Seasonal thermal energy storage (STES) offers an attractive option for decarbonizing heating in the built environment to promote renewable energy and reduce CO2 emissions. A literature review revealed knowledge gaps in evaluating the technical feasibility of replacing district heating (DH) with STES in densely populated areas and its impact on costs, fossil fuel consumption, CO2 emission reduction, and renewable power integration. The effects of large-scale STES applications on the power and DH sectors in a regional energy system were quantified by applying the 2030 and 2050 power structure scenarios. The results indicated that STES reduces fossil fuel consumption and CO2 emissions at an affordable cost. It facilitates the integration of wind and solar power into power grids. With 100 % replacement of DH by STES, fossil fuel consumption and CO2 emissions can be reduced by approximately 40 % and 45 % in 2030 and 2050, respectively, with an annual cost increase of 20 %. The CO2 avoidance costs were predicted to be approximately 60 €/t in 2030 and well below 50 €/t in 2050. STES will reduce renewable power curtailment by 10 % in 2030 and 18 % in 2050. This study investigated STES from an energy-system perspective, supporting the formulation of clean heating transition policies.