Energy cost analysis and optimization of thermoelectric (TE) power generators burning fossil fuel show a lower initial cost compared with commercialized micro gas turbines but higher operating cost per energy due to moderate efficiency. The quantitative benefit of the thermoelectric system on a price-per-energy ($/J) basis lies in its scalability, especially at a smaller scale (<10 kW), where mechanical thermodynamic systems are inefficient. This study is based on propane as a chemical energy source for combustion. The produced heat generates electric power. Unlike waste heat recovery systems, the maximum power output from the TE generator is not necessarily equal to the economic optimum (lowest $/kWh). The lowest cost is achieved when the TE module is optimized between the maximum power output and the maximum efficiency, dependent on the fuel price and operation time duration. The initial investment ($/W) for TE systems is much lower than for micro gas turbines when considering a low fractional area for the TE elements, e.g., 5% to 10% inside the module. Although the initial cost of the TE system is much less, the micro gas turbine has a lower energy price for longer-term operation due to its higher efficiency. For very long-term operation, operating cost dominates, thus efficiency and material ZT become the key cost factors.