Regulatory Barriers to the Adoption and Diffusion of Stationary Fuel Cells in Ohio William M. Bowen Professor, Public Administration and Urban Studies Director, Ph.D. Program in Urban Studies and Public Affairs

Historical Context for Regulatory Structure Without a regulatory structure similar to the one we have, the evolution of a universal electric system would have been impossible Legitimized the electric utility business Assured a return on investment in utilities Provided a relatively risk-free way to finance the creation of an electric utility industry (by establishing localized spatial monopolies)

Current Regulatory Context Now after about a century, thanks in large part to regulatory structures, we have more-or-less universal electric power But in the past couple of decades, the demands on and need for regulation have changed Changes driven in part by long term technological trend toward lower economies of scale in power generation

The Drive Toward Deregulation The original need for regulation, which was to encourage investment in infrastructure, passed into unimportance The bulk of the electric generators, transmission grids, and other infrastructure has been built and paid for Political climate favorable to privatization Competition expected to decrease costs and improve customer value Encourages innovation and adoption of innovation

Regulation/Deregulation Today The level and nature of competition at the generation level is dependent upon the transmission system’s capability to link potential buyers and potential sellers The transmission grid remains a natural monopoly

The State of Economic and Policy Research on Regulation: Three Primary Foci 1.Develop, apply and measure incentive regulation mechanisms that recognize asymmetric information (regulatory capture?) 2.Develop and apply realistic access and pricing rules for regulated monopoly networks that support efficient expansion of competition 3.Gain a better understanding of the effects of regulation on the development and diffusion of new supply technologies

Putative Regulatory Barriers to AET Adoption in the Electricity Industry Interconnection standards Siting, permitting and environmental regulations Utility pricing practices Rules about wholesale market access Rules about retail market access Manufacturing scale Financing uncertainty and cost