Micro combined heat and power (mCHP) is an emerging technology that can simultaneously produce onsite heat and power for residential, light commercial and industrial applications. These systems operate in parallel with the grid or islanded from the grid and in conjunction with other equipment to supplement or meet building power and thermal loads. mCHP systems can be integrated with other appliances to minimize operational costs by improving the overall system efficiencies as well as reduce greenhouse gas emissions associated with residential space conditioning and water heating. Such integrated energy systems (IESs) include a myriad of equipment combinations in addition to the mCHP, such as renewable power sources, thermal and electric energy storage, as well as traditional equipment such as furnaces, water heaters and heat pumps. IESs can be implemented in nanogrid configurations that allow for self-sustained HVAC and water heating independent of grid power. However, many nano-grid systems are designed around autonomous backup generators that do not operate in parallel with other power sources such as the grid. These systems often integrate the backup generators with renewable photovoltaics and battery storage that can be oversized due to intermittency and short-term operation of backup generators. This paper will discuss challenges and solutions associated with grid-tied and off-grid mCHP applications that use various nano-grid controllers to integrate mCHP systems with other bi-directional power sources, hybrid electric and fuel-fired HVAC and water heating systems, electric vehicle charging, and thermal and electric energy storage in Residential homes. The paper identifies potential benefits of interactive nanogrid or microgrid features that manage power and thermal sources and loads in real time to maximize efficiencies, minimize greenhouse gases and minimize operating costs.