A micro cogeneration unit based on a three-cylinder internal combustion engine, Skoda MPI 1.0 L compressed natural gas (CNG), with an output of 25 kW at 3000 RPM is proposed in this paper. It is a relatively simple engine, which is already adopted by the manufacturer to operate on CNG. The engine life and design correspond to the original purpose of use in the vehicle. A detailed dynamic model was created in the GT-SUITE environment and implemented into an energy balance model that includes its internal combustion engine, heat exchangers, generator, battery storage, and water storage tank. The 1D internal combustion engine model provides us with information on engine start-up time, actual effective power, friction power, and the amount of heat going to the cooling system and exhaust pipe. The catalytic converter was removed from the exhaust pipe, and the engine was always operating at full load; thus, engine power control is not considered. An energy storage system for an island operation of the entire power unit for a large, detached house was designed to withstand accumulated energy for a few days in the case of a breakout. To reach a low initial system cost, the possible implementation of worn-out battery packs toward emission reduction in terms of the second life of the battery is proposed. The energy and emission balance are carried out, and the service life of the engine is also discussed.