This article analyses the indicators that describe the overall efficiency of the district heating system and restrictions for its transition towards a 4th generation district heating system. The object of this case study is a district heating company with a modern biomass combined heat and power plant – “Fortum”, in Jelgava. Possible development scenarios for the district heating company moving towards a 4th generation district heating system were analysed. The scenarios were compared via technological, economic and bioeconomic indicators and evaluated for their restrictions for limiting long-term sustainable development. The scenarios which include production of new biomass products (bio-oil) are the most sustainable solutions that allow to increase the added value from 58 €/twood to 80 €/twood. The heat tariff was analysed in order to identify the economic feasibility of the development scenarios. Reducing tariffs by improving district heating’s operation is the only unsustainable solution for the district heating company because it reduces the company’s possibility to invest in future developments. It is concluded that bioeconomic development scenarios can support sustainability of the district heating systems. Development decisions need to be taken in due time before the consumption decreases because of energy efficiency measures.