SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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[X] Definitive Proxy Statement by Rule 14a-6(e)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

Environmental Power Corporation
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Notes:

ENVIRONMENTAL POWER CORPORATION
500 Market Street, Suite 1-E
Portsmouth, New Hampshire 03801

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Our Stockholders:

The Annual Meeting of Stockholders of Environmental Power Corporation, a
Delaware corporation (the "Company" or "EPC"), will be held on Tuesday, June
26, 2001 at 11:00 a.m. local time, at Courtyard Marriott, 1000 Market Street,
Portsmouth, New Hampshire, for the following purposes:

1. To elect a Board of Directors to serve for the ensuing year and until
their respective successors have been duly elected and qualified. The
nominees the Board proposes to present for election are Joseph E.
Cresci, Donald A. Livingston, Peter J. Blampied, Edward B. Koehler and
Robert I. Weisberg.

2. To consider and act upon a proposal to ratify the selection of the firm
of Deloitte & Touche LLP as auditors for the Company for the fiscal year
ending December 31, 2001.

3. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's common stock,
par value $.01 per share ("Common Stock"), from 20,000,000 to
50,000,000.

4. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Only stockholders of record on the books of the Company at the close of
business on May 8, 2001 will be entitled to notice of and to vote at the
meeting. In accordance with Delaware corporate law, the Company will make
available for examination by any stockholder entitled to vote at the meeting,
for any purpose germane to the meeting, during ordinary business hours, for at
least 10 days prior to the meeting, at the offices of the Company, a complete
list of the stockholders of record entitled to vote at the meeting, arranged in
alphabetical order. All stockholders are cordially invited to attend the
meeting.

Please sign, date and return the enclosed proxy in the enclosed envelope at
your earliest convenience. If you return your proxy, you may nevertheless
attend the meeting and vote your shares in person.

By Order of the Board of Directors,

/s/ William D. Linehan
_____________________________________
William D. Linehan
Secretary

Portsmouth, New Hampshire
May 29, 2001

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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IN THE UNITED STATES.

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ENVIRONMENTAL POWER CORPORATION
500 Market Street, Suite 1-E
Portsmouth, New Hampshire 03801

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PROXY STATEMENT

May 29, 2001

Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Environmental Power Corporation, a Delaware corporation
(the "Company" or "EPC"), for use at the Annual Meeting of Stockholders to be
held on Tuesday, June 26, 2001 at 11:00 a.m. local time, at Courtyard
Marriott, 1000 Market Street, Portsmouth, New Hampshire, and any adjournments
thereof (the "Meeting").

Any stockholder may revoke a proxy at any time prior to its exercise by
filing a later-date proxy or a written notice of revocation with the Secretary
of the Company, or by voting in person at the Meeting. If a stockholder is not
attending the Meeting, any proxy or notice should be returned in time for
receipt no later than the close of business on the day preceding the Meeting.
The persons named as attorneys-in-fact in the proxies are officers of the
Company.

Only stockholders of record as of the close of business on the record date
of May 8, 2001 will be entitled to notice of and to vote at the Meeting and
any adjournments thereof.

As of May 8, 2001 there were 11,406,783 shares of Common Stock of the
Company outstanding and entitled to vote. The shares of Common Stock are the
only outstanding voting securities of the Company. Stockholders are entitled
to cast one vote for each share held of record. The presence of a majority of
the outstanding shares of Common Stock represented in person or by proxy at
the meeting will constitute a quorum. The affirmative vote of a majority of
all outstanding shares of Common Stock is required to approve the proposal to
amend the Company's Certificate of Incorporation. All other matters to be
voted on will be decided by the vote of a majority of those shares present or
represented at the meeting and entitled to vote.

All properly executed proxies returned in time to be cast at the Meeting
will be voted and, with respect to the election of the Board of Directors,
will be voted as stated under "Election of Directors" below. Where a choice
has been specified on the proxy with respect to a proposal, the shares
represented by the proxy will be voted in accordance with the specification
and will be voted FOR if no specification is indicated. If a stockholder
returns a proxy withholding authority to vote the proxy with respect to a
nominee for director, then the shares of the Common Stock covered by such
proxy shall be deemed present at the Meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to each nominee,
but shall not be deemed to have been voted for such nominee. If a stockholder
abstains from voting with respect to any matter, then the shares held by such
stockholder shall be deemed present at the Meeting for purposes of determining
a quorum and for purposes of calculating the vote with respect to such matter,
but shall not be deemed to have been voted in favor of such matter. If a
broker returns a non-vote proxy, indicating a lack of authority to vote on any
matter, then the shares covered by such non-vote shall be deemed present at
the Meeting for purposes of determining a quorum but shall not be deemed to be
present and entitled to vote at the Meeting for purposes of calculating the
vote with respect to such matter.

