This paper analyzes primary energy reduction effect of cogeneration system (CGS) installed at individual house with large demand fluctuation, and discusses its improved system. The start-stop operation considering the start-up energy of CGS and heat radiation of thermal storage unit was proposed as a better operation method of CGS installed at individual house. It was shown from the analysis using the actual energy demand pattern of six houses that the start-stop operation is available and electricity network has mitigation effect of large demand fluctuation to increase the primary energy reduction. In order to elucidate the effective improved system, the reduction target was estimated from the analysis using ideal values for power interchange, heat radiation of thermal storage unit, and partial load efficiency of CGS.