Modernizing District Heating Networks: A Strategic Decision-Support Framework for Sustainable Retrofitting

Abstract

This study explores modernization strategies for existing district heating (DH) networks to enhance their efficiency and sustainability, focusing on achieving net-zero emissions in urban heating systems. Building upon a literature review and expert interviews, we developed a strategic decision-support framework that outlines distinct strategies for retrofitting district heating grids and includes a portfolio analysis. This framework serves as a tool to guide DH operators and stakeholders in selecting well-founded modernization pathways by considering technical, economic, and social dimensions. The review identifies several promising measures, such as reducing operational temperatures at substations, implementing optimized substations, integrating renewable and waste heat sources, implementing thermal energy storage (TES), deploying smart metering and monitoring infrastructure, and expanding networks while addressing public concerns. Additionally, the review highlights the importance of stakeholder engagement and policy support in successfully implementing these strategies. The developed strategic decision-support framework helps practitioners select a tailored modernization strategy aligned with the local context. Furthermore, the findings show the necessity of adopting a comprehensive approach that combines technical upgrades with robust stakeholder involvement and supportive policy measures to facilitate the transition to sustainable urban heating solutions. For example, the development of decision-support tools enables stakeholders to systematically evaluate and select grid modernization strategies, directly helping to reduce transmission losses and lower greenhouse gas (GHG) emissions contributing to climate goals and enhancing energy security. Indeed, as shown in the reviewed literature, retrofitting high-temperature district heating networks with low-temperature distribution and integrating renewables can lead to near-complete decarbonization of the supplied heat. Additionally, integrating advanced digital technologies, such as smart grid systems, can enhance grid efficiency and enable a greater share of variable renewable energy thus supporting national decarbonization targets. Further investigation could point to the most determining context factors for best choices to improve the sustainability and efficiency of existing DH systems.

1. Introduction

The building sector is one of the largest energy consumption sectors, with residential buildings accounting for around 26% and commercial buildings for around 14% of total energy consumption in Europe [1]. In particular, the building sector accounts for 60% of heat demand, most of which is supplied by fossil fuels [2].

Achieving the European targets for climate neutrality by 2050, according to the European Green Deal, requires significant changes to the current structures of heat supply and demand in buildings [3]. Densely populated urban areas face challenges in achieving a sustainable energy supply. While fossil fuel boilers are incompatible with Europe’s 2050 decarbonization goals, alternatives like biomass boilers present (logistical) issues with fuel supply, ash management, and potential particulate emissions. Likewise, electric resistance heaters are sensitive to price fluctuations and strain peak demand, whereas heat pumps might be limited by space and cost. District heating (DH) often seems to be the most practical option for decarbonizing heating, especially in urban environments [4,5]. However, DH feasibility depends significantly on existing infrastructure. In areas without DH networks, phased rollouts based on heat density, prioritization of anchor loads (e.g., hospitals), heat zoning, and targeted subsidies have proven effective in supporting cost-efficient deployment in new regions [6,7,8]. Existing DH infrastructure can be expanded to integrate a wide range of low-carbon energy sources, but this typically requires a modernization of existing infrastructure, e.g., a reduction in supply temperature [9].

Retrofitting strategies in district heating networks (DHNs) offer significant potential for reducing greenhouse gas emissions. For example, a Danish case study demonstrated that integrating low-temperature distribution and renewable heat sources can cut CO₂ emissions by 70–90%, depending on the extent of building and network upgrades [10].

DH systems can integrate various types of renewable energy to reduce GHG emissions and enhance energy sustainability. Biomass, in the form of wood chips, pellets, or biogas, is a widely used renewable fuel [11]. Solar thermal energy can also contribute, particularly in combination with seasonal thermal storage, allowing surplus heat collected in summer to be used in winter [12]. Geothermal energy offers a stable and continuous heat source, especially suitable for base-load supply in regions with accessible geothermal reservoirs [13]. Additionally, heat pumps powered by renewable electricity can upgrade low-temperature ambient heat from sources such as rivers, lakes, or wastewater for DH networks [14].

District heating (DH) systems remain central to energy transition efforts, particularly in Europe. Since 2022, policy support has increased due to energy security concerns. In 2023, the EU committed EUR 401 million to support green DH in the Czech Republic, while Denmark passed legislation to exempt geothermal DH from price regulation. The UK introduced zoning regulations for heat networks, and Germany, France, and Finland reported new network expansions. Beyond Europe, China launched its first project to use nuclear waste heat in DH, and Vancouver added 6.6 MW of sewage heat recovery. These developments signal renewed global momentum for decarbonizing and expanding DH systems [15].

According to the publication of District Energy Space 2023 [16], the tendency toward adoption of district energy to reliably and efficiently deliver heating and cooling to buildings both in the U.S. and around the globe has increased by 5%.

In the following, we use the case of Switzerland to discuss the role of DH in the energy transition. In Switzerland, fossil fuels (oil and gas) still represent a high share of residential heating with ca. 57% [17]. However, a shift is underway toward renewable energy sources, in particular heat pumps. DH, which primarily uses excess heat and renewable energy sources in Switzerland, has a small market share nationally, but is important in cities and is expected to expand by a factor of two or three in the coming decades (Figure 1).

