UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): December 2314, 2009

ENVIRONMENTAL POWER CORPORATION

(Exact name of Company as specified in its charter)

Delaware

001-32393

75-3117389

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification Number)

120 White Plains Road, 6^th Floor, Tarrytown, New York 10591

(Address of principal executive offices, including zip code)

(914) 631-1435

(Company’s telephone number, including area code)

NONE

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 28.0401. ~~TRIGGERING~~OTHER EVENTS ~~THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.~~

~~Overview~~Failure to Make Scheduled Interest Payment on Convertible Notes

~~As previously reported, Microgy Holdings, LLC (“Microgy Holdings”), a subsidiary of~~ Environmental Power Corporation (the “Company”), ~~was~~is ~~required~~party to ~~make~~that ~~payments,~~certain onFirst orSupplemental ~~before~~Trust ~~November 26~~Indenture, ~~2009,~~dated inas ~~respect~~ of ~~semi-annual interest payments due December~~March 1, 2009 ~~on its California and Texas tax-exempt bonds~~ (the “CAFirst ~~Bonds~~Supplemental Indenture”), ~~and~~between ~~“TX~~the ~~Bonds”,~~Company ~~respectively).~~and ~~The~~Wells ~~failure~~Fargo ofBank, ~~Microgy~~National ~~Holdings~~Association, toas ~~make~~Trustee (the “Note ~~payments~~Trustee”) ~~was~~relating ~~deemed~~ to ~~be an event of default under (i)~~ the ~~Loan~~Company’s ~~Agreement,~~14% ~~dated~~Convertible asNotes ofdue ~~October~~January 1, ~~2006~~2014 (the “TXConvertible ~~Loan Agreement~~Notes”),. ~~between~~The ~~Microgy~~Company ~~Holdings~~failed ~~and~~to make the ~~Gulf~~semi-annual ~~Coast~~interest ~~Industrial~~payment ~~Development~~in ~~Authority~~the ~~(“GCIDA”)~~amount ~~and,~~of ~~therefore~~$560,000 due on the ~~Indenture~~$8,000,000 principal ~~dated~~amount as of ~~October 1,~~ ~~2006~~Convertible ~~(the~~Notes ~~“TX~~currently ~~Indenture”)~~outstanding, ~~between~~which ~~the~~interest ~~GCIDA~~payment ~~and~~was ~~Wells~~due ~~Fargo~~on ~~Bank~~January 4, ~~National~~2010. ~~Association,~~The asfailure ~~Trustee~~to ~~(the~~make ~~“TX~~this ~~Trustee”)~~interest ~~relating~~payment towill become an event of default under the TXSupplemental ~~Bonds,~~Indenture and ~~(ii)~~ the ~~Loan Agreement~~Indenture, dated as of ~~August~~March 1, ~~2008 (the “CA Loan Agreement”)~~2009, between ~~Microgy~~the ~~Holdings~~Company and the ~~California~~Note ~~Statewide~~Trustee ~~Communities~~to ~~Development~~which ~~Authority (~~the ~~“CSCDA”)~~Supplemental ~~and, therefore, the~~ Indenture, ~~date as of August 1~~relates, ~~2008~~in (the ~~“CA~~event ~~Indenture”), between~~that ~~the~~such ~~CSCDA~~failure ~~and~~is ~~Wells~~not ~~Fargo~~cured ~~Bank,~~by ~~National Association~~February 3, as2010 ~~Trustee~~ (~~the~~30 ~~“CA~~days ~~Trustee”).~~from ~~While~~ the ~~Company~~date ~~and~~on ~~Microgy~~which ~~Holdings~~the ~~were~~interest inpayment ~~discussions~~became ~~with~~due ~~the~~and payable), ~~Texas~~ and, ~~California~~thereafter, ~~bondholders~~either ~~regarding~~the aNote ~~forbearance~~Trustee ~~agreement~~or ~~relating~~the ~~to these~~holders ~~events~~ of ~~default,~~not ~~the~~less ~~Texas~~than ~~and~~25% ~~California~~in ~~bondholders~~aggregate ~~nevertheless~~principal ~~elected~~amount toof ~~exercise their remedies under~~ the TXConvertible ~~Indenture,~~Notes ~~the~~outstanding TXmay ~~Loan~~declare ~~Agreement,~~ the CAprincipal ~~Indenture~~of and ~~the~~premium, CAif ~~Loan~~any, ~~Agreement~~ and ~~accelerate~~all ~~the~~accrued ~~obligations~~interest ~~relating~~on to the TXConvertible ~~Bonds~~Notes ~~and~~immediately ~~the~~due CAand ~~Bonds, as described in more detail below~~payable.

