The using of a horizontal ground heat exchanger may represent an reliable and efficient option for shallow ground-source thermal applications. This study presents the thermal performance analysis of a drainage trench used as ground heat exchanger (GHE) coupled with underground thermal energy storage (UTES). The trench is dug in shallow soil and filled with encapsulated phase change materials (PCMs) as granular filler. Two PCMs with different melting points are supposed to operate in summer and winter. Fluid flow and heat transfer in porous media are solved via a 2D finite element model to perform a yearly simulation under hourly-scale boundary conditions. The equivalent heat capacity approach is applied to consider the latent heat of the PCMs. The results show a significant capacity of the trench to smooth thermal waves produced by the heat pump. The effect of the PCMs is analysed by comparing with the corresponding case using coarse gravel as filling material instead PCMs. The case without PCMs still shows good performance, but PCMs offers the advantages of a seasonal UTES and smoothing thermal wave as well. The proposed solution can be therefore considered as an advanced alternative to other widespread common GHEs.