District heating plays a major role in the Swedish energy system. It is deemed a renewable energy source and is the main provider for multi-family dwellings with 90 %. Although the district heating fuel mix consists of majority renewables, a share of 5 % is provided from fossil fuels. To reduce fossil fuel usage and eradicate CO2-emissions from the district heating system new solutions are sought after. In this project, the potential for shortterm thermal energy storage in buildings is investigated. This concept is referred to as customer flexibility. Demand flexibility is created in the district heating system (DHS) by varying the indoor temperature in 50 multi-family dwellings with maximum 1◦C, without jeopardizing the thermal comfort for the tenants. The flexible load makes it possible to store energy shortterm in the building’ envelope. Consequently, heat load curves are evened in production. This leads to a reduction of the peak load in the DHS. Peaks are associated with high costs and environmental impact. Therefore, the potential benefits of customer flexibility are reduced peak production, fuel costs, and CO2-emissions, depending on the fuel mix in the DHS. The project objective is to examine the techno-economic potential of customer flexibility in a specific DHS. The case study is made in a DHS owned by the company Vattenfall, located in the Stockholm area. To evaluate the potential benefits of implementing the concept, seven key performance indicators are chosen. They are peak power, peak fuel usage, produced volume, total fuel cost, fuel cost per produced MWh, climate footprint, and primary energy. Moreover, an in-house optimization model is used to simulate multiple scenarios of the district heating DHS. Different sets of assumptions about the available flexibility in the DHS and the thermal characteristics of the buildings are made. Customer flexibility is modeled as virtual heat storage that can be charged up or down depending on the speed and size of the available storage at a specific outdoor temperature. Simulation results give a maximum peak power reduction of 10.9 % and annual fuel cost reduction between 0.9-3.6 % depending on the scenario. The results found are comparable to values found in similar studies. However, the environmental key performance indicators generated an increase in CO2-emissions and primary energy compared to the baseline scenarios. The result would have looked different if fossil fuels were used in peak production instead of biofuels. The master thesis also aimed to validate assumptions and parameters made in the input data to the optimization model. This was achieved by using results attained from a pilot in the specific DHS. Therefore results generated from the simulations are deemed accurate and confirm that customer flexibility leads to reduced peak production and DHS optimization. / Se filen