In this paper. design and exergy method optimization of a 5 kW power output polymer electrolyte fuel cell (PEFC) fuel cell with cogeneration application has been investigated. It is assumed that cooling water is passed through the fuel cell cooling channel, warmed up and supplied for space heating applications. The performance of the proposed system has been optimized by the second law based on exergy analysis. Results show that for maximum system efficiency and minimum entropy generation, fuel cell temperature and voltage should be as high as possible in the range of application. Also, the fuel cell pressure and stoichiometric air:fuel ratio should be as low as possible in the range of application. (c) 2005 Elsevier B.V. All rights reserved.