The contemporary energy sector undergoes the greatest transition, seen from the beginning of the development of modern energy. Such a comprehensive transition is a consequence of the imposed strategic policy goals such as the reduction of greenhouse gas emissions, the rational use of energy and the use of renewable energy sources (RES). The latter has led to the installation of significant generation capacities whose energy production is of an intermittent nature, which implies an increase in the requirements for flexibility within the energy system that can contribute to the balancing energy production and consumption. It can be asserted that flexibility of energy sector is a key driver for technically successful and economically efficient integration of renewable and climate friendly energy technologies. By literature review was concluded that many authors deal with energy transition and flexibility related issues. However, it was also observed that there is a lack of holistic researches where majority of energy transition aspects are taken into account in one place, such as energy generation technologies, district heating systems, flexibility of energy system, energy storages, ancillary services as well as legal and/or financial issues etc. Hence, motivation of this doctoral thesis was to conduct a comprehensive research of all aforementioned aspects of contemporary energy system and related challenges in order to obtain clear and unambiguous conclusions. Therefore, the main goal of this research was to identify and quantify technical potential and financial opportunities to use cogeneration power plants coupled with district heating systems as a source of flexibility. Namely, the hypothesis of the doctoral thesis is that district heating systems can be used as dynamic thermal storages and coupled with flexible cogeneration power plants can provide flexibility to the energy system and have a supportive role in balancing mismatch between energy generation and consumption. However, there are certain constraints which were thoroughly explored as will be elaborated latter on. Model of district heating systems Research related to examination of global dynamic characteristics of district heating systems was divided into two parts. First part related to the modelling of simplified district heating system of only 3 end users and straight pipeline network in length of 9.000 m. The set of algebraic and liner differential equations was defined, and the model was developed within Matlab Simulink software. Certain simplifications and assumptions were introduced such as: mass flow was considered as one-dimensional and quasi-static, thermal demands were in correlation with environment temperature, heat was transferred to each end users by the means of one heat exchanger, all end users had the same characteristics, mass of steel pipeline was taken into account when accumulativeness of thermal energy was analysed etc. In order to examine and proof hypothesis of doctoral thesis, that district heating systems can be used as thermal energy storages, simulations were carried out with two different types of imposed disturbances (so called input signals). First type of disturbance was related to steep increase of supply water temperature for 10 °C, while the second type of disturbance was managed in the way supply water temperature was lowered instantaneously for certain amount and for a certain period of time after which was returned to initial value (can be observed as temperature drops). These types of disturbances led to the conclusion that pipeline network of district heating systems can be used as a thermal energy storage with determination of global dynamic characteristic of accumulativeness and inertia. Results of simulations have shown that mass as well as length of the pipeline network have a positive impact on the amount of thermal energy that can be stored within pipeline network. In addition, it was shown that certain attention should be paid not only to the amount of imposed disturbance, but also to the location of the disturbance in pipeline network in order not to jeopardise thermal comfort of end users located near or far away from location of disturbance. Namely, mild but long-lasting disturbances will much more impact the end users located far away from the location of disturbance than end users near to the disturbance. In contrary, strong but short-lasting disturbances will impact much more end users near to location of disturbance. This is the consequence of thermal accumulation as well as transient phenomena within pipeline network. The second part related to the modelling of more complex pipeline network of district heating system and its calibration with real district heating system, from east part of Croatia for which measurement data were available. In addition, developed mathematical model was validated which provides a strong basis for conclusions made. The developed mathematical model was based on aggregated pipeline network and on the similar set of equation and assumptions as in the case of simplified model. In order to further examine global dynamic characteristics of district heating systems and to obtain specific indicators of thermal accumulativeness of district heating systems as well as to examine real potential and limitations of usage of district heating systems as dynamic energy storages several types of disturbances were simulated. Apart from disturbance related to steep increase of supply water temperature, additional, more complex disturbance was imposed. Namely, it was examined the case where continual additional thermal flux was supplied to the pipeline network. The additional thermal flux was supplied in different amounts but always until the temperature of water within pipeline network reached certain level, so called saturation temperature. Of course, thermal comfort of end users was not jeopardized in any moment, since it was one of the fundamental conditions. Such disturbance allowed examination of situations where heat generation unit (e.g. cogeneration power plant, heat pump, electric boiler) continuously reduce or increase heat production in order to actively participate on electricity market (or to provide ancillary services) and gain additional financial revenue. Again, it was concluded that accumulativeness is a global dynamic characteristic and that storage of thermal energy is invariant on thermal flux as well as on temperature gradient of supply water. Moreover, it was determined in which way and in which proportion accumulativeness depends on various external factors, such