Coal-based district heating systems in Central and Eastern Europe face increasing pressure from carbon pricing, aging infrastructure, and decarbonization requirements. This study presents a screening-level thermodynamic and operating-cost assessment of modernization pathways for a municipal coal-fired district heating plant. The analyzed options include replacement of the existing pulverized-coal boiler with a biomass-fired unit and conversion to three gas-turbine-based combined heat and power configurations: a simple cycle, a regenerative cycle, and an externally fired air-turbine system. Hydrogen was considered at mass shares of 0, 50, and 100 wt.%, and annual performance was evaluated for an equivalent operating time of 8,500 h and a common useful heat production of 315,360 GJ/year. The economic assessment included fuel expenditure, direct CO₂ allowance costs, and revenues from heat and electricity sales, while capital and infrastructure costs were excluded. For the heat-only cases, biomass reduced the selected operating cost from 4.41 million USD/year for coal to 2.64 million USD/year, mainly because no direct CO₂ allowance cost was assigned within the adopted EU ETS boundary. Among the natural-gas CHP cases, the simple gas turbine achieved the highest annual operating balance despite having the lowest electrical efficiency. At a hydrogen price of 1 USD/kg, increasing the hydrogen mass share improved the operating balance of all CHP configurations, with the 100 wt.% H₂ cases reaching 8.99–15.41 million USD/year. At 3 USD/kg, only the simple gas turbine with 50 wt.% H₂ retained a positive annual operating balance, whereas at 5 and 8 USD/kg all hydrogen-containing cases generated operating losses. The calculated break-even hydrogen prices ranged from approximately 2.25 to 3.32 USD/kg. The results indicate that thermodynamic efficiency alone does not determine operating competitiveness under the adopted assumptions; fuel demand, fuel price, electricity output, and direct carbon-cost exposure jointly shape the economic boundary conditions of district heating modernization.