A hybrid plant producing combined heat and power (CHP) from biomass by use of a two-stage gasification concept, solid oxide fuel cells (SOFC) and a micro gas turbine was considered for optimization. The hybrid plant represents a sustainable and efficient alternative to conventional decentralized CHP plants. A clean product gas was produced by the demonstrated two-stage gasifier, thus only simple gas conditioning was necessary prior to the SOFC stack. The plant was investigated by thermodynamic modeling combining zero-dimensional component models into complete system-level models. Energy and exergy analyses were applied. Focus in this optimization study was heat management, and the optimization efforts resulted in a substantial gain of approximately 6% in the electrical efficiency of the plant. The optimized hybrid plant produced approximately 290 kWe at an electrical efficiency of 58.2% based on lower heating value (LHV).