One of the by-products from bioethanol production using woody materials is lignin solids, which can be utilized as feedstock for combined heat and power (CHP) production. In this paper, the influence of integrating a drying process into a biomass-based polygeneration system is studied, where the exhaust flue gas is used to dry the lignin solids instead of direct condensation in the flue gas condenser (FGC). The evaporated water vapor from the lignin solids is mixed with the drying medium for consequent condensation. Thus, the exhaust flue gas after the drying still has enough humidity to produce roughly the same amount of condensation heat as direct condensation in the existing configuration. The influence of a drying process and how it interacts with the FGC in CHP production as a part of the polygeneration system is analyzed and evaluated. If a drying process is integrated with the polygeneration system, overall energy efficiency is only increased by 3.1% for CHP plant, though the power output can be increased by 5.5% compared with the simulated system using only FGC. (C) 2011 Elsevier Ltd. All rights reserved.