There is a high potential for small-scale and medium scale biomass cogeneration in Estonia. It can be explained by high heat loads in household sector and large availability of biomass energy sources. During the research an eligible size for biomass cogeneration capacity in Estonian small towns was defined. Estonian conditions were taken into account: local energy sources, fuel and electricity prices, cold climate, state of local district heating systems, Estonian legislation and support mechanisms for cogeneration plants. Heat load duration curves for four Estonian small towns with heat load 5-20 MW were taken as a base for small-scale and medium-scale cogeneration potential. Partial load cogeneration optimal sizing was researched in this paper. Results were checked and approbated by economical and environmental factors.