This study aims to develop a novel design method for reducing the energy consumption and CO2 emissions of local energy systems, simultaneously considering the recovery of industrial waste heat, and effectively dealing with the non-continuous nature of energy usage and heat recovery. A multi-period concept has been adopted for characterizing the change of heat demand and associated heat recovery in local energy systems which is used for targeting of the minimum energy consumption. In addition, techno-economic analysis is used to provide design guidelines for better heat integration. This design methodology also incorporates the impacts of heat storage and part-load performance of energy production equipment. Opportunities for utilization of low grade heat in process industries have been systematically considered for the minimization of energy generation in local energy systems together with the evaluation of the economic feasibility of such systems for integration of industrial low grade heat with local energy systems. Case studies are used to demonstrate the applicability and practicality of the heat integration methodology developed in this work, and to illustrate how a holistic approach can improve the overall energy efficiency of local energy systems.