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A new approach to minimise capital costs and energy usage in a district heating network is presented. The method comprises a two-stage programming model, which synthesises design and the optimal operation of a district heating network. Two different optimisation approaches—(a) minimising the annual total energy usage, and (b) minimising the equivalent annual cost of the heat network installation and operation—were examined and high and low temperatures district heating were investigated. For each optimisation approach, the minimum optimal annual total energy usage and minimum optimal equivalent annual cost were calculated and suitable pipe and pump sizes, taking into account different supply and return temperature regimes, target pressure losses and operating strategies within a district heating network were found. Design cases with minimum annual total energy usage and minimum equivalent annual cost used rather small pipe diameters and large pressure drops. This in turn reduced the annual total energy usage and the equivalent annual cost and the suitable pipe and pump sizes were selected. In addition, it was observed that by reducing the water temperature, the annual total energy usage and the equivalent annual cost could be reduced further. However, the obtained design cases based on a low temperature had relatively larger pipe sizes and smaller pressure drops compared with design cases obtained for the high temperature district heating. [ABSTRACT FROM PUBLISHER]