Local schools and homes in the small Georgian town of Reepham in Norfolk are taking part in the groundbreaking 12-month trial, led by the University of East Anglia (UEA).
Like two million homes across the UK and Ireland, the properties depend on heating oil for warmth and hot water, and the aim of the UEA trial is to prove that environmentally-friendly renewable heating oil is a viable option.
The renewable fuel being used is sustainable biodiesel manufactured from used vegetable oil and tallow by Argent Energy Ltd of Scotland. The biodiesel is stored in Norfolk and blended with conventional heating oil by Pace Fuelcare of King's Lynn, which delivers the fuel to the properties.
Fuel blends are being trialled that are equal or lower in carbon footprint than natural gas.
Partners in the pioneering project are UEA's Low Carbon Innovation Centre, Norfolk County Council, local entrepreneur Andrew Robertson of Clean Energy Consultancy, and the two bodies that represent the oil heating industry in the UK and Ireland - the Oil Firing Technical Association (OFTEC) and the Industrial Commercial Energy Association (ICOM).
By working closely with the oil heating industry, the project can demonstrate that every aspect of fuel supply and boiler operation is compatible with the renewable fuel, and the industry will be able to define clear standards for the use and supply of renewable heating oil.
"This is a major initiative in developing lower-carbon heating options for millions of properties, especially in rural areas, which depend on oil-fired heating," said project manager Dr Bruce Tofield, of UEA's Low Carbon Innovation Centre.
The project was launched and funded via UEA's Carbon Connections programme and has built on the expertise in biodiesel developed in the university through work with local companies on renewable transport fuels.
Around 30 properties in the North Norfolk town (including both the primary and the secondary school) and elsewhere in the county are taking part in the trials which started in December.
Jeremy Hawksley, director general of OFTEC, said: "Results from the field trials have been extremely encouraging to date. The project has also been well supported by many OFTEC manufacturing members who are conducting their own field trials alongside this project.
"Having a liquid biofuel that is interchangeable with domestic heating oil means that around 1.9 million households in the UK and Ireland will be able to use renewable technology to heat their homes, with very few modifications to their existing heating systems."
The third European Union Sustainable Energy Week (EUSEW) takes place in cities across Europe from Monday February 9 to Friday February 13 2009. Almost 300 cities will be pledging to cut their CO2 emissions by more that 20 per cent by 2020.
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