Despite the advancements in thermal energy storage (TES) systems for combined heat and power plants (CHP) operation, these technologies are not implemented in CHP-based district heating (DH) systems in some of the countries where DH systems are still in development. An analysis of economic and environmental benefits that can be reaped as a result of the TES integration within the DH system is required to successfully promote TES as a technology for the DH system improvement. An actual large-scale biomass CHP-based DH system is explored as a case study. Scenarios for two types of support policies (feed-in premium electricity produced by biomass CHP and high-efficiency biomass CHP) were examined by varying the size of TES. The aim of the research was to evaluate the impact of the biomass CHP support policy on TES integration feasibility. Calculations show that TES installation combined with biomass CHP is less feasible when all of the electricity produced by biomass CHP is subsidised.