In this study sustainability of the different district heating (DH) system development scenarios were evaluated and quantified. For this purpose, developed district heating planning tool (DHPT) was used. DHPT development was based on a diversified approach considering the expected reduction in heat consumption. This paper describes the DHPT development methodology and proposed criteria for the assessment of DH systems efficiency. Five development scenarios for specific DH system (heat source: two water heating boilers 2 × 2.6 MW, cogeneration unit 0.6 MW th , DH network total length of 1890 m, 23 consumers with a total heated area of 51,069 m 2 ) were assessed using DHPT and the optimal scenario was justified. Three building renovation scenarios with different supply water temperatures were evaluated using energy dynamic simulation tool IDA ICE, with the purpose to assess the potential of existing non-renovated buildings to switch to a fourth-generation district heating (4GDH) system. In optimal DH development scenario the heat losses in the distribution network are only 3.8% and the share of renewable sources has reached 47%, but natural gas-fired water boiler is used only for coverage of peak loads. Results from IDA ICE simulations have shown that in non-renovated buildings indoor temperature drop below 18 °C lasted 32 h during the whole heating season.