DH systems in Switzerland, though still a relatively minor component of the energy mix, are steadily growing and hold substantial potential to advance sustainable energy transitions [19]. Innovations such as fourth-generation DH (4GDH) systems prioritize efficiency, reduced heat loss, and compatibility with renewable sources like geothermal and solar energy [20,21]. The history of DH in Switzerland is long, dating back to the 1920s. Major cities like Zurich, Lausanne, and Basel began using waste heat from incineration plants to provide heat for buildings, replacing dirtier coal and offering a more economical solution [22]. Utilizing surplus heat from power plants and waste incineration for DH in homes and businesses is a well-established concept, implemented at scale in the 1960s and 1970s. However, by 2022, only 3.8% of residential buildings in Switzerland are heated by DH (Figure 1). However, today’s focus on renewable energy sources like large-scale wood and geothermal energy, along with utilizing various ambient heat sources as well as excess energy potentials, is reigniting the importance of DH [19].

DH is a key option for municipal authorities to enhance energy efficiency and integrate renewable sources in the heating sector [10]. In 2021, DH networks in Switzerland supplied 6.4 TWh of heat, covering around 6% of the market, with projections indicating a rise to 38% by 2050. However, existing DH grids in Switzerland operate at very high temperatures (>100 °C), which is inefficient and limits the integration of lower-temperature energy sources. Addressing this issue is critical for improving energy efficiency and enabling the transition to more sustainable heat supply solutions [21,23]. Past studies show the potential of reducing the temperature in DH systems to improve energy efficiency and reduce emissions [21,24]. However, challenges remain, including high initial costs, the complexity of cost and benefit assessment, the need for stakeholder alignment, and regulatory barriers. Therefore, although cities and utilities are aware of the benefits of DH modernization, few concrete steps have been taken so far. Research and real-world experience show that district heating challenges depend heavily on local conditions, so successful solutions in one area may not work in another.

This study aims to develop a strategic decision-support framework to identify technical, economic, and policy measures for devising a locally tailored strategy for DH modernization. Since these decisions involve many different people (like city officials, utility managers, engineers, policymakers, building professionals, and owners), the framework should act as a facilitation tool to support discussions across these groups. Therefore, the framework should give an overview of possible measures and allow actors to specify the expected costs and benefits of each measure from their own perspective.

We therefore pose the following research questions:

• RQ1: What are the potential action fields of a strategy to modernize district heating in a municipality?
• RQ2: Which measures are indicated to implement these strategic directions in different contexts?
• RQ3: How should practitioners prioritize retrofitting measures?

To answer these questions, we draw on a comprehensive literature review on DH modernization. To derive a structured overview of possible measures, we apply the threats–opportunities–weaknesses and strengths (TOWS) analysis to identify distinct strategic directions and aligned measures. We then categorize the relevant costs and benefits of each measure and incorporate them into the strategic decision-support framework. Finally, we test and refine the framework with two experts and illustrate its application. As this study is primarily conceptual in nature, the expert interviews served to improve the usability and clarity of the proposed framework, rather than to generate empirical findings.

The rest of this paper is structured as follows: Section 2 describes the methods, whereas Section 3 presents the results: an overview of the action fields and individual measures, the overall strategic decision-support framework, and findings from an illustrative application. Section 4 discusses the implications for research and practice, including the framework’s potential to identify promising pilot projects. Finally, Section 5 recapitulates the main findings and discusses the outlook for further research.

2. Materials and Methods

This study builds primarily on a comprehensive literature review of the topic of DH modernization. A list of individual measures is identified and structured according to a TOWS analysis. Based on this, a strategic decision-support framework is developed and applied in an illustrative case using insights from expert interviews (Figure 2).

The comprehensive literature review covered the following three fields: optimizing supply-side infrastructure, implementing demand-side management measures, and establishing a supportive policy and regulatory framework [25]. The criteria used for the literature review are listed in

Table 1. Search criteria for selecting and organizing the articles.

Keyword	Database	Type of Document	Language	Quantity
TS = (“energy” AND “district heating” OR “systems” AND “smart” AND “generation” AND “renewable” AND “sustainable” AND “heat” AND “temperature”)	Web of Science	Journal articles conference papers	English	39
TITLE-ABS-KEY (“energy” OR “designing” AND “efficiency” AND “program” AND “household” AND “achieve” AND “sustainability”) AND PUBYEAR > 2015 AND PUBYEAR < 2024 AND (LIMIT-TO (LANGUAGE, “English”))	Scopus	Journal articles conference papers	English	2
energy district heating systems future temperature generation report networks	Google Scholar	Journal articles conference papers	English	36

. We limited our review to publications from 2015 onward to ensure that the selected literature reflects the most recent developments relevant to district heating modernization. This timeframe was chosen because the transition toward low-temperature and advanced district heating systems, particularly fourth-generation concepts, gained practical traction around this time [26]. These developments include innovations in smart grid integration, decarbonization strategies, and cross-sectoral energy planning.

Bibliometric searches across platforms such as Google Scholar and Scopus confirm a significant increase in publications since 2015 using terms like “low-temperature district heating”, “4th generation district heating” and “advanced district heating technology”. This surge in research underscores growing academic and practical interest in next-generation solutions, justifying the choice of this timeframe for our review and framework development.

