Energy 29 (2004) 245–256 www.elsevier.com/locate/energy Modernization of local energy systems  Dietmar Lindenberger a,b,* , Thomas Bruckner c , Robbie Morrison c , Helmuth-M. Groscurth d , Reiner Ku ¨mmel b a Energiewirtschaftliches Institut an der Universita ¨t zu Ko ¨ln, Albertus-Magnus-Platz, 50923 Cologne, Germany b Institut fu ¨r Theoretische Physik, Universita ¨t Wu ¨rzburg, Am Hubland, 97074 Wu ¨rzburg, Germany c Institut fu ¨r Energietechnik, Technische Universita ¨t Berlin, Marchstr. 18, 10587 Berlin, Germany d Hamburgische Electricita ¨ts-Werke AG, U ¨ berseering 12, 22297 Hamburg, Germany Received 16 August 2002 Abstract This paper analyzes modernization options for a local energy system, including both demand reduction and supply-related measures. The high-resolution optimization model deeco (dynamic energy, emission, and cost optimization) is extended by developing techniques to support conventional insulation measures, transparent insulation, and switchable transparent insulation. Supply-side technologies include gas-fired boilers, heat pumps, solar collectors, and the cogeneration of heat and electricity. Compared to common practice comprising oil-fired boilers and public grid electricity, gas-fired cogeneration is a favorable option, although sensitive to electricity tariffs. Given the current prices of fossil fuels, extensive retrofitted thermal insulation would reduce CO 2 -equivalent emissions by about 20% and increase overall costs by 25%.  2002 Elsevier Ltd. All rights reserved. 1. Introduction ISOTEG (innovative systems and optimization techniques for the energetic modernization of buildings) is a suite of research projects funded by the Bavarian Research Foundation, involving more than 50 organizations from industry and academia. Major aims of the ISOTEG project, which is coordinated by the Bavarian Center of Applied Energy Research (ZAE Bayern), include the development of new components and systems to improve thermal insulation and the use of * Corresponding author. Energiewirtschaftliches Institut an der Universita ¨t zu Ko ¨ln, Albertus-Magnus-Platz, 50923 Cologne, Germany. Tel.: +49-221-17091814; fax: +49-221-446537. E-mail address: lindenberger@wiso.uni-koeln.de (D. Lindenberger).  An earlier version of this paper was presented at the International Workshop “Advances in Energy Studies”, Porto Venere, Italy, 2000. 0360-5442/$ - see front matter  2002 Elsevier Ltd. All rights reserved. doi:10.1016/S0360-5442(03)00063-X