Purpose – The purpose of this study is to carry out energy and exergy analysis of fuels. Production of power and heat in industrialized countries is almost entirely based on combustion of fuels. Usually, combustion takes place in boilers or furnace; well-designed boilers have high thermal efficiencies of > 90 per cent. Even very high efficiencies, close to 100 per cent can be achieved depending on the applied fuel and boiler type. These high thermal efficiencies do suggest that combustion processes are highly optimized and do not need further improvements with regard to their thermodynamic performance. Second law (entropy or exergy) evaluations, however, shows that thermodynamic losses of boiler and furnaces are much larger than the thermal efficiencies do suggest. During combustion, air is predominantly used. When using air, the adiabatic combustion temperature depends only on the properties of fuel and air. The determining parameters for optimal fuel utilization are the fuel type, their composition and moisture content, the air temperature and air factor at combustion inlet. Design/methodology/approach – Following assumptions are made for the analysis: calculation on the basis of 100 kg of dry and ash free fuel entering the control volume; fuel entering the control volume at T0, P0 and reacting completely with air entering separately at T0, P0 to form CO2, SO2, N2 and H2O, which exit separately at T0, P0 (T0 = 298 K; P0 = 1 atm); all heat transfer occurs at temperature T0; and the chemical exergy of the ash has been ignored The availability change and the irreversibility for chemical reactions of hydrocarbon fuels were studied because fuel and dry air composed of O2 and N2 react to form products of combustion in the restricted dead state, and fuel and dry air composed of O2 and N2 react to form products of combustion which end up in the environmental (unrestricted) dead state. The difference between the above two statement, is the chemical availability of the product gases as they proceed from the restricted to the unrestricted dead state. These evaluations were made in terms of enthalpy and entropy values of the reacting species. T0 extend these concepts to the most general situation, it is considered a steady-state control volume where the fuels enters at the restricted dead state, the air (oxidant) is drawn from the environment, and the products are returned to the unrestricted dead state. Findings – It is evident from the analysis that an air factor of 1.10-1.20 is sufficient for liquid fuels, whereas solid fuels will require air factors of 1.15–1.3. When the temperatures of the products of combustion (Tp) are cooled down to that of T0, the maximum reversible work occurs. From the analysis, it is clear that the rather low combustion temperature and the need for cooling down the flue gases to extract the required heat are the main causes of the large exergy losses. The maximum second law efficiency also occurs when Tp is set equal to T0. The maximum second law efficiency per kilo mole of fuel is found to be 73 per cent, i.e. 73 per cent of the energy released by the cooling process could theoretically be converted into useful work. It is evident that reducing exergy losses of combustion is only useful if the heat transferred from the flue gas is used at high temperatures. Otherwise, a reduction of exergy loss of combustion will only increase the exergy loss of heat transfer to the power cycle or heat-absorbing process. The exergy loss of combustion can be reduced considerable by preheating combustion air. Higher preheat temperatures can be obtained by using the flue gas flow only for preheating air. The remainder of the flue gas flow can be used for heat transfer to a power cycle or heat-absorbing process. Even with very high air preheat temperatures, exergy losses of combustion are still > 20 per cent. The application of electrochemical conversion of fuel, as is realized in fuel cells, allows for much lower exergy loses for the reaction between fuel and air than thermal conversion. For industrial applications, electrochemical conversion is not yet available, but will be an interesting option for the future. Originality/value – The outcome of the study would certainly be an eye-opener for all the stakeholders in thermal power plants for considering the second law efficiency and to mitigate the irreversibilities.