North America, On Site Power, Renewables

FuelCell Energy and Alliance Power to provide 500 kW of renewable power to City of Santa Barbara

Danbury, Conn., March 17, 2004 — FuelCell Energy Inc. and Alliance Power will supply 500 kilowatts of renewable power to Santa Barbara – a city committed to environmental leadership.

The two 250-kilowatt Direct FuelCell® (DFC®) power plants will supply electric power and heat to Santa Barbara’s El Estero Wastewater Treatment Plant, using methane gas from the anaerobic digesters as the fuel source. The power plants are expected to be delivered and operational in the fourth quarter of 2004.

Alliance Power and FuelCell Energy have formed a joint venture, which will sell the electric power and supply heat to the facility under a long-term power purchase agreement – the first of its kind for FuelCell Energy.

Alliance Power is the turnkey provider to the project and FuelCell Energy will provide the DFC power plants and operations and maintenance services. The 650-degree Fahrenheit exhaust from the power plants will be used to supplement heating of the anaerobic digesters that create the methane gas for use by the fuel cells.

Southern California Edison, administrator for The California Public Utilities Commission’s (CPUC) Self-Generation Incentive Program for their service territory, has issued a reservation letter that will provide incentive funding of $2.25 million to the combined entity.

“This project continues our success in the wastewater treatment market where we now have six installations sited and is a perfect example of how our DFC power plants are ready today to provide an environmentally sound and cost-effective means to generate electricity. ” said Herbert T. Nock, Senior Vice President of Marketing and Sales of FuelCell Energy.

“This project also demonstrates the role that well-funded, multi-year government incentive programs such as the Self-Generation Incentive Program in California can play in bringing renewable energy sources to the commercial marketplace to the benefit of ratepayers and the environment.”

“The cost of electricity purchased by the El Estero Wastewater Treatment Plant has more than doubled in the past four years, making it economically feasible to use the methane to generate electricity,” said Rebecca Bjork, Wastewater System Manager for the City of Santa Barbara. “This project provides exceptional overall value for the City of Santa Barbara by reducing electricity costs while balancing environmental impact and costs.”

Continued Bjork: “In addition to saving money, we will substantially reduce air pollution emissions by using the methane gas as the hydrogen source for the fuel cells, rather than simply flaring the gas. We estimate that we will reduce annual emissions by up to 35,000 pounds of oxides of Nitrogen (NOx) pollutants and 500 tons of carbon dioxide annually by using fuel cells instead of flaring the gas. These are real and tangible benefits to the ratepayers and residents of Santa Barbara.”

“Our goal is to continue to develop projects in California to provide needed onsite power generation for our customers,” said James Michael, President of Alliance Power. “By partnering with FuelCell Energy, we now have an opportunity to provide environmentally sound and cost-effective energy solutions.”

Tapping a Vast Market

Industrial and municipal wastewater treatment facilities with anaerobic gas digesters present an important opportunity for the FuelCell Energy’s DFC power plants. The methane generated from the anaerobic gas digestion process is used as fuel for the company’s DFC power plants, which in turn generates the electricity to operate wastewater treatment equipment at the plant.

Moreover, wastewater treatment gas is a renewable fuel eligible for government incentive funding for project installations throughout the world. The company has sited five other DFC power plants at wastewater treatment facilities in the U.S. and Japan, including its first one-megawatt DFC1500 in King County, Washington.

In a market study conducted in 1998, the company identified over 550 municipal wastewater treatment facilities in the U.S. that are capable of producing enough methane from anaerobic gas digestion to fuel a 250-kilowatt or larger DFC power plant. Furthermore, wastewater treatment plants in California are required to provide onsite backup generation to address the critical functions of these facilities. Fuel cells could serve both continuous and backup generation requirements of these facilities.

About the CPUC Self-Generation Incentive Program

The CPUC Self-Generation Incentive Program was created to encourage customers of electrical corporations to install distributed generation that operates on renewable fuel or contributes to system reliability.