The Board of Directors of the Company know of no other matters to be
presented at the Meeting. If any other matter should be presented at the
Meeting upon which a vote properly may be taken, shares represented by all
proxies received by the Board of Directors will be voted with respect thereto
in accordance with the judgment of the persons named in the proxies.

This proxy statement and the form of proxy were first mailed to
stockholders on or about the date hereof.

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth as of May 8, 2001 the name of each person
who, to the knowledge of the Company, owned beneficially more than 5% of the
shares of Common Stock of the Company outstanding at such date, the number of
shares owned by each of such persons and the percentage of the class
represented thereby.

Amount and
Nature of
Beneficial Percentage
Name and Address of Beneficial Owner Ownership(1) of Class
- ------------------------------------ ------------ ----------

Joseph E. Cresci.................................. 4,725,348(2)(4) 41.43%
c/o Environmental Power Corporation
500 Market Street, Suite 1-E
Portsmouth, New Hampshire 03801

Donald A. Livingston.............................. 2,461,739 21.58%
c/o Environmental Power Corporation
500 Market Street, Suite 1-E
Portsmouth, New Hampshire 03801

James F. Powers, as Trustee....................... 1,000,000(3) 8.77%
c/o Vitale Caturano and Company
210 Commercial Street
Boston, MA 02109

- --------
(1) Information with respect to beneficial ownership is based upon information
furnished by such stockholders. Except as indicated in notes 2, 3 and 4
all shares are held beneficially and of record.
(2) Includes 3,665,618 shares held in a revocable trust for the benefit of
members of Mr. Cresci's family, of which Mr. Cresci is the trustee, and
59,730 shares held in trust for the benefit of Mr. Cresci and his
children, as to which Mr. Cresci has shared voting and investment power;
but does not include 20,000 shares owned by Mr. Cresci's wife, as to which
shares Mr. Cresci has neither voting nor investment power and as to which
shares he disclaims beneficial ownership.
(3) Consists of 1,000,000 shares which Mr. Cresci deposited into a voting
trust (the "Voting Trust") on November 20, 1996 and in which Mr. Powers
has beneficial ownership in his capacity as trustee with sole voting
power. Mr. Cresci also has beneficial ownership in such shares which are
evidenced by voting trust certificates held by The Cresci Family Limited
Partnership of which Mr. Cresci is the sole general partner with sole
dispositive power.
(4) Includes 1,000,000 shares held by the Voting Trust (See Note 3).

PROPOSAL ONE--ELECTION OF DIRECTORS

The directors of the Company are elected annually and hold office for the
ensuing year and until their successors have been elected and qualified. Joseph
E. Cresci, Donald A. Livingston, Peter J. Blampied, Edward B. Koehler and
Robert I. Weisberg have been nominated by management for election at the
Meeting. All nominees are presently directors of the Company and were elected
at the Annual Meeting of Stockholders held on June 27, 2000. The Company's by-
laws presently state that the number of directors constituting the entire Board
of Directors shall be determined by resolution of the Board of Directors. The
number of directors currently fixed by the Board of Directors is five. This
number may be changed by resolution of the Board of Directors.

No proxy may be voted for more people than the number of nominees listed
below. Shares represented by all proxies received by the Board of Directors and
not so marked as to withhold authority to vote for any individual director (by
striking that individual director's name where indicated on the proxy) or for
all directors will be voted (unless one or more nominees are unable or
unwilling to serve) FOR the election of all the nominees named below. The Board
of Directors knows of no reason why any such nominee would be unable or
unwilling to serve, but if such should be the case, proxies may be voted for
the election of some other person.

The Board of Directors of the Company held four meetings during the fiscal
year ended December 31, 2000. The Compensation Committee, which consists of
Messrs. Blampied, Koehler and Weisberg, determines the compensation of the
Company's Chief Executive Officer and Chief Operating Officer and met once in
2000. The Audit Committee, which consists of Messrs. Blampied, Koehler and
Weisberg, oversees the accounting and financial functions of the Company,
including matters relating to the appointment and activities of the Company's
independent auditors, and met once in 2000. The Executive Committee, which
consists of Messrs. Cresci and Livingston, can act in place of the full Board
of Directors to the extent permitted by law and did not meet in 2000. The Stock
Option Committee, which consists of Messrs. Blampied, Koehler and Weisberg,
administers the 1990 Stock Plan and did not meet in 2000. Each member of the
Board of Directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and any Committee on which he served.

The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned by each nominee for Director as of
May 8, 2001. The nominees include all current Directors and Named Executives
(as defined below), except for William D. Linehan, a Named Executive, who does
not beneficially own Common Stock.

