Fiscal incentives and pathways to carbon-neutral urban heating: Integrating renewable power and seasonal thermal storage

Achieving carbon neutrality in urban heating demands both technological innovation and supportive fiscal policies. This study investigates the techno-economic pathways toward carbon-neutral district heating by integrating renewable power, power-to-heat technologies, and seasonal thermal energy storage (STES), underpinned by fiscal incentive mechanisms. Focusing on a hypothetical emissions-free neighborhood in Meizhou, Guangdong, a comprehensive energy system model is developed using the Integrate tool to simulate local photovoltaic (PV) generation, diurnal and seasonal variations, and multi-energy interactions. Three district heating (DH) scenarios are examined, with source temperatures of 87 °C (reference), 72 °C (medium), and 47 °C (low), to assess the influence on system costs, renewable integration, and flexibility. Results show that adopting low-temperature DH networks can reduce operating costs by over 40% compared to conventional systems, primarily due to improved heat pump performance, higher utilization of STES, and enhanced local energy self-sufficiency. Moreover, fiscal incentives—such as capital subsidies for renewable installations and tax reductions for energy storage investments—significantly accelerate economic feasibility and system deployment. The findings highlight that coordinated fiscal policies, coupled with integrated planning, are essential for enabling sustainable, affordable, and carbon-neutral urban heating systems.