Existing law defines ‘ultra-clean and low-emission distributed generation’ as an electric generation technology that produces zero emissions during operation or that produces emissions that are equal to or less than limits established by the California Air Resources Board (CARB). The program currently runs through 2007 and provides up to $66 million per year in incentive funding for ultra-clean generators, including fuel cells.

FuelCell Energy’s DFC300A Designated as ‘Ultra-Clean’ Technology in California

In May 2003, FuelCell Energy’s DFC300A power plants were state certified to meet CARB’s stringent new distributed generation emissions standards for 2007. By meeting this standard, the company’s sub-megawatt DFC power plants are categorized as an ‘ultra-clean’ technology, exempting them from air pollution control or air quality district permitting requirements by CARB.

In addition, this certification qualifies the company’s products for preferential rate treatment by the CPUC, such as the elimination of ‘exit fees’ and ‘standby charges’ for customer electric generation utilizing ‘ultra-clean’ technologies.

About Direct FuelCells

Direct FuelCells efficiently generate clean electricity at distributed locations near the customer, including hospitals, schools, universities, hotels and other commercial and industrial facilities, as well as in grid support applications for utility customers. In essence, Direct FuelCells are like large, continuously operating batteries that generate electricity as long as fuel, such as natural gas, is supplied.

Since the fuel is not burned, there is no pollution commonly associated with the combustion of fossil fuels. Because hydrogen is generated directly within the fuel cell module from readily available fuels such as natural gas and wastewater treatment gas, DFC power plants are ready today and do not require the creation of a hydrogen infrastructure.

This high-efficiency technology generates more electric power from less fuel and with less carbon dioxide emissions than traditional methods using combustion. Operating on biomass fuels, such as wastewater treatment anaerobic digester gas, Direct FuelCells are a renewable technology.

The sub-megawatt fuel cell power plant is a collaborative effort using Direct FuelCell® technology of FuelCell Energy and the Hot Module® balance of plant design of MTU CFC Solutions, GmbH, a subsidiary of DaimlerChrysler.

About FuelCell Energy, Inc.

FuelCell Energy, Inc., based in Danbury, Connecticut, is a developer and manufacturer of high temperature hydrogen fuel cells for clean electric power generation, currently offering DFC power plant products ranging in size from 250 kilowatts to 2 megawatts for applications up to 50 megawatts.

Its subsidiary, Global Thermoelectric Inc., is a developer of solid oxide fuel cell (SOFC) products and a manufacturer and distributor of thermoelectric stationary power generators for use in remote locations.

The company has developed commercial distribution alliances for its carbonate Direct FuelCell technology with MTU CFC Solutions in Europe; Marubeni Corporation in Asia; Caterpillar, PPL Energy Plus, Chevron Energy Solutions and Alliance Power in the U.S; and Enbridge in Canada. FuelCell Energy is developing Direct FuelCell technology for stationary power plants with the U.S. Department of Energy through its Office of Fossil Energy’s National Energy Technology Laboratory. More information is available at www.fuelcellenergy.com.

About Alliance Power, Inc.

Alliance Power, Inc. has developed economical and environmentally acceptable distributed generation (DG) facilities ranging in size from 1 MW to 49 MW. The company’s unique approach to DG projects maximizes the use of existing utility infrastructure to reduce costs. Alliance Power performs all aspects of project implementation including siting, planning, permitting, designing, constructing, financing, and operating.

The company has a proven team, and has the experience and technology to deliver DG power supplies on schedule — with economical and competitive rates. Alliance Power has a staff experienced in providing power generation development in a variety of settings and for a wide array of clients. Alliance Power’s headquarters are located in Littleton, Colorado with regional offices across the U.S. More information is available at www.alliancepower.com.

About City of Santa Barbara

The City of Santa Barbara is located on the Pacific Coast 95 miles NW of Los Angeles. Santa Barbara is a full service City with a population of 89,600. The birthplace of Earthday, Santa Barbara is as an environmental leader and continues to strive to find better ways to protect our local environment. More information about the City of Santa Barbara is available at www.ci.santa-barbara.ca.us .