Heating systems such as heat pump and combined heat and power cycle systems (CHP) are representing a key component in the future smart grid. Their capability to couple the electricity and heat sector promises a massive potential to the energy transition. Hence, these systems are continuously studied numerical and experimental to quantify their potential and develop optimal control methods. Although numerical simulations provide time and cost-effective solution for system development and optimization, they are exposed to several uncertainties. Hardware in the loop (HiL) system enables system validation and evaluation under different real-life dynamic constraints and boundary conditions. In this paper, a HiL system of heat pump testbed is presented. This system is used to present two case studies. In the first case, the conventional heat pump testbed operation method is compared to the HiL operation method. Energetic and dynamic analyses are performed to quantify the added value of the HiL and its necessity for dynamics analysis. The second case, the HiL testbed is used to validate the heat pump operation in a single family house participating in a local energy market. It enables not only the dynamics of the heat pump and the space heating circuit to be validated but also the building room temperature. The energetic analysis indicated a deviation of 2% and 5% for heat generation and electricity consumption of the heat pump, respectively. The model dynamics emphasized the model capability to present the dynamics of a real system with a temporal distortion of 3%.