Gavin D. J. Harper - MSc. Thesis

2008
The UK & California:

A Comparative
Analysis of Fuel Cell
Industry Clusters
This thesis examines the emerging Fuel Cell Industry in the UK
and California through the lens of Porter’s (1990) work on
industrial clusters and earlier work in the field of economic
geography.
This thesis assumes the perspective that empirical and

theoretical treatments of the development of disruptive vehicle
The ESRC Centre for Business technologies to date, have underplayed the role of spatial
Relationships, Accountability, agglomeration, which is a neglected aspect of the development
Sustainability and Society of these evolving new automotive technology clusters; this thesis
examines the factors that influence the growth of clusters using
Cardiff University Porter’s Diamond model.
55 Park Place
Cardiff The development of Fuel Cell Industry clusters is given a wider
CF10 3AT context through the imperative of developing clean
United Kingdom transportation solutions to answer the challenges posed by
resource shortage and anthropometric climate change.
+44 (0) 2920 876 562
Research Supported By:
Gavin D.sbsgdh
J. Harper
INSRV
www.gavindjharper.co.uk
2008
The UK & California: A Comparative Analysis of Fuel Cell Industry Clusters ii
The UK & California: A Comparative Analysis of Fuel

Cell Industry Clusters
This thesis is submitted by Gavin D. J. Harper

In partial fulfilment of the degree of
Master of Science: Social Science Research Methods
2008
The UK & California: A Comparative Analysis of Fuel Cell Industry Clusters – Gavin D. J. Harper 2008
Deeclaration iii
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CANDIDATTE’S ID NUMBBER: 0746116
CANDIDATTE’S TITLE: MR.
CANDIDATTE’S SURNAMEE: HARPER
CANDIDATTE’S FIRST NAMES: GAVIN DAVID JAMES
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CLARATION
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ATEMENT 1
•Thhis dissertationn is being submmitted in parttial fulfilment of

o the requireements for thee
deggree of MSc. Social
S Sciencee Research Meethods.
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ATEMENT 2
•Thhis dissertationn is the resultt of my own inndependent work/investigat

w tion, except
whhere otherwisse stated. Other sources arre explicitly accknowledged with
w
refferences. A Biibliography is appended.
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ATEMENT 3
•I hereby give coonsent for my dissertation, if accepted, to o be available for

photocopying annd for inter-libbrary loan, annd for the titlee and summarry to be made
avaailable to outsside organisations.
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The UK & California: A Comparative

