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Background Poor air quality and inadequate domestic heating sources are tightly connected problems in the Eastern-European countryside. There are a few alternatives to comprehensively solve these problems with an emphasis on economic and environmental sustainability. In this paper, individual heat pumps and energy efficiency measures are analyzed in four scenarios to investigate their role for cleaner and sufficient heating in rural settings. From a high-level perspective, this paper assesses the potential for electricity demand flexibility based on the use of individual heat pumps equipped with hot water storage. Methods In a first step, the current annual residential heating energy consumption of a rural area in Hungary is estimated with a bottom-up model using data from field surveys and official datasets. In a second step, four scenarios estimate the future heating energy consumption considering demographic trends and the average number of building retrofits (thermal insulation) performed yearly in the region. Results The reference scenario is a 20-year projection of heating energy consumption with modest retrofit actions which resulted in small energy savings. Alternative scenarios based on more effective retrofit actions reaching higher rates of the building stock would result in a 23–69% reduction in final energy consumption. Phasing out lignite from the heating energy mix would reduce particulate matter emissions. Each well-insulated dwelling with a heat pump-based system and hot water storage tank could provide theoretical flexibility of approximately 3.4 kWh per 24 h. Conclusions The current energy retrofit practices are not sufficient to solve the challenges faced in this area. Demand-side management policies based on the widespread use of individual heat pumps are an alternative to promote access to cleaner residential heating. An additional benefit is the potential for flexibility in electricity demand. Thus, this paper calls for an integration of energy retrofit with efficient heating (including hot water storage tank) to achieve results that further contribute to a future of sustainable energy.

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