A novel methodology for Optimal Sizing of Biomass-Fired Organic Rankine Cycle (ORC) Combined Heat and Power (CHP) System with Heat Storage is presented in this paper. The ORC technology received a lot of attention recently, especially for medium scale applications (e.g. district heating) where market potential is substantial. Another push for the technology is provided in the context of recent EU regulations to tackle the rising environmental problems, i.e. the 20-20-20 directive, which should provide another boost for the use of renewables in electric power systems. In this study, the simulation of the operation of a biomass-fired ORC CHP system is discussed first, where the dispatch of the plant is optimized to maximize the profits from electricity and heat sales. Based on the optimal dispatch values, an economic evaluation is carried out to determine the feasibility of the proposed scheme for investment purposes; this evaluation is based on calculations of modified internal rates of return for a realistic scenario. Lastly, an optimization procedure for optimal sizing of the generation architecture is convolved with the optimal operation and economic evaluation models, to achieve maximal rates of return on the ORC CHP investment. The results of the present studies demonstrate that the heat storage is not economically feasible in the assumed setup making profits from increasing the flexibility of the ORC CHP operation. Furthermore, the results show favorable economic parameters for the ORC CHP setup without the heat storage for annual heat demands higher than 5 GWh and biomass prices lower than 17 EUR/MWh. Crown Copyright (C) 2011 Published by Elsevier Ltd. All rights reserved.