It seems that studying the effect of heat recovery factor in combined heat and power (CHP) generation can present new solution for preventing energy loss in various supply and demand sectors and for recovering the dissipated energy in order to enhance energy efficiency. This will certainly have desirable social and economic consequences. This study is the first attempt at investigating the effect of heat recovery factor on CHP generation in distributed generation by solar cells. HOMER is used for simulations and the studied location is Isfahan city. Three different scenarios for the fuel of generator and boiler are studied which include diesel for both generator and boiler (scenario 1), natural gas for both (scenario 2), and diesel for generator and natural gas for boiler (scenario 3). Results indicated that increasing the heat recovery factor reduces the fossil fuel consumption which in turn lessens the CO2 emissions and price per kWh of energy. Also, in all three scenarios using solar cells combined with generator and boiler will have a higher cost but it reduces the fuel consumption and CO2 emissions. It can also be concluded from the results that the cheapest scenario is scenario 2. Additionally, the scenario 3 is the most expensive one. The cheapest electricity generated is priced at 0.167 $/kWh. According to the results, the third scenario and hybrid photovoltaics (PV)-generator microgrid outperform in terms of producing environmental pollutants with emitting 3604 kg/y CO2 at their best.