After closure of Ignalina nuclear power plant its capacity is going to be replaced by large-scale Lithuania’s power plants burning imported fossil fuel. This can lead to high energy system dependency from foreign countries, supplying mostly gas, and to the increase of environmental pollution. Meanwhile, some of small Lithuanian district heating companies suffer from high heat prices and consumers debts. Heat prices for consumers in small districts are by approximately 30 % higher, than for consumers in large cities. Needed electricity capacity could be partially replaced and district heating prices could be reduced by introducing small-scale cogeneration. This report is dealing with cogeneration technologies, their advantages and drawbacks. The possibilities and obstacles for implementation of these technologies in Lithuania are examined. The benefits from introduction of these technologies versus condensing power plants are analyzed. These issues have been assessed by simulating combined heat and power production in selected district heating company. There is evaluated the impact of electricity prices on the economy of different scenarios and heat prices. Finally, the conclusions about the feasibility of cogeneration implementation and the sufficiency of support schemes are made.