The review yielded a list of possible retrofitting measures. Measures are grouped into distinct fields of action. All measures are assessed using a practical framework from strategic decision-making, the “Threats, Opportunities, Weaknesses, Strengths” (TOWS) analysis [27]. The TOWS analysis builds upon the well-known SWOT analysis, additionally identifying strategic directions that either exploit strengths or mitigate weaknesses in the specific environmental context.

For each field of action, individual measures are classified as either S–O (leveraging strengths and opportunities) or W–T strategic directions (aimed at mitigating weaknesses and threats). It is worth noting that the TOWS framework contains two more types of actions (strengths–threats and opportunities–weaknesses). However, to prevent overlapping strategic directions, we focus solely on these two categories for the sake of clarity and practicality.

As a next step, we categorize the relevant costs and benefits of the measures. This resulted in a strategic decision-support framework structured as a two-dimensional matrix designed to assess each measure based on its associated costs and benefits.

In line with previous research, the challenge of identifying suitable measures for DH modernization was not formulated as a strictly techno-economic problem. Rather, we account for the fact that DH is frequently legitimized by its broader societal benefits, including environmental sustainability, energy efficiency, and local economic development [28]. To systematically account for the multilevel benefits, the “Co-Evolutionary Business Ecosystem Perspective” (CEBEP) framework [27,29] and its hierarchy of values [30] are selected and illustrated in Figure 3. In addition, because utilities consider not just direct costs but also other barriers, we included a category for transaction costs [23]. The strategic decision-support framework is implemented as a spreadsheet model and linked to a portfolio analysis template to compare the assessments of distinct measures across multiple participants.

Expert validation was conducted to refine the proposed strategic decision-support framework. Interviews with two senior researchers were carried out to refine the findings from the TOWS analysis and the practicability of the cost–benefit assessment. Interviewees were selected due to their long-standing expertise on DH, having carried out various applied research projects in close collaboration with industry. The purpose of the interviews was to test the framework’s usefulness for a multidimensional assessment of measures. Therefore, the interviews consisted of an exemplary application of the framework. While the framework is intended to facilitate decision-making for concrete applications, the illustrative applications during the development and test phase were not tied to a particular project. Experts were shown two tables: one linked the 36 identified measures to 4 types of value (customer, business, ecosystem, and public/social value) (Figure 3), and the other linked the same measures to 3 types of costs: CAPEX, OPEX, and transaction cost. In both cases, the experts were asked to rate the benefits or costs associated with each measure on a Likert scale. Interviewees were encouraged to explicate their thought process so that the data collected consisted not only of the Likert ratings but also of the interviewees’ comments. The interviews were recorded and transcribed. Qualitative content analysis was applied to track suggestions to improve the framework as well as the experts’ evaluation of measures.

The strategic decision-support framework was refined based on feedback from the expert interviews. We realized that CAPEX and OPEX were sometimes difficult to distinguish, at least on a generic level, since the capital structure can be different across projects. Therefore, we integrated, ending up with only two cost dimensions: financial and transaction costs. Also, compatible measures from different sections were integrated, narrowing the set to 17 key measures. Indeed, a discussion of all 36 measures resulted in redundant ratings of similar measures with identical ratings. Interviewees used a Likert scale to assess each measure. The illustrative portfolio analysis has been conducted from interview data. Portfolio analysis offers preliminary guidance on strategic choices for retrofitting DH systems. As illustrated in Figure 4, the framework helps to identify different classes of measures positioned in the four cost and benefits quadrants: high-potential future solutions with higher costs often require public support in the form of pilot and demonstration programs.

3. Results

This section differentiates key action fields and strategic directions identified by the literature review and TOWS analysis. It presents the measures and the overall assessment framework to support the development of a context-specific strategy for the modernization of existing DH networks.

3.1. Action Fields for the Modernization of District Heating Systems

Reducing district heating (DH) temperatures provides technical and economic benefits, supporting decarbonization through renewable and waste heat integration [31]. Key action fields include optimizing supply infrastructure, demand-side management, and establishing supportive policies. After reviewing the literature and analyzing existing case studies, we identified effective action fields and subfields (referred to as “measures”) that contribute to the modernization and retrofitting of DH networks. “Building improvements” and “R&D” measures are expected to have mostly indirect effects and fall outside the scope of our study. These measures are represented with lighter box colors, marked with an asterisk, for easy identification. Figure 5 categorizes the key action fields and their corresponding subfield measures, illustrating distinct measures aimed at reducing supply temperatures, enhancing efficiency, lowering CO₂ emissions, and promoting a sustainable energy system.

3.2. Strategic Directions

The TOWS method aids in identifying strategic directions for the action fields and their corresponding measures.

Table 2. Strategic directions for fuel diversification based on the literature research [15,21,23,32,40,41,42,43,44].

