Abstract To guarantee the space heating in the heating season, conventional combined heat and power (CHP) plants operate in a heat-controlled operation mode, resulting in restricted peak-shaving ability (PSA). To improve the CHP plant’s PSA, a novel solar aided CHP (SA-CHP) system is proposed and simulated in this paper. In the new system, solar heat could be flexibly used to generate power or to supply heat according to the heating and power demands, thereby realizing the heat-power decoupling. A set of models for the SA-CHP system is developed and validated. The PSA, the standard coal consumption (SCC) and the techno-economic performances of a 330 MWe SA-CHP system are comprehensively analyzed in this paper. The results show that the SA-CHP system can significantly improve (up to double) the PSA compared with the CHP plant under the same rated heating power. The feasible operation region area of the SA-CHP system is 74.7% larger than that of the CHP plant. The annual SCC of the SA-CHP system are 17378.23 t less than that of the CHP plant. The net annual revenue of the SA-CHP system is $2.24 M. Besides, techno-economic performances of SA-CHP systems with two different heat storage systems are compared.