The coupling of the heating and the electricity sectors is of utmost importance when it comes to the achievement of the decarbonisation and the energy efficiency targets set for the 2020 and 2030 in the EU. Centralised cogeneration plants connected to district heat networks are fundamental element of this coupling.Despite the efficiency benefits, the effects of introducing combined generation to the power system are sometimes adverse. Reduced flexibility caused by contractual obligations to deliver heat may not always facilitate the penetration of renewable energy in the energy system. Thermal storage is acknowledged as a solution to the above. This work investigates the optimal operation of cogeneration plants combined with thermal storage. To do so, a combined heat and power (CHP) plant model is formulated and incorporated into Dispa-SET, a JRC in-house unit commitment and dispatch model. The cogeneration model sets technical feasible operational regions for different heat uses defined by temperature requirements. Different energy system scenarios are used to assess the implications of the heating–electricity coupling to the flexibility of the power system and to the achievement of the decarbonisation goals in an existing non interconnected power system where CHP plants provide heating and electricity to nearby energy dense areas. The analysis indicates that the utilisation of CHP plants contributes to improve the overall system efficiency and reduce total cost of the system. In addition, the incorporation of thermal storage increases the penetration of renewable energy in the system.