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A natural gas fueled 1kW PEFC cogeneration system has been developed to demonstrate a PEFC system for residential use by Sanyo in late 1999. It is comprised of three packages that are a power source unit, a hot water storage tank unit including a water treatment device, and an inverter unit for utility grid interconnection. The power source unit has a fuel processor, a fuel cell module and a controller. This system achieved an electric efficiency of 28% HHV, a heat recovery efficiency of 25% HHV producing hot water and full-automatic operation using microprocessors.