make all new homes carbon-neutral by 2016.

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Yvette Cooper, the Housing and Planning Minister, said: “People said this couldn’t be done, but this Carbon Challenge site shows that developers are preparing to build the first major development of zero-carbon homes.”

Housebuilders are coming under increasing pressure to produce energy-efficient home designs when they bid for government-owned land that is controlled through English Partnerships. Acres of NHS and Ministry of Defence land is being sold off to raise the annual housing output to 240,000 new homes a year by 2016, up from the 180,000 currently built each year.

English Partnerships has drawn up a shortlist of six building companies to bid for the next eco-village, which is planned for a site in Peterborough.

The generator at the Hanham Hall site will heat centrally all the water needed for each house and produce all the electricity for the homes. The generator will be connected to the national grid in case back-up electricity is needed.

Heat from the generator will also warm communal greenhouses that, it is hoped, homeowners will use to grow their own vegetables.

Ben Cooke, a senior manager at Barratt, said: “This is a site-wide energy solution. We looked at solar panels – there is not enough space on the roofs to create energy. We found that micro-turbines are not that successful yet.”

Individual houses will be positioned so that living spaces face south to exploit heat from the sun and bedrooms will face north to prevent overheating.

The scheme also includes plans for a farm shop that is owned and run like a cooperative, with all of the profits ploughed back into the community. It is hoped that villagers will cut back on their drives to the shops.

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