Supply-Side Enhancements Fuel Diversification
	Internal factors	Strengths (S) S1. Energy security and resilience S2. Integration of renewable energy S3. Compliance with environmental regulations	Weakness (W) W1. Higher upfront investment W2. Technical challenges W3. Fuel availability and reliability W4. Potential efficiency losses
External factors
Opportunities (O) O1. Government incentives O2. Carbon pricing mechanisms O3. Improved public image		S–O strategy directions Carefully evaluate the technical feasibility and economic viability of integrating different fuel sources into your specific DH system, considering government incentives [45]. Create a strategic plan for fuel diversification that prioritizes readily available and cost-effective renewable energy sources while considering environmental goals [45]. Collaborate with research institutions or technology providers to stay updated on advancements in clean-burning and renewable fuel technologies [45]. W–T strategy directions Implement fuel diversification in a phased approach, starting with smaller-scale projects to gain experience and manage technical challenges before large-scale integration [46]. Negotiate long-term fuel contracts with reliable suppliers to mitigate the risk of price fluctuations for alternative fuels [47]. Engage in open communication with the public to address concerns and educate them about new fuel sources’ benefits and safety measures [48].
Threats (T) T1. Fluctuations in fuel prices T2. Existing regulations and infrastructure T3. Public perception of new technologies

,

Table 3. Strategic directions for thermal energy storage integration based on the literature research [15,21,23,32,40,41,42,43,44].

Supply-Side Enhancements Thermal Energy Storage Integration
	Internal factors	Strengths (S) S1. Improved efficiency and cost savings S2. Increased use of renewable energy S3. Reduced infrastructure costs	Weakness (W) W1. High upfront costs W2. Technical challenges W3. Limited system flexibility W4. Potential efficiency losses
External factors
Opportunities (O) O1. Government incentives O2. Technological advancements O3. Peak demand reduction incentives		S–O strategy directions Carefully assess the technical and economic feasibility of TES integration within your specific DH system to ensure cost-effectiveness [49]. Collaborate with experienced TES technology providers who can offer expertise in system design, integration, and operation [49]. Advocate for TES integration by emphasizing its contribution to the increased use of renewable energy sources in the DH system and its alignment with environmental goals [50]. W–T strategy directions Investigate alternative financing models like public-private partnerships or user fees to share the upfront costs of TES implementation [51]. Provide training and development opportunities for staff to address the knowledge gap regarding TES technologies and system integration [52]. Partner with industry organizations and policymakers to raise awareness of the benefits of TES for DH systems and its role in achieving sustainability goals [53].
Threats (T) T1. Uncertain long-term cost-effectiveness T2. Limited awareness of benefits T3. Environmental impact of certain TES technologies

,

Table 4. Strategic directions for district heating network expansion based on the literature research [15,21,23,32,40,41,42,43,44].

Supply-Side Enhancements District Heating Network Retrofitting and Expansion
	Internal factors	Strengths (S) S1. Economies of scale S2. Increased customer base S3. Environmental benefits S4. Increased reliability Increased market share	Weakness (W) W1. High upfront costs W2. Disruption during construction W3. Technical challenges W4. Reluctance of building owners to cooperate
External factors
Opportunities (O) O1. Government incentives O2. Urban development O3. Technological advancements O4. Public–private partnerships O5. Renewable energy integration		S–O strategy directions Prioritize areas with high potential customer density to maximize economies of scale and secure government funding focused on environmental benefits [54]. Integrate DH network expansion into new development projects, leveraging existing construction activities and minimizing disruption [55]. Proactively address public concerns regarding construction disruptions through transparent communication plans and community outreach initiatives [43]. W–T strategy directions Implement a phased approach to network expansion, starting with smaller, less disruptive projects and gradually expanding based on success and budget availability [56]. Investigate trenchless pipe installation techniques that minimize disruption to existing infrastructure and reduce surface excavation [57]. Collaborate with policymakers to streamline permitting processes for DH expansion projects, particularly those aligned with environmental goals [15].
Threats (T) T1. Public perception of disruption T2. Competition of other heating systems T3. Regulatory hurdles

,

Table 5. Strategic directions for smart metering infrastructure based on the literature research [15,21,23,32,40,41,42,43,44].

Demand-Side Management Smart Metering Infrastructure
	Internal factors	Strengths (S) S1. Improved billing accuracy S2. Enhanced customer insights S3. Leak detection S4. Demand response programs	Weakness (W) W1. High upfront costs W2. Data security concerns W3. Integration challenges W4. Limited customer awareness
External factors
Opportunities (O) O1. Government incentives O2. Improved system efficiency O3. Customer engagement O4. Integration with renewables		S–O strategy directions Emphasize how smart meters can improve billing accuracy and empower customers to save money through a better understanding of their consumption patterns [58]. Collaborate with technology providers or experienced DH operators who can offer expertise and potentially economies of scale when implementing smart metering infrastructure [59]. Implement robust cybersecurity measures and establish clear data privacy policies to address customer concerns and build trust [59]. W–T strategy directions Consider a phased implementation approach to manage upfront costs and minimize disruption. Start with pilot projects in specific areas to test the technology and gather data before broader deployment [60]. Proactively communicate the benefits of smart meters and address privacy concerns through transparent communication and educational campaigns [61]. Lobby policymakers for regulations that balance innovation with data security and encourage standardized protocols to minimize the risk of future upgrades due to regulation changes [62].
Threats (T) T1. Technological obsolescence T2. Customer resistance T3. Regulation and standards

,

Table 6. Strategic directions for implementation of financial incentives for consumers based on the literature research [15,21,23,32,40,41,42,43,44].

