Fuel cells for a sustainable future II:

stakeholder attitudes to the barriers

and opportunities for stationary fuel cell
technologies in the UK

Michael Peters and Jane Powell

November 2004

Tyndall Centre for Climate Change Research Working Paper 64

 Fuel cells for a sustainable future II
Stakeholder attitudes to the barriers and opportunities for stationary fuel cell
technologies in the UK

Peters, M.D. & Powell, J.C.

Centre for Social and Economic Research on the Global Environment (CSERGE)
University of East Anglia
Norwich NR4 7TJ

Email: m.peters@uea.ac.uk

Tyndall Centre Working Paper No. 64

October 2004

This report is part of a Tyndall Centre project ‘Fuel Cells: Providing Heat and Power in the Urban
Environment’ (IUD: TC1/IT1.36), being carried out jointly by the Energy Research Unit, Rutherford
Appleton Laboratory and the Centre for Social and Economic Research on the Global Environment,
University of East Anglia.

Please note that Tyndall working papers are "work in progress". Whilst they are commented on by
Tyndall researchers, they have not been subject to a full peer review. The accuracy of this work
and the conclusions reached are the responsibility of the author(s) alone and not the Tyndall
Centre.

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Summary

Based on stakeholder interview findings this paper explores the opportunities and barriers to the
development of stationary fuel cell technology in the UK. Stationary fuel cells offer a significant way
forward towards sustainable energy but there is still a long way to go, at a technical and non-technical
level, before they become an established, mainstream technology. Technically there is a need to
extend the knowledge base for fuel cells, to improve their efficiencies, reliability, lifetime and material
performances. Several issues also surround the sustainable production and storage of hydrogen and
the development of a hydrogen infrastructure. Non-technical issues include cost, education and
training, regulatory barriers, government commitment and issues surrounding the future of energy
distribution.

Increased Government support both in terms of legislative reform and financial support is necessary to
enable fuel cells to reach commercialisation and to establish a sustainable position in the market. If
stationary fuel cells are to be taken seriously a significant change of attitude is required within the
government and the energy industry, combined with proactive action. Subsidies for demonstration
models could be one way forward.

More working demonstrations would not only display the government’s commitment to fuel cells but
would also provide a test bed for independent assessment of their environmental and social impacts.
Financial support for the integration of fuel cell CHP into new housing developments would provide
an ideal opportunity, particularly if they are combined with other integrated forms of renewable
energy. The project would need to be independently monitored and evaluated and the results
publicised widely.

Although fuel cells can provide environmental benefits associated with reduced local pollution and
quiet operation there remains a question mark over the carbon implications. It is important to
recognise that the environmental implications of this technology vary significantly depending on the
source of fuel used to power them (e.g. natural gas) and their application. Fuel cells cannot be
considered in isolation, a lifecycle approach is needed.

Vehicular fuel cell applications have attracted high profile attention in recent times but it is felt that
problems surrounding the establishment of a hydrogen infrastructure will slow down their large scale
market emergence. In terms of niche market penetration mobile applications (e.g. phones) followed by
smaller CHP units are thought to be more promising in the medium term.

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1. Introduction
Fuel cells coupled with the hydrogen economy have been identified as key environmental solutions for
the 21st century, enabling clean efficient production of electricity and heat from a range of primary
energy sources. A range of fuel cell types suitable for different energy applications at varying scales
have been developed but they have been slow to be accepted as viable contenders in the energy
market. In addition to many technical teething problems associated with an infant technology a range
of ‘non-technical’ barriers appear to be hindering the advancement of this technology. These could
include investment and resource difficulties, regulatory complications and greenhouse gas emissions
associated with the reformation of hydrocarbons (EC, 2003; Pehnt & Ramesohl, 2003).

The purpose of this research has been to explore the barriers and opportunities to the development of
stationary fuel cell technology in the UK and to explore areas where initial fuel cell advances are most
promising. This paper reports the results of a series of stakeholder interviews that were carried out to
ascertain if there are specific problems delaying the development of the fuel cell market or if the
participants considered the slow process as normal for a new application of this technology. The
participants included fuel cell manufacturers, users and potential users and research experts – all
stakeholders who have an on-going interest in the development and application of fuel cells and CHP
in the UK.

The interviews were also designed to discover the broader range of opinions held regarding barriers
and opportunities for stationary fuel cell applications in the UK and to address the following key
objectives:

• to gain an understanding of the participants’ background, knowledge and interest in these

technologies;
• to find out what the participants think the main barriers are preventing fuel cells from taking on
more prominence in the UK energy market;
• to ask participants how they see electricity generation in the UK evolving and where the most
practical opportunities for fuel cells and related technologies are likely to be in the future, and
• to explore with them the broader implications and challenges posed by the introduction of a
hydrogen economy.

Before reviewing the interview results, we provide an introductory background to some of the key
issues related to the use of stationary fuel cells and the associated procurement of hydrogen.

2. Background
Fuel cells produce electricity and water from a fuel (usually hydrogen) and oxygen. The main methods
of producing the hydrogen are from natural gas, (using a processed called steam reformation),
electrolysis of water using renewable or fossil based electricity, and production from biomass. The
method used to produce hydrogen for fuel cells plays a significant role in how desirable they might
become as an energy technology suitable for widespread uptake. For example steam reformation of
natural gas continues to stand out currently as the most economically viable and practicable method
for hydrogen production but carries with it the environmental price tag of green house gas emissions in
the process. The environmental impact and economic prospect of power generation in a fuel cell is
thus largely dependent upon the means by which this energy is produced (Rastler, 2000).

Electricity from renewable sources provides the cleanest, least

environmentally damaging option for producing hydrogen via the electrolysis of water (Pehnt &
Ramesohl, 2003). However, the conversion of electricity from solar and wind generation into
hydrogen and then back into electricity results in considerable energy losses and extra cost (Dutton,
2002). If renewable energy were to become more widespread excess energy could be used to generate
hydrogen through electrolysis. However, this approach would only realistically be viable for

3
distributed networks or when renewables form a greater proportion of grid electricity and present
greater opportunities for energy storage (Pehnt & Ramesohl, 2003).

It is also possible to operate fuel cells on biomass-derived fuels (Watkiss & Hill, 2002). Bio-fuel
applications are most suited to powering fuels cell combined heat and power (CHP) technologies
offering minimal greenhouse gas emissions. The heat produced by a CHP system after the generation
of electricity is not wasted but is instead piped through district heating mains to housing and other
users. This contrasts with conventional electricity-only generating plant, where excess heat is dumped,
usually in the form of steam emitted from cooling towers (Webb and Gossop, 1995). In these
applications fuel cells potentially offer the efficient use of limited, often costly biomass resources
(Watkiss & Hill, 2002). Gasification, gas processing and fuel cells are still developing as technologies
and thus leave the use of biomass as a long term option for 2020 and beyond (Pehnt & Ramesohl,
2003). The production of biogas from manure or sewage gas could however provide a potentially early
market (Watkiss & Hill, 2002).

Currently, as discussed above, hydrogen is produced from fossil fuels and nuclear power, but the
greenhouse gas emissions associated with fossil fuels, and the waste disposal and safety risks
surrounding nuclear fuel substantially reduce the appeal of these options. Having said this, fuel cells
do have the potential to provide clean, quiet and efficient energy which can contribute to a reduction in
local pollution even when fuelled by hydrocarbon fuels. The use of natural gas, the cleanest
conventional hydrocarbon, in fuel cells can be considered to be an efficient method to aid the future
transition to a renewable energy supply system (Pehnt & Ramesohl, 2003; EC, 2003). . The key to
enabling this is entirely dependent on the ability to generate the operating fuel in a sustainable way,
through for example the electrolysis of water using renewable energy.

Although there remain many technical problems to be overcome, most of the barriers to the further
development of fuel cells are considered to be non-technical (Pehnt, 2003). Several barriers to the
development of fuel cells have been identified including; high cost and insufficient short term benefits
to users (Lokurlu, 2003; EC, 2003), regulatory restrictions to distributive generation (Bathurst &
Strbac, 2001), uncertainty surrounding the long-term development of the energy policy framework
(Pehnt & Ramesohl, 2003), vested interests in the current system and uncertainty in the future role of
hydrogen (Dutton et al, 2003).

