The addition of solar thermal and heat storage systems can improve the economic, as well as environmental attraction of micro-generation systems, e.g. fuel cells with or without combined heat and power (CHP) and contribute to enhanced CO2 reduction. However, the interactions between solar thermal collection and storage systems and CHP systems can be complex, depending on the tariff structure, load profile, etc. In order to examine the impact of solar thermal and heat storage on CO2 emissions and annual energy costs, a microgrid's distributed energy resources (DER) adoption problem is formulated as a mixed-integer linear program. The objective is minimization of annual energy costs. This paper focuses on analysis of the optimal interaction of solar thermal systems, which can be used for domestic hot water, space heating and/or cooling, and micro-CHP systems in the California service territory of San Diego Gas and Electric (SDG&E). Contrary to typical expectations, our results indicate that despite the high solar radiation in southern California, fossil based CHP units are dominant, even with forecast 2020 technology and costs. A CO2 pricing scheme would be needed to incent installation of combined solar thermal absorption chiller systems, and no heat storage systems are adopted. This research also shows that photovoltaic (PV) arrays are favored by CO2 pricing more than solar thermal adoption.