There is a substantial need to accelerate the advancement and implementation of clean energy technologies in order to solve the challenges of the energy crisis and climate change. Solar heating technology is a feasible solution among clean energy technologies. In real conditions such complex systems often suffer from different kinds of technical failures and deviations reducing the system performance. This paper focuses on the challenges of a solar district heating system at high latitudes, proposes an optimized solution and investigates the influence of possible failures in planning, implementation and operation phase. The configuration proposed is a heat pump connected between two tanks, using solar-charged borehole storage to directly charge the lower temperature tank. Dynamic simulations were performed and a multi-objective optimization was carried out. The impact of the considered system solutions on the renewable energy fraction, purchased electricity and investment cost as a function of demand, solar thermal and photovoltaic areas, tanks and borehole volumes have been evaluated. The influence of 10 different technical failures was investigated. The study showed that in the optimized system, the most serious faults were i) de-stratification of the storage tanks (23–35% increase in annual purchased electricity) ii) on-off instead of variable speed control of the solar circulation pump (1–22% increase) and iii) reduction in heat pump performance (7–21%). These numbers of course depend on the initial assumptions, but still they show the magnitude of performance reduction some failures can achieve. Therefore, these parameters need to be considered during the implementation of such a system.