Alternative energy sources, such as biomass CHP plants, have recently gained significantly in importance and action is due both on the large scale corporate level and on the small scale. Hence, making the scope and economic outline of such projects easily intelligible without losing relevant details seems a key factor to further promote the necessary developments. The model setup presented in this paper may therefore serve as a starting point for generating numerical results based on real life cases or scenarios. Its focus lies on the economic analysis of decentralized biomass CHP plants. It presents a new approach to analyzing the economic aspects of biomass CHP plants implementing a formal microeconomic approach. As Germany claims a leading role in the market for renewable energy production, the paper also takes a closer look on the effects of German energy policy with respect to biomass CHP plants. (c) 2013 Elsevier Ltd. All rights reserved.