When an industrial fuel cell is planned to be installed in a power system, locating it where the investment makes the maximum saving on the total operating cost of the power system is preferred for more economic power system operation. The cost sensitivity w.r.t. the bus MW powers will be a useful tool for finding the optimal location of the fuel cell in this case. This paper presents the economic location of an industrial fuel cell in a power system using this cost sensitivity. The cost sensitivity is derived in normal power flow using the optimization technique, in which the power system operating cost is defined as the objective function and the power flow equations as the constraints. Optimal location of 1 MW class fuel cell is demonstrated in an example power system. (c) 2005 Elsevier B.V. All rights reserved.