Co Analylysis of Fuel Cell Industry
I Clusterss – Gavin D. J. Har
arper 2008
Abstract iv
Abstract
This thesis examines the emerging Fuel Cell Industry in the UK and California through the
lens of Porter’s (1990) work on industrial clusters and earlier work in the field of economic
geography.
This thesis assumes the perspective that empirical and theoretical treatments of the
development of disruptive vehicle technologies to date, have underplayed the role of spatial
agglomeration, which is a neglected aspect of the development of these evolving new
automotive technology clusters; this thesis examines the factors that influence the growth
of clusters using Porter’s Diamond model.
The development of Fuel Cell Industry clusters is given a wider context through the
imperative of developing clean transportation solutions to answer the challenges posed by
resource shortage and anthropometric climate change.
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Table of Contents vi
Table of Contents
The UK & California: A Comparative Analysis of Fuel Cell Industry Clusters .......................... ii
Declaration.................................................................................................................................................. ii
Abstract ...................................................................................................................................................... iv
Creative Commons Licence / Copyright ............................................................................................. v
Table of Contents .................................................................................................................................... vi
Preface......................................................................................................................................................... ix
Dedication .................................................................................................................................................. xi
Acknowledgements ................................................................................................................................. xii
List of Tables............................................................................................................................................ xiv
List of Figures & Illustrations ................................................................................................................ xv
List of Abbreviations and Nomenclature .......................................................................................... xvi
Acronym .............................................................................................................................................. xvi
Definition ............................................................................................................................................. xvi
Chapter One: Introduction ..................................................................................................................... 1
Structure of the Thesis ........................................................................................................................ 2
Research Objectives ............................................................................................................................. 3
Contribution To Theory ................................................................................................................ 3
Improved Understanding of the 'Clustering Phenomenon' in Emergent Industries ......... 4
Contributions To Practise .................................................................................................................. 5
Improved Understanding of the Fuel Cell Industry in California and UK .......................... 5
Lessons Drawn From Comparison of Practise in Different Contextual Settings ............. 5
Chapter Two: Critical Literature Review ............................................................................................ 6
Roots of the Clustering Phenomenon......................................................................................... 6
Birth of the Clustering Phenomenon........................................................................................... 8
Porter’s Diamond ........................................................................................................................... 10
Growth of the Clustering Phenomenon ................................................................................... 13
Criticism of the Clustering........................................................................................................... 14
Problems of Definition .................................................................................................................. 15
Networks vs. Clusters ....................................................................................................................... 19
The Fuel Cell Industry in the context of Industry Clusters ................................................. 20
British Columbia ............................................................................................................................. 20
North East UK ................................................................................................................................ 21
Table of Contents vii
Illinois ................................................................................................................................................ 21
Singapore .......................................................................................................................................... 21
Chapter Three: Research Design ........................................................................................................ 22
Ontological and Epistemological Standpoint ................................................................................ 22
Selection of Geographical Research Areas ................................................................................... 24
Methodological Approach ................................................................................................................. 25
Defining the Starting Point ................................................................................................................ 27
Validity & Repeatability ...................................................................................................................... 30
Research Ethics.................................................................................................................................... 30
Selection of Appropriate Data Collection Techniques .............................................................. 30
Interviews ......................................................................................................................................... 32
Quantitative Methods ........................................................................................................................ 34
Questionnaire ................................................................................................................................. 34
Chapter Four: Fuel Cells & Hydrogen in Global Context ............................................................. 39
Drivers for Change ............................................................................................................................. 39
Fuel Scarcity, Hubbert's Peak ...................................................................................................... 39
International Fuel Supply & Prices .............................................................................................. 41
Climate Change .............................................................................................................................. 44
Global Trends in the Automotive Environment .......................................................................... 46
Hydrogen & Fuel Cells as a Disruptive Technology ................................................................... 47
Chapter Five: The Fuel Cells & Hydrogen Industry: California .................................................... 50
Overview of the Californian Fuel Cell Cluster ............................................................................ 50
Contextual Factors ........................................................................................................................ 51
Geography ............................................................................................................................................ 51
Differences Between Northern & Southern California ........................................................ 52
Legislative Environment ..................................................................................................................... 52
Key Policy Milestones.................................................................................................................... 53
Multi-Level Legislation ................................................................................................................... 54
Analysis of the Californian Fuel Cell Cluster ............................................................................... 56
Structure of the Cluster & 'Diamond Analysis' ....................................................................... 56
Analysis of Customer Demand ................................................................................................... 57
Actors in the Californian Fuel Cell Cluster(s)......................................................................... 58
What Does The Cluster Want To Achieve? ............................................................................... 61
What Is The Focal Point Of The Cluster ................................................................................. 61
Conclusions .......................................................................................................................................... 62
Table of Contents viii
Strengths........................................................................................................................................... 62
Challenges ........................................................................................................................................ 62
Chapter Six: The Fuel Cells & Hydrogen Industry: The U.K. ....................................................... 64
Overview of the UK Fuel Cell Cluster(s) ..................................................................................... 64
Contextual Factors ........................................................................................................................ 65
Analysis of the UK Fuel Cell Cluster(s)......................................................................................... 68
Conclusions ..................................................................................................................................... 77
Chapter Seven: Conclusions ................................................................................................................. 80
How Do We Define A Cluster ....................................................................................................... 80
Do Our Existing Definitions of Clusters Fit Emerging Industries? ..................................... 82
Cluster / Market Incubator-Laboratory? .................................................................................. 83
Regional Differences in UK & California ....................................................................................... 83
Chapter Eight: Recommendations ....................................................................................................... 85
A Long Term Cross-Partite Legislative Vision For Hydrogen ................................................. 85
Increasing The Lifetime Of Legislation to the Lifetime of Infrastructure Developments
............................................................................................................................................................ 86
Vertical Policy Co-ordination ...................................................................................................... 86
Subsidies & Funding ............................................................................................................................ 87
Increasing Stakeholders In The Hydrogen & Fuel Cell Industry .............................................. 87
Closer Ties Between Stationary & Mobile Application of Hydrogen ................................ 87
Infrastructure Development and 'Energy Utilities' ................................................................. 88
Suggested Further Research ............................................................................................................. 92
Appendix I – Interview ........................................................................................................................... 93
Ethical Statement ................................................................................................................................ 93
Appendix II – Questionnaire ................................................................................................................ 94
Ethical Statement ................................................................................................................................ 94
Covering Letter ................................................................................................................................... 95
Questionnaire Template ................................................................................................................... 96
Questionnaire Responses ................................................................................................................. 98
References ................................................................................................................................................. 99
Viva........................................................................................................................................................... 104
Preface ix
Preface
"And what will they burn instead of coal?"
"Water," replied Harding.
"Water!" cried Pencroft, "water as fuel for steamers and engines! water to heat water!"
"Yes, but water decomposed into its primitive elements," replied Cyrus Harding, "and decomposed doubtless,
by electricity, which will then have become a powerful and manageable force, for all great discoveries, by
some inexplicable laws, appear to agree and become complete at the same time. Yes, my friends, I believe
that water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly or
together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable.
Some day the coalrooms of steamers and the tenders of locomotives will, instead of coal, be stored with
these two condensed gases, which will burn in the furnaces with enormous calorific power. There is,
therefore, nothing to fear. As long as the earth is inhabited it will supply the wants of its inhabitants, and
there will be no want of either light or heat as long as the productions of the vegetable, mineral or animal
kingdoms do not fail us. I believe, then, that when the deposits of coal are exhausted we shall heat and
warm ourselves with water. Water will be the coal of the future."
"I should like to see that," observed the sailor.
"You were born too soon, Pencroft," returned Neb, who only took part in the discussion by these words.
Jules Verne, The Mysterious Island, 1874
In 1839, Sir William Robert Grove, a Swansea-born physical scientist invented the Fuel Cell,
several decades later in ‘The Mysterious Island’, Jules Verne predicted a world powered by
hydrogen after the demise of fossil fuels. ‘There is nothing new under the sun’.
Since then hydrogen and fuel cell vehicles have been called ‘The Car of The Perpetual
Future’ (Wrigglesworth 2008); elusive as ever, the concept of transportation producing
water as its only emission seems ever ephemeral – the gossamer like promises of industry,
science and technology that fuel cell vehicles are only a decade away have become a feature
of the ‘Hydrogen Economy’ debate for many years.
Whilst strident advances have been made in the materials science and technology aspects
of developing hydrogen vehicles, they are still not a ubiquitous sight – working vehicles
being confined to a few ‘clusters’ of activity worldwide.
Preface x
The materials science challenges posed by fuel cell and hydrogen vehicles have been the
subject of massive investment, both from government and the private sector worldwide;
however, there is also the need to address the issues of supporting these technologies
through the transition from research and development projects, through to
commercialization.
At the moment, we stand at a crossroad. Technology demonstrators are in the public eye
worldwide. They show that the technology is viable – now the challenge is to produce this
technology, and the infrastructure to support this technology at a price point that will
satisfy consumers.
Whilst Fuel Cell vehicles will only contribute marginal amounts to the reduction in global
emissions from transport for the foreseeable future, it is vital that we understand the
mechanisms to support this technology to maturity, as in a post-carbon world Hydrogen
could play a vital part in our energy balance.
Achieving this goal is no small feat – any disruptive technology will involve the challenge of
co-ordinating multiple stakeholders, with varying interests and agendas.
At the moment, the Hydrogen economy sounds like an impossible dream, intangible and
still out of reach. However – we are reminded…
The only way to discover the limits of the possible is to go beyond them into the impossible.
Arthur C. Clarke (1917 - 2008)
"Technology and the Future" (Clarke's second law)
Dedication xi
Dedication
For Kay Larson, Family & H 2 The Cat, who helped me, and
many other interested young people, take my first steps
into the world of Hydrogen and Fuel Cells.
Acknowledgements xii
Acknowledgements
I am immensely grateful to a whole host of people, who have given me help and support,
data, commentary and advice on the preparation of this thesis.
Undoubtedly, there is likely to be a couple of omissions from this list, for which I sincerely
apologise, however, thanks to Karen Hall of the United Kingdom Hydrogen Association,
Thomas W. Read of the Scottish Hydrogen and Fuel Cell Association, Karen Hall of the
National Hydrogen Association (USA), Zoe Lagarde and Patrick Maio of Fuel Cell Europe,
William Rose at the Department for Transport also to John Addison of Clean Fleet Report,
Alison Anzalone of Fotofab, Dr. Mike Binder of Fuel Cell Consulting Services, Benjamin
Deal, Craig Duehring, Leslie Good body and Mike Kashuba of the California Air Resources
Board, Kathy Haq of the National Fuel Cell Research Center Dr. Jon Heliwell at the Centre
for Process Innovation, John Hoyes of Flexitallic, Uwe Kueter of H-Tec, Wayne Mabry of
Mitsubishi Caterpillar Forklift America Inc., Robert Rose of the Breakthrough Technologies
Institute, Mikael Sloth of the H2 Logic, Lindsey K. Anderson and Greg Schriener of Fuel
Cell Magazine, Vernon Sproat of Stark State College, John Turner at Valeswood
Environment Technology Development Ltd. Diedra Wylie of General Motors, Andreas
Züttel of EMPA Materials Science and Technology, Roy Kim of the California Fuel Cell
Partnership, Jim Klocke of Asymtek, Dr. Frank Koch of Energie Agentur NRW, James Lewis
of Bac2 Conductive Components, André Martin of New Energy World, Lorna Ross of the
Hydrogen Office, Felipe Orozco of Caran Precision Engineering, Henry W. Wedaa of the
California Hydrogen Business Council, Johny Lanckriet of Société des Transports
Intercommunaux de Bruxelles, Stephen Tucker of Dexmet Corporation, Donald C. Hughes
of Alicat Scientific, Richard R. Kriete of Fuel Cell Energy, Timothy Mc Guire of Mercedez
Benz.
Acknowledgements xiii
I’d also like to thank Jan Gerner, designer of the Yanone Kaffeesatz free font family, which
is used for the titles and headings in this thesis.
A big thank you to Ross Gazey, Elizabeth Johnson, Laura Stewart, Daniel Aklil and Siobhan
Petersen at the PURE Energy Centre.
Thanks also to my grandparents, Dawn and James Carter for their perpetual help and
moral support and to my mother Cheryl, for keeping things ticking over whilst I have been
glued to the PC!
Finally a massive thank you to Kay Larson and her family for starting my on the journey of
hydrogen and fuel cell exploration.
It’s sometimes easiest to forget the most obvious people to thank – this addendum is
testament to this fact! Sometimes the greatest contributions are most easily
inadvertently-overlooked when lost in ‘the detail’!
Thanks immensely to my supervisory team, Dr. Peter Wells, Dr. Paul Nieuwenhuis &
Prof. Ken Peattie, all of whom have provided fantastic guidance throughout this year,
inspiration and encouraging faith in my endeavours.
Thanks also to the staff and students of BRASS, in particularly Emma Dean, Poppy
Nichol, Cerys Ponting, Radoslaw Stech & Steven Vaughan for their encouragement
and friendship throughout this year.
A final [yes - really final this time!] thank you to Sharon Andrews for her assistance in
printing this thesis.
List of Tables xiv
List of Tables
Table 1- Industry Clusters : Claimed Costs & Benefits.................................................................. 13
Table 2 – Clusters: The Confusion of Definitions I ........................................................................ 16
Table 3 – Clusters: The Confusion of Definitions II ....................................................................... 17
Table 4- Industry Clusters : Typology & Characteristics ............................................................... 18
Table 5- Networks & Clusters : Comparisons & Contrasts ......................................................... 19
Table 6 Networks & Clusters : Characteristics Compared .......................................................... 20
List of Figures & Illustrations xv
List of Figures & Illustrations

