A mini power station could be built in the centre of Croydon as part of a £55m council plan to sell its own heat and electricity.

The District Energy (DE) scheme would involve setting up a small-scale plant near the current council headquarters at Taberner House, powered by fossil fuels, renewable technologies or a combination of the two.

A sprawling network of pipes would connect it to the council’s planned new £145m headquarters in Fell Road and developments at Taberner House and College Green.

The council hopes to raise about £7m per year from selling heat and electricity to town centre businesses, but only expects to be making half that figure when the first phase of the scheme comes online in 2015. Further extensions are then planned for Ruskin Square, Dingwall Road and the Whitgift and Centrale shopping centres, as well as the Home Office buildings in Wellesley Road by 2025.

Croydon Green Party spokesman Shasha Khan said the scheme would be a “significant improvement” on the borough’s energy usage, but questioned what the new plant would use as fuel.

He said: “The paper completely sidesteps the critical issue of how the energy will be generated. The fact is that by 2025, when the scheme comes fully online, we will have hit peak oil and fossil fuel prices will be climbing rapidly. The report makes no mention of this, and thus smacks of being written by well-meaning officers who need to water down proposals for those Tory councillors who are still sceptical about climate change and the value of renewable energy.”

He called for the proposal to be included in an “energy descent plan” to reduce Croydon’s overall dependence on power.

Coun Simon Hoar, cabinet member for economic development and regeneration, said it was too early to say what the new plant would use as fuel, but mentioned rooftop solar panels as a possible part of the scheme.

He said: “From an economic development and regeneration perspective it’s a good move. It will encourage businesses to come to Croydon to get cheaper heat and electricity, so individual buildings can run cheaper.”