This paper discusses the development of a novel combined air conditioning and power system (CACP). This system uses advanced liquid desiccant technology and fuel cells to provide high efficiency electrical power as a byproduct of air conditioning. The system is fueled with natural gas. While distributed generation using fuel cells has concentrated on combined power and heat, expansion of the concept to combined air conditioning and power has much higher capacity to reduce energy costs and improve building efficiency. We estimate that with the CACP technology, operating cost reductions greater than 70% are achievable throughout the US. In states where the disparity between natural gas prices and electricity prices are high, such as in New York and California, air conditioning operating costs can be negative, which switches air conditioning from being a cost center to a profit center. Analysis provided in this paper shows the interaction between system elements and derives performance ranges for the CACP. A CACP system that produces 15kW of electricity and 10-tons (120kBtu/h or 35kW) of air conditioning is analyzed in terms of efficiency, operating cost, and payback period. This analysis leads to conclusions of critical variables that influence the performance and market acceptability of this novel air conditioning concept.