Figure 1 – External Economies of Industrial Localisation : Marshall’s Triad ............................... 7
Figure 2 - Cluster Policy: At the juncture of Industrial, Regional & Technology Policy ........... 9
Figure 3 – Competitive Factors in Local Industrial Clustering : Porter’s Diamond ................ 10
Figure 4- Industry Clusters: Interdependent Firms & Institutions ............................................... 12
Figure 5 : Industry Clusters : Three Hierarchical Cluster Concepts .......................................... 12
Figure 6 – Industry Clusters : Concentration & Specialization .................................................... 15
Figure 7 – Cluster Analysis & Policy : Common Approach .......................................................... 27
Figure 8 – Cluster Analysis & Policy: Alternative Approaches ..................................................... 29
Figure 9 – Deconstructing Clusters: Varieties of cluster & the cluster measurement
problem...................................................................................................................................................... 31
Figure 10 – Oil : Proven Reserves to 2007 end ............................................................................... 41
Figure 11 – Gas: Proven Reserves to 2007 end ............................................................................... 41
Figure 12 – Technological Trajectory : Disruptive Technologies ................................................ 48
Figure 13 – Cluster Growth & Technology Adoption: Development and the Product
Lifecycle Model......................................................................................................................................... 49
Figure 14 – Hydrogen Refuelling Stations in the Californian Fuel Cell Cluster ....................... 50
Figure 15 – University vs. Cluster: Intensity, Concentration & Alignment ............................... 55
Figure 16 – Graph Showing North Sea Oil Production to 2005 end ......................................... 65
Figure 17 UK Passenger Car Production – Period 2002-2007..................................................... 66
List of Abbreviations and Nomenclature xvi
List of Abbreviations and Nomenclature

Acronym Definition
AFC Alkaline Fuel Cell
AFV Alternative Fuel Vehicle
AT-PZEV Advanced Technology Partially Zero Emissions Vehicle
BEV Battery Electric Vehicle
CARB California Air Resources Board
CFCP California Fuel Cell Partnership
CHP Combined Heat & Power
CNG Compressed Natural Gas
DMFC Direct Methanol Fuel Cell
FCEV Fuel Cell Electric Vehicle
H2FCEV Hydrogen Fuel Cell Electric Vehicle
H2ICE Hydrogen Internal Combustion Engine
ICE Internal Combustion Engine
Methanol FCEV Methanol Fuel Cell Electric Vehicle
NHA National Hydrogen Association
NOX Oxides of Nitrogen
NFCRC National Fuel Cell Research Centre
PEMFC Proton Exchange Membrane Fuel Cell
PFC Personal / Portable Fuel Cell
PZEV Partial Zero Emissions Vehicle
SULEV Super Ultra Low Emissions Vehicle
Chapter One: Introduction P a g e | 1
Chapter One: Introduction
"Fuel cell vehicles will probably overtake gasoline-powered cars in the next 20 to 30 years."
Takeo Fukui, managing director, Research and Development, Honda Motor Co.,
Bloomberg News, June 5, 1999.
“If this works this is the holy grail, this is the breakthrough. We've done enough work, we think
there are risks, and the payoff is not just for the automotive OEM's (original equipment
manufacturers), it's the whole economy.''
Rick Wagoner, GM president and CEO, January 14, 2002.
Whilst there has been a frenetic air of euphoria surrounding each surge forward in
hydrogen innovation, if the technology is to have a serious impact on our lives and the
environmental impact of our transport activities, there is a need to move beyond
‘demonstrator vehicles’ towards full-scale trials, and then onto widespread acceptance.
Alternative vehicles and fuels already have to challenge the dominant discourses in the
automotive industry of the “Internal Combustion Engine”, and “Pressed Steel Bodywork”,
(Nieuwenhuis, Vergragt et al. 2006), this is no mean task, however, the situation is further
complicated by those who wish to polarise the debate, as one of competing technologies –
whilst Paine’s(2003) documentary “Who Killed The Electric Car?” stimulated much debate
into alternative vehicles and fuels, it also had the effect of dividing public opinion, and pitting
different groups of alternative vehicle enthusiasts against each other. In many respects this
was unhelpful – as one of my interviewees, a prominent researcher in the field of fuel cell
vehicles revealed “any next-generation vehicle technology will be based upon an electric drive
train […] it is not a question of ‘Fuel Cell’ or ‘Electric’ – the answer is ‘both’, technologies
developed for electric vehicles in many cases are applicable to fuel cell vehicles; the drive train
technologies are similar, it is only the power-source that differs.”
At the moment, the hydrogen economy is still a nascent dream in the minds of several
thousand innovators, auto giants, small technology start-ups and a handful of early-stage
consumers, experts at the U.S. Department of Energy suspect that we will be looking to
timescales of (Blanco 2006) “2015 before anything resembling an infrastructure is even a
possibility, and 2025 is a more likely date for these areas to be running a lot of hydrogen cars.”
However, if the technical and economic challenges can be solved, the potential for
hydrogen to play a key-role in a clean energy transformation is immense:
“In the twenty-first century hydrogen might become and energy carrier of importance comparable
to electricity. This is a very important mid-to-long-range research area.”
President’s Committee of Advisors on Science and Technology 1997

in (Hoffman 2002)
This thesis explores the early-stage hydrogen and fuel cell industry in the United Kingdom
through the lens of Michael Porters work on ‘Clusters’. It is hoped that theories of the
spatial distribution of firms and economic geography can help us to understand the
emergence of these centres of new technology development.
Structure of the Thesis
The second half of this introduction elaborates the research aims and objectives of this
piece of work. This is followed by a Critical Review of the Clustering Literature and an
outline of the methodology used to collect the data.
An evaluation of the drivers for Hydrogen and Fuel Cell Development in the Global
Context is then conducted, followed by two studies of ‘Hydrogen & Fuel Cell Clusters’ in
the UK and California. Conclusions and Recommendations are then drawn from this study.
Research Objectives
The objectives of this research are both academic and practical. Being reflexive for a
moment, it is my hope as a researcher, that I have produced a study that in addition to
contributing to the academic debate surrounding innovation and high technology clusters
can also make a meaningful practical contribution to those engaged in the every-day
business of labouring to make the vision of a hydrogen economy a reality.
Contribution To Theory
This research seeks to build on the pool of literature concerning economic geography, and
regional competitive advantage. Arguably Porter (1990) brought many existing strands pre-
existing interest in this field together with his ‘clustering’ theory, however, there has been
development of the literature in this field, in part because of the enthusiastic nature with
which regions have embraced Porters’ doctrine as a cure-all for regional development.
There is already a body of work on regional clusters of high-technology SME’s (Sternberg,
Tam et al. 1999) (Wever and Stam 1999) (Longhi 1999) and investigation into the
underlying processes of knowledge-transfer (Capello 1999) which give these high-
technology clusters enhanced advantage over firms that show random geographical
distribution. This study builds on this literature, by looking at two specific high-tech,
innovative clusters in the Fuel Cell & Hydrogen Industry.
Improved Understanding of the 'Clustering Phenomenon' in Emergent Industries
(Porter and Stern 2001) observe that innovation, incubation and commercialisation of new
high-technologies occur disproportionately in clusters. For this reason, it is believed that
the clustering literature can make an important contribution to our understanding of the
Hydrogen and Fuel Cell Industry.
The critical literature evaluation reveals that whilst there is a strong focus in the clustering
literature on the ‘supply side’ of the cluster – the interaction between firms and other
stakeholders that supply the product; there is less examination of the local demand
conditions. This researcher has been involved in some early-stage work, looking at the
demand generated by elite consumers in Alternative Vehicle and Fuel Clusters (Wells and
Harper 2008), and this study builds on that.
Whilst it is methodologically convenient to highlight the fact that ‘the world is our
customer’, in a globalised neo-liberal marketplace, it is not a critical approach. Whilst some
would posture that the above coupled with the opportunities afforded by the information
age signals the ‘Death of Geography’, others (Morgan 2004) would argue that “physical
proximity may be essential for some forms of knowledge exchange; and [for] territorial innovation
systems”.
Contributions To Practise
Improved Understanding of the Fuel Cell Industry in California and UK
As an emergent cluster, lessons are constantly being learned from the embryonic fuel cell
industry as it grows in these two locales. It is this researcher’s aspiration that this thesis can
make a meaningful contribution to the understanding of the fuel cell industry in California
and the UK which can feed into practical contributions to the development of those
regions.
Lessons Drawn From Comparison of Practise in Different Contextual Settings
This study forms the initial stage, in what is hoped to be a much larger exposition of
Alternative Vehicle and Fuel Clusters in a global setting:
“The research and policy-making process involves scouring the world for examples of best practice
to measure, codify, emulate and transfer.” (Bristow and Wells 2005)
In the search for understanding, it is hoped that lessons can be gleaned from different
regional contexts, that can be applied in the “search for business and spatial policy models that
encourage a better 'fit' between businesses and their local and regional environment, where
environment is seen in its broadest sense.” (Wells and Bristow 2007)
Chapter Two: Critical Literature Review P a g e | 6
Chapter Two: Critical Literature Review

