The Caltongate site is in the Old Town

The Caltongate scheme has been awarded a grant of over �789,000 by the Department of Trade and Industry for a special heating and cooling system.

The developers hope this will reduce its carbon footprint by at least 30%.

Installation is to be completed by December 2008 if planning applications for the �300m development are accepted.

Caltongate heating and cooling system

The system works by tapping into the natural temperature deep underground, which is between 11C and 13C, to provide heat in the winter and cooling during the summer.

A total of 90 pipes will be inserted 200 metres into rocks below the site, where they will extract heat which will be circulated around the buildings. During summer, the system can be reversed to cool the buildings by pumping heat into the ground.

It is the first award to a Scottish based project by the DTI.

The renewable energy system, will provide heat and cooling for 60% of the building project.

Mountgrange wants to create 200 new homes, a five-star hotel and conference centre, office blocks, cafes, bars, restaurants, and a new public square on the site of the old New Street bus depot.

'Welcome boost'

Nick Berry, director of Mountgrange, said: "We hope to be able to deliver the greenest development projects in Scotland and are actively looking at further ways to improve the energy efficiency and sustainability of the site."

Secretary of State for Trade and Industry, the Rt Hon Alistair Darling, added: "This is the kind of project that we want to encourage. We need greener energy and by 2050 clean energy technologies such as ground source heat pumps, micro-wind turbines and solar panels could provide 30 to 40% of the UK's electricity needs, significantly cutting carbon emissions."