The system design of a drying-incineration process for sewage sludge is discussed using an energy-balance model of the system. In particular, the profitability of this system is considered from the energy and cost points of view. An energy-balance model including drying, incineration, waste heat recovery, and exhaust gas treatment processes was formulated. This showed that autothermic conditions could be established at a lower dewatered cake calorific value, i.e., 350 to 400 kcal/kg wet solids (WS), in the drying-incineration system, in contrast to the higher dewatered cake calorific value of 700 to 750 kcal/kg WS necessary to produce autothermic conditions in direct incineration systems. The drying-incineration system had reduced energy costs but involved an increase in investment costs due to construction of the dryer. The authors designed a full-scale plant at the East Area Sludge Center in Kobe City, Japan. The capacity of one line in this plant is 200 tons of cake per day. From the results of full-scale operation, fuel oil consumption was 23 l/t cake (at a cake moisture content of 81.2% and a low calorific value of 180 kcal/kg), which is a lower value compared to conventional incineration systems.