Recent work on thermo-electric (TE) systems has highlighted the need for refined heat transfer design as well as the long standing need for improved materials performance. Recent work on heat transfer for TE systems has shown that enhanced heat transfer is needed over and above what would normally be seen in a vehicle exhaust system. In particular a better understanding of flow development and boundary layer behaviour is needed to support new design proposals.In the meantime, recent work in TE materials suggests that with the use of skutterudites significant performance benefits can accrue over existing materials. The current generation of TE materials have non-dimensional thermoelectric figure of merit (ZT) values of around 1. Skutterudites have been demonstrated to have ZT values of about 1.4 and can maintain these values over a wider temperature range than do existing materials through the engineering of the TE device.The combination of material developments and the requirement for heat transfer improvements strongly suggest the need for a systems evaluation technique to guide the research agenda for both topics. We describe the development of a component in the loop (CIL) method for evaluating heat exchange and materials improvements. The basis of the technique is a real time model that runs alongside a test engine making use of engine exhaust engine conditions to set the boundary conditions of the TE model. The model delivers the overall TE performance including output power and estimates the exhaust back pressure increment created by the device.We describe our initial analysis work and present the first results from tests on a medium duty diesel engine.