Local people could be offered a share in ownership of new renewables projects as "the norm" from next year, as part of plans to help communities take more control of their energy supplies and bills.
Communities will also be able to take advantage of a £10 million fund to develop their own renewable schemes in England, under the new Government strategy to help people come together to reduce their energy use or purchase and generate their own power.
The urban community energy fund will provide grants to support work to see if clean energy projects are feasible and to help with planning applications and developing business plans.
The Government is also launching a £100,000 competition for developing innovative approaches to saving money and energy, and backing a "one-stop shop" providing information for people who want to set up local energy schemes.
The community energy strategy is being launched during the "big energy saving week", in which people are being urged to check if they are on the best deal, switch if they are not, and to insulate their homes this winter.
It has been welcomed by a coalition of groups pushing for more community energy, although Friends of the Earth said more needed to be done to make local projects "more than a sideshow in the UK's energy mix".
The renewables industry has already committed to significantly increasing shared ownership of onshore developments, and the Government has asked a taskforce to report this spring on how they intend to achieve greater community involvement in projects.
The Government said it expects that by 2015, it will be the norm for interested communities to be offered some level of ownership of new, commercially developed onshore renewable projects such as wind and solar farms.
In addition, energy generation schemes involving the local community, such as solar panels on social housing, could power a million homes by 2020, the Department of Energy and Climate Change (Decc) said.
Community energy projects can also save money on bills, put pressure on suppliers to cut prices, create warmer homes and cut carbon emissions, and the new strategy aims to remove the barriers faced by communities who want to take action on energy.
Two fifths of people are already interested in joining a community energy group, and taking part in collective switching or collective purchasing schemes, research for Decc suggests.
And more than half of the 1,089 people surveyed by Decc said that saving money on energy bills would be their main motivation for getting involved with a community energy scheme.
At least 5,000 local groups have run energy projects since 2008, such as the Ashton Hayes Going Carbon Neutral project in Cheshire which saved households £300 a year on average by encouraging changes in behaviour and installing energy efficiency measures.
Energy and Climate Change Secretary Ed Davey said: "We're at the turning point in developing true community energy.
"The cost of energy is now a major consideration for household budgets, and I want to encourage groups of people across the country to participate in a community energy movement and take real control of their bills.
"Community-led action, such as collective switching, gives people the power to bring down bills and encourage competition within the energy market."
Decc also announced a £1 million boost for the big energy saving network, a scheme which supports volunteers to help vulnerable people to cut energy and bills by taking action on tariffs, switching and using energy efficiency offers.
Russell Gill, head of membership and social goals at The Co-operative, one of more than 25 organisations in the Community Energy Coalition, said: "The Government's new strategy is positive news for the vibrant and growing community energy sector.
"As its supportive measures are realised, we are optimistic that a huge increase in community and co-operatively owned projects will be forthcoming, giving people the ability to bring down household energy bills."
Patrick Begg, National Trust rural enterprise director, said: "At a time of rapidly rising energy bills and growing concerns over the impact of energy infrastructure on our precious landscapes, community energy can offer people a chance not only to take more control of their energy - where it comes from and what it costs - but also feel confident that the places they love have not been sacrificed to generate it."
Friends of the Earth's planning campaigner Naomi Luhde-Thompson said: "This new pot of money is a useful first step in helping more people to generate their own clean power, but more needs to be done if we're going to make community projects more than a sideshow in the UK's energy mix.
"Imagine whole streets and villages producing their own energy with wind and solar power, creating jobs while helping to tackle climate change - it's possible within the next few years if the Government removes the barriers.
"This year ministers should also require larger energy developments to have mandatory share offers for local people - making energy bills more affordable for many of us."