Axion Enters into Alliance Agreement with Hybridyne Power Systems

WOODBRIDGE, Ontario--July 18, 2005--Axion Power International, Inc. announced today that it has entered into a preliminary alliance agreement with Hybridyne Power Systems Canada Inc., a corporation specializing in distributed architecture, renewable (wind, solar and other dynamic sources) energy systems. The agreement outlines the parameters of a demonstration program that will test the performance of Axion's lead-carbon hybrid battery-supercapacitor e3 Supercell with Hybridyne's systems. The demonstration program will consist of at least five demonstration sites supervised by Hybridyne beginning in June 2006 and concluding at the end of the same year.

After a thorough review of Axion's e3 Supercell technology, Hybridyne has agreed to invest in the necessary power electronics and control system modifications to their system to accommodate the increased power handling and energy characteristics of Axion's e3 Supercell. Commenting on the agreement, Thomas Cleland, chief executive officer of Hybridyne, said, "We currently use premium high-cycle-life lead-acid and Gel batteries in our systems and discharge them to only 20% of their rated capacity to achieve acceptable system life spans. The Axion e3 Supercells are very appealing to us because they are designed to be discharged to 90% and still offer over 4000 cycles; this ultimately means the energy storage component of our system can be smaller, less expensive and potentially last for the entire 20 year life of our equipment. In addition, Axion's device recharges faster allowing us to capture energy more quickly from the wind, solar and other dynamic power sources used in our designs."

Under the terms of the agreement, Hybridyne will work with Axion to promote the sale of their system using the e3 Supercell energy storage system to end-users. Charles Mazzacato, president and chief operating officer of Axion, said, "We are excited to work with Hybridyne in demonstrating the performance of our e3 Supercells for use in their renewable energy systems. Hybridyne is a dynamic company changing the way the world views alternate energy generation and storage."

Commenting further, Thomas Granville, chief executive officer of Axion, stated, "This is the first of several important strategic alliances that Axion is finalizing. The project site units, manufactured for our strategic alliance partners, will prove the viability of the e3 Supercell in various energy storage applications. In addition, commercial revenues will result from e3 Supercell product sales into each of these projects."

About Hybridyne Power Systems Canada Inc.

Hybridyne Power Systems Canada Inc. specializes in the international sales and "turn-key" installation of its proprietary hybrid, integrated (wind, solar and other dynamic source) renewable energy systems. The Hybridyne System allows commercial and industrial customers to generate some or all of their own low-cost electricity, giving them significant financial savings and energy inflation protection, while freeing them from the concerns of possible blackouts, brownouts and other power problems, with a large-scale, facility-wide power conditioning system.

For further information, please visit www.hybridynepower.ca or contact:

Richard Leverton, Chief Media Relations Officer

Hybridyne Power Systems Canada 1-866-230-3918

richard.leverton@hybridynepower.ca

About Axion Power International, Inc.

Axion is developing advanced energy storage hybrid battery-supercapacitor devices termed e3 Supercells. Axion's e3 Supercells replace the lead-based negative electrodes, found in conventional lead-acid batteries, with nanoporous carbon electrodes. The result is a new class of energy storage device that offers both battery and supercapacitor performance characteristics combined with much longer service life. Axion believes its e3 Supercells may offer a cost-effective alternative to conventional lead-acid batteries that will:

-- Charge three to five times faster;

-- Offer three to four times as many charge/discharge cycles in deep discharge applications;

-- Withstand repetitive 90% depth of discharge without significant loss of performance; and

-- Require minimal maintenance.

Initially, Axion plans to focus on developing e3 Supercells for uninterruptible power supplies and DC power systems for communications networks. Its second target market will be energy storage and buffering systems for alternative and conventional grid-connected electric utilities. Its third target market will be high performance power systems for hybrid automobiles. Axion may also develop specialized e3 Supercells for a variety of industrial and consumer products including forklifts, wheelchairs and golf carts.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995:

Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a detailed description of the risk factors and uncertainties affecting the Company, please refer to our current and future filings with the Securities and Exchange Commission, all of which are available at www.sec.gov.

For further information, please visit www.axionpower.com or contact:

Nazia Khan, Corporate Communications

Axion Power International 905-264-1991

nkhan@axionpower.com