One regulatory restriction is the New Electricity Trading Arrangements (NETA) that came into effect
in March 2001 (Bathurst & Strbac, 2001). Under NETA participating generators and suppliers have to
submit contracts that define the amount of electricity they expect to produce over a given period. If
they fail to keep to these commitments an imbalance price (or penalty) has to be paid for any
difference between their actual position and what they had contracted to do. This system poses
difficulties – and high associated imbalance penalty costs - for intermittent renewable sources (e.g.
wind turbines) that are unable to forecast accurately their expected levels of generation (Bathurst &
Strbac, 2001).

3. Methodology
As described in the introduction, the aim of this project is to explore the barriers and opportunities to
the development of stationary fuel cell technology in the UK. The method used was the construction
and administration of a schedule of interviews designed to investigate with a range of stakeholders
their thoughts on the key drivers and barriers to the development of fuel cells. The stakeholders
included manufacturers (or ex-manufacturers), users, potential users and experts. Owing to time
constraints and the desire to obtain good quality data from the stakeholders involved it was decided
that an approach which drew on the methods and techniques of semi-structured interviewing would
produce the best results. Other methods that might have alternatively been used include focus groups
and unstructured interviews.

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There are many approaches that can be adopted when contemplating how best to formulate a
questionnaire for a mainly qualitative study. One such approach (Hussey and Hussey, 1997) that has
been adopted for this research, advises adherence to the following protocol for the purpose of semi-
structured interviewing:

• the need to explain the purpose of the interview to all participants;

• the questions should be kept simple;
• jargon and specialist language should be avoided;
• vague, descriptive words should be avoided;
• only relevant questions should be included;
• leading or value-laden questions should be avoided if possible;
• brevity should be a key objective, without forsaking adequate coverage
(Adapted from Hussey and Hussey, 1997: 165)

The selection of individuals (figure 1) for this piece of research was based on the identification of
suitable participants mainly arising from work carried out for the complimentary literature review
paper (Powell et al, 2004) and subsequent contacts established as a result of this research.

Fig. 1: Categories and numbers of interview participants

Category Number of
participants
Fuel cell manufacturers/fuel cell 3
component manufacturers
Experts 2
Users 2
Potential users 2
Industry funded fuel cell membership 1
organisation
Total 10

Following the protocol described above, the interview questions (Fig. 2) were designed to be
sufficiently open-ended to enable semi-structured discussions to take place where participants would
feel able to develop their ideas and opinions within the scope of the interview. As the survey sample
consisted of ten ‘elite’ participants this was deemed the best approach likely to enable the most
information to be gleaned from each participant.

The interviews were administered mainly on a face-to-face basis with the interviewer recording the
details of what was said by taking down hand-written notes onto a piece of paper. Just two of the
interviews were conducted as conference calls over the telephone as a result of difficulties regarding
other commitments of the stakeholders involved. The decision not to record the interviews onto audio
tape was taken mainly through previous experiences of conducting social science interviews. The
principle of recording every word was found, in almost every instance, to be particularly restrictive
and off-putting; both for the interviewer and the respondents.

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Fig. 2: List of key questions put to interview participants

1. Please outline your own interest in fuel cells and give a brief background to your
organisation.
2. What do you see as being the main barriers preventing a swifter development and uptake
of fuel cell technology?
3. On the specific issue of the regulatory regime what changes do you think might be
necessary to give fuel cells and related technologies a better chance?
4. Where do you believe the most likely opportunities for fuel cells lie in the near future?
5. What will be the main driving forces enabling a realisation of these opportunities for the
development and uptake of fuel cells?
6. As far as the UK is concerned do you see stationary application for fuel cells becoming a
reality in the near future or is it more likely that other applications (e.g. transportation and
smaller mobile applications) will be the main areas for market penetration and expansion?
7. It has been suggested by some that a move away from the centralised ‘grid’ energy
system to a distributed network of ‘embedded islands’ would favour green energy
technologies including fuel cells and CHP. Do you agree and/or think this is likely/a good
idea?
8. What is your ‘ideal world’ forecast for fuel cells/CHP/renewables in the future?

This opinion runs counter to much of the established literature on interview techniques, which often
points to the benefits of being able to concentrate on other aspects – such as body language, attitude
and behaviour – while the tape machine accurately records the complete audio details of the interview
(Bottorf, 1994; Quinn Patton, 1990). Seldon (1998) considers the three principal methods that can be
deployed for the purposes of recording interviews – memory, note taking and the tape recorder – and
concludes that “all methods have benefits and drawbacks: no one way is foolproof or ‘correct’”
(p.12).

One major benefit of audio recording is that it helps to overcome the weaknesses associated with note
taking. These include the automatic screening and summarising of information, in addition to the
various omissions and distortions that can sometimes occur during the process of taking notes.
However, for the purposes of this project it was not considered necessary to make an audio recording
during the interviews. It should also be pointed out that the process of note taking on its own does
have a range of well-rehearsed benefits, the most significant one perhaps being the ability to record
observations and responses to questions immediately while helping the interviewer to control the pace
of the interview (Hussey and Hussey, 1997; Seldon, 1998).

The specific detail of what was discussed with the participants for this project varied from interview to
interview in accordance with the particular background and knowledge of the individuals concerned
and the different organisations with which they were associated. Nevertheless, the core objectives
(described in the introduction) together with the key question areas (Fig. 2) provided a ‘control
framework’ for each separate interview.

4. Interview Results
This section presents and analyses the results of the interviews. It is divided into the key question areas
that were put to the participants (Fig. 2). While some of the sample were willing to be named and have
their organisations identified in this paper others requested anonymity. For this reason in the first part
of this results section where the participants are introduced and an outline of their background is
given, those who wished not to be identified are simply referred to in terms of the category of the
sample they represent. The other participants and their organisations are referred to by name.

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4.1 Background to participants and the organisations they represented

4.1.1 Fuel cell manufacturers/fuel cell component manufacturers

Manufacturer 1: Interviewee - Mrs Jean Aldous, co-founder and owner

Fuel cell manufacturing company 1 was established in the 1930s when the interviewee’s colleague, the
founder of the company, recognised this technology as a potentially clean and efficient energy carrier.
In the late 1960s the company’s fuel cells were adopted by the US Apollo space programme.
However, the founder also wanted to use their fuel cells for creating clean urban transport and clean
energy for buildings applications.
By the 1970s the organisation were designing electric road systems and received financial backing
from a Belgian energy company. Together they developed alkaline fuel cell (AFC) buses, the benefit
of AFCs being that they are not dependent upon precious metals. However, despite the progress made
the company was still lacking a profitable commercial base from which to launch the new technology.
The interview participant (who now owns and manages the company) said that this is a more pervasive
problem that still forms a major barrier today to the unhindered market development of fuel cells.

The company was transformed to focus primarily on hybrid vehicles – their products (alkaline fuel
cells) being based mainly on load levelling vehicles. The engines of these vehicles store energy at
times of low use to use when additional power is required. The motor company Ford showed
considerable interest in selling ‘hybridised’ vehicles, but due to cut backs on Government funding for
prototype development the project was unable to proceed. Following this the company went into
receivership. Jean Aldous felt that this failure reflects the problem that fuel cells have never achieved
widespread commercial success to date.

Manufacturer 2: Interviewee – company director

This company was established in 1994 but is also currently in receivership. Initially the company
focused on vehicles, but went on to concentrate on fuel cells for stationary and marine applications.
The company changed its focus in 1999, following the purchase of a Belgian company that developed
alkaline fuel cells (AFCs) centring on the development of zero emission products: vehicles, marine
applications and stationary generators.

The company then grew very quickly but was heavily reliant on private investment. The fuel cell
technology that the company were developing proved a very difficult energy market to compete in and
the company ran out of working capital. The interview participant believes that the problems
encountered by the company are also difficulties more broadly encountered by developers of fuel cells
and the uptake and application of the technology in the UK energy market.

Manufacturer 3: Interviewee – company director

This company is building a portfolio of hydrogen technologies and Intellectual Property aimed at the
hydrogen economy. Currently their lead technology is a cell that converts light and water directly into
hydrogen fuel using photo electrolysis (the combination of photovoltaics, semiconductors and an
electrolyser to generate hydrogen from water) and for which the company owns the world-wide
exclusive rights. The intention is that this process will be used for transport and building applications.
The company also owns rights to a process that enables the biological generation of hydrogen and are
actively seeking to acquire compatible technologies in hydrogen generation and storage.

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4.1.2 Fuel cell experts

Expert 1
The first expert participant has a background in engineering, with specialist knowledge of
environmental considerations. He continues to be involved in energy and environmental research.

