The emergence of distributed energy system is a matter of great significance relating to implementation of sustainable strategy. As proposed by the author, distributed energy system(DES)is defined as an electric power total system compatible with environment, sited in or in the vicinity of the consumer center area without bulk and/or remote power transmission. The DES concept allows people to build and operate energy system on total energy basis and thus facilitates demand side management as well as a more intelligent use of energy. It is considered essential for fossil fueled DES that energy is utilized in a cascade way matching the energy quality supplied and needed. DES also opens the most effective way of implementation of Combined Heat & Power as well as multi-generation. While the preferable choice of primary energy might be the clean fuel such as natural gas, but from the long-term point of view, the clean coal technology should not be excluded from the DES category. Although there is a great deal of interest in micro-turbines at the moment, combustion engines still have their tremendous potential for DES application.