A combined power system with solid oxide fuel cell (SOFC) and gas turbine (GT) is modelled and analysed thermodynamically in this paper. A novel optimisation strategy including the design of optimal parameters is proposed and applied to the hybrid system. Different sources of irreversible losses are specified, and entropy analyses are used to indicate the multi‐irreversibilities existing, and to assess the work potentials of the system. Expressions of the power output and efficiency for both the subsystems and the SOFC‐GT hybrid system are derived. The optimal performance characteristics are presented and discussed in detail through a parametric analysis. The developed model is expected to provide not only a convenient tool to determine the optimal system performance and component irreversibility, but also an appropriate basis to design similar complex hybrid power plants. This new approach can be further extended to other energy conversion settings and electrochemical systems. Decision makers should therefore find the methodology contained in this paper useful in the comparison and selection of advanced heat recovery systems.