SUMMARYA new comprehensive techno-economic analysis method for power generation systems with CO 2 capture is proposed in this paper. The correlative relationship between the efficiency penalty, investment increment, and CO 2 avoidance cost is established. Through theoretical derivation, typical system analysis, and variation trends investigation, the mutual influence between technical and economic factors and their impacts on the CO 2 avoidance cost are studied. At the same time, the important role that system integration plays in CO 2 avoidance is investigated based on the analysis of a novel partial gasification CO 2 recovery system. The results reveal that for the power generation systems with CO 2 capture, the efficiency penalty not only affects the costs on fuel, but the incremental investment cost for CO 2 capture (U.S.$ kW À1 ) as well. Consequently, it will have a decisive impact on the CO 2 avoidance cost. Therefore, the added attention should be paid to improve the technical performance in order to reduce the efficiency penalty in energy system with CO 2 capture and storage. Additionally, the system integration may not only decrease the efficiency penalty, but also simplify the system structure and keep the investment increment at a low level, and thereby it reduces the CO 2 avoidance cost significantly. For example, for the novel partial gasification CO 2 recovery system, owing to system integration, its efficiency can reach 42.2%, with 70% of CO 2 capture, and its investment cost is only 87$ kW À1 higher than that of the reference IGCC system, thereby the CO 2 avoidance cost is only 6.23$ t À1 CO 2 . The obtained results provide a comprehensive technical-economical analysis method for energy systems with CO 2 capture useful for reducing the avoidance costs.