Power generation, using gasification technology, is a well–understood science but could not adopt widely due to a few technical challenges. One of the challenges is the poor conversion efficiency of producer gas when used in internal combustion (IC) engines. Poor conversion efficiency is due to the lower heat value of producer gas, which leads to the low energy density of the air-fuel mixture and causing derating of the engines. The present research is focused on studying the performance of the IC engine operated with hydrogen-enriched producer gas, with enhanced energy density. The specific fuel consumption and the thermal efficiency of the IC engines are mostly influenced by adiabatic flame temperature and energy density (Ed). A detailed analysis of energy balance, elemental balance, and emissions of a power generation system using the air–steam gasification system was conducted. Experimental results show; that the maximum Ed achieved is 3.2 MJ Nm−3, which shows an increment of 10%. The IC engine operated on producer gas generated through the air–steam gasification system works with specific fuel consumption as 0.98 kg kWh−1 and the power generation efficiency as 21.6% at a compression ratio of 12.5:1.