Throughout this thesis, we shall be using the work of Michael Porter and his work on
‘clusters’ of industrial activity to evaluate the Californian and UK Fuel Cell and Hydrogen
Industries. This work has it roots in (Porter 1990) “The Competitive Advantage of
Nations”, however, it builds on traditions in the sphere of economic geography.
Roots of the Clustering Phenomenon
The idea of spatial agglomeration, whilst currently ‘in vogue’ as a result of the interest
generated by Michael Porter’s theories is far from new, and has it’s roots in a long history
of literature examining the spatial organisation of economic activities, stretching all the way
back to ‘Alfred Marshall’s’ ‘Principles of Economics’ (1890), in which he included a chapter
‘the concentration of specialised industries in particular localities’.
Marshall represented the factors influencing the concentration of specialised industries as a
‘triad’ of external influences, all of which came to bear on the local industrial atmosphere.
Marshall’s triad is reproduced overleaf.
However, as Martin & Sunley (2003) note, Porter’s re-invention of Marshall’s ideas, are not
the first time that the spatial dimension of business has been investigated, with a body of
work over the past couple of decades (which Porter seemingly ignores), that holds much in
common with the clustering literature, or at least shares facets of commonality:
[Economic geographers have invented a whole series of] neologisms to capture and
represent the spatial form and nature of local business concentrations, including: ‘industrial
districts’, ‘new industrial spaces’, ‘territorial production complexes’, ‘neo-Marshallian
nodes’, ‘regional innovation milieux’, ‘network regions’, and ‘learning regions’ (see for
example, Scott, 1988; 1998; Amin and Thrift, 1992; Harrison, 1992; Harrison, Kelly and
Grant, 1996; Markusen, 1998; Asheim, 2000).
Porter, however, is not the only economist Martin and Sunley (2003) hold guilty of ignoring
this body of literature with it’s roots in geography and regional studies, they also cite Paul
Krugman as “[another] economist who ha[s] recently discovered geography”. However, they
distinguish Porter, as his work has had such a radical effect on policy-makers.
External Economies of Industrial Localisation

Marshall’s Triad
Local Pool of
Specialised Labour
•Accumulated skills
•Local market for
special workers
Local Industrial
Atmosphere
•Localised knowledge
accumulation
•Creation of new ideas
and business
methods. Local Inter-firm
Local Supporting Division of Labour
& Ancillary Trades •Specialisation in
•Supply of inputs different branches of
•Organisation of production.
trade •Use of specialised
machinery.
Redrawn from Martin & Sunley (2001) citing Marshall (1980) Book 4, Ch. 10
Figure 1 – External Economies of Industrial Localisation: Marshall’s Triad
In turn, Porter’s work has had a large impact on the field of economic geography, as Martin
and Sunley cite a number of authors, who have eschewed their own terminology and
vernacular in favour of Porter’s ‘clustering language’. They cite Pinch and Henry, 1999; May
et al, 2001; Scott, 2001; Keeble and Wilkinson, 2000; Keeble and Nachum, 2002.
Birth of the Clustering Phenomenon
Porter, however, believes that theories to date on comparative advantage are flawed and
inadequate. Porter states that for a nation, or region to attain ‘competitive advantage’ the
firms that comprise that nation or region must in turn be competitive. This attribute is a
corollary of innovation.
Arguably, it is this focus on competitiveness, and enhancing regional economic strength,
that has given Porter’s theories such a warm reception in so many quarters. However,
(Schoenberger 1998) describes regional competitiveness as a ‘hegemonic discourse’.
Martin and Sunley also highlight a temporal dimension to ‘fashionable theory’ referencing
George Santayana’s 1913 work Winds of Doctrine, 1913 “For an idea ever to be
fashionable is ominous, since it must afterwards be always old-fashioned”. So how do we
reconcile the objectivity of Porter’s work, with claims that it is merely ‘the fashion’, as
Trochim (2000) highlights, "objectivity is an inherently social phenomenon" in a post-
positivist world, Porter's development of the existing theory on industrial clusters will only
be strengthened by the critique of the academic community - those who adhere to the
'natural selection theory of knowledge' (Trochim 2000), harbour a view that ideas have
'survival value' - ideas can be 'varied', 'selected' or 'retained'; Porter's analysis of Industry
clusters can therefore be viewed as a 'variation' of earlier theory of economic geography.
However, the literature has developed beyond a simple focus on studies of ‘regions’ or
‘industries’ to provide an important commentary on the growth of high-tech regions. As
much as clustering is used as a tool for regional development, it is also used as a tool for
encouraging innovation. We can view clustering policy therefore as being at the juncture of
Industrial, Regional and Technology policy, as shown in the following diagram:
Cluster Policy:
At the juncture of Industrial, Regional & Technology Policy
Industrial
Policy
Regional Technology
Policy Policy
Paytas et.al. (2005)
Figure 2 - Cluster Policy: At the juncture of Industrial, Regional & Technology Policy
Porter’s Diamond
Competitive Factors in Local Industrial Clustering

Porter’s Diamond
Firm Strategy & Rivalry

• Vigorous competition
among locally-based
rivals
Factor Input Conditions Demand Conditions

Local Context
• Local Labour, capital and Local environment • Sophisticated and
natural resources demanding local
that encourages customers.
• Physical, administrative,
information and appropriate • Specialised local demand.
technological forms of investment and • Customer needs that
infrastructures sustained upgrading. anticipate those
• Specialised Inputs alternatives.
Related & Supporting

Industries
• Presence of capable
locally-based suppliers
and competitive related
industries
Redrawn from Martin & Sunley (2001) citing Porter (1998) Ch. 10
Figure 3 – Competitive Factors in Local Industrial Clustering: Porter’s Diamond
Porter’s Diamond comprises four interlinked attributes –
1. Factor Conditions; for example the region’s position in terms of the quality and
availability of labour, degree to which this labour is educated, infrastructure and
resources available. Porter argues that these factor conditions are not simply
‘inherited’ from the cluster, but that they can be designed and created.
2. Demand Conditions; the degree to which consumers are sophisticated in their
choices and patterns of consumption.
3. Related and Supporting Industries; within the locale, to what extent are the other
enterprises co-located within the region, supportive of the clustering context
under examination?
4. Firm Strategy, Structure & Rivalry; the nature of competition within the region, the
structural features of firms and companies.
Porter's cluster theory eschews the belief that a firms competitiveness is intrinsic, locating
the sources of competitive advantage as much on the organisations proximate environment
as from within.
Wolfe, Davis & Lucas (2004) draw attention to the two main drivers that contribute to the
clustering phenomenon "agglomeration economies" and "privileged access to knowledge flows".
LeVeen (1998) provides a very thorough introduction to the clustering literature.
When examining clusters, it is important to be mindful of the large group of stakeholders
that comprise the cluster; this makes it particularly difficult to assess who falls within the
boundary of the cluster, as Bergman and Feser (1999) note, shown in the diagram overleaf.
The ‘Clustering Approach’ has often been cited as giving rise to enhanced performance
within the groups of collaborating firms. By moving beyond spatial concentration, to co-
operation; and then introducing additional non-commercial stakeholders, (Karlsson,
Johansson et al. 2005) regional competitiveness can be enhanced dramatically. It is the rich
synergies that arise out of the agglomeration of not only productive firms, but also
supportive institutions that helps to build regional competitive advantage.
Industry Clusters:
Interdependent Firms & Institutions
Industry
Cluster
Trading Related Supporting

