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The paper presents results of design parameters optimisation of a wood chips fired steam boiler based heat and power block in a sample project of coal fired municipal heating plant modernisation. The project assumes the conversion of the heating plant into a dual fuel heat and power plant. The problem that is presented is selection of cogeneration block structure and thermodynamic parameters taking into account financial support mechanisms for cogeneration and renewable energy technologies. There are examined energy conversion and financial performances of the project. The results show that without the financial support the project is not profitable although it generates savings of primary energy of fossil fuels. If an administrative incentives are applied the optimal technical solution is different than suggested by energy conversion efficiency or fossil fuel savings. Financial calculations were performed for Polish marked conditions in the years 2011 and 2014 showing the impact of relatively short term variations of prices and support intensity on optimal plant design parameters. [ABSTRACT FROM AUTHOR]