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Separation systems mainly involve interfacial mass and heat transfer as well as mixing. Distillation is a major separation system by means of heat supplied from a higher temperature level at the reboiler and rejected in the condenser at a lower temperature level. Therefore, it resembles a heat engine producing a separation work with a rather low efficiency. Lost work (energy) in separation systems is due to irreversible processes of heat, mass transfer, and mixing, and is directly related to entropy production according to the Gouy-Stodola principle. In many separation systems of absorption, desorption, extraction, and membrane separation, the major irreversibility is the mass transfer process. In the last 30 years or so, thermodynamic analysis had become popular in evaluating the efficiency of separation systems. Thermodynamic analysis emphasizes the use of the second law of thermodynamics beside the first law, and may be applied through (i) the pinch analysis, (ii) the exergy analysis, and (iii) the equipartition principle. The pinch analysis aims a better integration of a process with its utilities. It is one of the mostly accepted and utilized methods in reducing energy cost. Exergy analysis describes the maximum available work when a form of energy is converted reversibly to a reference system in equilibrium with the environmental conditions; hence, it can relate the impact of energy utilization to the environmental degradation. On the other hand, the equipartition principle states that a separation operation would be optimum for a specified set of fluxes and a given transfer area when the thermodynamic driving forces are uniformly distributed in space and time. Thermodynamic analysis aims at identifying, quantifying, and minimizing irreversibilities in a separation system. This study presents an overview of the conventional approaches and the thermodynamic analysis to reduce energy cost, thermodynamic cost, and ecological cost in separation systems with the main emphasis on distillation operations. Some case studies of cost reduction based on the thermodynamic analysis are also included.