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Brown agreed to invest in Tesla's idea for an AC motor. In a small laboratory not far from Edison's office, Tesla developed all the components necessary for an AC generation and distribution system along with his AC motor. Late in 1887 Tesla filed for seven U.S. AC systems. The inventions were so unique that they were issued without a successful challenge. George Westinghouse, inventor of railroad air brakes, heard about Tesla's system and visited him at his laboratory. 5,000 in cash and 150 shares of stock in the Westinghouse Corporation. Westinghouse then used Tesla's AC system to challenge Edison's DC system for the future of electrical distribution within the United States. Artist conception of Teslas' resonant transformer in action. The AC system was clearly superior. In order to send electricity any distance, it must be at very high voltages. The voltage in an AC system could be stepped up or down to different voltages very easily with a device called a transformer. Transformers were not available for DC at that time, which meant that DC power couldn't be sent more than a few blocks because lower voltages needed to be used in homes.
A DC system like Edison's might require a power plant within a few blocks of every house, instead of a single power plant for the whole city. Edison, ignoring this, started a full scale propaganda campaign against Westinghouse, Tesla and AC current. He hired a man by the name of Harold Brown to go around the country and demonstrate how AC was more dangerous than DC (something that wasn't necessarily true) by staging shows where he electrocuted dogs and old horses. Despite the smear tactics employed by Edison, it became clear that the AC system had many advantages. In 1892 the Chicago World's Fair was lit entirely with AC power coming from twelve thousand-horsepower AC generation units located in the fair's Hall of Machinery. Competitors had bid a DC system for the fair, but lost the job because the huge amount of copper needed for such a DC system (because of its low effiencey) was too high. As Westinghouse started winning the war, Edison was forced to merge his company with the newly formed General Electric Corporation. General Electric would have taken control of Westinghouse too if it hadn't been for the generosity of Tesla.
Tesla gave up control of AC patents worth millions of dollars because he believed that an independent Westinghouse Company was the only way his AC system would be widely adopted. This move by Tesla ensured the future of AC, but left him short of cash to pursue his research in the future. As a boy Tesla had seen an engraving of the great falls of the Niagara river and dreamed of harnessing their power. In 1893 he actually got his chance. Lord Kelvin, the head of the commission in charge of a project to tap power from the falls, originally had argued against Tesla's AC system, but changed his mind after visiting the Chicago World's Fair. Impressed, Kelvin supported AC for the project and Westinghouse won a contract to build a powerhouse at the falls. Tesla dreamed of taming the power of Niagara Falls. Tesla designed the systems and was confident they would work, though a project of this magnitude had never before been done. Investors, including J.P Morgan, were nervous about the success of the venture.
The project was difficult, expensive and took five years to complete. On November 16, 1896, when the switch was thrown, Tesla's systems worked perfectly. One by one each of the ten planned generators came online over a few months. The Niagara power station generated some 15,000 horsepower of electricity, a phenomenal amount for the time. Newspaper and engineering journals agreed that, as the New York Times put it, Tesla deserved the "undisputed honor" of making the project possible. Back at his laboratory in New York City, Tesla started to look into what happened with electricity when you alternated it at extremely high frequencies. At first he tried altering one of his AC generators to do this, but the machine flew apart when it reached twenty thousand cycles (alterations) per second. To go further he had to invent a new device. Dubbed the "Tesla coil," it could take normal household current (60 cycles a second) and step it up to thousands of cycles per second. The coil could also generate extremely high voltages.