Abstract Renewable energy source (RES) is playing an increasingly important role to reduce fossil fuels in district heating (DH) and to alleviate the accompanying environmental impact. In this paper, a combined heat and power (CHP) based DH system with RES and energy storage system (ESS) is studied. A modelling and optimization method is developed for planning and operating such CHP-DH systems. The objective of the optimization is to minimize the overall costs of the net acquisition for heat and power in deregulated power market. A planning model consisting of energy balances and constraints for system control and operation is built and an efficient algorithm is developed. We demonstrate the method in a CHP-DH system with a solar thermal plant and a thermal energy storage (TES). Results indicate that the developed method is efficient and flexible for planning and operating CHP-DH systems. To simulate the future situation, we also optimize the same CHP-DH system with a higher share of RES and a bigger TES. Results show that TES is used more intensively in the future with more fluctuating CHP load and a higher share of RES.