Demand-Side Management Implementation of Financial Incentives for Consumer
	Internal factors	Strengths (S) S1. Increased customer loyalty and satisfaction S2. Boosted energy efficiency S3. Attracting new customers S4. Improved system load management	Weakness (W) W1. Reduced revenue W2. Administrative burden W3. Free rider problem W4. Potential complexity
External factors
Opportunities (O) O1. Government support O2. Improved customer engagement O3. Data-driven targeting O4. Collaboration with other stakeholders		S–O strategy directions Design incentives that specifically encourage energy-saving behaviors that maximize system benefits, such as lowering thermostats during peak hours or participating in demand response programs [63]. Seek out and apply for government grants or funding programs specifically designed to support consumer incentives in DH systems [64]. Utilize smart meter data to personalize incentives based on individual consumption patterns, targeting high-consumption customers for the most significant impact [65]. W–T strategy directions Collaborate with local energy agencies or NGOs to leverage their expertise and potentially share administrative responsibilities [66]. Ensure incentive programs are clearly communicated, with eligibility criteria and reward structures that are perceived as fair and equitable to avoid public backlash [67]. Start with pilot programs for new incentive structures to test effectiveness and refine them before broader implementation. Regularly evaluate program performance and adjust them as needed to ensure they achieve desired outcomes [68].
Threats (T) T1. Competitor response T2. Fluctuations in energy costs T3. Public perception of unfairness

and

Table 7. Strategic directions for government support based on the literature research [15,21,23,32,40,41,42,43,44].

Policy and Regulatory Framework Government Support
	Internal factors	Strengths (S) S1. Increased investment S2. Regulatory framework S3. Public image and awareness S4. Increased reliability	Weakness (W) W1. Reliance on government support W2. Complex application processes W3. Potential for bureaucracy
External factors
Opportunities (O) O1. Environmental goals O2. Energy security O3. Technological advancements		S–O strategy directions Emphasize how DH systems align with government environmental goals by highlighting their efficiency and potential for renewable energy integration [69,70]. Collaborate with policymakers to develop regulations that incentivize DH connection and discourage inefficient heating systems [71]. Partner with government agencies to launch public awareness campaigns that leverage the government’s endorsement to enhance the public image of DH [71]. W–T strategy directions Work with governments to simplify grant application processes and establish clear communication channels to navigate regulations efficiently [71]. Conduct thorough cost–benefit analyses to showcase the long-term economic benefits of DH projects, reducing reliance on ongoing government support [71]. Anticipate public concerns and proactively address them through transparent communication about the environmental and economic benefits of DH systems [71].
Threats (T) T1. Shifting political priorities T2. Competing interests T3. Public scrutiny

present the strengths, weaknesses, threats, and opportunities as well as the strategic directions aimed at enhancing DH system performance, which regional actors should consider for the short- and mid-term modernization of their DH networks. We chose the S–O and W–T strategies to use strengths and opportunities while reducing weaknesses and threats. Based on insights gained from the review of the relevant literature, we identified promising measures, limiting ourselves to three within each action subfield. This selective approach ensures clarity, avoids overcomplexity, and focuses on measures with the highest potential for practical implementation and measurable outcomes. (In the Appendix A, the TOWS analysis results for long-term actions are provided and may inform broader strategic road mapping for national orchestrators and policymakers regarding “Research and Development” and “Building Retrofitting” directions).

On the supply side, fuel diversification (Table 2) depends on the locally available renewable energy potential and the ability to integrate it into the existing network. This is, on one side, a technical question, as the configuration of the existing infrastructure may raise technical challenges. However, favorable policy frameworks may improve the economics of such measures. Also, nontechnical barriers may occur, such as the public acceptance of new energy sources or incompatibility with existing regulations. Integrating thermal energy storage (TES; Table 3) improves the system’s efficiency and enables an increased utilization of renewable energy sources. Storage may allow a reduction in peak demand, which is potentially crucial for the system’s economics. TES includes a broad array of technological solutions, with scales ranging from single-building to whole-system integration. Also, here, the feasibility is influenced by technical factors (e.g., compatibility) as well as nontechnical factors (e.g., adverse environmental effects of some technologies). DH network expansion and retrofit (Table 4), besides the benefits of serving additional buildings, may help lower the network’s supply temperature if the transport capacity of the network is increased. The expansion to new areas is therefore not necessarily in focus in the context of DH modernization. However, the well-known challenges of grid construction persist: it remains a highly disruptive process, can encounter technical difficulties in civil engineering, and may face public acceptance issues. A further option is to integrate substations with newer designs that allow lower temperatures. It should be noted that this option is not unambiguously classified on the supply side, as substations are sometimes owned by building owners. A common characteristic of most supply-side action fields is high upfront costs, which represent a potential barrier and may make these measures risky.