Amount &
Nature of
Nominee's Name and Date Positions and Offices with Beneficial Percent of
First Became a Director the Company Ownership(1) Class
----------------------- -------------------------- ------------ ----------

Joseph E. Cresci......... Chairman, Chief Executive 4,725,348(2) 41.43%
1982 Officer and Director
Donald A. Livingston..... President, Chief Operating 2,461,739 21.58%
1982 Officer and Director
Peter J. Blampied........ Director 130,300(3) 1.14%
1988
Robert I. Weisberg....... Director 210,000(4) 1.82%
1994
All directors and officers as a group (6 persons)... 7,527,387(5) 65.08%

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(1) Except as otherwise indicated, the named person has sole voting and
investment power with respect to the shares. Except as indicated in notes
2, 3, and 4, all shares are held beneficially and of record.
(2) Includes 3,665,618 shares held in a revocable trust for the benefit of
members of Mr. Cresci's family, of which Mr. Cresci is the trustee, and
1,000,000 shares held by the Voting Trust (see "Principal Holders of
Voting Securities") and 59,730 shares held in trust for the benefit of Mr.
Cresci and his children; but does not include 20,000 shares owned by Mr.
Cresci's wife as to which shares he disclaims beneficial ownership. Mr.
Cresci has shared voting and investment power with respect to the 59,730
shares held in trust for the benefit of himself and his children but no
voting power with respect to the shares held in the Voting Trust.
(3) Includes 30,000 shares which Mr. Blampied has the right to acquire
pursuant to stock options which are all currently exercisable.
(4) Includes 130,000 shares which Mr. Weisberg has the right to acquire
pursuant to stock options which are all currently exercisable.
(5) Includes 160,000 shares which Messrs. Blampied and Weisberg have the right
to acquire pursuant to stock options which are all currently exercisable.

Occupations of Directors

The following table sets forth the age and principal occupation of each of
the nominees for director during the past five years. Except for Mr. Blampied
who is a director for Access Capital Strategies, 124 Mount Auburn Street,
Cambridge, MA 02138 and a trustee for Northeast Investors Trust, 50 Congress
Street, Boston, MA 02109 and Mr. Weisberg who is a trustee for Monterey Mutual
Fund, 1299 Ocean Avenue, Suite 210, Santa Monica, California 90401, none of the
nominees for director holds any other directorships in any company subject to
the reporting requirements of the Securities Exchange Act of 1934 or in any
company registered as an investment company under the Investment Company Act of
1940.

Name Age Principal Occupation
---- --- ------------------------------------------------

Joseph E. Cresci......... 58 Chairman and Chief Executive Officer of the
Company (1982 to present).
Donald A. Livingston..... 58 President and Chief Operating Officer of the
Company (1991 to present).
Peter J. Blampied........ 58 Trustee, Northeast Investors Trust (2000 to
present); President, Corcoran Management Company
(1998-present); Director, A.W. Perry, Inc.
(1998--present); Director, Access Capital
Strategies (1997--present); Director, Nellie Mae
(1982--present); Director, Citizens Bank of
Massachusetts (1996 to 1999); and Director,
Citizens Financial Group, Inc. (1994-1996)
Edward B. Koehler, Esq... 47 Partner, Hunton & Williams (1990 to present)
Robert I. Weisberg....... 53 President and Chief Executive Officer, Alco
Financial Services, LLC (1997--present);
Trustee, Monterey Mutual Fund (1998 to present);
and President and Chief Executive Officer, Pro-
Care Financial Group, Inc. (1994--1997)

COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS

Compensation of Executive Officers

Summary Compensation Table: The following table sets forth certain
information with respect to the annual and long-term compensation of the
Company's Chief Executive Officer, Chief Operating Officer and each other
executive officer earning in excess of $100,000 in salary and bonus in 2000
(the "Named Executives") for the three fiscal years ended December 31, 2000.

Long-Term
Annual Compensation Compensation
------------------------- ------------------
RESTRICTED
Stock
Name and Principal Position Year Salary Bonus Awards Options
- --------------------------- ---- -------- -------- ---------- -------

Joseph E. Cresci.................. 2000 $150,000 $350,000 -- --
Chairman of the Board and 1999 150,000 -- -- --
Chief Executive Officer 1998 67,584(1) -- -- --

Donald A. Livingston.............. 2000 $150,000 $350,000 -- --
President and 1999 150,000 -- -- --
Chief Operating Officer 1998 90,569(1) -- -- --

William D. Linehan................ 2000 $ 91,708 $ 10,000 -- --
Secretary, Treasurer and 1999 71,500 -- -- --
Chief Financial Officer 1998 71,500 7,500 -- --

- --------
(1) Reflects repayment by the Named Executive of a portion of 1998 salary as
described in the Report of the Compensation Committee below.

