The Peabody Trust's zero-energy BedZED project in south London is a model for sustainable communities, as well as a useful guide to how designers can meet revisions to the Building Regulations.
Factory farming is not a term usually associated with sustainable development. But any green-fingered residents of a radical housing development under construction in the London Borough of Sutton will be doing exactly that - their gardens sit on the roofs of nearby industrial units.

The scheme is a mixed-use, high-density development of 82 town houses, maisonettes and apartments designed as a sustainable community. The development will also include workspaces for about 20 businesses, a village green, an organic café and shop, a healthy living centre, a nursery, a sports field and club house.

Called Beddington Zero Energy Development, but known simply as BedZED, the development is the Peabody Trust's flagship environmental project. Designed by Bill Dunster Architects with environmental specialist Bioregional Developmental Group, the scheme is an ambitious attempt to transform a disused former sewage works into a model of urban sustainability.

BedZED is a genuine, radical and brave attempt to integrate the government's tripartite definition of sustainable development: environmental, social and economic in a suburban development. It is an example of how the government's target for new homes in the South-east could be met without environmental degradation. The Royal Commission on Environmental Pollution, in its 22nd report released a couple of weeks ago, also called the scheme "a pioneering development … the most ambitious low-energy housing development in the UK to date". And with the government's recently proposed changes to the energy conservation requirements of Part L of the Building Regulations, this development will be attracting the attention of architects, builders and developers searching for ways to make buildings more energy-efficient.

Even before work started on site, the development was breaking new ground. The council's sale of land to the Peabody Trust had to be approved by the DETR because a commercial developer had put in a higher bid. The sale went ahead because the authority was allowed, for the first time, to consider the scheme's environmental and social benefits when assessing the bid. The outline planning brief set a value for the site with permission for 305 habitable rooms. The Peabody Trust scheme has 271 habitable rooms plus 2400 m2 of income-generating commercial space, without the trust actually paying for the land this space is built on. This planning gain will fund the increased build costs of the dwelling's low-energy specification.

The low-energy strategy exploits the building's form and fabric, avoiding dependence on sophisticated electrical and mechanical systems. The environmental concept is driven by the strategy for a zero fossil-energy development, one that will produce no net carbon emissions. Local economic sustainability is promoted by the use of networks of local suppliers for food and services and the use of local renewable and recycled material and tree waste for fuel. Social sustainability is addressed by the high standard of accommodation and by developing a community on the site.

The orientation of the terraces is fundamental to the environmental strategy. They are designed to minimise areas of overshading, and therefore to maximise solar heating and daylight to save energy on artificial light. The heat from the sun will enter each dwelling through a south-facing conservatory where it will be stored in the building's heavy concrete structure. The thermal mass of the ceilings and tiled floors will absorb enough heat to prevent the dwellings overheating in summer, and will store the sun's warmth in winter.

In winter, heat is retained in the dwellings by high levels of insulation. Chris Twinn, an associate director at engineer Ove Arup & Partners, and the building physicist behind the design, describes the dwellings as "super-insulated". The designers decided to invest in 300 mm thick thermal insulation rather than spending money on an expensive heating system. A combination of passive solar gain and heat from lighting and cooking will be all that is needed to keep the dwellings warm in winter. The buildings are also designed to prevent heat disappearing through gaps in the fabric but to retain sufficient fresh air to remove smells and moisture from kitchens and bathrooms. To do this, Twinn has designed a natural ventilation system that uses stack ventilation with heat recovery.

In summer, the conservatories will convert into open verandas by opening the windows. At night, this will allow through-ventilation to cool the floor and ceiling structure by removing the heat stored in the building fabric. The design means that domestic energy consumption will be about one-tenth that of a standard suburban house.

Keeping energy demand to a minimum was important if renewable energy resources were used. The development does not make any use of pumps and fans – things Twinn calls "parasitic energy". Energy needs are kept to a minimum by low-energy white goods and lighting. The occupants of a three-bedroom maisonette should save up to £500 a year, compared with the equivalent house built to 1995 regulations.

All the energy supplied to BedZED will come from renewable sources. A combined heat and power plant using tree surgery waste will provide most of the electricity and hot water. The 110 kW plant works by burning wood-gas generated from the tree waste. This gas is used to power the engine that generates the electricity. The system is efficient because the waste heat from the engine is piped to the dwellings to heat water. The system is carbon-neutral because trees absorb carbon dioxide when they are growing and release it back to the atmosphere when they are burned.

The mix of workspaces and dwellings means the combined heat and power system can work extremely efficiently. The mix evens out the electrical demand during the day and the problem of seasonal changes in space-heating needs has been largely eliminated by the highly insulated dwellings with no heat requirement. However, hot water demand fluctuates widely throughout the day, so over-sized hot water cylinders will be installed in both the workspaces and dwellings to even out the load. Any surplus electricity will be sold to the grid and, if necessary, top-up electricity can be drawn from the grid on a green tariff.

Keeping the development sustainable also means cutting down on water consumption. BedZED residents will use 54% of the water that a conventional development does. "It is possible to collect enough rainwater from the roof of a typical house to meet its water needs, provided water-efficient appliances are used," says Dunster. Beddington has low-flush toilets, showers and spray taps, water-efficient washing machines and low-volume sculpted baths. A water meter prominently displayed in the kitchen will remind residents of their consumption. Large tanks incorporated into the foundations will store the rainwater.

It is not just the rainwater that will be used in the development. Sewage and waste water, too, will be recycled using a treatment known as a "living machine" imported from the USA. "This is biologically rather than chemically based," explains Dunster. "The nutrients in the sewage sludge will feed plants." Using this system, the water is treated to a standard that will allow it to be recycled to underground rainwater storage tanks to be used once again for toilet flushing. And the well-fed plants? They will be sold in the site's shop.

Unusually, the development also incorporates a green transport plan – a pool of 20 electric cars that residents can hire by the hour. In the true spirit of sustainable motoring, the cars' batteries will be charged using a 109 kW solar electric installation, funded by a grant from the European Union's Thermie programme. "Using photovoltaics to displace the heavily taxed fuel in transport brings their payback down to about 13 years," says Twinn. Again, any surplus electricity can be sold to the grid. The photovoltaic panels will be used to shade the roofs of the dwelling's conservatories that will, in effect, make the buildings producers of energy for transport. But for those who want to go completely green, every dwelling has been designed with its own bicycle storage space.

BedZED is an Egan demonstration project for the Housing Forum. Next week, the design team will be launching the system developed for Beddington on the commercial housing market as ZEDfactory, a one-stop shop for developers looking to build sustainable communities.

The Peabody Trust is hoping that the development will demonstrate that sustainable building and an environment-friendly lifestyle are achievable, viable and attractive. "We are a charity to look after ordinary Londoners. Unless society grapples with the challenge of sustainability, they are the ones who will suffer most," says Dickon Robinson, director of development at the Peabody Trust. "With this development, we are hoping to demonstrate to housebuilders that there is a market for sustainable developments."