Technological diffusion through cascading niche markets: Residential fuel cells in the United States

Subsidy programs for new energy technologies are by motivated by the experience curve: Increased adoption of a technology leads to learning and economies of scale that lower costs. There is a need for improved models of technological diffusion in order to inform choices in subsidy programs. In this research we explore how geographic variability in factors that determine the economic performance of an energy technology (e.g. fuel prices, climate) affects the progression of a technology through its experience curve. The notion of a cascading experience curve is that regions with favorable economic conditions serve as the basis to build scale and reduce costs so that the technology becomes attractive in new regions. We demonstrate this idea through a case study of residential solid oxide fuel cells (SOFCs) for combined heating and power in U.S. states. Residential scale systems are not yet available, but are under development by industry and also supported through federal subsidies.