His research focuses on: the legislative barriers to the introduction of new and renewable energy; the
reasons why the New Electricity Trading Agreement (NETA) has proved obstructive; economic
studies involving energy-related contingent valuation; and policy issues to do with energy supply and
decision making.

Expert 2
The organisation within which our second expert works caters for the training needs of professionals
in the energy field. The interview participant said he has a personal interest in the potential for
developing the hydrogen economy.

4.1.3 Fuel cell users

Fuel cell user 1: James Farrell, Manager, London Hydrogen Action Plan, Greater London
Authority (GLA)
James Farrell manages the London Hydrogen Action Plan which was established under the Greater
London Authority’s non-statutory Energy Strategy for London. The GLA’s recent purchase of three
hydrogen fuel cell buses began a two year trial in January 2004. London is one of nine European cities
taking part in the trial as part of a scheme to reduce local pollution, greenhouse gas emissions and
noise.

The GLA’s Energy Strategy has been designed to be delivered through an energy hierarchy where the
pinnacle represents energy conservation and energy efficiency, the middle tier represents renewable
energy and other/new technologies form the lower end of the hierarchy. The central aim of the Energy
Strategy is to integrate with and build on key elements found in the series of other strategies drawn up
by the Mayor’s office which include the Noise Strategy (main points of overlap here being buses and
fleets), the Waste Strategy (main overlaps including fleets and end of life issues) and the Economic
Development Strategy (energy decisions having a clear impact in the context of this strategy).

James Farrell emphasised that these strategies reflect the desire of the GLA to work towards
sustainable environmental and economic solutions to key issues and services, and that this has been
met with considerable approval and positive anticipation. For example, the desire to encourage the
introduction of hydrogen technology applications has gained considerable support from London’s
Regional Development Agency (RDA). It encourages the manufacture of fuel cells through a long-
term H2 partnership programme as part of their drive to promote a green economy and green
businesses. The RDA have additional actions gathering support from industry, academia and action
groups. James Farrell is very enthusiastic about all of these developments because of the positive
implications for a more sustainable London “economically, socially and environmentally”. His
particular interest is in expanding the GLA’s adoption of suitable fuel cell applications as part of its
strategy.

Fuel cell user 2: Allan Jones MBE, Energy Services Manager, Woking Borough Council
Allan Jones has provided critical guidance and drive for Woking’s innovative sustainable energy
initiative. In December 2001 the Council became the first local authority to install a full scale fuel cell
CHP system. The 200kWe CHP fuel cell is part of a larger project that also includes an 800kWe
reciprocating engine, an existing 150KWe CHP, solar shading photovoltaic system and heat fired
absorption cooling and thermal store, making a total CHP capacity of 1.15MWe. The individual
components are connected by heat and chilled water mains and local distributive electricity. The

8
project produces sufficient heat and power to supply the swimming pool and leisure centre at Woking
Park, plus is a net exporter of electricity (fuller details of the Woking project are given in Powell et al,
2003).

Allan Jones believes passionately in the potential for fuel cells in the UK as a means to transform the
current system of generation and distribution to a more sustainable future. He would like to see the
reformation of regulatory barriers that currently hinder the proper market development of this energy
technology and its associated applications.

"Installing a fuel cell is a logical part of our ongoing efforts to promote and use sustainable energy
sources. We are proud to be the first site in the United Kingdom to employ fuel cell technology in
everyday use."

4.1.4 Potential fuel cell users

Linda Boal, Planning Officer (Regeneration), Norwich City Council

A new development of retail, housing and a swimming pool on an old industrial site gave Norwich an
opportunity for considering a range of technology options for providing heat and power to their new
leisure facilities. But unlike Woking the City Council did not consider utilising a fuel cell application.
They did, however consider purchasing a CHP unit following the successful installation and use of
such a system at the nearby Wymondham swimming pool complex. Eventually they decided against
this plan primarily on three grounds:

• there was to be no sports hall or other leisure facilities attached to the new Norwich pool and CHP
units of a suitably small size were not available;
• the cost of installing CHP was considered prohibitive;
• the council did not want any ‘burdens’ associated with the new pool.

Eventually oil fired boilers were installed to provide the necessary heating.

Colin Hale, Planning Officer, Norwich City Council

As a Planning Officer Colin Hale is involved in the Greater Mile Cross Single Regeneration Budget
project in Norwich. This area of Norwich (situated to the north of the city) is one of three Single
Regeneration Budget (SRB) Projects. The SRB is a Government funded initiative to bring life back to
areas which have both economic and social problems including areas of industrial dereliction. The
Mile Cross scheme initially ran from 1995 to 1999. Funding was through a mixture of government
grant, private sector money and other public funds. The purpose of this scheme is the regeneration of
the area through community development, economic regeneration, environmental improvements and
new housing on under-used, vacant or derelict sites. It aims to improve the quality of life, training and
employment opportunities of people living there and contribute to the economic well-being of the city
as a whole. An integral part of the project has been the promotion and implementation of energy
conservation measures, including combined heat and power (CHP). The Mile Cross CHP unit in the
city provides heat and power for 300 properties including three tower blocks and three four storey
flats.

The system basically involves a gas-fired CHP system that provides hot water at a high enough
temperature to be used for space heating. Included is a heat exchanger that increases the efficiency of
the system. In addition to the domestic properties the electricity produced is also used by the City Hall
and the Police station. Excess power is sold to electricity suppliers yielding, on average, about £50,000
per year. The Mile Cross CHP which was installed in 1995 achieved 30% energy savings after the first
year of it being up-and-running. As a member of the planning team Colin Hale is particularly keen to
fulfil the energy objectives of the SRB project through environmentally sustainable means including
the uptake of ‘alternative’ technologies.

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“The way ahead – to encourage an increase in the uptake of CHP and other more environmentally
sound energy technology – will require a mix of capital funding, grants and private finance.”

4.1.5 Fuel Cell Trade Association

Celia Greaves, Fuel Cells UK

Fuel Cells UK was launched in May 2003 with initial funding from the UK Department of Trade and
Industry. Their objectives are to construct a ‘capabilities guide’ for the UK fuel cell industry detailing
information about fuel cell manufacturers and the manufacturers of fuel cell components (this has been
published, available at www.fuelcellsuk.org); produce a fuel cell vision for the UK highlighting the
benefits to the UK in taking a leading role in fuel cell development and deployment (also
downloadable at www.fuelcellsuk.org); and to establish a range of industry focused activities building
links to key organisations across the UK and beyond.

Fuel Cells UK aims to open channels for dialogue and interaction between the UK’s fuel cell
manufacturers and component manufacturers and develop into a trade and industry association. Celia
Greaves looks forward to the realisation of the organisation’s aims in moving fuels cells forward in the
UK.

“The establishment of Fuel Cells UK shows a commitment to fuel cells from the Government. Fuel
cells have had a relatively low profile up until now and this is a good indication of moving forward.”

4.2 Key barriers preventing a swifter development and uptake of fuel cell technology

4.2.1 Governmental/regulatory barriers

One of the main lines of argument relate to the apparent lack of government support for the
development of fuel cell technology in the UK to date. Although some participants believe that this
situation seems to be slowly changing it was generally observed that a much larger attitudinal shift
backed up with legislative changes is required for the fuel cell industry to thrive.

“The UK government has traditionally shown considerable reticence when contemplating financial
support for projects that lack the vital element of being likely winners, and those technologies that
might be called ‘new, innovative, or unknown/untested.” Fuel cell manufacturer

Many participants also suggest that European Union support for fuel cells should be strengthened to
make project funding easier to obtain. Both lines of argument highlight a desire among the participants
for a greater policy emphasis on the development of fuel cells together with appropriate funding and
support mechanisms. It was pointed out that checking, testing and modifying are all part of the process
of developing new technologies, and that financial investment for the manufacturing stage is essential.

“People don’t understand the need for development. Until recently there has been and to some extent
still continues to be a strong under swell against innovation and development. This is a barrier in
itself.” Fuel cell manufacturer

The participant representing the fuel cell trade association believes that it is only relatively recently
that the UK government has started to show tangible support for hydrogen fuel cells. This point was
developed by two other participants who pointed out that gaseous hydrogen does not currently form an
important enough focus of the government’s policy programme for sustainable energy. This would
need to change if an infrastructure and market is to develop that might enable commercial viability for
fuel cells. The component manufacturer participant feels that fuel cells are a low priority in the Energy
White Paper. This participant did however point out that the PIU Energy Review and the Energy

10
White Paper have contributed to the establishment of numerous government-funded missions relating
to fuel cells. These initiatives (e.g. Fuel Cells UK - a participant in these interviews) that are designed
to highlight fuel cell developments in the UK, can be seen as a positive, if limited move forward. This
type of initiative is thought to a large extent to mirror the objectives and progression of Fuel Cells
Canada and Fuel Cells USA.

