More than 700 Glasgow households will see their heating bills reduced through a £10.6 million project.

A new energy centre will be constructed in Broomhill, Glasgow, to provide heating and hot water to 702 homes through the Cube Housing Association District Heating project. Cube has already introduced district heating schemes in Collina Street in Maryhill and Gorget in Knightswood as part of the project.

The low carbon central heating system aims to reduce fuel poverty in the area, and is projected to deliver significant CO2 savings over its lifetime, including 2,008 tonnes of CO2 in its first year.

The Broomhill district heating project will be part funded by a £5m loan from the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) Fund, a joint Scottish Government and European Regional Development Fund initiative. The remaining funding will come from British Gas.

The Broomhill scheme is the final allocation of funding from the initial £50m SPRUCE fund which, since 2011, has invested in various regeneration projects across Scotland. These include the redevelopment of land at Haymarket in Edinburgh, creation of offices at Queen Street and St Vincent Plaza in Glasgow, construction of industrial units in Coatbridge and a Low Carbon Innovation Centre in Fife.

The final allocation of funding means that investments, including the £9.6m Queen Street loan, which has been repaid, can be released and recycled into additional regeneration projects.

Social justice secretary, Alex Neil, announced details of the Broomhill investment on a visit to Cube’s Gorget district heating scheme which is already benefitting residents in the area.

He said: “This £10.6m project will make a massive difference to the lives of hundreds of households in Glasgow, supplying heat more efficiently and saving people money on their bills.

“The district heating scheme will help tackle fuel poverty, be better for the planet and make homes in the Broomhill area warmer and cheaper to heat.

“From energy centres to business parks the SPRUCE fund is helping to regenerate areas by providing crucial investment that is supporting the economy and jobs and transforming our communities for the better.

“I look forward to seeing what new projects will secure investment from SPRUCE as it recycles the funding over the years to come.”

Liz Ruine, chair of Cube Housing Association, which is part of Wheatley Group, said: “This huge investment in our homes will make a big difference to the lives of Cube tenants and to the communities around it.

“We’re delighted to be able to show the Social Justice Secretary how we are creating warmer homes and communities tenants are proud of.”

British Gas is carrying out the building and installation work at Broomhill. The energy centre will include three 500kW wood pellet boilers with thermal heat stores, plus 1.5MW of condensing gas boilers to provide severe weather top up and standby energy sources.

Underground heat mains, a new distribution pipe network and heating systems and metering will all be installed in the area.

Cameron Cook, head of origination for Amber Infrastructure in Scotland, which manages the SPRUCE fund, said: “The Cube Housing Association District Heating project is a ground breaking initiative that will contribute greatly to the alleviation of fuel poverty across the homes it serves, as well as substantial environmental benefits through carbon dioxide savings.

“Amber and the SPRUCE Fund are delighted to be participating in the project, realising SPRUCE’s ambitions to help develop social, economic, and green infrastructure in Scotland. The investment demonstrates Amber’s JESSICA fund management expertise and our growing presence in the region.

“With SPRUCE now having completed its first investment round, we are committed to utilising new and recycled monies to invest in regeneration and energy efficiency projects that will provide long-term benefits to local communities throughout Scotland.”