To improve energy efficiency and give more access to renewable energy sources, low-temperature district heating (LTDH) is a promising concept to be realized in the future. However, concern about Legionella proliferation restricts applying low-temperature district heating in conventional systems with domestic hot water (DHW) circulation. In this study, a system with decentralized substations was analysed as a solution to this problem. Furthermore, a modification for the decentralized substation system were proposed in order to reduce the average return temperature. Models of conventional system with medium-temperature district heating, decentralized substation system with LTDH, and innovative decentralized substation system with LTDH were built based on the information of a case building. The annual distribution heat loss and the operating costs of the three scenarios were calculated and compared. From the results, realizing LTDH by the decentralized substation unit, 30% of the annual distribution heat loss inside the building can be saved compared to a conventional system with medium temperature district heating. Replacing the bypass pipe with an in-line supply pipe and a heat pump, the innovative decentralized substation system can reduce distribution heat loss by 39% compared to the conventional system and by 12% compared to the normal decentralized substation system with bypass. (C) 2015 Elsevier Ltd. All rights reserved.