In this paper, a cost analysis method based on thermoeconomics is applied to a 300 MW pulverized coal fired power plant located in Yiyang (Hunan Province, China). This method, as derived from the second law of thermodynamics, can provide detailed analysis for cost formation of the power plant as well as the effects of different operating conditions and parameters on the performance of each individual component. To perform the thermoeconomic analysis of the plant, a simulator is developed from thermodynamic modeling of the plant. With the thermodynamic properties of the most significant mass and energy flow streams being obtained from the plant, this simulator can reproduce the cycle behavior for different operating conditions with relative errors less than 2%. The models of the simulator are refined using data from designed performance tests in this plant. After simulation, an exergy analysis is performed to calculate the exergy and negentropy of the flows. Then, a thermoeconomic model of the plant is defined based on the functionality of each component using the fuel-product definition. The distribution of the resources throughout the plant and the costs of all flows in the production structure can be calculated by solving a set of equations including the thermoeconomic model of the plant. Three thermoeconomic variables are defined for improving the exergy cost equations in the structural theory of thermoeconomics. Several simulation cases have been analyzed in detail using the improved exergy cost method. The results show that the specific irreversibility cost is more suitable than the unit exergy cost of product in quantifying and representing the production performance of a component. The results provide insights useful to designers and managers of the plant into the relations between the thermodynamic losses and exergetic costs. This work demonstrates the merits of this advanced thermoeconomic analysis over those conventional analysis techniques based on the first and second laws of thermodynamics. (c) 2005 Elsevier Ltd. All rights reserved.