“The Energy White Paper only gave fuel cells a small mention – main focus was on wind power and
photovoltaics.” Fuel cell user

In the context of regulatory barriers, very few participants are optimistic about the prospects for fuel
cells in the future, reflecting the magnitude of difficulty posed by those specific barriers they
identified. One fuel cell user who particularly considers regulatory barriers to be a problem,
emphasised that opportunities for fuel cells in the short term are made more difficult by regulatory
barriers. The participant did however consider that stationary fuel cells for domestic energy present an
exciting and realistic alternative if solutions to these barriers can be arrived at. This participant and
three others referred to the New Electricity Trading Arrangements (NETA – see section 2) and in
particular to the penalties incurred by generators who do not meet their ‘advance contract
commitments’.

Under the NETA arrangements generators have to agree to provide a specific quantity of electricity. If
they do not produce exactly the agreed quantity a generator has to pay for a shortfall at the System
Buy Price (TBN, 2001) or if excess is produced this is paid for at the System Sell Price, which usually
results in financial penalty. The participants pointed out that these imbalance penalties currently
marginalise fuel cell and intermittent renewable technologies and have in extreme cases caused some
CHP and renewable energy owners to switch their systems off in order to avoid penalty. This
particularly occurs during periods when the System Buy Prices have been volatile and high combined
with very low and negative System Sell Prices
“The regulatory regime… inhibits small generators.” Fuel cell expert
Related to this are issues the participants raised that relate to the structure of the distribution networks.
Currently significant transmission losses occur due to energy being transmitted from a small number
of large power stations throughout the country. The problems faced by many smaller generators were
also highlighted, in particular the difficult and expensive process of connecting to networks that were
not designed to accommodate them. Distributed generation is discussed further in section 4.6.

“The Government makes statements but does act on them in a joined up way. NETA and the
connection of small generators to the grid is a barrier to small generators in general, especially
regarding the bureaucracy and costs involved.” Fuel cell user

“Changing the current domestic supply situation will be a complex and difficult process but presents a
healthy challenge.” Fuel cell expert

These participants clearly identify regulatory barriers as key to the slow progress of fuel cells and
other more established renewable technologies that still only occupy a very small proportion of the
overall UK energy market share.

4.2.2 Cost barriers

Another major barrier cited by all the interview participants is that of cost. Currently the development
costs involved in progressing the technology are prohibitive thus stunting development and restricting
the commercial viability of potential product applications.

“The issue of cost is the foremost barrier – if we could get cheaper fuel cells working in peoples
homes we might be able to use excess industrial hydrogen to power them.” Fuel cell manufacturer

11
“Capital cost is definitely one of the main barriers to the introduction of such technology for a local
authority.” Potential fuel cell user

Most participants are of the opinion that there is often a long-term struggle to reduce the cost of new
systems until the market is developed sufficiently for mass production. One of the expert participants
believes that for fuel cells the ‘critical mass’ time (i.e. producing a sufficient number of fuel cells to
penetrate the market and make a profit) will take years and that increasing the production rate of
products such as fuel cells that require rare and specialist materials (e.g. precious metal catalysts)
represent a major investment. This resonated with others who agreed that the marginal costs, coupled
with the initial investment required are currently major barriers. The difficulty of obtaining certain
specialist components was also seen as an obstacle.

“The cost should come down as further advances are made in the technology and as a greater demand
for fuel cells develops. However, with certain fuel cells, like Proton Exchange Membrane for example,
the high cost of the precious metal (platinum) has to be overcome which will not be easy.” Fuel cell
expert

Another part of the cost barrier alluded to by several participants related to governmental barriers.
Many participants believed that currently there is insufficient government funding for the wide scale
establishment of pilot projects, or for substantive research and development of the technology.

“Funding is a real problem to most UK companies involved in the development of fuel cells, fuel cell
components or auxiliary systems. The main problem is how do you move development into the
manufacturing/commercialisation phase? Government funding is not there and private/venture capital
sources are not forthcoming.” Fuel cell membership organisation representative

“The government does not fund the transfer of technology into the commercialisation/manufacturing
phase. There is a need for more government-funded demonstration projects.” Fuel cell manufacturer

4.2.3 Technological barriers

While some participants clearly felt that technologically fuel cells are as advanced as one could
reasonably expect and that this did not of itself pose any particular obstacle others consider that the
technology still has a long way to go.

“Fuel cell technology still needs to advance considerably – especially in terms of prototype modelling,
testing and monitoring – before the market for them will really be able to develop and take off
commercially.” Fuel cell expert

For those who identified technological problems, a major factor is that fuel cells and hydrogen
technology more generally are still relatively young and unproven. As a result there are inevitably
technological problems that have yet to be overcome. Participants feel that this may well delay the
progression of fuel cells.

“Wind power is already established and proven as a technology – fuel cells have yet to prove
themselves in this sort of way.” Potential fuel cell user

Some participants also mentioned the need for a hydrogen infrastructure to be established, particularly
if fuel cells for vehicular applications are to become a wide spread reality.

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“Until the UK takes serious steps to develop a workable hydrogen infrastructure this will inevitably
hinder the progress and uptake of fuel cells – particularly regarding vehicle applications. This is an
area that probably requires government intervention/backing in addition to co-operation by the oil
companies and private investors.” Fuel cell expert

“We have the ability to produce components for fuel cells in the UK but at the present time there are
no really successful fuel cell manufacturers per se in the UK.”
Fuel cell membership organisation representative

4.2.4 Other barriers

In addition to the key barriers of government policy, regulation, cost and technology the participants
highlighted several other areas where potential difficulties for the progression of fuel cells in the UK
are present. These are listed below together with some direct quotations illustrating the various
barriers.

• Electricity suppliers lack of interest in or support for hydrogen fuel cells.

• Fossil fuel suppliers are concerned that hydrogen could revolutionise energy supply and
distribution away from fossil fuel exploration. It was the belief of this participant that these
companies therefore want to be involved but on their own terms and to their own time scales,
which may prove too late.

“UK industry for stationary power is run by a small number of incumbents (i.e. large electricity
generating companies). They think that fuel cells and distributed generation are fascinating as concepts
but are not convinced that they represent the way forward or are in their best financial interest.” Fuel
cell expert

“If one considers all small companies involved in the development of fuel cells in the last 25 years you
realise that none of them have really succeeded in getting their products off the ground. This is
regrettable and can be changed. It needs to be changed if fuel cells are to take their rightful place in the
production and supply of energy in the UK.” Fuel
cell manufacturer

• The motor industry also came under scrutiny. It was stated that the interest of large companies in
new technology tends to be encapsulated in 5-10 year project plans. The example of BMW was
given, who have indicated that they may well not be selling hydrogen cars for some years. The
participant speculated that before fuel cell vehicles become commercially viable in a wide scale
way BMW and similar manufacturers will want a hydrogen infrastructure developing with the oil
infrastructure to a fairly advanced stage.

• Public perceptions. Several participants consider there needs to be a programme of education and
persuasion to encourage the concept of clean energy among the general public. It is the public who
will buy fuel cell vehicles and be the end users of fuel cell CHP community systems, so promoting
an ethos of environmental awareness regarding energy will help in this respect. At the moment an
underdeveloped market and lack of consumer demand all slow down the process of fuel cell
applications emerging properly – both in terms of energy supply and private transport
considerations.

• The environmental ramifications of reforming hydrocarbons, with the associated emission of

harmful greenhouse gasses. i.e. the respondent was referring to the problem of generating
hydrogen in ways that will still cause the emission of carbon dioxide when the fuel cell ‘solution’
is supposed to be a step forwards to more sustainable energy.

13
“A life cycle assessment might reveal that it would be best to use a low carbon source (e.g. nuclear +
hydro + some renewables). But it might be necessary to start hydrogen production with a carbon
source to get the initial interest aroused.” Potential fuel cell user

“Industry does not buy into Fuel Cells UK’s ‘vision’ because there is not much going on development-
wise in the UK other than small technology developments. We have no manufacturing capacity.” Fuel
Cells UK representative

• Energy is cheap and therefore there is little incentive to develop alternative energy systems.

