Echelon Wins Energy Award from the California Energy Commission

Company’s Green Headquarters Showcases 30% Energy Savings in Demand Response Program

(SAN JOSE, CA– March 27, 2007) - Echelon Corporation (NASDAQ: ELON), a leading provider of networking technology that is used to manage and reduce energy consumption, today announced that it has been awarded an Early Adopter Innovator Award from the State of California Energy Commission’s (CEC) Demand Response Research Council (DRRC) in recognition of Echelon’s leadership and continuing support to reduce loads on California’s electricity grid by participating in the Automated Critical Peak Pricing Pilot Study. The DRRC is a joint research center of the CEC, Pacific Gas & Electric (PG&E) and Lawrence Berkeley National Laboratory (LBL). The study measured the potential energy savings that could be achieved through voluntary reduction in energy use by corporations in response to energy pricing signals from utilities. Under the 2006 study, Echelon’s corporate headquarters demonstrated the ability to quickly reduce energy consumption by over 30%—more than any other participant in the program—without impacting building occupants.

“When we were first introduced to Echelon’s technology, we knew these solutions were the future of energy management and of green buildings,” said Mark Kendall, founder and president of Kenmark Real Estate Group, which manages Echelon’s San Jose headquarters over the Internet from its offices in San Francisco. “No other system is capable of saving so much energy so smartly, nor does any other allow us to implement facility management programs as cost effectively and with as many benefits to the tenant. In Echelon’s building, we’re able to reduce energy and save our client significant operating costs, without ever impacting their work environment. That is our goal – maximum energy conservation with no negative impact on our clients.”

Demand response is considered a key component of energy management policy to ensure a balance between supply and demand while simultaneously reducing greenhouse gas emissions. In an electricity grid, any significant imbalance between electricity consumption and production can cause grid instability or severe voltage fluctuations and failures within the grid. Demand response is the reduction of energy usage at the end-user level in order to place usable megawatts back on a region's energy grid during periods of peak demand, eliminating the need to run inefficient peaking plants and reducing generation costs. In return, end-users are offered reduced electricity prices or other financial incentives. Demand response is particularly useful during hot, summer months when the need for electricity often surpasses a utility’s generation capability.

Echelon’s corporate headquarters, which contain over 1,100 smart devices from over 16 suppliers using Echelon’s LONWORKS® device networking technology in the heating, air conditioning, lighting and other building control systems, helped show that highly integrated building automation systems, such as Echelon’s LONWORKS based control system, were able to reduce demand significantly more than any other building automation system. Using the web services technology in Echelon’s i.LON® 100 Internet Server as the interface to a LONWORKS based control system, the building can drop electrical demand by 30% within moments of an energy demand notification from PG&E without any human intervention.

In addition to Echelon’s building, the study included numerous other buildings that utilize a full spectrum of demand response capabilities - from fully manual (facilities personnel manually shut down systems and offices) to system level response (each sub-system in a building reports to a central controller) to fully open and integrated device networks like LONWORKS (individual, connected devices respond intelligently to demand requests). The study showed a substantially improved savings for fully open, integrated buildings. (Please reference http://www.echelon.com/company/press/pressPDFs/lawrence_berkeley_labs_Jan10-05.pdf for LBL’s results table.) “Seventy percent of all electricity consumed in the U.S. is used by commercial buildings, and 70% of that amount is used by lighting and heating, ventilating and air-conditioning (HVAC) systems,” said Bea Yormark, Echelon’s president and COO. “Buildings owners report that LONWORKS based HVAC and lighting systems can reduce annual energy use by over 30%. Even if we were to save only 10% through LONWORKS based control systems in every U.S. building, the U.S. Climate Technology Cooperation has calculated that such a saving would reduce carbon emissions equivalent to reducing automobile gasoline usage by over 12 billion gallons per year.”

“The time to act is now. According to the Paris-based International Energy Agency, more efficient use of energy can do far more in the coming decades to cut carbon dioxide emissions than either a shift to renewable energies or nuclear power. Smart, LONWORKS based control systems are already saving energy in thousands of buildings worldwide. Applying smart control technology to all of today’s buildings, utilities and homes would have tremendous, far reaching benefits to the environment, economy, and people’s everyday lives,” concluded Yormark.

Demand response is gaining acceptance and recognition with utilities worldwide as a way to conserve energy, reduce greenhouse gases, and lower costs for end-users. In a typical work day there are hours where electricity demand peaks significantly, resulting in a strain on overall grid capacity and costing commercial customers as much as 10 times the price per kilowatt-hour (kWh) as during non-peak times. This peak demand period may only last 2-4 hours and is quite predictable. Demand response programs were created by utilities such as PG&E to provide financial incentives to companies and building owners to decrease electricity consumption during peak hours. Automated demand response is a process wherein no human intervention is required to implement a lower electricity use strategy.

About Echelon
Echelon Corporation (NASDAQ:ELON) is a networking company that provides products and systems that can monitor and save energy, lower costs, improve productivity and enhance service, quality, safety and convenience by networking together everyday devices in utility,
building, industrial, transportation and home control systems. Tens of millions of smart devices based on Echelon’s products and systems are in use around the world today bringing benefits to consumers and industry. More information about Echelon can be found at http://www.echelon.com.

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