This study evaluates the techno-economic and environmental potential of retrofitting a 3 MWth biomass-fired moving-grate boiler in Sweden, for polygeneration of district heat, electricity, and biochar through direct biochar integration. The retrofit suppresses late-stage char oxidation to recover solid carbon as biochar, while volatile gases are fully combusted for heat generation. A scenario-based assessment was conducted using full-year operational data, combining mass and energy balance modeling, Organic Rankine Cycle (ORC) simulation, levelized cost of biochar (LCOB) assessment, and sensitivity analysis. Results show that approximately 54% of fuel energy is delivered as heat and about 45% is retained in biochar, with flue gas condensation contributing substantially to heat recovery. Under demand-driven scenarios (S1–S3), annual heat supply remains constant at about 13.6 GWh, while biochar production reaches 1.2–1.4 kt (9.9–11.1 GWh). ORC integration produces up to 1.59 GWh of electricity annually, depending on dispatch strategy. The maximum-throughput case (S4) increases biochar and electricity output but generates surplus heat. The LCOB without considering revenue from carbon sequestration is estimated at 39 €/MWh (320 €/t) under demand-constrained operation and is most sensitive to biomass price and, when ORC is applied, electricity price. Biochar production enables carbon sequestration of 2.4–2.7 kt CO₂/y in S1–S3 and 10.2 kt CO₂/y in S4. The study demonstrates that integrated biochar coproduction can convert existing biomass district-heating boilers into carbon-negative polygeneration systems while maintaining reliable heat supply.