A power interchange operation, in which electricity generated by residential gas engine cogeneration systems is shared among the residences in a housing complex without a reverse power flow to a commercial electric power system, has a high energy-saving effect. In this study, the optimal sizing of the residential gas engine cogeneration system for the power interchange operation is discussed from the energy-saving viewpoint by conducting optimal operational planning based on mixed-integer linear programming. First, the scale effect of the residential gas engine cogeneration system on its performance is identified from the nominal performances of commercial devices. Then, the energy-saving effect of the power interchange operation is analyzed from the optimal operation patterns for various system scales. The result shows that the energy-saving effect increases with the system scale because the heat to power ratio of the system decreases and approaches that of the demand because of the increase in generating efficiency. However, systems with a rated electric output larger than 1 kW exhibit almost the same energy-saving effect. Hence, it is concluded that a system with a rated electric output of 1 kW, which is a commercial device for residential applications, is the optimal scale for the power interchange operation. (C) 2010 Elsevier Ltd. All rights reserved.