This research work presents a method to design, model and analyze solar-aided bagasse dryer system to improve power generation and meet power demand of WSSF by reducing the moisture content of wet bagasse. WSSF is established in the year 2013 G.C and is located at Dodota, 21 Km from Wonji. The factory has a rated crushing capacity of 6250 tons of cane crushed per day and 32 MW power co-generation plant. Though the factory was designed to contribute 20 MW electric powers to the national grid in addition to satisfying its own demand which is 12MW, it couldn‟t meet those expectations yet. Bagasse is a commonly used fuel type for boilers to generate power in WSSF. But, due to high moisture content of bagasse, which varies from 50% to 55%, the factory couldn‟t fulfill its own energy demand. If the bagasse moisture content is above the allowed minimum possible level, the output steam pressure and temperature of the boiler will drop. This will lead to the reduction of output power of the thermal power plant. Thus, the generator output power will be unable to supply the required electrical loads of the factory. Thus, drying the bagasse to the lowest possible moisture content is very important issue using bagasse dryer. In this thesis work the performance of existing cogeneration plant of WSSF is evaluated using 50% bagasse moisture content as a calculation base. The result shows that thermal power plant is able to generate only 11.35 MW of power and it is concluded that the power plant is performing at reduced efficiency. Hence, this thesis work is focused on designing, modeling and analysis of solar aided bagasse dryer system in which both solar energy and exhaust flue gas of boiler is used as a heat source to the dryer. In this thesis TRANSYS software is used to model the dryer and TRANSYS PID controller is used to monitor the temperature of the proposed bagasse dryer system. Analytical calculations and thermal analysis is carried out in determining the percentage reduction of moisture in bagasse and the percentage increase in power output as a result of using SIMPROSYS software. Finally, economic analysis is studied to check financial feasibility. Thus, the result of this study indicated that power output of thermal power plant were increased from 11.35 MW to 22.64 MW by reducing the moisture content of wet bagasse from 50% to 37.5%. Moreover, excess bagasse of 262,103.33 tones/year is also saved in order to generate revenue from the sale of bagasse. This thesis work also shows that by installing solar aided bagasse dryer and the development of more efficient energy conversion technologies has allowed bagasse to provide not only energy for the factory, but also surplus power of 10.64 MW for the electricity grid.