Stock Options: There were no options granted during 2000 to the Named
Executives. As of December 31, 2000, there were no unexercised options held by
the Named Executives.

Defined Benefit Pension Plan: In December 1998, the Company established a
noncontributory defined benefit pension plan (the "Pension Plan") covering all
eligible employees of the Company. The Pension Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974. Employees
aged 21 or older who have completed twelve months of service during which they
worked a minimum of 1,000 hours are eligible to participate. Employees earn a
year of service for vesting purposes in each employment year in which they
complete at least 1,000 hours of employment. Employees become vested in the
Pension Plan over a 6 year period (20% after 2 years and 20% per year
thereafter, to 100% after 6 years). Benefits are based upon the participant's
annual compensation (including bonuses and similar special pay), as more fully
defined in the Pension Plan, over the number of years of service up to a
maximum of 25 years.

The following table shows the estimated annual pension benefits payable upon
retirement to a participant of the Pension Plan for various salary levels and
years of service.

Years of Service
Average Annual ---------------------------------------------------------------------
Compensation 10 15 20 25
-------------- ------ ------ ------ ------

100,000 11,000 24,750 44,000 55,000
150,000 16,500 37,125 66,000 82,500
200,000 18,700 42,075 74,800 93,500
250,000 18,700 42,075 74,800 93,500

During fiscal year 2000, the maximum amount of annual compensation which may
be included for Pension Plan purposes was $170,000. The figures shown above
apply under the Pension Plan as of December 31, 2000. The benefit amounts
listed are not subject to any deduction for Social Security or other offset
amounts. As a result of limitations imposed under the Federal income tax law,
the maximum annual benefit

payable under the Pension Plan for the fiscal year ending December 31, 2000 is
$135,000, although the amount will be actuarially adjusted in accordance with
Federal income tax regulations if payments commence prior to or following the
date that unreduced Social Security benefits become payable. As of December 31,
2000, Messrs. Cresci and Livingston each had eighteen years of credited service
under the Pension Plan and Mr. Linehan had five years of credited service under
the Pension Plan.

Compensation of Directors

Each director of the Company who is not an officer or employee of the
Company receives $2,000 (plus expenses) for each scheduled meeting of the Board
of Directors or non-coincident meeting of a board committee which he attends.

During 2000, Messrs. Blampied and Weisberg received option grants to
purchase 10,000 shares each under the Company's Director Option Plan which are
exercisable at per share prices of $.50 and $.6875, respectively, based on the
market prices of the Common Stock on their respective anniversary dates of
becoming Directors. Mr. Koehler, under the policies of the law firm in which he
is a partner, which law firm periodically provides services to the Company, is
prohibited from owning shares in the Company.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is comprised of Peter J. Blampied, Edward B.
Koehler and Robert I. Weisberg. No member of the Compensation Committee is now
an officer or an employee of the Company or any of its subsidiaries or has been
at any time an officer or employee of the Company or any of its subsidiaries.

Mr. Koehler is a partner with Hunton & Williams a law firm which
periodically provides services to the Company.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors determines the
Company's executive compensation policy and sets compensation for the Chief
Executive Officer (the "CEO") and Chief Operating Officer (the "COO").

The Compensation Committee's policy is to offer the CEO and COO competitive
compensation packages that will permit the Company to attract and retain
individuals with superior abilities and to motivate and reward such individuals
on the basis of the Company's performance in an appropriate fashion in the
long-term interests of the Company and its shareholders. Currently, executive
compensation is comprised of salary and cash bonuses which may be awarded from
time to time. In previous years, the Company offered its executive officers
long-term incentive opportunities in the form of stock options under the
Company's 1990 Stock Plan and restricted stock awards. Presently, there are no
shares available for grant under the Company's 1990 Stock Plan and no
additional shares reserved for restricted stock awards. However, in the future,
the Board of Directors may consider whether it is in the best interest of the
Company to establish another stock plan, reserve additional shares for
restricted stock awards or establish other long-term incentive opportunities
for executive officers.

The Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for the CEO and COO. The Compensation
Committee does not utilize any specific quantitative formula or targets in
making compensation decisions. While the Compensation Committee considers
corporate performance measures such as net income, earnings per share, return
on assets and return on equity, the Compensation Committee also appreciates the
importance of achievements that may be difficult to quantify, and accordingly
recognizes qualitative factors, such as successful supervision of major
projects and demonstrated leadership ability. Base

salaries for the CEO and COO are established at levels considered appropriate
in light of the duties and scope of responsibilities of each officer's
position. Salaries are generally reviewed periodically and adjusted as
warranted to reflect individual officer performance. The Compensation Committee
focuses primarily on total annual compensation, including incentive awards and
benefits derived from other fringe benefits such as the Pension Plan, rather
than base salary alone, as the appropriate measure of executive officer
performance and contribution. Compensation decisions regarding executive
officers other than the CEO and COO are made by the CEO and COO.

