In today’s fast changing electric utilities sector demand response (DR) programs are a relatively inexpensive means of reducing peak demand and providing ancillary services. Advancements in embedded systems and communication technologies are paving the way for more complex DR programs based on transactive control. Such complex systems highlight the importance of modeling and simulation tools for studying and evaluating the effects of different control strategies for DR. Considerable efforts have been directed at modeling thermostatically controlled appliances. These models however operate with only one degree of freedom, typically, the thermal mass temperature. This paper proposes a two-degree-of-freedom residential space heating system composed of a thermal storage unit and forced convection system. Simulation results demonstrate that such system is better suited for maintaining thermal comfort and allows greater flexibility for DR programs. The performance of several control strategies are evaluated, as well as the effects of model and weather parameters on thermal comfort and power consumption.