Shaogang Iron and Steel Group Taps Echelon Technology for Energy Management and Process Optimization Solutions; LonWorks(R) Networking Platform Helps Company Streamline Production and Reduce Operating Costs.

SAN JOSE, Calif. -- Echelon Corporation (NASDAQ:ELON), a global networking company providing technology and solutions for controls, smart metering, and energy and environment management, announced today that the Shaogang Iron and Steel Group of China has successfully used Echelon's technology to optimize its energy utilization and process control systems. Shaogang's work is in accordance with a new initiative, "energy and environment," the latest move by the Chinese government designed to prevent energy supply shortages and slow environmental degradation in the world's fastest growing economy. With this first installation Shaogang is hoping to begin the process of establishing a standard method and technology platform for energy saving applications in the Chinese steel production industry. Shaogang's first energy optimization application - covering a 10 square kilometer steel plant - has resulted in a 10% reduction in operating costs.

"In China, energy costs can be as much as one third of the overall operating costs for a steel plant, which is much higher than our counterparts in the West. Now, the Chinese government is mandating energy cost reductions for heavy industries such as steel plants like ours. Shaogang Iron and Steel Group has quickly learned the technology lessons associated with rapid growth, and we are committed to applying them at the factory and system level to more effectively manage energy, and operate more efficiently," said Mr. Jianmei Huang, head of the information technology (IT) department at Shaogang Iron and Steel Group. "Echelon's technology has given us the ability to create the infrastructure that helps us quickly deploy a scalable system and achieve our energy and operating goals."

Prior to implementing its Echelon based solution, the large size of the physical plant made it challenging to accurately measure energy usage in real-time. Information from the energy and control system is integrated with the plant's manufacturing execution system (MES) to allow Shaogang to identify best case use scenarios for energy consumption and production.

"Shaogang's work is a strong indicator of how economic, environmental, and policy trends are beginning to drive corporate decisions in China," said Anders Axelsson, Echelon's senior vice president of sales and marketing. "Echelon's infrastructure approach to controls is ideal for Shaogang Iron and Steel Group's energy conservation application because each additional device on the network can improve the overall effectiveness of current and future optimization strategies. We look forward to working with the Shaogang Iron and Steel Group on future enhancements to their facilities and with other steel producers across China."

Inefficient energy use and environmental pollution are both byproducts of China's rapid growth in recent years. In March, 2002, Shaogang Iron and Steel Group implemented its Data Acquisition and Energy Management System, a real time supervisory control data acquisition system for improving energy management and reducing pollution. The real time energy data provides the basis to form a better energy management strategy, thus increasing the operation efficiency.

About Shaogang Iron and Steel Group

Founded in 1966, Shaogang Iron and Steel Group is among the top 100 steel manufacturers in the world and is in the top 500 Chinese enterprises. In 2003, Chinese Center TV (CCTV) named Shaogang Iron and Steel Group the most valuable public traded company in China, with annual steel production reaching five million tons. Shaogang Iron and Steel Group is based in Guangdong.

Further information regarding Shaogang Iron and Steel Group can be found at http://www.sgis.com.cn.

About Echelon Corporation

Echelon Corporation (NASDAQ:ELON) is a pioneer and world leader in control networking -- networks that connect machines and other electronic devices -- for the purpose of sensing, monitoring and controlling the world around us. Echelon's LonWorks platform for control networking was released in 1990 and has become a worldwide standard in the building, industrial, transportation, and home automation markets. Launched in 2003, Echelon's Networked Energy Services system is an open, extensible, advanced metering infrastructure that can bring benefits to every aspect of a utility's operation, from metering and customer services to distribution operations and value-added business. In 2005 Echelon released the world's first embedded control network infrastructure, the Pyxos(TM) platform, extending the benefits of networking inside machines to the sensors and actuators that make them function.

Echelon is based in San Jose, California, with international offices in China, France, Germany, Italy, Hong Kong, Japan, Korea, The Netherlands, and the United Kingdom. Further information regarding Echelon can be found at http://www.echelon.com.

Echelon, LonWorks, and the Echelon logo are registered trademarks of Echelon Corporation registered in the United States and other countries. Pyxos is a trademark of Echelon Corporation in the United States and other countries. Other product or service names mentioned herein are the trademarks of their respective owners.

This press release may contain statements relating to future plans, events or performance. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the demand for Echelon products and services for use in building automation, energy management and other markets in China and elsewhere, the overall size of the revenue opportunity in these markets and Echelon's potential participation therein, the timing and level of orders, if any, by Shaogang and other customers; risks that LONWORKS based products made by suppliers other than Echelon will be used in building automation applications in China and elsewhere; risks associated the ability of Echelon's products to perform as designed; and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.