Notice of ~~Acceleration~~Material ofBreach ~~the~~under TXCooperation ~~Bonds~~Agreement with Xergi

OnThe ~~December 23,~~Company ~~2009,~~and ~~the~~its TXsubsidiary, ~~Trustee gave notice to~~ Microgy ~~Holdings that~~, asInc. ~~a result of events of default under~~ (~~i) TX Loan Agreement, (ii) the TX Indenture, (iii) the Guarantee Agreement, dated as of October 1, 2006, as amended and supplemented to date (the~~ “~~Guarantee Agreement~~Microgy”), ~~among~~are ~~Microgy~~party ~~Holdings,~~to ~~the~~that ~~Subsidiary~~certain ~~Guarantors~~Cooperation ~~named therein and the TX Trustee and the CA Trustee, (iv) the Restatement of Demand Purchase~~ Agreement, dated as of ~~November~~ April 2023, 2009 (the “~~Restatement~~Cooperation Agreement”), ~~between and~~ among ~~Microgy Holdings,~~ the Company, ~~the TX Trustee (in its capacity as both TX Trustee~~ and ~~CA Trustee~~Microgy, ason ~~defined below),~~ the ~~Texas~~one ~~and California bondholders and the Subsidiary Guarantors signatory thereto~~hand, and ~~consented to by the GCIDA and the CSCDA and (v) various collateral documents~~Xergi, ~~and~~A.S. ~~acting in accordance with the direction of the holders of a majority in interest of the TX Bonds, the TX Trustee had declared the principal of~~ and ~~accrued~~its ~~interest on all TX Bonds then outstanding~~subsidiary, ~~and~~Danish ~~all~~Biogas ~~corresponding obligations of Microgy Holdings under the TX Loan Agreement~~Technology, toA.S. ~~be immediately due and payable and that it was distributing to the holders of record of the TX Bonds as of December 22~~(“DBT”), ~~2009 a total of $22,000,000, representing all monies held by the TX Trustee under the TX Indenture. As the aggregate principal of and accrued interest~~ on the ~~outstanding~~other TX Bonds and the corresponding amounts owed under the TX Loan Agreement as of December 23, 2009 equals $45,196,228, the distribution to the holders of the TX Bonds leaves a deficiency of $22,274,079 which is immediately due and payable by Microgy Holdingshand. ~~Microgy Holdings currently does not have sufficient funds to pay any portion of this amount.~~

~~Notice~~Pursuant to the terms of ~~Acceleration~~the Cooperation Agreement, Microgy was required to make certain payments to DBT in respect of license fees relating to the CASwift ~~Bonds~~Grand Island project, which payments have not been made. DBT delivered notice to the Company and Microgy on December 14, 2009 demanding immediate payment of such amounts and stating that, if such payment is not received within 30 days (i.e., by January 13, 2010), it will immediately proceed to exercise its available rights and remedies, including, without limitation, the termination of the Cooperation Agreement and the commencement of proceedings to recover the amounts owed.

On December 23, 2009, the CA Trustee gave notice to Microgy Holdings that, as a result of events of default under (i) the CA Loan Agreement, (ii) the CA Indenture, (iii) the Guarantee Agreement, and (iv) the Restatement, and acting in accordance with the direction of the holders of a majority in interest of the CA Bonds, the CA Trustee had declared the principal of and accrued interest on all CA Bonds then outstanding, and all corresponding obligations of Microgy Holdings under the CA Loan Agreement, to be immediately due and payable and that it was distributing to the holders of record of the CA Bonds as of December 22, 2009 a total of $22,980,000, representing all monies held by the CA Trustee under the CA Indenture. As the aggregate principal of and accrued interest on the outstanding CA Bonds and the corresponding amounts owed under the CA Loan Agreement as of December 23, 2009 equals $31,389,458, the distribution to the holders of the CA Bonds leaves a deficiency of $8,000,602 which is immediately due and payable by Microgy Holdings. Microgy Holdings currently does not have sufficient funds to pay any portion of this amount.

Effect on Other Material Obligations of the Company

The acceleration of the obligations represented by the TX Bonds and the CA Bonds described above each constitutes an event of default under the First Supplemental Trust Indenture, dated as of March 1, 2009, between the Company and Wells Fargo Bank, National Association, as Trustee (the “Note Trustee”) relating to the Company’s 14% Convertible Notes due January 1, 2014 (the “Convertible Notes”). Either the Note Trustee or the holders of not less than 25% in aggregate principal amount of the Convertible Notes outstanding may declare the principal of and premium, if any, and all accrued interest on the Convertible Notes immediately due and payable.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ENVIRONMENTAL POWER CORPORATION By: /Ss/ MICHAEL E. THOMAS Michael E. Thomas Senior Vice President, Chief Financial Officer and Treasurer

Dated: ~~December~~January 248, ~~2009~~2010

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