This paper presents a progressive separation procedure of the induced effects for power plant system diagnosis based on structural theory and symbolic thermoeconomics. The malfunction/dysfunction analysis and the fuel impact analysis of the structural theory as well as an improved induced malfunction evaluation method, which is composed of a progressive separation procedure, are applied to a 300 MW pulverized coal fired power plant located in Yiyang (Hunan Province, China). First, the dysfunctions induced by the malfunctions are separated by the malfunction/dysfunction analysis from the irreversibility increases in the components. The effects of the malfunctions on each component and the whole plant are also evaluated by using the fuel impact analysis, which are very useful for system maintenance and improvement. Then, the induced malfunctions generated by the inefficiencies in the other components are separated from the remaining irreversibility increases (i.e. malfunctions) by using the induced malfunction evaluation method proposed in this paper. This method enables evaluation of the induced malfunctions in thermoeconomic diagnosis applications. After separating the induced effects, the real anomalies can be quantified and localized. Nevertheless, the search for causality of the malfunctions is not equivalent to that for localization of these malfunctions. Hence, the capabilities and the limits of this approach to searching for the real causes of malfunctions are also discussed. The results show that thermoeconomics is a promising tool for the diagnosis of complex energy systems. This method also provides a great prospect for thermal power plant optimizations. (c) 2006 Elsevier Ltd. All rights reserved.