A 20 million pound heat and electricity system could be introduced in Exeter, financed through a public/private partnership.
It would involve combined heat and power generators in various locations, and a network of underground hot water pipes, in a system that would reduce energy prices and CO2 emissions.
The proposal has been drawn up by engineering consultants after a study commissioned by the city and county councils, the University of Exeter and the local NHS Trust.
If all parties agree to take the recommendations forward, the next step will be to produce a business case to test the potential for private sector investment in the project.