As discussed in the section "Compensation of Executive Officers", the
Company established in December 1998 a Pension Plan to provide retirement
benefits to all of its eligible employees including the CEO and COO. The
Company funded its 1998 contribution to the Pension Plan of $255,062 during
1999, which contribution benefited the CEO and COO in the amounts of $132,416
and $109,431, respectively. In December 1998, in anticipation of receiving this
benefit from the Pension Plan, the CEO and COO each elected to repay to the
Company a portion of their 1998 compensation in an amount equal the benefit
they would receive from the 1998 contribution to the Pension Plan. As a result,
the 1998 annual compensations of the CEO and COO were reduced from $200,000 and
$200,000, respectively, to $67,584 and $90,569, respectively.

During 1999, since their responsibilities became less complex after the
settlement of the Milesburg litigation, the Compensation Committee set a lower
base salary for the CEO and COO and established a policy of rewarding these
executive officers with cash bonuses which were tied to successful
achievements, improvements in results and the fulfillment of corporate goals.
In March 1999, to further these objectives, the Compensation Committee ratified
the establishment of the Pension Plan, reduced the annual base salaries for the
CEO and COO from $200,000 to $150,000, and considered various bonus incentives
for these executive officers. The Compensation Committee considered the lower
base salaries, when combined with the estimated benefits that the CEO and COO
would receive from the Pension Plan and bonus incentives, to be an appropriate
compensation package for the CEO and COO at that time.

In April 2000, the Compensation Committee awarded the CEO and COO each a
bonus of $100,000. In deciding to award this bonus, The Compensation Committee
considered factors including the very successful results achieved by the CEO
and COO in the settlement of the long-standing litigation with Pennsylvania
Electric Company.

In December 2000, the Compensation Committee awarded the CEO and COO each a
bonus of $250,000 to acknowledge the significant progress made toward the
settlement of the Sunnyside litigation as well as the increase in their duties
to formulate and assess restructuring options, consider sale and merger
proposals, and evaluate prospects for business expansion. However, due to
concerns about the Company's ongoing cash requirements, the Compensation
Committee requested that the CEO and COO use substantially all of the proceeds
from these cash bonuses to repay their outstanding loans due to the Company.
The Compensation Committee agreed, however, to allow the CEO and COO to borrow
back sufficient funds to pay their individual tax obligations resulting from
these bonuses subject to the Company's receipt of a settlement payment from the
Sunnyside litigation. The Compensation Committee felt this arrangement properly
compensated the CEO and COO for their present achievements, duties and
responsibilities while also preserving the Company's cash resources for ongoing
business activities. In April 2001, the Company received $1,500,000 pursuant to
a settlement of the Sunnyside litigation and the CEO and COO each borrowed back
$100,000 from the Company.

In 1993, Congress enacted Section 162(m) of the Internal Revenue Code, which
prevents publicly held corporations from deducting compensation in excess of $1
million paid to CEO's and the four highest compensated officers unless the
compensation is performance-based. The Company's compensation program currently
is not of a level such that this limit would apply.

Respectfully Submitted by the Compensation Committee:

Peter J. Blampied Edward B. Koehler Robert I. Weisberg

STOCK PERFORMANCE GRAPH

The following graph compares the Company's cumulative stockholder return on
its Common Stock with the return on the NASDAQ Market Index and with the SIC
Code 4911 (Electric Services) Index for the five year period ended December 31,
2000.

Fiscal Year Ending
-----------------------------------------------------------------
Company/Index/Market 12/29/1995 12/27/1996 12/31/1997 12/31/1998 12/31/1999 12/29/2000
- -------------------- ---------- ---------- ---------- ---------- ---------- ----------

Environmental Power
Corp................... 100.00 373.59 1055.01 620.68 523.32 445.87
Electric Services....... 100.00 103.38 127.55 145.11 121.97 153.73
NASDAQ Market Index..... 100.00 124.27 152.00 214.39 378.12 237.66

SOURCE:Media General Financial Services
P.O. Box 85333
Richmond, VA 23293
Phone: 1-(800) 446-7922
Fax: 1-(804) 649-6826

Other Transactions

In December 1985, the Company loaned $55,000 to Mr. Livingston. This loan
incurred interest at a bank's floating prime rate plus 1/2% and was due and
payable by December 31, 2000. On December 29, 2000, Mr. Livingston made
aggregate principal and interest payments of $128,218 to satisfy this
obligation.

