And, as luck would have it, the 30ft diameter hobbit-style home has found itself in the midst of a radical experiment: last year Pembrokeshire county council and the Pembrokeshire Coast national park authority agreed to grant planning permission for low-impact developments (LIDs) in the council area - and even in the national park - if they met stringent criteria. It is an unusual policy that could encourage other planning authorities across Britain to rethink sustainable development: after all, these homes are affordable, carbon-neutral and can be built on green fields without environmental degradation.

But the pioneers of zero-carbon living have long been derided as hippies and denied legitimacy by the planning system, from the celebrated Tinker's Bubble in Somerset to Steward Wood in Devon. Wrench is typical, forced to fight his eviction from the moment council officers spotted the glint of his bus-window skylight during an aerial inspection. "An unsightly and incongruous appearance," sniffed the first inspector to clap eyes on the Roundhouse. And to Wrench's dismay, in the new policy's first test, his retrospective application for the Roundhouse was rejected last week.

Grapes are trained over the eaves of the green roof of his home, built on neglected farmland owned by a friend at Brithdir Mawr. Freshly dug potatoes sit in a bucket by the door and, after nearly 10 years, the bracken still sprouts through the kitchen's earth floor every spring. Three small solar panels and a tiny wind turbine provide power. Sometimes Wrench has to choose between his laptop or a lightbulb, but it is not a life of deprivation.

Inside is a cosy jumble of books and ornaments, sheepskins and a wood-burning stove. Beneath their raised bed is a wine cellar, well stocked with Wrench's sweet raspberry wine. The stove heats hot water for baths. They manage without a fridge or a washing machine. And the roundness is pleasing. "Once you live in round, corners seem a bit weird," says Faith.

A reedbed soaks up their grey water - the water left over after washing up, bathing and laundry - and a double-sided compost toilet is situated 20 yards from the house. Wrench, who carves wooden bowls for a living, finds adding the leftover wood shavings to the mix makes perfect compost. "Every year we get nine wheelbarrows of really good compost. It's completely odour-free - the raspberries love it," he says. "When you're shitting it's a creative cycle, rather than it going out to sea and becoming someone else's problem."

The authorities, however, see Wrench as a problem. Under the new criteria, he had to prove he could meet 75% of his needs - energy, food etc - from his smallholding; the planners decided there weren't enough trees to support him. The Roundhouse was also rejected on environmental grounds; Wrench disputes the charge that he has "improved" the grassland (in planning terms "unimproved" is better) and is adamant that biodiversity has flourished under his watch. His son, a botanist, has logged 73 species in his meadow.

Wrench will appeal but is aggrieved by the apparent false dawn of Pembrokeshire's LID planning regime. "They've set the criteria so they can say no to virtually anything," he says. "Are we serious about sustainability, or are we more serious about value judgments about what looks pretty or not in a national park?"

Council planners introduced the low-impact policy after lengthy consultation - and some reluctance from the national park - when they realised they had no way of dealing with alternative dwellings like the Roundhouse. Peter Sedgwick, the council's forward planning officer, says the criteria had to be tough but are not impossible to meet: "Planning guidance is against development in open countryside. This is an exceptional policy that only allows for it when the development can be seen as not just sustainable but positively contributing to things like biodiversity."

Could other planning authorities follow Pembrokeshire? Sedgwick and Martina Dunne of Pembrokeshire Coast National Park believe LIDs will remain a "marginal" provision. Dunne says planners' focus must be on affordable housing. This is exactly what the LID builders claim to be (Wrench's house cost £5,000) but the planners don't recognise it. "You couldn't call it affordable housing as far as the majority of people are concerned," says Dunne. "In a way, the ethos of low-impact developments - sustainability and sustainable design - should be mainstream. But if you ask people in the street, 'Do you want to live that way?', 95% of them say no."

However, the Lammas cooperative, with its slick website, hopes to change the perception of LIDs as hippy dwellings. The brainchild of carpenter Paul Wimbush, the project aims to build nine smallholdings near the village of Glandwr in Pembrokeshire (but not in the national park), and it will be the next test of Pembrokeshire's LID policy this autumn.

Wimbush has invested £50,000 in the planning stage, in order to make sure that Lamas is a model low-impact community. This has involved numerous studies and professionally drawn "earth-sheltered" eco-homes made from timber and cob-and-straw bales, with plots designed in detail, right down to the type of plum tree in the orchard. "We want it to be mainstream," says Wimbush, 35, who lives near Swansea in a low-impact house with his wife, Hoppi, and three children. "We want normal people to come round and say, 'I could live like that - they've got TVs and computers, and they aren't toiling in the mud.'"

Lammas won't need electricity or water from the grid, as it will get its power from a water turbine already on site, part of an old farm the cooperative has agreed to buy at agricultural rates if it gets planning approval. The project is not, however, about opting out of society. Residents will pay council tax and have mortgages. "We are deliberately taking a much more integrated approach," he says. If approved, Lammas is determined to contribute to the local community: working with farmers' markets and collecting compost from ordinary villagers.

So far, though, the project has met with local suspicion. Much of the opposition may be nimbyism, some could be cultural (of the nine families planning to take plots, only one is Welsh-speaking local) but a bit may also be indignation. Why should they get preferential planning treatment?

"Why should we buy land at £2,000 an acre whereas Wimpey has to pay £2m?" says Wimbush. "Because we are meeting such stringent criteria and we are, as the planning phrasing goes, being 'exemplars of sustainability'."

Ahead of a decision in October, Wimbush diplomatically says that the council "has been really open-minded and forward-thinking. It potentially sets up the county as a model for sustainability."