Merits of co-generation system: 1) Co-generation can meet both power & heat needs. 2) Less cost than conventional generation. 3) Higher system efficiency as energy wastage is highly reduced. 4) Reduction in emission of pollutants due to reduced fuel consumption. 5) A much more efficient use of primary energy can be achieved than with a separate production of electricity & heat. 6) In this system, heat generated is by-product in electricity generating process. 7) Due to decentralization of electricity supply it avoids transmission losses & makes system more flexible.