During 1993 and 1995, Messrs. Cresci and Livingston exercised options to
purchase shares of the Company's Common Stock. As payment for the exercise
price of these stock options, the Company accepted promissory notes which are
payable upon demand by the Company from Messrs. Cresci and Livingston
aggregating $332,875 and $428,281, respectively. Interest on these notes, which
is payable monthly at the Applicable Federal Rate, amounted to $46,735 in the
aggregate during 2000 and has been fully collected from Messrs. Cresci and
Livingston. As of April 20, 2001, after certain transactions which are
described further in the Report of the Compensation Committee, Messrs. Cresci
and Livingston had aggregate balances due to the Company of $186,875 and
$410,498, respectively under the these notes.

In September 1997, Mr. Weisberg exercised options to purchase 80,000 shares
of the Company's Common Stock. As payment for the exercise price of these stock
options, the Company accepted a promissory note which is payable upon demand by
the Company from Mr. Weisberg in the amount of $48,575. Interest on this note,
which is payable quarterly at the Applicable Federal Rate, amounted to $2,983
in 2000 and has been fully collected from Mr. Weisberg.

Edward B. Koehler is a partner with Hunton & Williams a law firm which
periodically provides services to the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and Directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file initial
statements of beneficial ownership (Form 3), and statements of changes in
beneficial ownership (Forms 4 or 5), of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all such forms
they file.

The Company believes, based solely on its review of the copies of forms
received by it, or written representations from certain reporting persons that
no additional forms were required for those persons, that its officers,
directors and greater than ten-percent beneficial owners complied with all
filing requirements applicable to them for 2000.

REPORT OF THE AUDIT COMMITTEE

Audit Committee Responsibilities

The Audit Committee, which met once during 2000, operates under a written
charter adopted by the Board of Directors in April 2001, a copy of which is
attached to this Proxy Statement as Exhibit A. Management is responsible for
the Company's internal controls and the financial reporting process. The
Company's independent accountants are responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
auditing standards generally accepted in the United States of America and
issuing an independent accountants' report on such financial statements. The
Audit Committee reviews with management the Company's consolidated financial
statements; reviews with the independent accountants their independent
accountants' report; and reviews the activities of the independent accountants.
The Audit Committee recommends to the Board of Directors, subject to
shareholder ratification, the appointment of the Company's independent
accountants each year. The Audit Committee also considers the adequacy of the
Company's internal controls and accounting policies. Mr. Blampied is the
chairman of the Audit Committee and Messrs. Weisberg and Koehler are members.
The chairman and members of the Audit Committee are all independent directors
of the Company within the meaning of Rule 4200(a)(15) of the NASD listing
standards. The Company incurred the following fees for services performed by
Deloitte & Touche LLP pertaining to the fiscal year ended December 31, 2000.

Audit Fees

Deloitte & Touche LLP billed aggregate fees of $91,500 for the annual audit
and three quarterly reviews pertaining to the fiscal year ended December 31,
2000 ("Audit Services").

Financial Information System Design and Implementation Fees

Deloitte & Touche LLP did not perform any services related to financial
information systems design and implementation during the fiscal year ended
December 31, 2000.

All Other Fees

Deloitte & Touche LLP billed aggregate fees of $2,688 for all other services
rendered during the fiscal year ended December 31, 2000.

Audit Committee Report

The Audit Committee has reviewed and discussed the audited financial
statements with management of the Company. The Audit Committee has discussed
with the Company's independent auditors the matters required to be discussed by
SAS 61. In addition, the Audit Committee has received the written disclosures
and letter from the Company's independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), as may be modified or supplemented, and has discussed with the
independent accountants matters pertaining to their independence. The Audit
Committee also considered whether the additional services unrelated to Audit
Services performed by Deloitte & Touche LLP were compatible with maintaining
their independence in performing their Audit Services. Based upon the reviews
and discussions referred to above, the Audit Committee recommended to the Board
of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for 2000 for filing with the Securities and Exchange
Commission. The Audit Committee and Board of Directors have also recommended,
subject to stockholder approval, the selection of Deloitte & Touche LLP as the
Company's independent accountants for the fiscal year ending December 31, 2001.

Respectfully Submitted by the Audit Committee:

Peter J. Blampied Edward B. Koehler Robert I. Weisberg

PROPOSAL TWO--RATIFICATION OF SELECTION OF AUDITORS

The Board of Directors has selected the firm of Deloitte & Touche LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending December 31, 2001. The Board of Directors recommends a vote FOR the
ratification of this selection.

It is expected that a member of the firm of Deloitte & Touche LLP, the
independent certified public accountants who reported on the Company's
financial statements included in the 2000 Annual Report, will be available
either by telephone or present at the Meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions.

PROPOSAL THREE--APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES

The Board of Directors has requested that the stockholders of the Company
approve an amendment (the "Amendment") to its Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), from 20,000,000 to 50,000,000.

