Several thermodynamic relations between energy and exergy losses and capital costs for thermal systems and equipment are developed and applied to a modern coal fired electrical generating station. Some possible generalizations of the results are also discussed. The application considers the overall station and the following station devices: turbine generators, steam generators, preheating devices and condensers. The data suggest that an important parameter is the ratio of the thermodynamic loss rate to capital cost. The relative spread in the ratio values for different devices is seen to be large when based on energy loss and small when based on exergy loss. The results suggest that a systematic correlation exists for capital cost and exergy loss but not for capital cost and energy loss. The results further suggest that the devices in modern coal fired electrical generating stations approximately conform to a particular ratio value (based on exergy loss), which reflects the appropriate trade-off between exergy losses and capital costs that is practiced in successful plant designs. Further research is justified on the relations between the thermodynamic losses and capital costs, in general, and on the extension of the present results to different technologies, in particular. It is anticipated that the results will provide insights useful to designers into the relations between the thermodynamic losses and capital costs and will help to demonstrate the merits of second law analysis over the more conventional first law analysis techniques. (C) 2003 Elsevier Science Ltd. All rights reserved.