The development towards high energy efficiency and low environmental impact by human interactions, has led to a change in many levels of society. Due to the introduction of penalties on carbon dioxide emissions and other economic instruments, the energy industry is striving towards energy efficiency improvement and climate mitigation by switching from fossil to renewable fuels. Biomass-based combined heat and power (CHP) plants connected to district heating networks have a need to find uses for excess heat to produce electricity during summer when the heat demand is low. On the other hand, the transport sector is contributing substantially to the increased CO2 emissions, which have to be reduced. One promising alternative to address the two challenging issues is the integration of vehicle fuel production with biomass based CHP plants. In this paper, the configuration and operation profits in terms of electricity, heat and ethanol fuel from cellulosic biomass are presented. A case study of a commercial small-scale CHP plant has been carried out using simulation and modeling tools. The results clearly show that electricity production can be increased when CHP production is integrated with cellulosic ethanol production. The findings presented also show that the economical benefits of the energy system can be realized with near-term commercially available technology