With the costs of oil, gas and electricity spiralling, residents of one Wiltshire village have decided the answer is to return to positively medieval ways of heating their homes.

Villagers of Urchfont have set up what is believed to be the West's first wood-fuel co-operative, in what green experts say is a win-win scenario for their fuel bills and the local environment.

The village has a large wood on part of the estate of the local manor house, which is now owned by Wiltshire County Council. Since 1994, when its future was threatened, local people have taken over the management of the wood in a volunteer-based charity.

Now, for the first time, with the onset of the chilly north wind, villagers are making use of their community resource, and have set up their co-operative to bring warmth on cold autumn evenings. All over Urchfont, the spirals of smoke from the chimneys comes from wood cut down just half a mile away.

The idea is that residents are trained up to use chainsaws and in the ancient art of woodland management. They then sell the wood cut to other residents who are members of the co-operative. The money goes back into the woodland management, and everyone is happy, explained Friends of Oakfrith Wood chairman Peter Newell. He said: "The wood-fuel we produce is actually cheaper than what people might expect to pay to commercial suppliers, maybe as much as £20 or £30 a load.

"The nearest supplier of logs comes from several miles away, but not only is this wood coming from a sustainable resource, it is also brought to the villagers from no distance at all, saving on transport costs. With the rising costs of other kinds of fuel, like oil, gas and electricity, this proves to be cheaper, and more environmentally friendly.

"How it came about is that since we've been managing the woods for the last 14 years, it's become increasingly apparent that the wood needed essential thinning work, a normal part of managing a woodland. We tried to engage a contractor, but there's no market for the relatively small-scale operation like that, especially one we wanted done sensitively.

"So eventually, we came up with the idea of training the villagers involved on how to do it ourselves, and the idea followed on from there."

Wiltshire County Council, environment boss Councillor Fleur de Rhe-Philipe is launching the scheme next Saturday at a special party in the woods.

She said: "Not only are people using a renewable resource, but everyone benefits from the fact big lorries aren't delivering large amounts of timber around the country's roads.I am pleased we are able to support this worthwhile project which is helping local people to keep a beautiful piece of local woodland in great condition for future generations to enjoy."

Steve Russell, the council's countryside manager, said: "This project is a great example of a community woodland – the wood is open to the public, it provides a haven for wildlife, it produces sustainable timber that is used locally as firewood, and it is all done for the local community by the local community.

"This is a pioneering partnership project with which the county council is pleased to be a partner."