ClearEdge Power, the small-scale fuel cell startup with backing from a veteran of the 1980s leveraged buyout scene, has a proposal for Congress.

For about $50,000, the Hillsboro, Ore.-based startup, makes 5-kilowatt combined heat and power fuel cell units that run on natural gas. The energy savings can pay back the costs in about six to seven years, said Bill Sproull, senior vice president of business development.

But a bill being proposed by Oregon Congressman David Wu could shave a few years off that payback, he said. The bill seeks to raise the tax credits for residential fuel cells, now set at $1,000 per kilowatt, to match the $3,000 per kilowatt cap for commercial installations.

ClearEdge, founded in 2003 sees the discrepancy as an oversight ­– residential scalesolarpower got its cap lifted completely in the February stimulus package, Sproull noted.

Doing the same for fuel cells – particularly through a tax bill unrelated to the controversial cap-and-trade energy bill now before Congress – could face a relatively low hurdle, he suggested.

ClearEdge's natural gas-fueled CE5 units are being tested at its Hillsboro, Ore. headquarters, as well as at a fire station and McDonald's restaurant in the Portland, Ore. area. California will be its first market, however. Two CE5 units are now running in the state – one in a home in Palm Desert, which offers incentives for home fuel cells, and the other in the Menlo Park office space of Kohlberg & Co., Sproull said.

James Kohlberg, the head of the company and its venture arm Kohlberg Ventures, is a former executive at corporate raider Kohlberg Kravis Roberts & Co.. Kohlberg has led investments of about $40 million into ClearEdge, most recently with a $15 million series D round, Sproull said. Other investors have included Applied Materials' venture arm Applied Ventures.

CE5's don't qualify as renewable power, since they burn natural gas, though they still qualify for various government incentives (see Green Light post).

But they are more efficient compared to burning natural gas for electricity, Sproull said. Add captured heat to the mix, and a typical system could yield savings of $6,000 to $12,000 a year, he said.

Fuel cells also can run all the time, unlike wind and solar power. They're still expensive compared to burning natural gas in big turbines serving established grids. But they emit less carbon, which may make them more valuable as time goes by.

Large-scale fuel cells from United Technologies, Ballard Power Systems and Plug Power are now in the field (see Fuel Cells as Renewable Power?). ClearEdge is like them, but at a smaller scale.

ClearEdge is looking to cash be flow self-sufficient some time next year, Sproull said. It also maintains internet links to its devices, providing a potential route to link them utility smart grid networks, he said.