Abstract There is an increasing debate on a new coal-fired power plant (CPP) construction over a demanding economic development and pressing environmental issues. A fundamental spatial analysis is required to identify potentially suitable sites, select a site and design a layout plan that are crucial for a sustainable energy development. The site selection and layout planning problems are mutually dependent. The different selection of the sites may lead to variations in the site layout plan, and vice versa. A proper site selection-layout planning solution is vital to the environmental, economic and social performances of a coal-fired thermal energy system. This study proposes a reconciling strategy to address the site selection and layout planning problems simultaneously. In specific, three types of conflicts in the site selection and layout planning processes are deliberately identified and quantified. To reconcile the conflicts, address practical constraints, and arrive at a “win-win” solution, three mechanisms are introduced and a bi-level multi-objective optimization model is established. Subsequently, a bi-level particle swarm optimization (BiPSO) is developed to generate an appropriate CPP site for the project owner and design an efficient site layout plan for the specialty subcontractor. The reconciling strategy is able to settle an agreement between the project owner and the subcontractor. To validate the applicability of the proposed method, a being-constructed CPP in China is used as a case study. The results demonstrate that it is an effective, robust and systematic method for decision makers to conduct a proper spatial analysis.