This paper discusses the conditions to develop a micro-cogeneration plant based on biomass-fuelled rotary steam engine (RSE). The use of RSE in micro-cogeneration is justifiable due to relatively high electrical efficiency, capability of applying versatile thermal sources and low operational temperatures and pressures. At steam temperatures 200…300ºC, the electrical efficiency of 20 % may be obtained with the electrical power varying between 1…20 kW_e. The other advantages of an RSE are that it is lubricant free and the noise level is low. In residential applications, an RSE may be considered an alternative for Stirling Engines and internal combustion engines, when integrated into a hydronic heating system and electrical grid. Another promising adaptation is desalination. A solar-powered RSE micro-cogeneration system would provide an inexpensive option to supply fresh water and electricity for the rural areas in developing countries that have access to sea water. A 10 kW_e RSE plant combined with a once-through multi-stage flash (MSF) distillation plant is estimated to have potential of producing pure water from 180 to 800 kg/h.