A distributed energy system refers to an energy system where energy production is close to end use, typically relying on various small-scale energy generation, conversion and storage technologies. The Chinese government has recently expressed interest in promoting this type of energy system. The paper develops an optimization model to evaluate the economic feasibility of adopting a distributed energy system in a new residential community in Beijing, where grid coverage is already well developed and accessible. The economic implications of adopting different grid connection regimes are also assessed. Results show that compared to the more conventional approach of relying entirely on the grid for electricity supplies, a distributed energy system is cheaper when a connection to the power grid can still be used to draw some electricity during periods of peak demand. Additionally, the economic benefits of electricity buy-back provisions for the distributed energy system are found to be minimal. (c) 2012 Elsevier Ltd. All rights reserved.