Approximately 38% of current UK greenhouse gas emissions can be attributed to the energy supply sector. Losses in the current electricity supply system amount to around 65% of the primary energy input, mainly due to heat wasted during centralised production. Micro-generation and other decentralised technologies have the potential to dramatically reduce these losses because, when fossil fuels are used, the heat generated by localised electricity production can be captured and utilised for space and water heating. Heat and electricity can also be produced locally by renewable sources. Prospects and barriers to domestic micro-generation in the UK are outlined, with reference to the process of technological innovation, energy policy options, and the current status of the micro-generation industry. Requirements for the main technology options, typical energy outputs, costs to consumers, and numbers of installed systems are given where data is available. It is concluded that while micro-generation has the potential to contribute favourably to energy supply, there remain substantial barriers to a significant rise in the use of micro-generation in the UK.