Mayor Boris Johnson has revealed plans to develop green power plants across the city to reduce emissions and electricity bills and generate employment.
The project involves the use of combined heat and power (CHP) technology in biofuel and gas-fired power stations in every London borough.
At present, a major portion of London's power comes from power plants far from the city. CHP and district heat networks, however, require electricity to be produced close to where it is consumed.
According to Johnson's target, 25% of the capital's heat and electricity should be derived from local sources by the year 2025, reducing emissions by 3.5 million tons per annum.
Johnson said that he wants to position London as the world's leading low-carbon economy.
"We are working with the business community and London's boroughs to create ripe conditions to revolutionise the way we power our city," said Johnson.
The proposal has been drafted by the Greater London Authority, London Development Agency (LDA), London councils and London First.
The LDA has 14 decentralised power projects and has allocated £16m for the next four years.
London Thames Gateway Heat Network will trap low carbon heat from Barking Power Station to provide heating and hot water to 120,000 properties.
Guy's and St Thomas' hospital has unveiled a CHP system that will annually save £1.5m in energy bills and reduce emissions by 20%.