On the demand side, smart metering (Table 5) is a comparatively inexpensive way to monitor the efficiency of substations. Of note, an in-depth case study carried out in Switzerland [40] found that most inefficiencies at the substation level were due to faults that can be easily repaired, so that monitoring flows and temperatures offers a quick and cheap way to lower return temperatures and improve systemic efficiency. While the integration of smart meters is nowadays standard in new DH systems, older systems are often not equipped with them. Installing smart meters on an existing DH system may prove challenging, depending on the willingness of building owners to cooperate. In particular, concerns related to data privacy and cybersecurity. In addition to technical measures, utilities may also offer financial incentives to building owners (Table 6) to encourage grid-friendly behavior. While this may lead to increased customer satisfaction, designing fair incentive schemes may prove complex and increase the utility’s administrative burden. Finally, public policy interventions may also be a way to increase the efficiency on the demand side, e.g., by incentivizing efficient and grid-friendly energy use (Table 7).

3.3. Strategic Decision-Support Framework

This section presents the adjusted list of measures for each action field. The adjustments are based on the feedback from interviews conducted with the two experts. The measures were originally derived from the TOWS analysis and included in the initial strategic decision-support framework. The interviews centered on the action fields and evaluation of the measures.

• Supply-Side Strategies: fuel diversification, thermal energy storage (TES) integration, and district heating network retrofitting and expansion.
• Demand–Side Strategies: smart metering infrastructure and implementation of financial incentives for customers.
• Policy Frameworks: government support, policy advocacy, and public outreach.

The 36 measures were consolidated based on feedback from the interviewees to avoid redundancy. The finalized list of measures, presented and elaborated in

Table 8. Final list of measures for the subfield of action.

Category	Action fields	Measures	Illustrative Activities
Supply	Fuel Diversification	Feasibility and Planning	Evaluating Feasibility: assess the technical, economic, and environmental viability of various fuels. Strategic Plan: set goals, policies, and risk management for fuel integration. Staying Updated: keep current with fuel technology advancements and train staff. Phased Implementation: introduce new fuels gradually through pilots and scale up based on success.
		Risk Management and Communication	Risk Management: identify potential risks associated with fuel diversification, such as supply instability and cost fluctuations, and develop mitigation strategies. Communication: ensure clear, transparent communication with stakeholders about the benefits, risks, and progress of fuel diversification efforts.
	Thermal Energy Storage Integration	Planning and Collaboration	Planning: develop a detailed plan for integrating thermal energy storage, including goals, timelines, and resource allocation. Collaboration: engage stakeholders, including technology providers and regulatory bodies, to ensure coordinated efforts and successful implementation.
		Benefits and Financing	Benefits: enhances energy efficiency, reduces costs, and improves grid reliability. Financing: secure funding through grants, loans, and partnerships with private and public sectors.
		Building Staff Expertise	Building Staff Expertise: provide training and development opportunities for staff to address the knowledge gap regarding TES technologies and system integration.
	District Heating Network Retrofitting and Expansion	Targeting and Development	Targeting: identify high-demand areas and potential customers for network expansion. Development: plan and construct new infrastructure, ensuring scalability and integration with existing systems.
		Public Concerns and Expansion	Public Concerns: address community issues such as cost, disruption, and environmental impact through transparent communication. Expansion: strategically extend the network, prioritizing areas with high demand and ensuring minimal disruption.
		Policy Collaboration	Policy collaboration: work with government and regulatory bodies to align expansion plans with policies, secure necessary approvals, and access funding opportunities.
Demand	Smart Metering Infrastructure	Customer and Efficiency	Customer: empower users with real-time energy usage data for better management and cost savings. Efficiency: enhance energy distribution efficiency through precise monitoring and demand response capabilities.
		Security and Management	Security: implement robust cybersecurity measures to protect data and system integrity. Management: optimize smart meter operations through centralized monitoring and efficient resource allocation.
		Transparency and Stability	Transparency: provide clear and accessible energy usage data to customers, fostering trust and informed decision-making. Stability: ensure reliable and consistent performance of the metering system to maintain continuous service and accurate billing.
	Implementation of Financial Incentives for Consumer	Behavior and Opportunities	Behavior: encourage energy-efficient practices by offering financial rewards and rebates. Opportunities: create new avenues for consumers to save money and reduce energy consumption through targeted incentives.
		Fairness and Evaluation	Fairness: ensure equitable access to incentives for all consumers, regardless of income or location. Evaluation: regularly assess the effectiveness and impact of incentives to make data-driven improvements.
		Partnership and Expertise	Partnership: collaborate with businesses, government agencies, and nonprofits to design and implement effective incentives. Expertise: leverage industry knowledge and best practices to maximize the impact and efficiency of financial incentive programs.
Policy	Government Support	Benefits and Advocacy	Benefits: provide essential resources, funding, and policy support to drive sustainable initiatives and economic growth. Advocacy: promote policies and programs that encourage innovation and public well-being through active engagement and communication.
		Public Image and Outreach	Public Image: enhance the government’s reputation by demonstrating commitment to public welfare and transparency. Outreach: engage with the community through campaigns, consultations, and educational programs to build trust and support for government initiatives.
		Applications and Impact	Applications: implement government support across various sectors, like grant application processes, and establish clear communication channels to navigate regulations efficiently, to address public needs. Impact: maximize the impact of government funding and programs to improve societal well-being and economic stability.

, is used in the strategic decision-support framework.

The measures were evaluated from two different perspectives:

• Benefit dimension evaluation, which includes four different subcategories: customer value, business value, ecosystem value, and public and social value.
• Cost dimension evaluation, which includes two different subcategories: CAPEX/OPEX and transaction costs.