“There is no strict guidance or policy from the council on green considerations in planning. The
council generally views green applications as problematic, especially if they turn out to be an
expensive alternative to tried and tested cheaper solutions.” Potential fuel cell user

“There should be regulatory incentives for green vehicles and incentives for the introduction of fleets
such as ‘no emission zones’ that would favour lower carbon and fuel cell vehicles.” Fuel cell user

• Safety concerns about hydrogen gas is a related issue that several participants’ raised, in particular
the transport of hydrogen in built up cities. The introduction of local hydrogen reforming plants
would probably need the ‘softening’ of current planning restrictions.

4.3 What are the necessary regulatory regime changes that might give fuel cells and related
technologies a better chance?

Increased regulation (particularly in terms of pollution/emissions targets) came across from the
participants as having the potential to be a very strong driver. One of the main lines of argument was
that in some other European countries (e.g. Germany and Scandinavia) environmentally-driven
policies and regulatory measures seem have a much greater impact, encouraging the development of
sustainable energy on a broader scale than in the UK.

“Stronger, better designed legislative drivers are causing certain other EU countries to look very
seriously into alternative energy solutions. This force will hopefully gather momentum in the UK as
well where government support for fuel cells has been almost non-existent until recently.” Fuel cell
manufacturer

Planning and local planning interpretation are also considered important . One potential user was
positive about the Government’s removal of fuel duty on hydrogen but points out that further reform
of fuel duties is needed: “they should start to introduce a scale of duty regarding the source of the
fuel.”

One of the key problems identified is that, legislation sometimes sends contradictory messages. The
central argument here is that although policy makers increasingly encourage the recognition of
environmental considerations, as far as energy is concerned there appears to be a bias towards
traditional, established means of generation and distribution thus making it difficult for technologies
like fuel cells to get a proper ‘foothold’ in the market.

Although this paper is primarily concerned with stationary applications for fuel cells, one fuel cell
user participant suggests that the encouragement of both stationary and vehicular applications at the
same time may be the most effective way to enhance their development and market position. The
participant believes that this can be achieved through the implementation of new legislative drivers.

“There should be regulatory incentives for green vehicles and incentives for the introduction of fleets
such as ‘no emission zones’ that would favour lower carbon and fuel cell vehicles. Together with

14
similar incentives for stationary applications this would provide the sort of boost and support
necessary to give fuel cells a better chance.” Fuel cell user

There is a general perception among the participants that government intervention is required to
increase the likelihood of fuel cells becoming a viable alternative energy carrier. The interventions
identified include properly designed policy incentives that encourage the development and deployment
of fuel cell applications but also enforceable, realistic disincentives that make the use of fossil fuel
generated energy increasingly unattractive. Four participants suggest that strengthened carbon targets
would be a useful approach for the Government to continue.

“Legislation (particularly in terms of pollution/emissions targets) is potentially a very strong driver.

Cultural and legislative drivers are very much interlinked.”
Fuel cell membership organisation representative

4.4 Main opportunities for fuel cells in the near future

Some participants consider the market for stationary fuel cells and the mobile application market (e.g.
portable energy for laptop computers) are the areas that will reach commercialisation first. It is
interesting to note that most of the participants similarly state that the market for vehicles will come
later despite the ‘good words’ and research undertaken by certain prominent car manufacturers in
recent years. One of the manufacturer participants point out that the US seems to be driving hard
towards the commercialisation of fuel cell vehicles, but in the UK this participant was still ”not
convinced that this is where cars will go short term.” The participant believes there has already been
problems with this fuel cell application.

“Smaller scale CHP applications will be the first to become fully established, then progressing up to
larger megawatt scale systems and beyond.” Fuel cell expert

“Portable electronics will be the first major fuel cell application (possibly being introduced next year –
2004).” Fuel cell membership organisation representative

One of the expert participants advises that it is important not to consider all the different types of fuel
cell as the same, as some types are more suited to stationary application, some to transport applications
and some to micro-mobile applications etc. This is a particular problem for planners and policy makers
who may not be sufficiently knowledgeable of the technology. The participant affirms that some types
of fuel cell will be able to proceed to competitive market status before others. For example, proton
exchange membrane fuel cells are more suited to small and mobile applications (e.g. mobile phones
and laptop computers) whereas others such as solid oxide fuel cells and multi-carbonate fuel cells are
better suited to large stationary applications.

“If fuel cells are thought of as a single generalised entity then local authorities and others in a position
to incorporate them into various developments will be none the wiser as to the range of applications
that the technology is actually suitable for.” Fuel cell expert

A number of participants focused on the niche market opportunities for various applications involving
fuel cells. The following niche market areas were identified:

• uninterruptible power supplies;

• standby power;
• power for computers;
• remote sites e.g. telecom masts in the countryside could be powered by fuel cells rather than
diesel engines.

15
“Fuel cells should be used where application possibilities exist – mobile phones and laptops for
example (still a niche market).” Fuel cell manufacturer

On the issue of different methods of hydrogen production for fuel cell applications most participants
thought that conventional fuel options (e.g. natural gas) would be the primary source. This could be
followed by the integration of renewables (e.g. wind/solar energy to fuel the process of electrolysis) if
renewable energy continues to expand and have the spare capacity for this.

Some participants also discussed intermittency (i.e. the variable nature of renewable energy sources)
and efficiency. There is a general consensus of opinion that the intermittency problem will become a
more pertinent challenge as traditional fuel sources continue to deplete and their prices subsequently
rise.[Is intermittency seen as an opportunity for FC?] Indeed the depletion of natural fossil resources
coupled with stronger environmental regulation and targets was seen as being a major window of
opportunity for fuel cells and other ‘more sustainable’ energy alternatives.

4.5 What will be the main driving forces enabling a realisation of these opportunities for the
development and uptake of fuel cells?

The government subsidy of fuel cell research and development was cited by many participants as
something desperately needed. The creation of a more favourable investment climate was also
discussed. This will include political support and high profile financial encouragement from agencies
such as the Carbon Trust with government and industry backed investment to enable the
commercialisation of fuel cells. This would allow fuel cells to initially be more affordable, allowing
the development of a strong market.

Other driving forces are summarised below:

• The need for more case studies to inspire and encourage future developments was also
highlighted.
• The development of a strategic policy framework geared towards greater recognition of the
potential part that could be played by new energy technologies in building a more sustainable
future;
• Government and organisations at all levels need to be involved in the development of skills,
provision of training courses, and initiation of engineering expertise networks;
• Changes to planning regulations to enable the uptake of fuel cell technology to be more
favourable; In particular easing the planning criteria used to identify where energy generation
facilities can be sited
• Programmes of education are required to increase public awareness and acceptance;
• Government to lead and encourage the development of a hydrogen infrastructure for fuelling
fuel cell vehicles.

Some of the participants suggest that the potential environmental benefits of fuel cells (given
appropriate and sustainable sourcing of hydrogen) represent a driver on their own. It was widely
considered that the culture of energy decision making at higher, governmental levels would almost
certainly need to change for this to become a reality.

“For fuel cells really to progress there will have to be large attitudinal shift among energy policy
makers backed up with legislative changes.” Potential fuel cell user

Several (but not all) participants emphasise the role that fuel cells might play in reducing carbon
dioxide emissions. This feature could be developed as an element of a local authority’s attempts to
meet local/national climate change targets.

16
“Fuel cells could be used in a package of renewable systems to enable the reduction of carbon dioxide
and other major greenhouse gases, helping to meet the targets set by central Government. This
meeting of targets is also useful with respect to securing future funding, and so this should be seen as a
key incentive for local authorities to really make an effort in setting up these sustainable energy
systems.” Potential fuel cell user

One fuel cell user participant highlighted the importance of fuel cell CHP as an example of available
technology for demonstration projects. The widely accepted benefits of CHP could, in the opinion of
this participant, enable a ready application potential for fuel cells where the combined benefits would
be more tangible and opportunities for implementation fairly wide spread. The key points identified to
accelerate the demonstration of fuel cell CHP to encourage interest and advances in the development
of other fuel cell applications were:

• Safety: Safety concerns about the use of natural gas as an energy carrier within the home are
reduced but these may be replaced by new fears surrounding the use of hydrogen. This issue and
that of major leaks from hydrogen pipelines would need to be fully addressed during the
developmental stages of the technology;
• Environment: reduction of potentially harmful emissions into the atmosphere;
• Energy Efficiency: Fuel cell CHP can provide increased levels of efficiency and interior comfort.
• Fuel security: the replacement of oil-fired boilers can lead to reduced reliance on the insecurity of
the oil industry.
• There might be scope for combining CHP, fuel cells and other renewable energy sources. This
way economies of scale combined with the practicalities of installation would ease their
introduction (e.g. for providing heat and power to housing developments and industrial
developments). It was pointed out that this would almost certainly require long-term forward
planning and a full acceptance of the efficiency/workability of the new, and hopefully more
sustainable energy systems.