as environment temperature, thermal demand of end users as well as temperature levels of circulating water. It can be asserted that high level of supply water temperature implicates lower amount of thermal energy that can be stored within pipeline network, as well as that greater amount of thermal energy can be taken, withdrawn, from pipeline network, i.e. from dynamic thermal storage. However, in the case of low level of supply water temperature situation is opposite. In addition, a quantity of thermal power reserve was introduced as a difference between nominal thermal demand (in regard to environment temperature) and maximum/minimum thermal power (thermal flux) which can be supplied to the pipeline network without jeopardizing thermal comfort of end users. The thermal power reserve together with accumulativeness and pipeline network geometry was the basis to determine specific accumulativeness of district heating systems. It was determined that district heating systems can provide flexibility on the level of 0,11 MWht for total thermal power reserve for each kilometre of pipeline network length. On that way potential of district heating systems as providers of flexibility was determined as well. Model of cogeneration power plants Since district heating systems can be considered as dynamic thermal energy storages and sources of flexibility it was opportune to examine potential impact on operation strategies of cogeneration power plants. Namely, cogeneration power plants if coupled with thermal energy storages can have active role on electricity market. If there are no thermal energy storages, cogeneration power plants in fact have passive position on electricity market due to the fact that their operation strategies are determined by current thermal demands. Therefore, utilisation of pipeline networks of district heating systems as dynamic thermal energy storages enables cogeneration power plants to respond on impulses from electricity market and to gain additional financial revenue. Moreover, cogeneration power plants can also provide ancillary services to transmission system operator in order to maintain the stability of electric power system. Within doctoral thesis model of gas engine cogeneration power plant backed up with natural gas peak boilers was developed in PLEXOS integrated energy model. Various details were modelled, such as start cost, ramp rate, necessary time for cold start, minimum operation time, efficiencies in dependence on load etc. In order to perform simulations and examine potential of district heating system usage as thermal energy storages several scenarios were introduced. For each scenario simulations were carried out with same initial and boundary conditions. The thermal load and prices of electricity were given on the hourly level for entire referent year. In total, seven scenarios were analysed where one scenario was used as a referent scenario while other six as scenarios related to deployment of the thermal energy storages. In detail, referent scenario comprised no thermal energy storage i.e. cogeneration power plant could not actively participate on electricity market. Following three scenarios related to the utilisation of the district heating system as dynamic thermal energy storage. In the first of them the cogeneration power plant did not provide ancillary services, in the second cogeneration provided lower level of ancillary services, while the third scenario reflected the case where cogeneration provided high level of ancillary services. In other words, within these three scenarios cogeneration power plant actively participated on electricity market as well as in provision of ancillary services. The rest of scenarios were analogous to the previous three scenarios but with the difference that conventional thermal energy storage (thermal tank) was used. On that way comparison between conventional and dynamic thermal energy storage have been done. It has been shown that the use of both types of thermal energy storages contribute almost to the same extent and in the same amount to flexible operation strategies of cogeneration power plants, which is an additional basis for using district heating systems as dynamic thermal energy storages. Economic indicators In order to obtain comparison of different economic indicators for all analysed scenarios, a net present value, internal return rate, payback period as well as profitability index were determined for each scenario. The main goal was to address benefits of usage of district heating systems as dynamic thermal energy storages where no capital expenditures are needed. Namely, conventional thermal energy storages require designing and construction which implicates certain needs for capital expenditures. Overall economic analysis comprised of several sub-analyses such as revenue analysis (from electricity markets, providing ancillary services), analysis of operational expenditures and analysis of capital expenditures. Capital expenditures assumed designing and construction of generating units and all related costs (Balance of Plant) as well as cost for conventional thermal energy storage (for related scenarios). Results show that the best economic indicators are obtained for the scenarios where district heating system was used as a dynamic thermal energy storage, especially in the case of scenario with high level of ancillary services provision. Scenarios with conventional thermal energy storage also have positive economic indicators, but not as much as in the case of dynamic thermal energy storage. In the referent scenario, without thermal energy storage, economic indicators are the less positive, i.e. net present value is even negative. Conclusion Within doctoral thesis and conducted researches following key conclusions are obtain: • District heating systems can be used as dynamic thermal energy storages with limitations in the sense of current thermal demand of end users and temperature levels of supply and return water. • Potential for deployment of district heating systems as dynamic energy storages have been determined. • Flexibility provided from district heating systems can be used to adopt advanced operation strategies of flexible cogeneration power plants and to enable them active role in electric power system. The flexible cogeneration power plants can participate in balancing of generation and demand mismatch in order to support integration of intermittent renewable energy sources. • Active role of cogeneration power plants on electricity market and provision of ancillary services leads to additional financial revenue.