Together, these two matrices form the strategic decision-support framework, as presented in Figure 6 and Figure 7. The spreadsheet presents the rating results in two forms. First, the weight given by the user to different benefit and cost dimensions for each measure, as presented in Figure 8 and Figure 9, is the relative comparison of the field-specific measure of the portfolio analysis as presented in Figure 10. Figure 8, Figure 9 and Figure 10 are described in the following section, which illustrates the application of the strategic decision-support framework.

3.4. Illustrative Testing and Conceptual Refinement of the Strategic Decision-Support Framework

This section presents an illustrative application of the strategic decision-support framework based on expert feedback. The interviews with two senior researchers were conducted to assess and improve the usability, communicative clarity, and practical alignment of the framework with real-world decision-making processes. Importantly, these interviews were not intended to generate empirical or generalizable results, but to support the conceptual development and refinement of the tool. The expert feedback served to identify potential improvements, reduce redundancy in the measure set, and enhance the structure of the evaluation process. The following summary should therefore be understood as a formative test of the framework’s practical logic, rather than as a source of evidence-based conclusions.

3.4.1. Illustration of Benefit and Cost Dimension

The expert feedback was used to illustrate how the strategic decision-support framework captures the distribution of benefits and costs across key value dimensions. Figure 8 presents an example of how measures relate to different types of benefits, such as customer, business, ecosystem, and public value, highlighting their relevance for different stakeholder groups and indicating where synergies or trade-offs may exist.

Figure 9 complements this by showing the cost side, distinguishing between financial costs (CAPEX/OPEX) and transaction costs. These visualizations helped demonstrate how measures could be prioritized based on their strategic positioning. Infrastructure-intensive options like thermal storage were seen as high-cost/high-benefit, while digital tools like smart metering appeared as low-cost and scalable. These insights informed refinements to the framework, improving its usability in decision-making processes.

3.4.2. Portfolio Visualization

The cost–benefit analysis illustrates varying perspectives on the proposed measures and shows the height of distinct benefit and cost dimensions, but does not provide a summarized ranking of costs and benefits per measure. This is achieved with the second graphical output: a summary of the weighting of costs and benefits for the different action fields (Figure 10). The X- and Y-axes show the average Likert ratings for different measures across all benefit (X-axis) and cost dimensions (Y-axis). Since only medium- to high-benefit strategies were included based on expert input, no measures appear in the low-benefit quadrants. The quadrant structure was retained to preserve the analytical consistency of the framework.

As illustrated in Figure 10, supply-side measures are most likely to require financial support due to the inclusion of high-cost and high-benefit measures. Similarly, key action fields such as “thermal energy storage integration” and “district heating network retrofitting and expansion” are associated with both higher costs and greater benefits.

In sum, the assessment results indicate that several measures, such as planning and collaboration, benefits and financing, targeting and development, public concerns and expansion, customer and efficiency, were assessed as high-cost and high-benefit. Consequently, these measures are positioned in the top-right quadrant of our analysis portfolio, categorizing them as high-potential future solutions. For the interpretation of the CBA, Figure 4 provides the main recommendations for each quadrant, differentiating potential P&D projects with high costs and benefits from self-runner projects with high benefits but low costs.

3.4.3. Summary of Expert Feedback

The expert interviews provided valuable qualitative feedback that supported the refinement of the strategic decision-support framework. In particular, the experts emphasized the need to account for nonmonetary factors, such as transaction costs, stakeholder coordination, and public value, which are often critical in real-world DH modernization projects.

They also stressed the importance of aligning long-term infrastructure investments with appropriate financing models and suggested that the framework could effectively support early-stage strategy discussions, including the identification of suitable measures for pilot projects. Thermal storage, smart metering, and substation upgrades were seen as promising pilots for demonstration due to their potential impact and scalability.

Finally, the experts praised the framework’s clarity, structured logic, and its ability to distinguish between strategic directions and individual measures. They regarded the cost–benefit structure and scoring approach as practical tools for supporting informed decision-making across diverse stakeholder groups.

4. Discussion

4.1. A Strategic View of DH Modernization

This study responds to recent calls to consider DH modernization not solely as a technical, but as a strategic question [23,72,73]. This study reviewed the literature on DH modernization, which is mostly focused on designing and evaluating technical solutions, using a strategic analysis (TOWS analysis) to assess the review. This review shows that DH modernization spans several technical and nontechnical domains. Indeed, measures include interventions on the supply side and on the demand side as well as public policy. The TOWS analysis revealed two strategic implications: first, the measures proposed in the literature are not only addressed to DH utilities, as some require collaborations with other actors (municipal authorities, policymakers, technology providers, research institutions) as well as direct involvement of customers. Second, some measures are more suited to leverage strengths of the local DH ecosystem (e.g., utility and municipal administration with ample financial resources and capabilities; established contacts with relevant technology providers and research groups; readiness of customers to accept new interfaces such as smart meters) and favorable environmental conditions (e.g., supportive policy frameworks), where other measures help mitigate weaknesses and threats (e.g., low acceptance of measures or financial risks).

