Water from a disused mine that has been warmed by the earth is to be used to heat homes in a Welsh Valleys village, the Welsh Government has said.

The scheme described as “trailblazing” would use underground mine water from the workings of the old Caerau colliery, which closed in the late 1970s, to heat houses, a school and a church in Caerau in the Llynfi Valley, South Wales.

On Friday, cabinet secretary for energy, planning and rural affairs Lesley Griffiths said the Welsh Government had awarded the project £6.5 million in EU funds.

“Our ambition is for our nation to be a world leader in pioneering low carbon energy,” he said.

“This is a cutting-edge model of generating a clean source of renewable energy, drawing on the legacy of our coal mining heritage.”

Bridgend County Borough Council is investigating how water in the colliery’s underground workings, which has been heated by the earth and is a geothermal source of energy, could be extracted using heat pump technology and a network of pipes to warm around 150 nearby homes.

Test drilling carried out at the Old Brewers site in Caerau found the mining void is full of water to a depth of 230 metres.

The results of a feasibility study to determine if the water is warm enough to heat homes is expected by the end of February.

The British Geological Survey has been involved in testing the temperature, chemistry and volume of the mining water, with the temperature expected to be around 20.6 C – warm enough for the scheme to be a success.

Mr Griffiths said the project, which would be the first of its kind on such a scale in the UK, would not only attract further investment to the area but also address fuel poverty by cutting energy bills, and has the potential to be rolled out to Wales and beyond.

He added: “This EU-funded scheme will also create jobs both within the initial construction period and the ongoing supply chain, as well as offering training and educational opportunities in a very innovative area.”

Homeowners’ existing radiators would be used in the scheme and mine water would not enter residents’ properties.

Councillor Richard Young, Bridgend County Borough Council’s cabinet member for communities, said it was the volume and temperature of the water at the site that made the scheme possible.

“The next phase is to work through the full scope of the scheme and put everything in place to deliver a trailblazing project for the Llynfi Valley,” he said.

While the initial heat network will involve 150 properties and the nearby school and church, there may be potential for the scheme to warm up to a thousand local homes, a spokeswoman for the Welsh Government added.

Findings from the feasibility study will be shared with Caerau residents in a exhibition planned for spring, while construction is expected to start in 2020.

Additional funding for the £9.4 million pound project, which is a demonstrator project for the UK Government-led Smart System and Heat Programme, will be made up by the UK Government, Energy Systems Catapult and Bridgend County Borough Council.