Other key drivers described by the participants included the following:

• Cultural and legislative incentives and drivers. These are very much interlinked. The
participants considered cultural issues (i.e. what people think about fuel cells and hydrogen – their
fears and aspirations for this technology) could be a major incentive but it will require a great deal
of carefully targeted education and awareness-raising to improve the profile and desirability of
fuel cells and their various application potential. Allan Jones, Woking Borough Council’s Energy
Services Manager believes that by taking a first step the innovative Woking example has unlocked
a door to future fuel developments. But this needs to be strengthened by many other working
examples so as to build the momentum and develop the market.

• Engagement with the general public. The public (and in terms of local authority housing
schemes, tenants) are generally in favour of environmentally sound action. Experience has shown
that local authority instalment of CHP does not equate to higher heating bills. So, explaining to the
public what is going on and engendering their interest is another key driver in moving the whole
sustainable energy concept forwards.

“Education at all levels is essential if fuel cells are to take on greater prominence and be accepted as a
potentially clean source of energy. People will need to know all of the facts about this technology – its
strengths and weaknesses – and pilot, prototype tests will have to prove that fuel cells really do work.
Until cultural acceptance emerges it is difficult to envisage fuel cells making it as a serious option in
the UK’s largely intransigent energy market.” Fuel cell manufacturer

• Funding opportunities. Grants for fuel cells are available through the Energy Savings Trust to
partly offset capital costs, thus giving a more competitive financial grounding for fuel cells and

17
 CHP systems to be tested and become better established. This was considered to be a major
incentive provided that the opportunities are better advertised and communicated.

“Subsidy incentive together with media/publicity value would enable authorities to consider buying
and implementing fuel cells.” Potential fuel cell user

• De-regulation. Although the trend to date has been towards fewer, larger electricity suppliers,
some participants felt that with time a deregulatory process will emerge. This may well result in
the establishment of smaller electricity suppliers providing the energy needs of closer geographic
areas and communities.

• Depletion of finite fossil fuel resources. Several participants believe that energy supplies will
become scarcer and thus more expensive in the future. When other energy sources start dropping
out this will become a key driver for the progression and development of fuel cells. Linked to this
is security of supply which was also considered to be an important driver.

“The oil economy will die out before oil resources die out.” Fuel cell user

4.6 The move away from centralised ‘grid’ energy

Approximately half of the participants thought that distributed generation (DG) networks offer a
practicable opportunity for fuel cells in integrated systems, especially with the combination of CHP
and other renewable energy. The other half did not consider distributed generation a practical option.
This divide of opinion did not appear to be related to the type of participant. Many of the ‘pro’
distributed generation participants acknowledged that the Government do not yet support a DG
system.

“It is a question of whether people want to do it (i.e. make distributed generation a reality).” Fuel cell
expert

Participants in favour of distributed generation felt that there are exciting opportunities for stationary
fuel cell applications if the UK moves towards this approach and away from the current grid system.
For example, one such participant said “this would reduce utility generation infrastructure costs and
could help to improve reliability.”

“Power generation distributed across domestic dwellings would be a sensible approach. This however
might be a threat to the major energy suppliers.”
Fuel cell membership organisation representative

By contrast another section of the interview sample did not think that distributed generation is good
idea. Part of their argument was that economies of scale result in local systems tending to be oversized
to deal with the differential of peak and ordinary demand. So, for example, during the winter months
the same system is able to cope with the increased need for heating and light etc. that is not present in
the summer and ‘ordinary’ periods. One participant said “it’s a bit like buying a car that is suitable for
pulling a caravan even though 90% of the time it is only used by one person travelling to work and
back.”

There were a few participants who were more undecided in their responses on this subject. A central
question that arose was that although distributed generation may technically be feasible would local
suppliers be completely separate from the grid? They thought that distributed generation is perhaps a
useful way of looking at the provision of energy for remote close communities, but that realistically
for a nationwide distributed system, five or six small generators would probably be necessary for each

18
county. This may present development difficulties and therefore the notion of changing to distributed
networks still needs a substantial amount of thought and research.

“Current electricity distribution is not geared towards the integration of small scale fuel cell systems.
Distributed generation and being able to feed into the grid is an issue.”
Fuel cell user

4.7 Participants’ ‘ideal world’ forecast for fuel cells, CHP and renewable energy in the future

“In an ideal world a variety of fuel cells would be functioning for many different applications.
Alkaline fuel cells would be used for remote applications as they are robust and simple systems (for
which reason they could have potential for developing world applications). Proton exchange
membrane fuel cells would be incorporated into vehicles, and renewable energy (solar/wind/wave)
systems where they could be used to produce and store hydrogen gas in a sustainable fashion.” Fuel cell
expert

“Fuel cell CHP applications will expand to start with enabling us to capitalise on lower emissions.
Other applications including the vehicle sector will then follow. Fuel cells and hydrogen give us more
flexibility in our approach to generating energy sustainably.” Fuel cell expert

“I would like to see more demonstration projects leading to financially viable market opportunities for
fuel cells. They should take on more importance as an element of sustainable energy for the UK.” Fuel
cell user

“Distributed generation is an attractive proposition that could include mini grids and provide certain
building complexes (e.g. hospitals, offices etc.) with their own power sources. Fuel cell power stations
supplemented by solar/wind feeding grids may well provide possibilities for the future.” Fuel cell user

“We need to know all the facts [and] set that alongside the importance of scaling down fossil
generation. We owe this to the future generation but [first] need to prove that the technology works.”
Potential fuel cell user

“Once people understand what fuel cell technology is they will support the alternatives over the old
energy dinosaurs. In my ideal future we would see fuel cells being used in stationary, automotive and
mobile situations together with a healthy mixture of wind, solar and tidal power.” Potential fuel cell user

“What does future mean? Have we lifted more than 50% of our crude oil supplies yet? Once it is not
there we have got to look to alternatives. This includes renewable energy, nuclear energy and coal. In
50 years time we will see renewable with better technologies however, further into the future nuclear
or coal may have to be used to cope with an increasing population.” Fuel cell manufacturer

“In reality fuel cells will never totally replace the current energy production and supply systems that
we have in the UK but they will increasingly be able to represent an important aspect of a cleaner,
greener energy system. Greater investment in the design and research of new and renewable energy is
certainly required.” Fuel cell manufacturer

“Different mix of fuels will be required to produce more electricity and more for transport. Distribute
hydrogen through present natural gas system adding compressors to assist. Hydrogen has a high
calorific value therefore not as much is needed as with carbon based fuels.” Fuel cell manufacturer

“I would like to see progress towards a hydrogen economy in an ideal future. This would present
opportunities for fuel cells in all their different forms and application possibilities. Waste is a source of
hydrogen that should be utilised and the process of pyrolysis requires further research and
development.” Fuel cell membership organisation representative

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5. Discussion

For the participants of this research the key barriers to the development of fuel cells relate to
governmental and legislative issues. There is a strong feeling that insufficient governmental support
has been given to enable fuel cells to develop properly as a credible alternative energy technology. It is
generally considered that government intervention, in the form of legislative drivers and support are
required to promote the development and commercial viability of fuel cells. Appropriate legislative
reforms, particularly relating to the New Electricity Trading Arrangements (NETA) are also
considered essential.

During – and since - the time of carrying out the empirical research for this paper there have however
been substantial reductions to the imbalance prices that initially caused problems for smaller
generators, particularly CHP and wind operators. Since July 2002, changes to the calculation of
imbalance prices under NETA have been made which have had the effect of reducing the spread
between System Sell Prices and System Buy Prices. These reductions came about largely as a result of
NETA being governed by industry (Piearce, 2004). In its initial set-up the DTI gave the energy
industries involved the right to raise proposals for modifying the rules. Following on from the huge
penalties that generators were paying for only slight imbalances in amounts of energy generated the
industrial bodies instigated small procedural rule changes to NETA that have resulted in imbalance
prices being reduced. In this sense some of the views expressed by participants who identified this
issue as a major barrier have now to some extent been dealt with through the industry-regulated
system. Reduction of the Balancing Reserve Level and shorter gate closer both came into effect in July
2002. In the 6 weeks before the changes the average spread between system sell and system buy price
was 2.1p/kWh. In the 6 weeks after both the changes, the average spread was approximately 1.2p/kWh
(DTI, 2004).

