In a commercialized 300 kW molten carbonate fuel cell (MCFC) power plant, a univariate alarm system that has only upper and lower limits is usually employed to identify abnormal conditions in the system. Even though univariate alarms have already been adopted for system monitoring, this simple monitoring system is limited for using in an extended monitoring system for fault diagnosis. Therefore, based on principal component analysis (PCA), a recursive variable grouping method for a multivariate monitoring system in a commercialized MCFC power plant is presented in this paper. In terms of development, since a principal component analysis model that contains all system variables cannot isolate a system fault, heuristic recursive variable selection method using factor analysis is presented here. To verify the performance of the fault detection, real plant operations data are used. Furthermore, comparison between type 1 and type 2 errors for four different variable groups demonstrates that the developed heuristic method works well when system faults occur. These monitoring techniques can reduce the number of false alarms occurring on site at MCFC power plant. Copyright (C) 2012, Hydrogen Energy Publications, LLC. Published by Elsevier Ltd. All rights reserved.