Many countries in Europe promote cogeneration as a way to meet energy needs in residential and commercial buildings. They do this to save primary energy and reduce CO₂ emissions. This article presents an energy and economic analysis approach for cogeneration plants hosted by such buildings. The plants use gas-fired internal combustion engines as prime movers. Technical criteria to characterize annual operation for cogeneration systems with seasonally and daily variable heat demand are defined. The focus is on determining the total engine size or output by considering different operational strategies. The methodology is illustrated by applying it to a cogeneration plant that meets domestic hot water and heating demand in a residential complex in Spain. The resulting graphical analysis allows one to compare various operational strategies.