M-C Power Corporation is a small business concern founded in 1987. Our sole mission is to bring the very promising IMHEX® molten carbonate fuel cell technology to the market place. Because we do not have a saleable product yet, and are not a subsidiary of a profit-making company, our progress depends on federal funding and external costsharing.

M-C Power's molten carbonate fuel cells are assembled into a single unit (the stack) for packaging in a skid-mounted power plant for delivery to the customer. Our role is specifically the development and manufacturing of the fuel cell stack. We have enrolled the support of a very strong team of subcontractors that includes the Bechtel Corporation for power plant design and engineering; Stewart & Stevenson Services, Inc. for assembling and packaging the entire plant as a skid-mounted unit for delivery and installation; and the Institute of Gas Technology for advancing electrochemical technology. Stewart & Stevenson will also serve as the pimary marketer of our commercial plants, lending their worldwide marketing sales, distribution and services experience and network to our efforts It is a very strong team because it relies on the best capabilities of its individual members, each a leader in its field.

We also work closely with the Alliance to Commercialize Carbonate Technology (ACCT). ACCT and its dues paying members serve as the conduit for market-oriented input from prospective customers, and for the interaction of M-C Power with the utilities and industries represented to develop the product and their confidence in its value.

During 1994 and 1995, M-C Power and its team of subcontractors fabricated and commissioned the first full-scale molten carbonate fuel cell power plant test in the world. This 250 kW unit, sited at the Union Oil of California's (UNOCAL) Fred L. Hartley Research Center in Brea, California, was supported by the U.S. DOE, the Electric Power Research Institute, the Gas Research Institute, the South Coast Air Quality Management District, Southern California Edison, Southem California Gas, the State of Illinois and Union Oil of California. As is typical in many first tests of a new technology, the power plant test did not meet performance expectations in spite of the successful commissioning of the fuel cell stack at our plant in Burr Ridge, Illinois. However, significant experience and know-how were acquired in such critical areas as full-size stack manufacturing, assembling, commissioning, transportation, and installation; balance-of-plant packaging, transportation and installation; and power plant start-up and operation.

The "lessons-learned” at UNOCAL clearly indicated the importance of balance-ofplant design and equipment simplification. Minimizing the number of rotating devices in the plant is critical for successful commercialization and high plant reliability. The experiences gained at UNOCAL are being applied to the construction and installation of a second, fully integrated, 250 kW power plant at Naval Air Station (NAS) Miramar in San Diego, California. This integrated, skid-mounted power plant will verify our packaging techniques and demonstrate the high efficiency of our IMHEX® molten carbonate stack concept. All power plant equipment (reformer, inverter, skid-mounted balance-of-plant), with the exception of the stack, is now at NAS Miramar. Contractors are now piping and

wiring the equipment. Process and control (PAC) testing, including our fully-computerized control system, will begin in April of this year, and we currently plan to ship the 250 kW fuel cell stack to the site in July. After final PAC testing, the plant is scheduled to begin operation in the fall. The power plant will be connected to NAS Miramar's electric grid and the heat will be recovered, in the form of steam, and delivered to the station's steam supply piping system. The test is scheduled to last until January, 1997. It will be very valuable to continue operation beyond this date; however, additional funds will be needed.

The NAS Miramar unit is a very exciting project that is receiving the support of the U.S. DOE in a 50%-50% cooperative agreement with the Gas Research Institute, San Diego Gas & Electric and M-C Power and its team members. The project also received some financial support from the Advanced Research Projects Agency of the U.S. Department of Defense and has been receiving great encouragement and cooperation from the U.S. Navy and its personnel at NAS Miramar.

The operation of this power plant will provide much needed design and operational data to our current contract with the U.S. DOE, which will culminate in the construction and operation of a 1 MW prototype plant in 1999 to prove the readiness of our technology. This 1 MW prototype plant incorporates only one rotating device in its design, a turbogenerator, following one of the important "lessons-learned" at UNOCAL. The molten carbonate fuel cell stack technology required to meet commercial objectives is now being proven in the laboratories at the Institute of Gas Technology. During FY 1996 and FY 1997, this technology will be scaled-up to full size and tested in 20-kW and 250-kW stacks by M-C Power prior to incorporation into the 1 MW prototype plant.

For FY 1997, M-C Power requests that this subcommittee supports a level of U.S. DOE Molten Carbonate Fuel Cell funding of $40 million to continue supporting equally the two existing contractors, thus maintaining the competition and pace of development. We recognize that our recommendation may exceed the U.S. DOE's request for FY 1997 for this line item and that it is 5% above the current FY 1996 level. We recognize as well that this subcommittee hopes to lower, rather than increase, federal spending. Our request of $20 million for M-C Power, however, still lags behind the overall funding pace agreed to in our multi-year contract signed with the U.S. DOE in December, 1994, which represented the most cost-effective approach to develop M-C Power's molten carbonate fuel cell through the remaining stages of product development, testing and manufacturing cost reduction necessary to position us for commercial competition.

