Combined Heat and Power (CHP) units produce heat to warm living spaces, supply hot water and generate electricity. Their normal operation is determined by the building thermal demand. These systems supply hot water on demand from hot water storage tanks avoiding intermittent operation of the machines. A method based on a novel control algorithm is presented to optimize the operating costs of one or a set of CHP units in either commercial or residential buildings. The algorithm uses hot water storage tanks to schedule the daily operation of the CHP devices maximizing the benefits of the electricity that is generated, while ensuring that the heat demand is covered. This is especially relevant for regulatory environments with Time of Use tariffs for electricity. The method comprises an optimization algorithm that minimizes the value of a target function. The target function includes a series of weights that penalize the violation of certain constraints. The outputs of the optimization algorithm define the operating set points of CHP unit/s. The results of the case study simulations demonstrate that the proposed implementation of the algorithm can achieve cost effective savings. Finally, the successful operation of the algorithm is demonstrated in a real building installation. (C) 2015 Elsevier B.V. All rights reserved.