Member States are required to conduct a comprehensive assessment of “the potential for the application of high-efficiency cogeneration and efficient district heating and cooling” according to Article 14 of the Energy Efficiency Directive (2012/27/EU). This comprehensive assessment is to be based on a cost-benefit analysis “capable of facilitating the identification of the most resource-and cost-efficient solutions to meeting heating and cooling needs”. The methodology presented will assist EU Member States in the fulfilment of this requirement. A key feature of the methodology is the collection and processsing of relevant data that will result to a heat map showing the heating and cooling demand as well as potential supply points. Based on a sectoral and spatial description of demand and supply, and other local factors relevant for the analysis like climate, population density, renewable energy resources availability etc. the method allows to locate those areas with sufficient heating/cooling demand for DHC deployment, and to identify potential supply sources (e.g. industrial waste heat, geothermal etc.) to cover the demand. In order to conduct the analysis, different heating and cooling alternative scenarios, which reflect different options for making heating and cooling supply more efficient, have to be defined. The methodology suggests identifying and evaluating the technical potential of each of the scenarios related to high-efficiency cogeneration and efficient district heating and cooling. After that, each scenario will be compared to a baseline, which reflects the present situation and the most likely evolution of heating and cooling sector. The analysis will identify and estimate the most relevant economic effects, i.e. potential costs and benefits associated with the scenarios considered. On the side of costs, capital and operating cost of equipment has to be accounted. Additionally, the economic value of other effects has to be estimated, mainly, the changes in socio-economic and environmental factors. All the costs and benefits over the timeframe of the analysis will be reflected in the Net Present Value. Based on this and the spatial characteristics, the most cost-efficient solutions to meeting heating and cooling needs will be identified.