The choice of heating system in new residential buildings has a significant effect onthe total life cycle-cost. Rising energy prices and tougher energy demands for newbuildings creates incentive for energy- and cost-efficient solutions. The purpose ofthis project is therefore to investigate how the choice and sizing of a heating systemin a building can be performed with focus on cost-efficiency. The project is conducted as a case study on a residential building during the buildingphase on behalf of INTEC Dalarna AB, a technical engineering company. The project aim is to answer the following questions: – What heating system of district heating, ground source heat pumps or air towater heat pumps is the most cost-effective for a new residential building inthe middle of Sweden? – Is there a specific combination of a heat pump of arbitrary size and peak heating system that is particularly advantageous for the building? – Is IDA ICE suitable for simulation of energy use in buildings with heatpumps? – Does high energy-efficiency also mean high cost-efficiency for the building? The questions will be answered with building simulation software IDA Indoor Climate and Energy along with capital budgeting. The capital budgeting will be performed with net present value and payoff period for the heat pumps over choosingdistrict heating. The results of the project show that a system with ground source heat pumps with acapacity of 50 percent of the annual peak heat demand and electricity for peak loadsis the most cost-efficient option for the building. However, the most energy efficient option is a ground source heat pump with a capacity of 50 percent of the annual peak heat demand with district heating for peak loads. The project also shows that IDA ICE is suitable for simulating the performance of heat pumps in buildings.The conclusion is that a smaller system of ground source is more cost-efficient forthe building, and that the most energy efficient option is not always equal to themost cost-efficient over time.