Sectors Sectors Institutions
Intermediate Similar
Suppliers Education
Technologies
Capital Good Shared Pool

Suppliers Training
Of Labour
Producer Similar
Services R&D
Strategies
Consultants Development
Contract
R&D Regulatory
Bergman & Feser (1998)
Figure 4- Industry Clusters: Interdependent Firms & Institutions
Industry Clusters
Three Hierarchical Cluster Concepts
Regional
Innovation
System
Regional Competitiveness & Innovation
Entrepreneurial
Co-Operation
Attitudes
Regional Between Firms
Innovation & Institutions
Network
Entrepreneurial
Activities
Co-Operation
Regional Between Firms
Cluster
Spatial
Induction Concentration
of Firms
Redrawn From: Karlsson, Johansson & Stough (2005)
Figure 5 : Industry Clusters : Three Hierarchical Cluster Concepts
Growth of the Clustering Phenomenon
When examining the reason for the growth of the ‘clustering phenomenon’ and its
enthusiastic adoption by policy-makers, regional government structures and bodies
responsible for innovation, we need look no further than the claimed advantages of regional
agglomeration. If the proponents of ‘clustering’ as a theory are to be believed, the approach
yields a rich set of advantages for the cluster as a whole. These advantages are well
summarised in the following table taken from (Martin and Sunley 2003) – however, it is also
essential to note that applying a cluster methodology is not without caveats.
Industry Clusters
Claimed Costs & Benefits
Claimed Advantages Potential Disadvantages

Ã Higher growth Ä Labour cost inflation
Ã Higher productivity Ä Inflation of land & housing costs
Ã Increased profitability Ä Widening of income disparities
Ã Increased competitiveness Ä Over-specialisation
Ã Higher new firm formation Ä Institutional lock-in
Ã High job growth Ä Foreign take-over
Martin & Sunley (2003)
Table 1- Industry Clusters : Claimed Costs & Benefits
What is open to debate, is how many of the claimed advantages and disadvantages of
applying a clustering approach arise specifically out of the application of ‘cluster
development’ as an approach to regional or innovation development, and how many of
those attributes would arise in the course of normal economic development.
Criticism of the Clustering
As we have already discussed, Porter's notions of clustering are not without their criticism.
Sharp and Dawes (1996) and Benneworth & Henry (2003) characterise the literature
surrounding clustering as being 'theoretically immature', however, still acknowledge that
there are benefits to it as a theory, but argue for a 'multi-perspective' approach when
dealing with clusters. They cite (Clark, 1998, Allen, 2002), who express a view that many of
the debates regarding clustering have consisted of 'stylised facts and thin abstractions'.
Benneworth and Henry go on to criticise the 'lack of conceptual clarity' inherent in the
literature about clustering, and suggest that there is a divergence of views regarding
clustering. Porter’s work has also been criticised for only applying to ‘developed’
economies, as his work was largely based on case-studies.
(Bristow 2005) challenges the notion that ‘everyone can be a winner’ with regions competing
against each other, and expresses concern that “a discourse with ostensibly thin and ill-defined
content has assumed such significance in policy circles, and to consider the potential policy
consequences”.
Martin & Sunley (2003) are also critical of Porter's cluster theory, they argue that…
"… the mere popularity of a construct is by no means a guarantee of its profundity.

Seductive though the cluster concept is, there is much about it that is problematic, and the
rush to employ 'cluster ideas' has run ahead of many fundamental conceptual, theoretical
and empirical questions.".
Whilst Martin and Sunley do not completely reject the notion of clustering, they argue for a
much more cautious use of its application, and a more thorough discourse on clustering’s
theoretical underpinnings and theorisation.
There is also a line of criticism of the resource-based school of economics, which runs that
demand is taken as a 'given' and assumed – this is a line pursued in Robertson and Yu
(2001) who posit that strategy decisions are not simply based on 'supply-side' economics,
and that the economics of demand are sorely ignored.
Problems of Definition
Whilst the term ‘cluster’ is used freely, there remains a problem as to what constitutes the
definition of a cluster; how do we differentiate a cluster from other types of agglomeration?
In this respect, the following diagram from Karlsson, Johansson and Stough (2005) is aid to
understanding:
Industry Clusters:
Concentration & Specialization
Relative Industrial Stock
∞
I IV
Specialised Industry
Rural
Relative Industrial Density
Region Cluster
0 ∞
1
Industrial Agglomeration
Periphery or City
II III
0
Redrawn From: Karlsson, Johansson & Stough (2005)
Figure 6 – Industry Clusters : Concentration & Specialization
However, definitions still vary widely throughout the literature as to the ‘exact’ definition
of a cluster – do we simply accept Porter’s original definition, or do we accept any of the
other multifarious definitions that have permeated through the literature?
Clusters:
The Confusion of Definitions I
Porter (1998 : 199)
• “ A cluster is a geographically proximate group of interconnected

companies and associated institutions in particular field, linked by
commonalities and complimentarities.
Crouch & Farrell (2001 : 163)
• The more general concept of ‘cluster’ suggests something looser: a

tendency for firms in similar types of business to locate close
together, though without having a particularly important presence in
an area.
Rosenfeld (1997 : 4)
• A cluster is very simply used to represent concentrations of firms

that are able to produce synergy because of their geographical
proximity and interdependence, even though their scale of
employment may not be pronounced or prominent.
• The definition [of a cluster] might be based on Porter’s four-part

model of national competitive advantage (the “diamond”) or a more
narrow view of industrial interdependence based on technological
linkages.
Feser (1998 : 26)
• Economic clusters are not just related and supporting industries and
institutions, but rather related and supporting institutions that are
more competitive by virtue of their relationships.
Swann & Preveser (1996 : 139)
• Clusters are here defined as groups of firms within one industry

based in one geographical area.
Based Largely on Martin & Sunley (2005 : 15)

With additions from:
Maskell & Kabir (2004)
Table 2 – Clusters: The Confusion of Definitions I
Clusters:
The Confusion of Definitions II
Swann & Preveser (1998 : 1)
• A cluster means a large group of firms in related industries in a

particular location.
Simmie & Sennett (1999 : 51)
• We define an innovative cluster as a large number of interconnected

industrial and/or service companies having a high degree of
collaboration, typically through a supply chain, and operating under
the same market conditions.
Roelandt & den Hertag (1999 : 9)
• Clusters can be characterised as networks of producers of strongly

inter-dependent firms (including specialised suppliers) linked each-
other in a value-adding production chain.
Van den Berg, Braun & van Winden (2001 : 187)
• The popular term cluster is used to refer to this local or regional

dimension of networks…Most definitions share the notion of
clusters as localised networks of specialised organisations, whose
production processes are closely linked, through the exchange of
goods, services and/or knowledge.
Enright (1996 : 1)
• A regional cluster is an industrial cluster in which industrial firms are

in close proximity to one another.
Maskell & Kebir (2004)
• Clusters may be defined as non-random geographical agglomerations

of firms with similar or closely complementary capabilities
Based Largely on Martin & Sunley (2005 : 15)

With additions from:
Maskell & Kabir (2004)
Table 3 – Clusters: The Confusion of Definitions II
One thing is clear from the literature –the term is polysemous, and certainly within the
context of ‘hydrogen and fuel cells’ terminology such as ‘station clusters’ is used by
planners when referring to groups of stations in an entirely different context to the
Porterian turn. Within the definition of ‘clusters’ (Morgan 2004) (Gordon and McCann
2000) have advanced a typology of Industry Clusters.
Industry Clusters
Typology & Characteristics
Critical Mass Supply Chain Social Network

