Combined heat and power (CHP) plants fired by forest wood can significantly contribute to attaining the target of increasing the share of renewable energy production. However, the spatial distribution of biomass supply and of heat demand limits the potentials of CHP production. This article assesses CHP potentials using a mixed integer programming model that optimizes locations of bioenergy plants. Investment costs of district heating infrastructure are modeled as a function of heat demand densities, which can differ substantially. Gasification of biomass in a combined cycle process is assumed as production technology. Some model parameters have a broad range according to a literature review. Monte-Carlo simulations have therefore been performed to account for model parameter uncertainty in our analysis. The model is applied to assess CHP potentials in Austria. Optimal locations of plants are clustered around big cities in the east of the country. At current power prices, biomass-based CHP production allows producing around 3% of the total energy demand in Austria. Yet, the heat utilization decreases when CHP production increases due to limited heat demand that is suitable for district heating. Production potentials are most sensitive to biomass costs and power prices. Copyright (C) 2009 John Wiley & Sons, Ltd.