In 2012, Peter and Carole Lillywhite visited the Isle of Man for the first time. Three days into their visit, they had an offer accepted on a small, 19th-century cottage on Sartfell in the west of the island. The derelict cottage – the third highest on the island – sits alone on the brow of a hill and is known locally as Cloud Nine.

“The cottage wasn’t really fit for 20th-century living, never mind 21st,” recalls Peter, a retired management consultant with a background in scientific research. The couple, who are both in their 60s, appointed the architect Will Foster to design a contemporary, carbon-neutral home for them next to the existing cottage.

While their project was going through design and planning, the Isle of Man was applying for Unesco Biosphere Reserve status. “It was serendipity,” says Peter. “The island’s status was awarded in 2016, and this has given us a unique opportunity to do something we didn’t think possible.”

‘Every morning we spot something out the window, drop our spoons and rush to get the binoculars’: Peter and Carole Lillywhite at home. Photograph: Anthony Dawton/The Observer

The couple has built a Riba award-winning home (a first for the island) and, working with the Manx Wildlife Trust, they have transformed what was seven acres of farmland into a nature reserve. The project has been renamed Sartfell Restorative Rural Retreat, but the couple are clearly still living on cloud nine.

“It is a privilege to be here,” says Carole, a retired educator. “Every morning, when we’re up having breakfast, we spot something out the window, drop our spoons and rush to get the binoculars. When we bought the land, there was nothing but grass and bit of bog,” she continues. “The biodiversity has increased 1,000-fold: rare orchids, hen harriers, kestrels, buzzards, choughs and butterflies are all back in abundance and there are frogs in the new lake.”

The lake was dug out of the land, and the rocks that were excavated have been used to clad the cast concrete shell of the building. “The architect installed a weather station on site and monitored the weather for a year before commencing the build,” explains Peter.

Log on: the wood-burning stove in the living area. Photograph: Edmund Sumner/View

Foster recorded 90mph winds on Sartfell, so the need to feel sheltered informed the design, which is moulded into the slope. Long, horizontal slot windows provide panoramic views across the reserve to Scotland and Ireland.

“When the wind is howling and the rain is horizontal, we’re warm as toast in here, looking out at this wild weather,” says Peter.

The lake also conceals a ground source heat pump, which heats the entire three-storey building. (A wood-burning stove is used to bump up the temperature on the coldest days.) “Pristine” spring water comes from a nearby borehole and the couple is planning to install a wind turbine, which will generate enough electricity to run their home and feed back into the grid. Turfed roofs provide further insulation and allow the new building to merge into the hill.

A palette of raw materials has been used inside: cast concrete walls and polished floors run throughout the interior, and a spectacular iron staircase connects the three levels. On the lower ground floor are two bedrooms, two bathrooms, a games room, garage and plant room; the kitchen, library and open- plan living space is on the middle floor and a panoramic office is at the top of the building.

Having given themselves nine months to enjoy their retreat on Sartfell, the couple are about to begin the next phase of the project. Their vision – which is entirely self-funded – is to build a visitor centre and work with local charities and trusts to educate school children and eco-tourists about natural history, sustainable living and biodiversity. Visitors will be able to explore the nature reserve and see how green energy works. (The original 19th-century cottage will soon be available to rent.)

“There is a very healthy social conscience on the island,” says Carole. “But we need more young people to be interested in these things from an early age.” Peter adds: “A lot of the work we’ve done here is a process that will go on for the next generation. This is our last home, but it is also a resource for the future.”