The objectives of this study are to present a model for biogas production systems to help achieve a more cost-effective system, and to analyse the conditions for connecting combined heat and power (CHP) plants to the biogas system. The European electricity market is assumed to be fully deregulated. The relation between connection of CHP. increased electricity and heat production, electricity prices, and electricity certificate trading is investigated. A cost-minimising linear programming model (MODEST) is used. MODEST has been applied to many energy systems, but this is the first time the model has been used for biogas production. The new model, which is the main result of this work, can be used for operational optimisation and evaluating economic consequences of future changes in the biogas system. The results from the case study and sensitivity analysis show that the model is reliable and can be used for strategic planning. The results show that implementation of a biogas-based CHP plant result in an electricity power production of approximately 39 GW h annually. Reduced system costs provide a profitability of 46 MSEK/year if electricity and heat prices increase by 100% and electricity certificate prices increase by 50%. CO2 emission reductions up to 32,000 ton/year can be achieved if generated electricity displaces coal-fired condensing power. (C) 2012 Elsevier Ltd. All rights reserved.