4.2. Implications for Policy and Practice

Recall that this framework is meant to be used at the beginning of the decision-making process, bringing together actors with different interests and backgrounds. At that time, a detailed estimate of costs and revenues may not be available. Rather, users rate the costs and benefits based on their expectations, hence the use of a Likert scale. This graphical representation, therefore, helps determine the broad characteristics of a measure. This study has highlighted the complexity of DH retrofitting: indeed, multiple evaluation dimensions are necessary to select measures and develop a tailored retrofitting strategy. In the illustrative case, discussion proved essential, as the costs and benefits are insufficiently characterized by the Likert scale. This is especially the case when the costs and benefits cannot be clearly monetized, as is often the case for indirect benefits (e.g., benefits at the ecosystem scale) or transaction costs. We therefore see the developed framework as a boundary object, which can help structure discussions to make sense of complex decision-making situations on local energy systems [74].

This study was initiated to address the need to classify measures on a simple cost–benefit grid, in cases where detailed information is not available. This enables a first decision on how to proceed to implement measures: those with high benefits and low costs should ideally be executed by the industry without any additional support. Measures with smaller benefits but low costs should be considered at an operational level. By contrast, measures with high potential benefits and high costs may benefit from public support in the form of a pilot project. The exemplary application also helped elicit some ideas for suitable pilot projects, such as the integration of substations with innovative cascade architectures or advanced heat exchanger technologies in older urban DH networks, innovative financing mechanisms to support the retrofit of DH grids, or the integration of smart meters in existing DH grids. Such an approach would provide a practical demonstration of the feasibility and effectiveness of retrofits in reducing return temperatures and improving overall system performance. Both the TOWS analysis of the reviewed literature and the expert interviews stressed the need to consider organizational factors such as multifactor decision making and collaboration, benefits on multiple levels, and transaction costs. Indeed, pilot projects ideally provide benefits beyond testing technological solutions, such as collaborative learning and network development [75]. However, while this study provides a conceptual framework based on a review of the existing literature, further empirical testing and broader stakeholder engagement are essential for presenting its application with real-world cases and for investigating critical context factors that may influence strategy development for DH retrofitting.

Private sector participation in DH investments becomes increasingly viable when business models and technologies are aligned with the expectation of quick returns on investment [76]. Technologies that support this objective include: (i) heat recovery systems (e.g., from industrial waste heat or data centers), which offer low-cost heat sources and require relatively modest upfront investment; and (ii) digitalization and smart DH grids, which improve operational efficiency and enable revenue optimization with minimal additional cost [77,78,79].

In addition to technological levers, cobenefits such as regulatory incentives, climate branding, and alignment with Environmental, Social, and Governance (ESG) frameworks can further enhance the attractiveness of DH projects to private investors. These factors can help companies fulfill corporate social responsibility goals and gain access to green finance or sustainability-focused investment capital [14,76,80].

Based on this study, we highlight the following aspects for a successful pilot project:

• Potential Investors: Potential investors include local utility companies, government bodies, and private sector investors with an interest in enhancing the efficiency and sustainability of district heating networks. Government and municipal bodies are particularly well-positioned to support such projects due to their alignment with public policy goals related to energy efficiency and greenhouse gas emission reductions (see also [81]).
• Opportunities and Risks: The opportunities associated with such a P&D project include the scalability across other regions, potential cost savings from improved efficiency, and enhanced integration of renewable energy sources. However, risks such as technical challenges, high upfront investment costs, and consumer acceptance issues need to be carefully managed through robust planning and stakeholder engagement.
• Designing the P&D Project: The P&D project should be designed with a focus on both engineering know-how and collaborative stakeholder involvement. Such a holistic approach ensures that the project not only demonstrates technical feasibility but also addresses economic and social dimensions, making it a viable option for broader application.

5. Conclusions

In this work, the critical need for comprehensive modernization strategies for existing DH grids to achieve sustainable district heating systems has been studied.

This study examined district heating (DH) through a literature review and TOWS analysis to identify strategic directions. Expert interviews validated and refined these strategic directions, emphasizing benefits and costs in retrofitting existing DH systems. The research resulted in a strategic decision-support framework incorporating a portfolio analysis.

While expert input helped refine the framework, the main contribution remains conceptual, and the illustrative application should be understood as a demonstration of the tool’s practical structure, not as empirical validation. The contribution of this research lies in the development of a novel decision-support tool that aids stakeholders in evaluating and selecting the most suitable strategies for grid modernization in their specific context. By integrating technical, economic, and social considerations, the tool provides a holistic approach to decision-making in the context of complex energy systems.

Ultimately, this study serves as a call to action for researchers and practitioners to further explore and apply these findings in practical settings. In doing so, they can contribute to ongoing efforts to decarbonize urban heating systems and promote sustainable energy solutions.

The study findings indicate that the choice of certain strategic actions should be tailored to the specific situations and context: there is no single best measure that could be recommended for a general context. However, further research is needed to explore the integration of advanced digital technologies, such as AI and smart grid systems, which could optimize grid operations and enhance energy efficiency.

Longitudinal studies that monitor the long-term performance and environmental benefits of these strategies would provide valuable insights into their sustainability and resilience. Expanding the strategic decision-support framework to include more comprehensive criteria, such as lifecycle assessments, resilience to climate change, and potential for future technological integration, could further enhance its value as a decision-making tool for stakeholders.