With an increased ambition of implementing renewable electricity production in our energy systems follows the need of handling the inherent variability from some of these production sources (e.g. wind and solar). This could be via curtailments, infrastructural reinforcements of the power grid, and/or increased utilization of power system reserves. The aim of this study was to investigate if power surplus and deficit due to mismatch between intermittent power generation and power demand could be reduced with electric heat pumps (used for power-to-heat purposes), combined heat and power (CHP) production (for power balancing), and seasonal thermal energy storage (STES) (as buffering capacity). A residential area consisting of buildings refurbished for improved energy performance, roof top solar photovoltaic (PV) systems, a local heat distribution system, a small-scale CHP plant, central heat pumps, and a STES, was simulated. The heat pumps were given priority to use surplus power from roof top PV generation or surplus from the grid (e.g. wind power). The CHP plant produced power during power deficits. Surplus heat from the CHP plant as well as from the heat pumps was stored in the STES. The results showed a reduction of the surplus power from the local PV systems towards the upstream power grid. Also, the possibility to offer regulative service towards upstream power grid by using CHP was demonstrated. The conclusion is that power-to-heat and CHP can significantly reduce the mismatch between variable power generation and power demand.