The Board of Directors of the Company has unanimously adopted a resolution
declaring it advisable that the Certificate of Incorporation be so amended. The
Board of Directors further directed that the Amendment be submitted for
consideration by stockholders at the Annual Meeting. In the event the Amendment
is approved by stockholders, the Company will thereafter execute and submit to
the Delaware Secretary of State for filing a Certificate of Amendment of the
Certificate of Incorporation providing for the Amendment. The Amendment will
become effective at the close of business on the date the Certificate of
Amendment is accepted for filing by the Secretary of State.

Under the Certificate of Incorporation, the authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock"). As of the
date of this Proxy Statement, the Company has outstanding 11,406,783 shares of
Common Stock, no shares of Preferred Stock, and options for the issuance upon
exercise of 160,000 shares of Common Stock. The Company's outstanding options
were all fully vested on their dates of grant.

The Board of Directors recommends that the Certificate of Incorporation be
amended to ensure that sufficient shares of Common Stock are authorized and
available for possible use in connection with future financings, investment
opportunities, business transactions (including corporate mergers and
acquisitions), employee benefit plans, distributions to existing stockholders
(such as stock dividends or stock splits) or for other corporate purposes. The
issuance of additional shares of Common Stock for any of these purposes could
have a dilutive effect on earnings per share, depending on the circumstances,
and could dilute a stockholder's percentage voting power in the Company. The
Board of Directors will make the determination for future issuances of
authorized shares of Common Stock, which will not require further action by the
stockholders except where otherwise provided by law or then applicable listing
requirements.

As previously announced, the Company has begun efforts to identify
development, merger and acquisition opportunities and to evaluate possibilities
for attracting investment into the Company. However, other than the shares
which may be issued upon exercise of the options described above and any future
options which may be granted to employees and directors, the Company has no
definitive plans or commitments requiring the issuance of additional shares of
Common Stock. The Board of Directors believes authorization of the additional
shares is appropriate, however, so that it may have the flexibility to issue
shares from time to time, without the delay of seeking shareholder approval
(unless required by law or then existing listing standards), whenever, in its
judgment, such issuance is in the best interest of the Company and its
stockholders.

In the event stockholders approve the Amendment, Article Fourth of the
Certificate of Incorporation will be amended to increase the number of shares
of Common Stock which the Company is authorized to issue from 20,000,000 to
50,000,000. The par value of such stock will remain one cent ($.01) per share.
The Amendment does not change the authorized Preferred Stock, which remains at
1,000,000 shares. Upon effectiveness of the Amendment, the first paragraph of
Article Fourth of the Certificate of Incorporation will read as follows:

"FOURTH. The total number of shares of all classes of capital stock
which the corporation shall have authority to issue is 51,000,000 shares,
comprised of 50,000,000 shares of Common Stock with a par value of One Cent
($.01) per share (the "Common Stock") and 1,000,000 shares of preferred
stock with a par value of One Cent ($.01) per share (the "Preferred
Stock")."

Although an increase in the authorized shares of Common Stock could, under
certain circumstances, also be construed as having an anti-takeover effect (for
example, by permitting easier dilution of the stock ownership of a person
seeking to effect a change in the composition of the Board of Directors or
contemplating a tender offer or other transaction resulting in the acquisition
of the Company by another company), the proposed Amendment is not in response
to any effort by any person or group to accumulate the Company's stock or to
obtain control of the Company by any means. In addition, the proposal is not
part of any plan by the Board of Directors to recommend or implement a series
of anti- takeover measures. The Board of Directors recommends a vote FOR the
Amendment to the Certificate of Incorporation.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended for inclusion in the proxy statement to be
furnished to all stockholders entitled to vote at the 2002 Annual Meeting of
Stockholders of the Company must be received at the Company's principal
executive offices not later than January 29, 2002. In order to curtail
controversy as to the date on which a proposal was received by the Company, it
is suggested that proponents submit their proposals by certified mail-return
receipt requested. Such proposals must also meet the other requirements
established by the Securities and Exchange Commission for stockholder proposals.
If the Company does not receive notice of any matter that is to come before the
stockholders at the 2002 Annual Meeting of Stockholders on or before April 14,
2002, which corresponds to forty-five days before the date on which the Company
first mailed this proxy statement, the proxy for the 2002 Annual Meeting of
Stockholders may, pursuant to Rule 14a-4(c) of the Proxy Rules under the
Securities Exchange Act of 1934, confer discretionary authority to vote on the
matters presented.

OTHER BUSINESS

The Board of Directors knows of no business that will be presented for
consideration at the Meeting other than that stated above. If any other
business should come before the Meeting, votes may be cast pursuant to proxies
in respect to any such business in the best judgment of the person or persons
acting under the proxies.

