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Combined heat and power (CHP) systems simultaneously deliver electric, thermal and mechanical energy services and thus uses fuel with great efficiency. The recovered energy can be used for heating or cooling purposes, eliminating the need for a separate boiler. Significant reduction in energy saving, pollutions and carbon emissions can be achieved from the improved efficiency of fuel use. The present work concentrated on the Micro CHP engine modification which describes the overall necessary changes to the various components of the engine. The work also focuses on the performance of the new concept of Micro CHP with two different new fuels. The first fuel was bio diesel which consisted of 80% waste vegetable oil and 20% animal fat and the second fuel was 90% sesame seed oil mixed with 10% white diesel. Using these fuels has had the positive outcome of reduced pollution and increased energy saving.