Decarbonisation strategy for district heating based on an existing gas-turbine combined heat and power plant: A novel approach with long-term scenario techno-economic optimisation

Decarbonising existing gas-turbine-based combined heat and power plants represents a critical challenge for the transition of district heating systems. This study presents a techno-economic optimisation framework to identify the optimal configuration of a renewable energy hub based on a hybrid power-to-methane and heat-pump pathway. The proposed system integrates electrolysis, methanation with CO 2 recovery from flue gas and seasonal storage to minimise the levelised cost of heat while meeting mandated renewable fractions. A comparative analysis between Riga (Latvia) and Milan (Italy) was conducted by coupling TRNSYS dynamic simulation with GenOpt optimisation. The results reveal that local climatic and market conditions dictate distinct optimal designs. Achieving an equivalent renewable fraction in Milan requires larger synthetic methane storage, whereas Riga favours increased thermal energy storage. Notably, the wind-dominated profile in Riga necessitates a significantly higher electrolyser capacity to manage generation variability. The analysis demonstrates that high renewable fraction targets compel component oversizing, leading to exponential growth in energy exports and increasing the Levelized Cost of Heat from a baseline of 0.10 EUR/kWh to approximately 0.20 EUR/kWh. This study’s novelty lies in its multi-fidelity approach, combining high-resolution physical optimisation with long-term system dynamics modelling. From a long-term perspective, the results suggest that aggressive early-stage investment in renewable capacity is economically advantageous, leveraging net electricity exports to offset the costs of deep decarbonisation.