M-C Power and its industrial supporters have provided significant cost-sharing to our contracts with the U.S. DOE. We have received $58 million from the U.S. DOE and provided $33 million of cost-sharing in the UNOCAL and Miramar projects. At the completion of our current contract, M-C Power will have provided over $33 million in private sector cost-sharing to the $71 million it will receive from the U.S. DOE. However, our primary private sector support, and our current primary future markets, are within the electric and natural gas industries. While the electric and gas industries have pledged strong cost-sharing to our program, the current uncertainties of deregulation in those

industries would make it extremely difficult at this time to seek additional cost-sharing to maintain the current program pace if shortfalls in DOE funding continue. While those market changes will make future opportunities even greater for distributed power through the use of molten carbonate fuel cells, the temporary uncertainty regarding who will be the purchasers in those markets restricts our ability to target new cost-sharing or investment efforts.

Delays or uncertainties in the government's commitment to our efforts will cause additional negative impacts. Our cost-sharing partners expect timely progress in exchange for the contributions and commitments they have already made. They plan their needs for future power generation equipment on our market entry projections today.

M-C Power is developing an efficient, clean power generation technology for a strong market. Molten carbonate fuel cells will be the technology of the 21st century for small (< 10 MW) distributed power generation equipment and we ask this subcommittee to provide the federal support necessary for us to continue our progress at the rate proposed in our contract with DOE.

THURSDAY, MARCH 7, 1996.

DOE

WITNESS

TERRY SINGER, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF ENERGY SERVICE COMPANIES

Mr. BUNN. Terry Singer from the National Association of Energy Service Companies. Welcome.

Ms. SINGER. As executive director of the National Association of Energy Service Companies, which is a trade association of energy service companies and their utility and manufacturing, I appreciate the opportunity to present the following comments.

The United States government is the single largest energy consumer in the world. Despite efforts by the Congress and the executive branch to mandate reductions in energy use in 1994, the Federal Government still spent about $3.8 billion alone for the energy it used in the buildings that it owns and leases. These annual energy costs can be reduced by an additional $1 billion per year through performance based energy efficiency improvements by the private sector. Through the use of energy service performance, private sector investments can be used to bring about the more efficient use of energy in Federal facilities at no added cost to the Federal budget or American taxpayers.

For example, at Hill Air Force Base in Utah, an energy service company called CES/Way is installing a 20-year, $19 million privately-financed, comprehensive energy efficiency project that will be paid for entirely out of energy savings. This project will save United States taxpayers $50 million in energy costs over the life of the project.

Similarly, energy service company EUA Cogenex has completed a comprehensive lighting retrofit of DOE's Forrestal Building saving United States taxpayers $2.8 million in energy costs over the seven year contract term.

At Fort Polk in Louisiana, energy service company, Coenergy Group, is reducing energy costs by an anticipated 35 to 40 percent on a project that is also expected to pump approximately $25 million into Fort Polk's local economy over the next 20 years through the use of local contractors.

These energy cost savings and related benefits could be multiplied dramatically at Federal facilities. Until recently, Federal procurement barriers and a shortage of trained Federal energy managers have constrained the widespread use of energy savings performance contracting. This is changing, however. Over the past three years, DOE has demonstrated leadership and initiative in four critical areas. One, in technical guidance and training of Federal energy managers and contract officers. Two, in the formulation of standardized guidelines and procedures for quantifying the energy savings resulting from the installation of energy efficiency measures. Three, in the finalization of the energy savings performance contracting regulations necessary to undertake private investments in Federal facilities. And, four, in providing information about the elements of the responsible delivery and implementation

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of cost effective energy efficiency projects to public and private sector end users.

Given these activities, NAESCO supports the budgetary levels being sought by DOE for its Federal energy management activities. A decision by Congress to underfund these programs would deny the Federal Government the long term budget gains that can be achieved through private energy efficiency investments in Federal buildings. This potential was recognized by Congress last year in the conference report on the Fiscal Year 1996 Interior Appropriations Act which encouraged Federal agencies to make greater use of partnerships with private sector energy service companies through the use of energy savings performance contracts.

NAESCO thanks you for your support and urges you to reaffirm your support this year. NAESCO also urges the committee to require agencies to comply with the reporting requirements in the 1992 Energy Policy Act; for example, by inclusion of the so-called Bingaman amendment in your bill.

In closing, I would like to especially thank_Christine Irvin, the Assistant Secretary for Energy Efficiency and Renewable Energy at DOE and her extremely capable staff who are working so hard to translate policy into practice in this area.

Mr. BUNN. Thank you very much.

[The statement of Ms. Singer follows:]