The thesis of this study was that high levels of small scale embedded generation (SSEG), specifically dCHP, can contribute positively to the UK’s liberalised electricity industry whilst delivering benefits to all stakeholders including the consumer, the supplier, the Distribution Network Operator (DNO) and the UK Government’s 2010 energy targets. The research reports the benefits and detriments of dCHP and examines the technical, economic, environmental and regulatory challenges that dCHP faces. Software simulation techniques are used to model network interaction for increasing amounts of connected dCHP over a range of conditions and operational criteria. The existing Distribution Network (DN) was not designed to accommodate large deployments of SSEG. Levels of dCHP that the existing DN can accommodate are derived and possible strategies to overcome these barriers are then proposed to optimise dCHP integration. Economic modelling is used to assess the financial argument for dCHP and the impact on the main stakeholders. The sensitivity of the economic case is examined for changes in market conditions. dCHP is then compared economically to other domestic energy efficiency measures. Regulatory obstacles are examined and possible strategies to overcome these barriers are proposed. The environmental credentials of dCHP are scrutinised and contrasted with alternative energy efficiency measures. Ultimately, it was found that dCHP is unlikely to contribute significantly to the UK Government’s 2010 targets. Despite having many inherent attributes that would contribute positively to the UK electricity industry, dCHP still has to overcome significant political, regulatory and economic barriers before its full potential can be realised.