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I suspect the water heater Use Side in parallel is the problem. It will get the flow instead of the CHP. Report out time series results for System Node Mass Flow Rate on the supply branches to diagnose where the flow is going. The water heater is really sort of passive and does not get dispatched by the plant operation schemes.

I suggest looking at the example file called MicroCogeneration.idf. The topology that works better for this application is to connect the CHP to the Source Side of the water tank with a second plant loop. The CHP heats the water tank when the tank makes a request for indirect heating and if it can't keep up the water tank's heater picks up the remaining load.