Abstract The European Union has set the target for energy sector decarbonization. Variable renewable energy technologies are necessary to reach this target, but a high level of variable renewable energy raises the flexibility issues. In this research paper, the flexibility issue is addressed by analysing possibility of sector coupling via power-to-heat and power-to-gas applications by using system dynamics approach. The model is applied to the case of Latvia. Model results show that power-to-heat is a viable flexibility measure, and with additional financial incentives, it can even help to move towards decarbonization of the energy sector. In the best scenario, heat from surplus power can cover 37 % from total heat production in 2050. Unfortunately, in spite of a well-developed gas infrastructure, power-to-gas application is still very immature, and, in the best-case scenario with high incentives in power-to-gas technologies, only 7 % from available power surplus could be allocated for power-to-gas technologies in 2050.