GOSHEN -- A small local business will receive a $1 million federal grant to further develop a renewable energy product that generates electricity from underground water pipelines.

"We are thrilled. It couldn't have come at a better time. It's been a long development phase and this grant moves things forward much more rapidly," said Gina Leichty, director of communications at Lucid Energy Technologies.

The downtown company's patented turbine product was invented by local engineer Rod Schlabach.

"Northwest PowerPipe" is a spherical turbine housed inside a water pipeline. It generates "clean" electrical energy when water rushes through large transmission pipelines -- mostly found on the east and west coasts -- where large volumes of water are moved into cities, Leichty said.

"The water flows through and spins the turbine, and that spinning motion powers the generator, and that movement then converts the energy into electricity," she said.

"This is a totally new type of hydropower. Other people have tried to do it, but we've found a way to do it effectively."

With the grant award, Lucid plans three additional pilot product installations and will continue testing it in laboratories. Dallas, Texas, and Chelan County, Wash., are the first proposed sites. Lucid is negotiating with interested parties in both areas, said Leichty.

The third proposed site would be housed inside the Goshen Powerhouse building on the Millrace Canal. Lucid envisions creating a "living laboratory" there, where visitors could watch how the power of water is harnessed into electricity.

The city of Goshen received a grant to renovate the exterior of the Powerhouse building, and nearby businesses have expressed interest in purchasing power generated from the site, Leichty said.

Before the "living laboratory" can be built, Lucid must complete negotiations with numerous regulatory agencies and meet all regulations of the Federal Energy Regulatory Commission.

The grant award represents phase two of the 2010 Recovery Act Small Business Innovation Research and Small Business Technology Transfer from the U.S. Department of Energy. Lucid received phase one of the grant, a $50,000 award, last September.

In two years, the company plans to apply for phase three of the grant, which, if received, would see an approximate $2.5 million additional government investment in the local firm.