DANBURY, Conn. (Dow Jones/AP) – Starwood Hotels & Resorts Worldwide Inc. Wednesday said it will power one of its California hotels with fuel cells by the end of the year.

Four 250-kilowatt fuel cell power plants will convert natural gas into electricity and heat without combusting it, said Steven Eschbach, a spokesman for Danbury-based FuelCell Energy Inc.

Fuel cells are, in effect, large, continuously operating batteries that generate electricity as long as fuel, such as natural gas, is supplied.

Since the fuel is not burned, pollution commonly associated with the combustion of fossil fuels is dramatically reduced. The technology is similar to that which helps power NASA’s space shuttle.

The plant, which is about the size of a semi-trailer, will supply base load electricity for the 1,044-room Sheraton San Diego Hotel & Marina. The hotel’s Lagoon Pool will run on the plants’ heat.

Starwood spokesman Mark Ricci said the power plant, which is located on the premises, is inconspicuous.

Starwood began using fuel-cell energy in 2003 at its Parsippany and Edison, N.J., properties, Ricci said. They have cut about 5 percent from the hotels’ energy costs. Last year, Starwood put a fuel cell plant in the Sheraton New York, a 1,750 room hotel.

Alliance Star Energy LLC, a joint venture formed by FuelCell Energy and privately-held Littleton, Colo.-based Alliance Power Inc. will provide fuel-cell power plant projects for Starwood’s California hotel.

The companies didn’t release the cost of the project, but Ricci said the San Diego project cost Starwood nothing, outside of some marketing costs.

The San Diego Regional Energy Office ear-marked up to $2.5 million for the hotel project.

The office administers the California Public Utilities Commission’s Self-Generation Incentive Program for the San Diego area. The program was created to encourage installation of distributed generation that operate on renewable fuel or contributes to system reliability.

FuelCell Energy’s power plants have been designated as ultra-clean’ technology in California. The units were state certified to meet California Air Resources Board’s stringent 2007 emissions standards.

FuelCell shares closed up $1.69, or 18 percent, to $10.98 on the Nasdaq Stock Market.

AP-ES-02-16-05 1733EST