Based on the short-circuit situation of typical three-phase circuit, the formula of total current is deduced when the initial value of DC component of short-circuit current is maximum, and the effect of DC component on the actual breaking capacity of circuit breaker is quantitatively given. Considering the two factors affecting the DC component of short-circuit current, which are the amplitude of the periodic component of short-circuit current and the decay time constant, a DC component limitation measure of short-circuit current based on fault current limiter (FCL) is proposed. The evaluation indexes of DC component limitation effect, bus voltage drop and system loss are established. The optimal installation location of fault current limiter is selected by comprehensive weighting coefficient method. The feasibility and effectiveness of this method are verified by actual power grid.