These trends that seem to be moving more favourably towards smaller generators will be carried on
under the proposed British Electricity and Transmission Arrangements (BETTA) which basically
represents the extending of NETA to cover Scotland where currently almost all the generating capacity
is allocated to the two major electricity companies operating there (Piearce, 2004, pers. comm.).
Generation ownership in England and Wales is much more widely distributed with no single company
owning more than 20% of capacity. The purpose of BETTA is to facilitate the creation of a single,
integrated and competitive wholesale electricity market covering the whole of Great Britain. This will
involve a single system operator, common rules and charging arrangements for connecting to and
using the transmission system, and a common set of balancing and settlement arrangements (DTI,
2004). Currently differences in the rules and charging arrangements between Scotland and England
and Wales limit competition between them and the absence of market based arrangements inhibits
effective competition (DTI, 2004). BETTA ‘go live’ date is anticipated to be during April 2005.

Several participants believe that some European countries, having developed environmentally-driven
policies and regulatory measures, have had a much greater success in encouraging the development of
sustainable energy in general than in the UK. Certainly at a European level the European High Level
report (EC, 2003) provides an ambitious ‘roadmap’ to stimulate and fund research on hydrogen and
fuel cell development. However, at the same time the DTI published a UK version (DTI, 2003), a
discussion document intended to be the starting point for a UK fuel cell vision, but this was not
mentioned by the participants. Although an offshoot of this, UKFC, an industrial organisation (and
one of the participants) was considered useful (by the other participants) but mainly for awareness
raising only.

For most of the participants ‘government support’ includes financial support, through some form of
subsidy or taxation. Despite funds from the DTI (£92M between 1992 and 2003 – DTI, 2003), the
Carbon Trust’s Low Carbon Innovation Programme and the Engineering and Physical Science
Research Council (EPSRC) cost factors were still considered to be a substantial barrier to fuel cell
development. Participants highlighted the prohibitive development costs involved in progressing the

20
technology, in that it inhibits development and restrict the commercial viability of potential product
applications. This supports the findings of the European High Level Group (EC, 2003) that recognises
hydrogen and fuel cells do not currently offer sufficient short-term end-user benefits to justify their
high costs compared to conventional technologies. The necessity of further governmental support for
demonstration as well as development projects is considered vital in order to give fuel cell technology
a better chance of market penetration and survival.

It is interesting to note, however, that in some areas of the literature the price of the products
(particularly in terms of mobile applications – a key emerging niche market) is not considered to be
the main factor that will prevent consumers from deciding to choose a hydrogen/fuel cell product in
preference to another (possibly cheaper) alternative (Evers, 2003). Rather, it is suggested that
increased awareness of the technology will have the greatest consumer impact, encourage desire for
hydrogen/fuel cell powered products and catalyse the development of other fuel cell products and
services that are not currently available (Evers, 2003). However this would seem to apply more to
products that are purchased for their lifestyle image (e.g. cars and laptops) rather than utility products
like heating systems.

A need to educate at all levels was identified by the respondents, with the purpose of drawing greater
attention to the environmental damage caused by conventional energy generation and the depleting
quantity of fossil fuels available as well as increasing awareness of the opportunities offered by fuel
cells. This would raise the environmental benefit profile of fuel cells for potential users, policy makers
and local planners. The need to keep stakeholders, such as the participants, informed is also important
particularly regarding legislative reforms such as those identified above.

Fuel cells are still regarded as being a relatively ‘young’ technology and therefore still have much to
prove as an alternative means of energy generation. The practicality of developing fuel cells to a
position of prominence in the energy market is also considered a barrier particularly when it is thought
that there is a considerable vested interest for many large organisations to maintain the status quo. It
was considered that if the government is seen to back the fuel cell industry this would help to
overcome the perceived inertia of the energy industry.

The lack of evidence that fuel cells are significantly less damaging environmentally than conventional
power sources when fuelled by hydrogen produced from fossil fuels is of concern to several
participants. However a number recognise the benefits from reduced local pollution and quiet
operation, an important concern in an urban environment. If however alternative, more sustainable
means of hydrogen production are deployed then fuel cells are considered to offer an attractive,
environmentally beneficial energy alternative. There is however still the question of whether it is
better to use renewable energy directly rather than to use it to make hydrogen for stationary
applications. In addition it is recognised that the production of hydrogen from natural gas is currently
the most economically viable method and that fuel cells may need to go through a transition phase of
using natural gas before biofuels and renewables are used. It is interesting that the participants did not
mention combining carbon sequestration with fuel cells using fossil fuel hydrogen as an alternative
way forward. This may reflect the relatively early stage of development of carbon sequestration.

A clear advantage, identified by some participants was that of overcoming problems of intermittency
associated with several forms of renewable energy. Hydrogen can provide a useful means of energy
storage to even out the fluctuating requirements of supply and demand but until renewables form a
substantial part of the UK’s energy demand this can also be met by linking to the grid, so is only
significant for isolated distributive systems.

There was a diversion of opinion among the participants as to whether distributed generation (DG) is
likely to become more predominant in the future. Some participants consider the current centralised
grid system to be an inefficient means of distributing energy and that smaller, localised supply
networks represent the only sensible approach for a sustainable future. Others argue that the
practicalities of altering an already established grid network realistically precludes distributed

21
generation as a viable alternative in the foreseeable future. One participant considers that more
governmental and regulatory support is required for distributed generation. This might have the effect
of encouraging the development of technologies suited to smaller scale generation such as fuel cells
and renewable energy. In the light of recent developments within the DTI, Ofgem and the
government-industry Distributed Generation Co-ordinating Group, it would appear that distributed
generation is now being considered by the UK Government as a major area for policy advancement. In
a recent Ofgem strategy paper entitled “Distributed Generation – the way forward’ DG is clearly set
out as a very positive and desirable approach to enabling the integration of more renewable and
smaller-scale clean energy technologies into the distribution network (Ofgem, 2004). Ways of
enabling this that are proposed include the following measures designed to remove existing barriers to
connection:

• Allowing generators the option of spreading connection costs;

• Establishing a standard connections procedure to ease the connection of domestic CHP
generators to the networks;
• Reimbursing distributed generators some of the initial connection fee when another generator
connects to some part of the network which they have already paid for (Ofgem, 2004).

It is also stated that the next distribution price control review should consider developing appropriate
incentives for distributors to connect DG to their systems and that the difference between the amount
generators are charged for connecting to the system and the amount they pay to put electricity onto the
network should be set out more clearly. In addition, a key policy question that Ofgem would like to
see developed is how DG should be taken account of within the distribution price control process.

The fact that such policy-relevant discussions are being developed at this level together with the new
price control from April 2005 reflects the increasingly attractive incentives for distributors to connect
and integrate DG.

The majority of participants consider that stationary and mobile fuel cell applications would be the
most likely area for serious advances for fuel cells in the medium term. Although vehicular
applications have attracted high profile attention in recent times it is felt that problems surrounding the
establishment of a hydrogen infrastructure coupled with the long-term aims of car manufacturers and
the oil industry would slow down the large scale market emergence of fuel cell vehicles for the time
being. For this reason the participants believe that applications involving mobile phones, laptop
computers and smaller CHP units will overtake automotive development in terms of niche market
penetration. This largely concurs with the current literature that is developing on this issue. For
example, in a commercial review of fuel cells, E4Tech (2004) project likely commercial introduction
points for fuel cell applications. This recent forecast, carried out for the DTI and the Carbon Trust, is
based on detailed assessments and prediction of technologies and markets. It comes to similar
conclusions to this study, indicating that in the near future smaller fuel cell applications such as remote
power and compact portable technologies will play an important role preparing the way for cost
reductions, wider commercialization and the establishment of broader-scale applications in the energy
market including domestic CHP and vehicular applications (E4Tech, 2004).

