1. A method of diagnosing faults in a monitored system, the monitored system being monitored by sensors, comprising: constructing an empirical model for a targeted component of the monitored system, wherein the empirical model is trained with an historical data source that contains example observations of the sensors; generating substantially real-time estimates based on instrumented data corresponding to the targeted component; comparing and differencing the substantially real-time estimates with instrumented readings from the sensors to provide residual values; and analyzing the residual values to detect the faults and determine a location of the faults in the monitored system.