The California Energy Commission has awarded a US$500,000 grant to install and test SC Power Systems' fault current limiter - a ground breaking power and proprietary grid stability device - in the Californian electricity grid. The test is to take place in the grid of Southern California Edison, which is California‘s largest utility. The CEC and SCE will oversee the testing process and are anticipated by the directors to subsequently produce standardised performance guidelines, based on the results of those tests, which are accordingly expected to form the benchmark of performance criteria for all future FCL‘s in the United States. The award follows an extensive submissions period during which SC Power and others responded to requests from the CEC for such a device. The group is the fi rst recipient of the award, which is expected to be formalized by May 1, 2007.

The FCL is a scaled-up version of previously constructed prototypes, built and successfully tested by the group and is being constructed by Delta Star Inc, a manufacturer of transformers and the sole manufacturer of mobile transformers in the United States. Construction, installation and testing are expected to be completed by the end of 2007.

The global market for FCLs is expected to be worth up to US$5 billion per annum. As evidenced by the blackouts in August 2003, which spread across a huge area of North East America from New York to Ohio and up to parts of Canada, national power grids are subject to sustained and increasing pressure resulting from 25 years of underinvestment and a persistent growth in energy demands. Accordingly, problems with power quality issues now affect all aspects of daily power usage, adversely impacting industrial productivity and resulting in energy wastage, widespread blackouts and frequent infrastructure damage. Related economic loss is escalating. The generally accepted conclusion in the United States is that there is an unacceptably high risk that a relatively isolated natural disaster or terrorist attack could cause widespread failure of the electricity grid, blacking out huge regions of the United States jeopardizing public order and security. In this regard, it is noted that the blackouts of August 2003 affected over 50 million people.

The failing grid system in the United States has become a central issue for the American administration and a report to Congress produced by the Department of Energy in August 2006 (responding to the 2005 Energy Policy Act), stressed the importance of procuring a number of mobile electric grid substations as a Homeland Security measure to improve the country‘s emergency preparedness. Moreover, the report recommended that these mobile substations should all be fitted with "Saturable HTS Fault Current Limiters," the type of FCL device developed by the group and the subject of this grant.

Following on from the installation and testing of the group‘s device, it is hoped that the production of standardized performance criteria will assist in the accelerated adoption of FCLs on a wide scale throughout the United States.

The directors note that in addition to the DOE report, the Federal Energy Regulatory Commission took the landmark step of adopting mandatory and enforceable reliability standards in relation to power grid operation and infrastructure within the United States, which commenced on March 15, 2007. Spurred on by record power demand levels in eight regions of the United States during the summer of 2006, the new standards will be enforced by the imposition of both monetary and non-monetary penalties upon violating utility companies. The directors view this regulatory change as significant because, for the first time, utility companies are now obligated to adhere to high technical and consistency standards of delivery requirements directly addressed by the group‘s FCL device.

The timing of the award is also pertinent given Zenergy‘s announcement on Feb. 20, 2007 that the group had received Notice of Allowance from the U.S. Patent Office for the issuance of its core patent covering the FCL device, which has been developed over a number of years in conjunction with several of the major utility companies in the United States. The directors believe that this close association has enabled the group to produce a device specifically dealing with the concerns of utility companies by incorporating a number of features distinguishing it from other available solutions. Furthermore, it is the belief of the directors that these attributes have cultivated the support from the CEC to expediting the testing and implementation of the group‘s solution.