Competitive and
Relations among firms Competitive Competitive
Collaborative
Market-based
None production; Nonmarket
Critical Linkages apparent buyer-supplier interaction
relationships
None
Nature of Linkages Apparent
Formal Formal & Informal
Goods, services
None People, ideas &
Resource Flows apparent
& factors of
knowledge
production
Level of Inderdependence Low Moderate High
Industry
Production association and
Organising Mechanism Market forces
process cluster
organisation
Maintenance Provision of
Facilitation /
Role of Supporting of overall specialised
convening of
Institutions business production
networking
relations inputs
Lower
Knowledge
Economies of transaction
spilloevers,
Competitive Advantage scale, costs, better
productivity and
specialisation access to
skilled workers
suppliers
Furniture and Catawaba (N.C.)
textiles in Hosiery
Detroit auto
Examples Hickory &
production
Technology Center
Piedmont and Louisville (KY)
Triad (N.C.) Business Networks
Morgan’s (2004 :47) interpretation of Gordon & McCann (2000)
Table 4- Industry Clusters : Typology & Characteristics
Networks vs. Clusters
Our understanding of co-operation between firms is further complicated, if we elucidate
the differences between clusters and Networks, Forsman and Solitander (2003) draw
distinction between Clusters and Networks by drawing comparisons and contrasts
between them as represented in the table below.
Networks & Clusters

Comparisons & Contrasts
Networks Clusters
Networks allow firms access to Clusters attract needed specialised
specialised services at lower costs services to a region
Networks have restricted membership Clusters have open membership
Networks are based on contractual Clusters are based on social values that
agreement foster trust and encourage reciprocity
Networks make it easier for firms to Clusters generate demand for other
make complex products firms with a variety of similar and
related capacities
Networks are based on cooperation Clusters take both cooperation and
competition
Networks have common business goals Clusters have collective visions
Forsman & Solitander (2003) citing Rosenfeld (2001)
Table 5- Networks & Clusters : Comparisons & Contrasts
Rosenfeld draws similar distinctions, however also differentiates between “Hard” and
“Soft” networks.
For the purposes of this thesis, we will primarily be exploring ‘Clusters’ however, some of
the associations under discussion could also be considered ‘soft’ networks.
Networks & Clusters

Characteristics Compared
“Hard” Networks “Soft” Networks Clusters
“Membership” Closed Open, membership None required
based
Relationships Collaborative Cooperative Cooperative &

Competitive
Basis for Agreements Contractual Majority Social norms &

determination reciprocity
Value Added Allows firm to focus Aggregates & External economies

on core organises demand
competencies for services
Major Outcomes Increased profits & Shared resources, Access to suppliers,

sales. lower costs, services, labour
benchmarking markets
Basis of External Economies Shared functions & Membership Location / proximity

resources
Shared Goals Business outcomes Collective vision None
Rosenfeld (2001 : 115)
Table 6 Networks & Clusters: Characteristics Compared
The Fuel Cell Industry in the context of Industry Clusters
There is some discussion of the ‘fuel cell industry’ in terms of ‘industry clusters’,
(Nyuyokuchuzaiinjimusho 2002) and there appears to be widespread cognisance of the
term ‘industry cluster’ within the emergent fuel cell industry, however, there is a paucity of
academic literature that examines the fuel cell industry in a detailed manner through the
lens of Porter’s clustering theory. The following selections show the awareness of the term
‘clustering’ in different global contexts, and serve as a backdrop for this study into the UK
and California:
British Columbia
“[British Columbia’s] Hydrogen fuel cell cluster, which is one of the largest concentrations of fuel
cell expertise in the world.”
North East UK
(Hopwood 2008)
“We launched Fuel Cells North East in September 2007, a business cluster dedicated to
creating an effective supply chain of organisations that have either direct or indirect links to fuel
cells.”
Illinois
(Tynan 2003)
“The Illinois Coalition and the state’s Department of Commerce & Economic Opportunity have
established Illinois 2H2 to create an industry cluster centred on the development of hydrogen as
an energy carrier.”
Singapore
The fuel cell Industry in Singapore has been examined by (Ho, Chan et al. 2004)
“Fuel cell research, development and demonstration activities have made an important head start
in Singapore, although much more needs to be accomplished before the fuel cell area can become
a bona fide industry cluster.”
Whilst there are a range of technology suppliers that will doubtless form a part of any
potential fuel cell cluster – as these are components that are fundamental to the design of a
fuel cell vehicle – e.g., Fuel Cell Stacks, Hydrogen Storage, Control Electronics, Electric
Drive Components e.t.c. there are also other components and processes, that whilst not
directly associated with fuel cell technology, and although not overtly associated with fuel
cell vehicles, are likely to form a part of future fuel cell vehicles as a result of design choices
that must be taken – e.g. for weight saving purposes. Such processes could include
aluminium manufacture, manufacture of advanced composites and plastics.
Johnston et.al. (2000 : 7) talk about 'agglomeration typically gives rise to 'external economies'
associated with the collective use of the 'infrastructure' of transportation, [...] and other services."
Chapter Three: Research Design P a g e | 22
Chapter Three: Research Design

