This study deals with exergoeconomic analysis of a combined heat and power (CHP) system along its main components installed in Eskisehir City of Turkey. Quantitative exergy cost balance for each component and the whole CHP system is considered, while exergy cost generation within the system is determined. The exergetic efficiency of the CHP system is obtained to be 38.33% with 51 475.90 kW electrical power and the maximum exergy consumption between the components of the CHP system is found to be 51 878.82 kW in the combustion chamber. On the other hand, the exergoeconomic analysis results indicate that the unit exergy cost of electrical power produced by the CHP system accounts for 18.51 US$ GW(-1). This study demonstrates that exergoeconomic analysis can provide extra information than exergy analysis, and the results from exergoeconomic analysis provide cost-based information, suggesting potential locations for the CHP system improvement. Copyright (c) 2007 John Wiley & Sons, Ltd.