A suburban energy transition: Deploying heat Pump–Photovoltaic systems as a cost-effective alternative to district heating in low-density settlement

ABSTRACT Suburban areas with dispersed buildings and low heat flux densities present distinct challenges for the decarbonization of heating systems. While district heating is often promoted in dense urban cores, its economic viability in suburban zones remains questionable due to high network costs and thermal losses. This study investigates whether decentralized, household level solutions combining high-temperature air source heat pumps with photovoltaics can outperform centralized district heating in such contexts. Using a case study of four peripheral settlements in Croatia, the research employs a dual-scale techno-economic optimization framework: a mixed-integer linear programming model for district heating and a prosumer-level model for individual heat pump-photovoltaic–battery systems. Three building renovation scenarios (no, partial, and full renovation) are evaluated alongside a mixed-financing scheme involving grants, household equity, and energy service company participation. Results show that decentralized heat pump-photovoltaic–battery systems under full renovation deliver the highest energy savings (75% reduction in household energy costs), the greatest carbon dioxide reduction (2,207 tonnes annually), with a net present value of 1.49 million EUR and an internal rate of return of 7.21%. When external costs of air pollution and carbon are internalized, the economic net present value rises to 68.39 million EUR. The results suggest that, under the assumptions and boundary conditions defined in this study, decentralized renewable heating systems are both technically viable and economically favorable compared to district heating in low-heat-density suburban contexts. This work provides a replicable decision-support framework for policymakers and planners seeking to accelerate the clean heating transition in dispersed residential areas.