The diffuser-augmented wind turbine (DAWT) is one of the advanced concepts being investigated to improve the economics of wind energy conversion systems (WECS). Application of modern boundary-layer control techniques has reduced the surface area requirements of an efficient diffuser by an order of magnitude. Many parameters that affect the performance of the diffuser system have been examined in small-scale wind tunnel tests with a family of compact diffusers, using screens and centerbodies to simulate the presence of a turbine. Flowfield surveys, overall performance, the effect of ground proximity, and the prospects for further improvement are described. The baseline configuration is a conical, 60 deg included angle diffuser with an area ratio of 2.78 controlled by two tangential injection slots. This first-generation DAWT can provide about twice the power of a conventional WECS with the same turbine diameter and wind. Economic estimates show that this DAWT can be as much as 50% cheaper than coventional WECS for the same rated power.