This paper concerns the experimental and numerical analysis of a combined heat and power (CHP) installation equipped with a biomass downdraft gasifier, gas purification system and gas piston engine. The numerical studies were aimed at identifying waste heat in the CHP installation for further utilisation. In turn, a new innovative method of heat recovery inside the gasifier was proposed and subsequently applied in the experimental CHP installation. The newly developed facility is able to produce up to 75 kWe of electrical power. An extensive parametric study was performed under the steady and unsteady facility operation and was supplemented by economic analysis of the process. The main objective of the study was to examine the possibility of sewage sludge gasification and the impact of produced syngas quality on gas engine performance. During the investigation a number of different types of biomass were investigated including wood pellets, sewage sludge and their blends. The results showed a stable operation of the CHP facility in terms of produced syngas load, calorific value and content - even when dried sewage sludge was used alone. Results indicate that a 40/60% blend of wood pellets with sewage sludge is recommended, which allowed the lower heating value (LHV) of 4.45 Mj/Nm(3). Additionally, it was confirmed that the fixed bed gasifier is able to self-adjust to temporary changes in gasifier agent load. The economic analysis was performed taking into account policies and regulations in the Polish energy market sector. The study showed that it is more profitable to use the generated electricity and heat for its self-consumption rather than selling it on the market. Even with the supporting policies the payback time is not less than about eight years. Taking into account calorific value and limited local biomass availability, it seems justified that the described CHP installation is suitable for decentralised power generation such as small farms or horticultural businesses, where the produced electricity and heat can be sufficiently utilised. This technology also contributes to reduction of CO2 emissions into the atmosphere, which is one of the most problematic issues for energy sector today. (C) 2017 Elsevier Ltd. All rights reserved.