Toho Gas Co., Ltd. and Sumitomo Precision Products Co., Ltd. have been jointly developing a SOFC system using SC2O3 stabilized ZrO2 electrolyte supported cells. To commercialize the SOFC system, ensuring high reliability is very important. Therefore, Sc-TZP (tetragonal zirconia polycrystals) electrolyte, which has good mechanical and electrical properties, was selected for our system. The first 1 kW SOFC system (α model) was successfully demonstrated in September 2003. This paper describes improvements such as durability against thermal cycles, operation under catalytic partial oxidation reformed gas fuel, and information for a new co-generation system. As a result, less degradation of open circuit voltage (OCV) is shown during thermal cycles by controlling the adhesion strength of the gas sealing material. Moreover, the efficiency of cell stacks has successfully been improved from 24% to 45% (DC, LHV) by making the temperature distribution of cell stack uniform. Also, the system was operated on gas reformed by catalytic partial oxidation and the efficiency of system was 27% (LHV). A new co-generation system (β model) was manufactured and a power generation test was started.