6. Conclusions
The purpose of this paper is to explore the barriers to and opportunities for the development of fuel
cell technology in the UK. A series of semi-structured stakeholder interviews were used to discover
the opinions and ideas of individuals who have an on-going interest in the development and
application of fuel cell technology. Their responses indicate that both at a technical and non-technical
level there is still a long way to go before fuel cells are become an established, mainstream
technology. The participants recognise the need to extend the knowledge base for fuel cell
technologies, to improve their efficiencies, reliability, lifetime and material performances. However

22
the research found there are also a significant number of non-technical aspects that need to be
addressed.

Three main conclusions can be drawn from this research. Firstly, the overall
impression from the participants was that stationary fuel cells offer a
significant way forward towards sustainable energy. However, although fuel
cells can provide environmental benefits associated with reduced local
pollution and quiet operation there remains a question mark over the carbon
implications. In addition, there are several issues surrounding the sustainable
production and storage of hydrogen and the development of a hydrogen
infrastructure. It is important to recognise that the environmental
implications of this technology vary significantly depending on the source of
fuel used to power them (e.g. natural gas) and their application. Fuel cells
cannot be considered in isolation, a lifecycle approach is needed.

Secondly, it was widely felt that the Government has not shown sufficient support for fuel cells to date
and that further backing – both in terms of legislative reform and financial assistance – will be
necessary to enable fuel cells to reach commercialisation and to establish a sustainable market position
for them. Although some moves have been made towards encouraging the fuel cell industry most
participants did not consider the government was truly convinced by the hydrogen economy or fuel
cells in particular. If stationary fuel cells are to be taken seriously a significant change of attitude will
be required within the government combined with proactive action. Hopefully reforms within the new
electricity trading regulations called BETTA (British Electricity Trading and Transmission
Arrangements) will address some of the regulatory barriers identified by participants in this research.
It is interesting to note that even for the research for this paper finding out clear information about
BETTA was extremely difficult. Personal communication with the DTI (Piearce, 2004, pers. comm.)
eventually enabled us to unearth the key facts but perhaps reflect a need for more transparency and
improved provision of information by the government to aid understanding and knowledge of policy
progressions.

Thirdly, the lack of demonstration models in the UK is seen as extremely detrimental to their
development. Currently the only example of fuel cell CHP in the UK is at Woking Council, although
others are planned in the Tees Valley. More working demonstrations would not only display the
government’s commitment to seriously considering fuel cells but would also provide a test bed for
independent monitoring and evaluation of their environmental and social impacts. Financial support
for the integration of fuel cell CHP into new housing developments would provide an ideal
opportunity, particularly if they are combined with other integrated forms of renewable energy. The
project would need to be independently monitored and evaluated and the results publicised widely.

In terms of the future, most participants envisage a place for fuel cells as part of sustainable energy
strategy. Although none could see fuel cells as being a panacea for a perfect, zero emissions energy
future, there was a general feeling that important advances can to be made if they could be coupled
with other technologies including renewable energy and combined heat and power.

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The trans-disciplinary Tyndall Centre for Climate Change Research undertakes integrated research into the
long-term consequences of climate change for society and into the development of sustainable responses
that governments, business-leaders and decision-makers can evaluate and implement. Achieving these
objectives brings together UK climate scientists, social scientists, engineers and economists in a unique
collaborative research effort.
Research at the Tyndall Centre is organised into four research themes that collectively contribute to all
aspects of the climate change issue: Integrating Frameworks; Decarbonising Modern Societies; Adapting to
Climate Change; and Sustaining the Coastal Zone. All thematic fields address a clear problem posed to
society by climate change, and will generate results to guide the strategic development of climate change
mitigation and adaptation policies at local, national and global scales.
The Tyndall Centre is named after the 19th century UK scientist John Tyndall, who was the first to prove the
Earth’s natural greenhouse effect and suggested that slight changes in atmospheric composition could bring
about climate variations. In addition, he was committed to improving the quality of science education and
knowledge.
The Tyndall Centre is a partnership of the following institutions:
University of East Anglia
UMIST
Southampton Oceanography Centre
University of Southampton
University of Cambridge
Centre for Ecology and Hydrology
SPRU – Science and Technology Policy Research (University of Sussex)
Institute for Transport Studies (University of Leeds)
Complex Systems Management Centre (Cranfield University)
Energy Research Unit (CLRC Rutherford Appleton Laboratory)
The Centre is core funded by the following organisations:
Natural Environmental Research Council (NERC)
Economic and Social Research Council (ESRC)
Engineering and Physical Sciences Research Council (EPSRC)
UK Government Department of Trade and Industry (DTI)

For more information, visit the Tyndall Centre Web site (www.tyndall.ac.uk) or contact:
External Communications Manager
Tyndall Centre for Climate Change Research
University of East Anglia, Norwich NR4 7TJ, UK
Phone: +44 (0) 1603 59 3906; Fax: +44 (0) 1603 59 3901
Email: tyndall@uea.ac.uk
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Integrating Renewables and CHP into the UK
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M.R. (2003). Climate Change, Impacts, Future
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40
Watson, J. (2003), UK Electricity Scenarios for
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Kim, J. A. (2003), Sustainable Development and
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Anderson, D. and Winne, S. (2003),
Innovation and Threshold Effects in
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Shackley, S., McLachlan, C. and Gough, C. (2004)
The Public Perceptions of Carbon Capture and
Storage, Tyndall Centre Working Paper 44
Purdy, R. and Macrory, R. (2004) Geological
carbon sequestration: critical legal issues,
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Watson, J., Tetteh, A., Dutton, G., Bristow, A.,
Kelly, C., Page, M. and Pridmore, A., (2004) UK
Hydrogen Futures to 2050, Tyndall Centre
Working Paper 46
Berkhout, F., Hertin, J. and Gann, D. M., (2004)
Learning to adapt: Organisational adaptation
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Working Paper 47
Pan, H. (2004) The evolution of economic
structure under technological development,
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Awerbuch, S. (2004) Restructuring our
electricity networks to promote
decarbonisation, Tyndall Centre Working Paper 49
Powell, J.C., Peters, M.D., Ruddell, A. & Halliday, J.
(2004) Fuel Cells for a Sustainable Future?
Tyndall Centre Working Paper 50
Agnolucci, P., Barker, T. & Ekins, P. (2004)
Hysteresis and energy demand: the
Announcement Effects and the effects of the
UK climate change levy, Tyndall Centre Working
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Agnolucci, P. (2004) Ex post evaluations of CO2
–Based Taxes: A Survey, Tyndall Centre Working
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Agnolucci, P. & Ekins, P. (2004) The
Announcement Effect and environmental
taxation, Tyndall Centre Working Paper 53

Turnpenny, J., Carney, S., Haxeltine, A., &

O’Riordan, T. (2004) Developing regional and
local scenarios for climate change mitigation
and adaptation, Part 1: A framing of the East
of England, Tyndall Centre Working Paper 54

Mitchell, T.D. Carter, T.R., Jones, .P.D, Hulme, M.

and New, M. (2004) A comprehensive set of
high-resolution grids of monthly climate for
Europe and the globe: the observed record
(1901-2000) and 16 scenarios (2001-2100),
Tyndall Centre Working Paper 55

Vincent, K. (2004) Creating an index of social

vulnerability to climate change for Africa,
Tyndall Centre Working Paper 56

Shackley, S., Reiche, A. and Mander, S (2004) The

Public Perceptions of Underground Coal
Gasification (UCG): A Pilot Study, Tyndall Centre
Working Paper 57

Bray, D and Shackley, S. (2004) The Social

Simulation of The Public Perceptions of
Weather Events and their Effect upon the
Development of Belief in Anthropogenic
Climate Change, Tyndall Centre Working Paper 58

Anderson, D and Winne, S. (2004) Modelling

Innovation and Threshold Effects
In Climate Change Mitigation, Tyndall Centre
Working Paper 59

Few, R., Brown, K. and Tompkins, E.L. (2004)

Scaling adaptation: climate change response
and coastal management in the UK, Tyndall
Centre Working Paper 60

Brooks, N. (2004) Drought in the African Sahel:

Long term perspectives and future prospects,
Tyndall Centre Working Paper 61

Barker, T. (2004) The transition to

sustainability: a comparison of economics
approaches, Tyndall Centre Working Paper 62

Few, R., Ahern, M., Matthies, F. and Kovats, S.

(2004) Floods, health and climate change: a
strategic review, Tyndall Centre Working Paper 63

Peters, M.D. and Powell, J.C. (2004) Fuel

Cells for a Sustainable Future II, Tyndall
Centre Working Paper 64