The UK could save 10m tonnes of carbon dioxide every year if the waste heat from some of the country's biggest power stations was diverted to warm homes and offices, according to a study by engineers.

They say attaching heat capture technology to stations such as Kingsnorth and Drax would meet 5% of the UK's heat requirements. And in future, any new big power stations should be built to capture and distribute heat as well as electricity. In addition, new housing developments should be designed and built with small local combined heat and power (CHP) plants.

Heat accounts for around 49% of all primary energy needs in the UK. This is mainly fuelled by gas – in 2006, the heat sector used 735 TWh compared with 653TWh and 393TWh used by transport and electricity sector respectively.

Currently, coal and nuclear power stations are around 35% efficient which means that, for every 1,000MW of electricity the stations produce, around 2,000MW of heat is dumped into the atmosphere via the cooling towers. Theoretically, if half of that energy could be captured for domestic or commercial heating, it could meet 25% of the UK's current heat demand, according to a new study by researchers at the University of Southampton and the Institution of Civil Engineers (ICE).

The study acknowledged that attaching CHP equipment to all of the UK's power plants and then building the piping infrastructure needed to distribute it would not be practical for all the current power stations. One practical problem is that many nuclear and coal stations are built in remote locations, far away from places that could usefully need their heat.

But the report did identify some power stations that are near to population centres: the region around Drax, Ferrybridge and Eggsborough near Leeds and the Kingsnorth and Tillbury power stations near London. The installation of heat recovery schemes in these power stations could meet 5% of the UK's demand for heat and cut CO2 emissions by 10m tonnes.

Keith Tovey of the Institution of Civil Engineers' energy panel said that, although installing CHP would make a power plant produce less electricity, because it would produce useful heat, its fuel efficiency could more than double from 35% to around 80%.

Speaking at the launch of the report, Tovey said: "What we need to do is look closely at introducing district heating networks in areas surrounding viable existing power stations in the UK and ensure we assess potential heat capture possibilities for any new facilities."

District heating networks would replace the need for boilers in homes and offices. Residents would use whatever heat they needed from the mains and it could be metered in the same way that electricity is now. Dr Patrick James of Southampton University said that such scheme would remove the need for householders to pay upwards of £2,000 for gas boilers, along with the associated servicing and repair costs.

Dr Doug Parr, chief scientist at Greenpeace UK, said: "We're pleased to see the growing recognition that our inefficient, centralised electricity grid is losing over half of its energy in waste heat. At a time when profligate energy use is threatening our survival, this makes less sense than ever."

"However, once the problem has been recognised, we need to be more ambitious than just shaving a few per cent off the waste with bolt-on additions to a badly designed system – we need a decentralised grid where the power stations are sited in the correct places to make efficient use of the fuel they burn, not a continuation of the current model with some small token improvements. CHP should be at the heart of our planning, not an afterthought."

Tovey said that, in the longer term, the UK should consider the potentially huge benefits that decentralised CHP could bring to the UK. "With the current generation of thermal power stations coming to the end of their lifespan, there is a real opportunity to vastly improve the efficiency of our energy sector and drastically lower its carbon footprint."

According to the ICE report, the most efficient method for using heat is a decentralised CHP and district heating network, of the kind routinely found in Scandinavia and other parts of Europe, where small power stations are located close to the centre of population. In addition the engineers encouraged places such as hospitals and universities to use small CHP stations for their energy needs.

Tovey acknowledged that delivering the kind of decentralised CHP across the UK that the ICE report recommended would require significant new infrastructure and a large reorganisation of the sector. "But if we are to guarantee security of supply, whilst meeting tough carbon targets, radical change may be what is needed."