The potential for new, small-scale and micro-cogeneration installations in Portugal is very considerable due to the number of potential host buildings. In this work, we discuss the legal framework of the Portuguese energy market, and some modifications to accommodate the Directive, 2004/8/EC are stressed. A practical case of cogeneration is also presented, showing the application of the Annex III (b) and (c) of the Cogeneration Directive. The practical case presented shows that micro CHP can be considered highly efficient, with parameters calculated with the Directive rules. Two main improvements in Portugal's energy policy are important: improvement on the permission to access grid system and improvernent on support mechanisms indexing it to PES. The Cogeneration Directive transposition is an excellent opportunity to induce a less restrictive framework for the installation of new cogeneration systems, reducing the technological barriers, namely allowing medium-voltage connection with the grid, and improving the revenues provided from these smiall cogeneration systems. These modifications can improve significantly the number of potential hosts for small-scale cogeneration systems. (C) 2007 Elsevier Ltd. All rights reserved.