A thermophotovoltaic (TPV) system was built using a 12 to 20 kWthmethane burner which should be integrated into a conventional residential heating system. The TPV system is cylindrical in shape and consists of a selective Yb2O3emitter, a quartz glass tube to prevent the exhaust gases from heating the cells and a 0.2 m2monocrystalline silicon solar cell module which is water cooled. The maximum system efficiency of 1.0 &percent; was obtained at a thermal input power of 12 kWth. The electrical power suffices to run a residential heating system in the full power range (12 to 20 kWth) independently of the grid. The end user costs of the TPV components ‐ emitter, glass tube, photocells and cell cooling circuit ‐ were estimated considering 4 different TPV scenarios. The existing technique was compared with an improved system currently under development, which consists of a flexible photocell module that can be glued into the boiler housing and with systems with improved system efficiency (1.5 to 5 &percent;) and geometry. Prices of the electricity from 2.5 to 22 EURcents/kWhel(excl. gas of about 3.5 EURcents/kWh), which corresponds to system costs of 340 to 3000 EUR/kWel,peak, were calculated. The price of electricity by TPV was compared with that of fuel cells and gas engines. While fuel cells are still expensive, gas engines have the disadvantage of maintenance, noise and bulkiness. TPV, in contrast, is a cost efficient alternative to produce heat and electricity, particularly in small peripheral units. © 2003 American Institute of Physics