The purpose of work was to assess the maximum potential use of bio-fuels to produce heat in Mažeikiai town by refusing to use fossil fuels. Technical-economic evaluation of heat generation plants burning biofuels was provided in the paper and economically purposeful development of heat production facilities using biofuel was determined. Economic-financial calculations were performed, the project implementation influence on the price of heat was determined. Analysis of implementation of the biofuel cogeneration plant project was also carried out in the work. Technical parameters were set, economic-financial calculations at different fuel prices, need of investment and prices of sold electricity were performed. The results obtained were summarized in the conclusions.