EXPENSES AND SOLICITATION

The cost of solicitation of proxies will be borne by the Company. Proxies
will be solicited principally through the mail. Further solicitation of proxies
from some stockholders may be made by directors, officers and regular employees
of the Company personally, by telephone, telegraph or special letter. No
additional compensation, except for reimbursement of reasonable out-of-pocket
expenses, will be paid for any such further solicitation. In addition, the
Company may request banks, brokers, and other custodians, nominees and
fiduciaries to solicit customers of theirs who have shares of the Company
registered in the name of a nominee. The Company will reimburse any such
persons for their reasonable out-of-pocket costs.

ANNUAL REPORT ON FORM 10-K

You may obtain a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 filed with the Securities and Exchange
Commission without charge by writing to: Investor Relations, Environmental
Power Corporation, 500 Market Street, Suite 1-E, Portsmouth, New Hampshire
03801. The Company's Annual Report on Form 10-K, as well as additional public
filings, press releases and information about the Company, are also available
on the internet from the Company's web site which is located at
www.environmentalpower.com

EXHIBIT A
---------

Environmental Power Corporation
Charter of the Audit Committee of the Board of Directors
Adopted in April 2001

I. Audit Committee Purpose

The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:

. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.

. Monitor the independence and performance of the Company's independent
auditors.

. Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.

The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary in
the performance of its duties.

II. Audit Committee Composition and Meetings

Audit Committee members shall meet the requirements of the Nasdaq National
Exchange. The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be independent
nonexecutive directors, free from any relationship that would interfere
with the exercise of his or her independent judgment. All members of the
Committee shall have a basic understanding of finance and accounting and be
able to read and understand fundamental financial statements, and at least
one member of the Committee shall have accounting or related financial
management expertise.

EXHIBIT A (continued)
---------------------

Audit Committee members shall be appointed by the Board. If an audit
committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee
membership.

The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
independent auditors, and as a committee to discuss any matters that the
Committee or each of these groups believe should be discussed. In
addition, the Committee, or at least its Chair, should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors
limited review procedures.

III Audit Committee Responsibilities and Duties

Review Procedures
-----------------

1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.

2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.

3. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together
with management's responses.

4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review.

EXHIBIT A (continued)
---------------------

Independent Auditors
--------------------

5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.

6. Approve the fees and other significant compensation to be paid to the
independent auditors.

7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.

8. Review the independent auditors' audit plan - discuss scope, staffing,
locations, reliance upon management, and general audit approach.

9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS
61.

10. Consider the independent auditors' judgment about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.

Legal Compliance
----------------

11. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.

Other Audit Committee Responsibilities
--------------------------------------

12. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement.

EXHIBIT A (continued)
---------------------

13. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.

14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.

ENVIRONMENTAL POWER CORPORATION
500 Market Street, Suite 1-E
Portsmouth, New Hampshire

The undersigned hereby appoints Joseph E. Cresci and William D. Linehan,
and each of them, proxies, with full power of substitution, to vote all shares
of stock of the Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Environmental Power Corporation to be held on
Tuesday, June 26, 2001 at 11:00 a.m. at Courtyard Marriott, 1000 Market Street,
Portsmouth, New Hampshire, and at any adjournments thereof, upon matters set
forth in the Notice of Annual Meeting of Stockholders and Proxy Statement.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
PROPOSALS IN ITEM 2 AND ITEM 3, AND AUTHORITY WILL BE DEEMED GRANTED UNDER
PROPOSAL 4.

- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the books of the Corporation.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears a
majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- --------------------------------------------------------------------------------

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

- ---------------------------------- ----------------------------------

(continued on the reverse side)

[X] Please mark your vote as in this example.

FOR ALL WITHHOLD AUTHORITY
Nominees to vote for all nominees
(except as marked
to the contrary below)

1. To elect a Board of Directors [_] [_]
to serve the ensuing year
until their respective successors
have been duly elected and qualified.

Nominees: Joseph E. Cresci
Donald A. Livingston
Peter J. Blampied
Edward B. Koehler
Robert I. Weisberg

Note: To withhold authority to vote for any individual nominee(s), mark the "FOR
ALL" box and strike a line through the name(s) of the nominee(s) you wish to
withhold. Your shares will be voted for the remaining nominee(s).

FOR AGAINST ABSTAIN
2. To ratify the section of the firm of
Deloitte & Touche LLP as auditors for the [_] [_] [_]
Corporation for the fiscal year ending
December 31, 2001.

3. To ratify the amendment to the Certificate of [_] [_] [_]
Incorporation.

4. To transact such other business as may properly come before the meeting or
any adjournments thereof.

Mark box at right if an address change has been noted at left [_]

Stockholder sign here____________________________________

Co-owner sign here_______________________________________ Date_________________

NOTE: Please be sure to sign and date this Proxy.