## 1 Introduction  
In 2021, China pointed out that it is necessary to make a good commitment to the peak of carbon emission around 2030 and carbon neutrality by 2060. This means that China's energy mix will change in the future, with 68% thermal power generation and 38% of its total carbon emissions. Therefore, finding a way to generate electricity and heat to limit the development of thermal power generation has become the goal of decarburization in China in the future. Owing to the following characteristics of distributed CHP systems, the government attaches great importance to it:  
* Micro-CHP systems are typically installed near the end-user (e.g., commercial or residential buildings) that enable the recycling of waste heat [1], which helps to reduce transportation and distribution losses. * More than 85% of energy efficiency, low carbide and harmful gas emission, and environmental friendliness. * Peak load shifting for smart grids and gas pipelines with better economic benefits. In recent years, great efforts have been made by many researchers on the economic and environmental performance of local micro-CHP systems [2, 3]. They point out that the actual economic convenience of a micro-CHP plant strongly depends on the electrical and thermal demand of the user, the electricity and fuel tariffs, the existing incentives, and the proper size of the prime mover (PM) and the TES system. However, it is unpopular to use micro-CHP with higher energy efficiency and low emissions in buildings for the following reasons:* Higher investment costs compared to DHW systems with low-capacity boilers is not conducive to the spread of the technology. * China's previous energy mix, management system and electricity/gas price made it difficult to popularize it on a large scale. * Due to the operating environment and load of CHP system in different regions, the reasonable configuration [2] of Micro-CHP system has a limiting factor for its development. Since micro-CHP systems with a larger amount of total annual cost saving have a shorter payback period of investment, the investment costs cannot completely reflect advantages and disadvantages of each system [3]. Moreover, because the characteristic of residential is relatively decentralized, the feasibility of the micro-CHP system for residential is a subject worth studying. Many scholars have demonstrated the economic and environmental potential of micro-CHP for residential [4,5]. They compared micro-CHP for residential with a large heating grid or other large heating equipment. However, there is no literature that compares the economization of micro-CHP for residential with the most commonly used domestic heating equipment, such as the domestic electric water-heater and the domestic gas-fired water-heater. Whether the micro-CHP system for residential is better than the domestic heating equipment as the heating method for residential in the future is a problem worth studying. Therefore, it is necessary to analyze its cost-effectiveness. Meanwhile, this work entails an energy and economic study of several water heating options for buildings, with the primary aim to assess the effectiveness of a micro-CHP approach to providing domestic hot water. In this paper, annual heat use efficiency (AHUE) is taken as one of the factors to consider the economic evaluation of DHW system, and the influence of different AHUE on the payback period of micro-CHP investment is analyzed. For a DHW system, AHUE indirectly represents the idleness situation of heating units and can more intuitively measure heat demand. It can also be used as a reference for DHW system configuration. The rest of this paper is organized as follows. In Section 2, the arrangement of five configurations is introduced. In addition, the modeling of each configuration is proposed. Moreover, an economic assessment is introduced to calculate NPV, payback period and CSR. In Section 3, a case study is used to examine the best arrangement of a distributed DHW system. Optimization results will be compared in Section 4.