Ontological and Epistemological Standpoint
I intend to adopt a social ontology to my research, as opposed to an asocial one. This study
assumes a post-positivist, weak constructivist worldview. In particular, the view is taken,
that the construction of clusters, and the adoption of innovative technology will be
influenced by the weltanschauung* [world view] of different actors, coming from different
perspectives, with each actor ‘constructing’ their reality of transportation systems
depending on their local environment and circumstances. This has the result that different
regional approaches will be developed to accommodate regional contexts and sensitivities.
(Denzin and Lincoln 1994) characterise Constructivism, as a substantive formal interpretive
paradigm in which interpretive case studies and ethnography feature heavily. Attributes
they cite as being central to the constructivist perspective are "trustworthiness, credibility,
transferability and confirmability". It is important for me to be mindful of these attributes
throughout the course of my study.†
I intend for my research to follow in the interpretive research tradition, as (Berger and
Luckmann 1967), assuming the perspective that reality is constructed (to an extent) and
shaped by society. This results in a rejection of metanarratives and deep structure;
nomothetic research being rejected in favour of individual stories and characterisations of
individual problems. ‡
*
An idea that Soft Systems Methodology Checkland, P. B. and R. Griffin (1970). "Management
information systems: a systems view." Journal of Systems Engineering 1(2): 29-42.
†
This paragraph was excerpted from my essay for module BST205.
‡
I reject technological determinism and a more 'purist' hard constructivist Guba & Lincoln
1994 in (Denzin and Lincoln 1994) viewpoint, however, I assume the stand-point that
technology shapes society and in turn society shapes technology. It can be seen how the
motor car has dramatically changed our patterns of living, the built environments in which
we live and our behaviours and interactions with others. §
It is hypothesised that there are lessons that can be learned from the adoption of clustering
principles in different localities, and whilst clustering, or any individualised approach to
stimulating industry cluster activity cannot be viewed as a 'policy panacea' (Martin & Sunley,
2003), we can view the emergence of alternative vehicle clusters, as local actors
constructing networks to support commercial activity in a manner that befits the norms,
culture and practises of the locale.
I am mindful of (von Glasersfeld 1989) who cites G. Vico’s statement ‘the human mind can
know only what the human mind has made.’ – in thinking about our energy futures, we live
within systems for producing, buying, selling and trading energy which have been
‘constructed’ by man – not only in the physical sense, but also in the systemic sense taking
into consideration the organisational and regulatory structures that we have built to
support the consumption of energy.
In qualitative research, reflexivity is an important consideration; and can be grouped into
two distinct types of reflexivity – personal and epistemological. Personal reflexivity asks us
as researchers to reflect on how our own person impacts the outcome of the research;
whilst epistemological reflexivity urges us to consider if the way that we have asked the
question, somehow influences the answer. **
§
**
As a researcher engaging with the process of qualitative research, it is important to be self-
aware of the opinions, experience, prejudices and my interpretations of meaning.
Nightingale & Cromby (1999) express reflexivity as asking us "to explore the ways in which a
researcher's involvement with a particular study influences, acts upon and informs such research."
I acknowledge that I come from a 'green' perspective looking at problems confronting an
industry, this informs my research, but also has the potential to colour it.
Whilst there is a spectrum of views on environmental issues and sustainability, I consider
myself to have 'moderate' green views; not deep green – which can sometimes be a barrier
to perceiving the economic and business dimensions of a problem; however, also not so
aligned with business that I cannot see the environmental and sustainability issues that are
involved. ††
In terms of epistemological reflexivity, my aim is not to constrain my research too tightly in
the early stages – carrying out some exploratory unstructured or ethnographic interviews
(described later in this assignment) to help me understand the meanings and stories of
those involved in the alternative vehicle industry. From these exploratory studies, I will
begin to form a clearer idea of the industry, leading to gradually more focussed studies,
which are more targeted and hope to educe and elicit greater levels of depth that then
unstructured research methods might provide. ‡‡
Selection of Geographical Research Areas
In selecting the areas of interest in which I would be conducting my research, it was
important to consider issues of practicality and the efficacy of data collection within the
timeframe available for researching and writing this thesis.
††
‡‡
The United Kingdom was selected as one of the locations in which to conduct research, as
it is an area that I am directly familiar with, bringing to the project some prior knowledge of
hydrogen and alternative vehicle activity in this area.
To provide a comparison and contrast to activities in the United Kingdom, California was
selected as an example of believed ‘best practice’. The U.S. Department of Energy look on
California as a ‘lighthouse’ (Blanco 2006) for hydrogen. Indeed, California exhibits a greater
number of vehicles on the ground and filling stations in operation than anywhere else in the
world at the time of this research study.
Methodological Approach
Being reflexive; as a researcher, I bring to the project a previously acquired body of
knowledge on systems thinking, and soft-systems methodology. Whilst a systems thinking
approach has not been used 'explicitly' in the process of producing this thesis, there are
undoubtedly ideas, tools and methods from systems thinking that have made their way into
this thesis; either through conscious decision or unconscious assumption into this thesis.
Wolfe, Davis & Lucas (2004) assert that "The cluster approach is a 'systems' approach to
understanding economic behaviour. To understand clusters as systems, we have to understand their
internal workings: their components, their structures, their processes and routines, and their
development pathways."
A search for " 'soft systems' AND 'industry cluster' " and a number of variations thereof,
seems to yield no results - indeed, whilst it is beyond the scope of this study to investigate
the application of soft-systems methodology to the investigation of industry clusters, it is
the view of the author that this is a fruitful field ripe for exploration, and a more formalised
codified interpretation of how SSM could be applied to problems of clustering would be a
useful contribution to the literature.
Whilst the area of 'Industry Clusters' is already well-defined within the literature (and the
gaps and shortcomings in the literature have already been well-documented and
highlighted) the literature evaluation did not yield any specific studies on 'Fuel Cell Industry
Clusters', however, there is a significant number of studies looking more broadly at the
'automotive industry' through the lens of clustering. This presents a problem as whilst
there is already an established literature on clustering, there remains a great many
unknowns in this study; in particular, automotive industry cluster studies will focus on the
'mature' automotive industry, whilst by comparison, the alliances and networks that are
forming in the fuel cell industry are embryonic by comparison.
This presents a challenging dichotomy, as aspects of the research are well defined, lending
themselves to an 'inductive' approach, whilst parts of the research explore hitherto
uncharted territory leading to a 'deductive' approach. In order to reconcile these two
approaches it was decided that rather than drawing simplistic distinctions between
'inductive' and 'deductive' research, the project would be viewed as existing as part of a
'learning cycle', an idea popularised by Kolb. Throughout this study, my 'abstract'
knowledge of industry clustering and economic geography, gained from the literature, and
my 'concrete' experience of the fuel cell industry, mutually grew and co-shaped one
another.
Methods suited to exploratory research were considered to be most appropriate to
explore this area - collecting information from participants about the fuel cell industry in
their area or region, looking for general trends in the data collected - and making
comparisons and contrasts between the fuel cell industry in different geographical areas,
before linking this information with the existing literature on industry clustering.
A challenge was posed by trying to define ‘where to start’ in this sense-making process.
Defining the Starting Point
A common approach to exploring clusters, is to start with a well-defined cluster of
industries and actors, and through a process of analysis, examine the policy implications of
that cluster and from that analysis design new policy instruments to support the growth of
the cluster in question.
Cluster Analysis & Policy

Common Approach
Cluster definition
Analysis
Findings Input to analysis
Output from analysis

Policy implications
Policy design
Implementation
Bergman & Feser (1999 : 245)
Figure 7 – Cluster Analysis & Policy : Common Approach
Where a cluster is ‘well-defined’ and already the subject of a number of studies, this can
yield a fruitful avenue for quantitative analysis of factors affecting firm performance, which
in turn can translate into policy design to aid the effectiveness of these clusters.
However in the context of this study, we do not have a ‘well-defined; cluster of industries
and organisations. Whilst there is a body of research examining other well-defined high
technology clusters, (Longhi 1999), (Maggioni 2002), (Sternberg, Tam et al. 1999), (Wever
and Stam 1999) there is relatively little investigation of the fuel cell industry through the
lens of Porter’s (1990) clustering theory. This leads to an alternative construction of the
investigation as suggested by (Bergman and Feser 1999).
First, we will start with a ‘Policy Problem’ which is framed in terms of the ‘Drivers for
Change’ which will be examined in the next chapter - these are the global factors that are
stimulating interest in hydrogen and fuel cells as an alternative vehicle fuel - namely,
resource scarcity, climate change and wider global trends in the automotive environment.
These global factors lead to the definition of ‘Policy Goals’; these policy goals will be greatly
shaped, not only by international factors, but also by regional and local factors.
From this policy goal, we can define the sort of cluster that we want to create, and
produce appropriate instruments to support this development. These may be based on
existing capability.
“One way that governments’ try to support new technology firms is through the
development and support of a cluster of related firms and supporting infrastructure in a
geographic region.”
(Hopwood 2008)
We can then analyse the impacts of this policy intervention, which leads us to findings
which then impact future policy implementation. This is represented in the diagram
overleaf; note the differences between this and the preceding diagram.
Cluster Analysis & Policy

Alternative Approaches
Framing
Policy Problem
Rationale
Existing / Potential
Cluster Definition
Spatial concentration
Comprehensiveness
Analysis
Generalizability
Findings Input to analysis
Output from analysis

Policy design
Industry Involvement
Implementation
Analysis
Bergman & Feser (1999 : 246)
Figure 8 – Cluster Analysis & Policy: Alternative Approaches
This is the approach that has been used in a paper by (Nyuyokuchuzaiinjimusho 2002),
which examines fuel cell technology as a way to reinvigorate Michigan State’s ailing
automotive industry. First a policy problem is identified – in this case decline of a region’s
industrial and economic base, and then the cluster is defined in such a way to address this
policy goal.
Validity & Repeatability

In considering the selection of appropriate methods, it was important to consider issues of
validity and repeatability. These are particularly troublesome concepts in exploratory
studies such as this, where it is hard to gauge whether research findings are specific to the
studies under examination, or whether more generic outcomes can be learned. (Brinberg
and McGrath 1985) were helpful in this respect 'validity is not a commodity that can be
purchased with techniques… Rather validity is like integrity, character, and quality, to be
assessed relative to purposes and circumstances' furthermore, Maxwell (2002) states
''Understanding is a more important concept for qualitative research than repeatability', in
particular due to the complex nature of industry clusters, and the many factors that affect
their development, I am not confident that perfect 'repeatability' is a realistic aim.
Research Ethics
Approval was sought from the Business School Research Ethics committee for the research
to be undertaken. The University’s ethical procedures were followed at all times. Data
collection was overt and participants were asked to consent to the use of their data in the
study. As the Fuel Cell and Hydrogen industry is a fast-moving commercial environment, it
was anticipated that some data could be collected in the course of the research that is
commercially sensitive. This was accounted for by assuming all participants responses were
anonymised, and the data stored in a form where their names could not be traced back to
statements. Where interview transcripts are used in this research to illustrate a specific
point, they are not attributed to any individual or organisation.
Selection of Appropriate Data Collection Techniques

