The authors in conjunction with Shikoku Electric Power and Toagosei have been developing a new energy saving system using byproduct hydrogen assisted by the Agency of Industrial Science and Technology (AISI) of the Ministry of International Trade and Industry (MITI) since 1993. The main unit of the system is a 100-kW class phosphoric acid fuel cell (PAFC) utilizing by-product hydrogen. The development technology of this hydrogen PAFC system include the following items; (1) recycling technology for using unreacted exhaust hydrogen at the anode outlet (2) safe processing technology of exhaust hydrogen. The system was constructed at the Tokushima plant of Toagosei and has operated from December 1996. The total operating time reached over 3000 h as of June 1997. The demonstration test will be conducted from 1996 through FY 1998.