In selecting appropriate research methods for exploring the clusters in question, I was
strongly influenced by Martin & Sunley’s 2003 work on ‘Deconstructing Clusters’; in
particular, the following diagram, is useful to consider when trying to conceptualise the
research problem.
At this stage of the research, and considering the length and scale of this study, it would be
impossible to explore all of these variables thoroughly and pay them the due attention they
deserve.
Deconstructing Clusters:
Varieties of cluster & the cluster measurement problem
Cluster Conceptual / Empirical Ease of Empirical

Concept Definitional Depth Methodology Measurement Support
Co-location Shallow Top-Down Easy to Indirect
Measure Evidence
Colocation &
technological
proximity
Input-output
table and
complimentaries
Co-location &
superior
performance
Marshallian
externalities
Network firms
Explicit
collaboration
Informal
knowledge
Hard to Direct
spillovers Deep Bottom-Up Measure Evidence
Martin & Sunley in Breschi & Malerba (2005) citing Swann (2002)
Figure 9 – Deconstructing Clusters: Varieties of cluster & the cluster measurement problem
It was decided to use a mixed-methods approach, in order to give the researcher practical
exposure to the use of a range of research methods, to gauge their success and applicability
to the problem of understanding industry clusters. As this was an exploratory piece of
research, suitable methods would need to be chosen commensurate with our
understanding of the problem. It was decided to use semi-structured interview techniques,
accompanied by participant observation at public fuel cell events, and to pilot a
questionnaire for quantitative data collection.
Qualitative Methods
Interviews
(Rubin and Rubin 2004) discuss the need to “translate your research puzzle into one or several
main questions that your interviewees can answer more easily based on their experiences.” and go
on to explain that there are two main methods which can be used to accomplish this aim.§§
Either, the researcher can bring to the research question sufficient background knowledge
to be sure that if certain information is obtained, the research question can be answered,
and the researcher will have some indication of if an interviewees responses can be
translated into an answer for the research question.†
The second approach discussed by is where the researcher is mindful of a ‘research puzzle’
but doesn’t have the background knowledge to clearly understand what questions will solve
the puzzle. The researcher has a broad knowledge of the components, and functions that
make up the research question; in this approach, the interviewer allows the interviewee to
explore each of these components and functions. Follow up questions based on elements
of the interviewees responses, seek to clarify details required to complete the research
puzzle. †
§§
The following paragraphs have been adapted from my essay “Interviews & Interviewing” submitted for Module SIT072.
Being reflexive for a moment, my understanding of Fuel Cell technology enables me to talk
on a level with participants, about aspects of their company or service that would not be
accessible to someone without this technical knowledge. This is a message that was re-
inforced in one of the sessions ‘Make sense to, or be meaningful to, the interviewees’
(Henwood 2008). In addition, focussing on my strengths, I already have pre-existing contact
with the fuel cell industry, I have previously been to a number of conferences, and worked
with organisations in the Fuel Cell Industry; this enables me to ‘relate to [my] interviewee’s
circumstance [and], experiences’ (Henwood 2008)***
In total over the course of the research, some 25 interviews were conducted, ranging in
length from twenty minutes to one hour. These were conducted with a variety of
stakeholders in both the Californian and UK clusters.
In some cases the interviews followed a semi-structured format with a pre-defined set of
questions, however, the structure was sufficiently flexible to accommodate an interviewees
own views and orientation. In some cases, what started as a semi-structured interview
evolved into an ethnographic interview.
The Ethnographic Interview has in roots in the 1979 book of the same name by Spradley. In
an ethnographic interview, the interviewer rejects any notions of controlling or steering
the interview, and allows the interviewee to ‘teach’ the interviewer. It is important to
understand the interviewee’s taxonomy of the situation – as a domain must be established,
then a series of categories within that domain defined. The interviewer can then be able to
derive such data from the interview as semantic networks, cognitive maps and other
*** The following paragraphs have been excerpted from my essay “Interviews & Interviewing”submitted for Module SIT072.
measures of association. The challenge for the ethnographic interviewer is to maintain a
conversational tone, without influencing the course of the interviewees output, whilst still
collecting valuable data. The ethnographic interview can help the interviewer understand
how the interviewee perceives their world and provides a rich seam of thematic data which
can be interpreted to identify patterns. When looking at Clustering in the groups of
organisations that are involved in Hydrogen and Fuel Cells, ethnographic interviews could
help me to gain understanding of the structure of the industry, where companies perceive
themselves to be, and how individuals within companies identify their companies within
clusters. †††
Quantitative Methods
Quantitative data was collected to support the qualitative data obtained from interviews.
As this is an exploratory study, there were limitations as to the extent for which
quantitative methods would be appropriate. As this MSc. thesis is written in the context of
a longer research project as part of a 3+1 Ph.D studentship, there are limitations as to the
amount of data that could be collected within the time-frame allocated for this piece of
work; however, it was felt that this initial questionnaire would form a ‘pilot’ of a
questionnaire to be used more comprehensively as part of the larger research study.
Questionnaire
(Perry 2004) presents a short quantitative study examining clusters in New Zealand, a
short questionnaire was constructed, based on Perry's Table 7.2 an circulated to all the
†††
This section was excerpted from my essay for module BST308.
organisations responsible for fuel cell networking and collaboration within the UK and
California.
(Baruch 1999) cites two main reasons which influence the return rate of questionnaires –
the respondents may not receive the questionnaire; or they may not wish to answer.
In order to maximise the chances of success, a database was compiled of the most up-to-
date addresses for the Fuel Cell Organisations in question. Where possible, a named
individual was sought to send the questionnaire to directly.
The questionnaire was accompanied by a covering letter, explaining the research goal,
outlining the ethical procedures which the research adheres to and providing contact
details should further information or reassurances need to be sought. Response to the
questionnaire was voluntary.
Following the initial mail-out, three responses were returned. This was followed by a
subsequent follow-up letter after which an additional response was returned. Two of the
Out of the fourteen questionnaires mailed out, four were received back, representing a
response rate of 28.5%. Due to the limited number of Fuel Cell organisations available to
survey, a high response rate was essential for the success of this study. It was felt that the
data provided was insufficient in order to form comprehensive, conclusive and
representative conclusions.
(Baruch 1999) cites (Henderson 1990) who argued that a response rate of 20- 30% is fairly
typical for a mail-out survey to a large sample of firms. The paper goes on to cite (Fenton-
O'Creevy 1998) who cited 28% of non-respondents quizzed in a random follow-up to a
survey cited lack of time as reason for non-response.
Of all four questionnaires that were returned, all data asked for was complete and clear, so
the questionnaires could be considered ‘usable’.
It was possible to contact two named individuals who did not respond to this questionnaire
– both said ‘lack of time’ was the reason for non-response.
(Baruch 1999) notes that “The use of the questionnaire as a research instrument for the
acquisition of information can rarely provide a full set of data”
The responses from the questionnaire data are summarised in Appendix II
Whilst the results from this questionnaire were not conclusive enough to provide any
supporting data for this thesis, the process of generating and sending a questionnaire was a
useful process which will inform later stages of this research. Out of all the responses
received, all were completed in such a manner that the data was useful – this suggests that
the fundamental design of the questionnaire is sound – however, response rates remain an
issue.
(Edwards, Roberts et al. 2002) explore ways of increasing questionnaire response, using
their guidelines as a basis for a commentary evaluating the performance of this initial study,
the feedback from this study is shown in brackets, within the analysis of (Edwards, Roberts
et. al 2002) which is italicised.
The odds of response were more than doubled when a monetary incentive was used (odds ratio
2.02; 95% confidence interval 1.79 to 2.27) and almost doubled when incentives were not
conditional on response (1.71; 1.29 to 2.26). – (Due to the limited resources of the research
project, this is not a viable method for this study.) Response was more likely when short
questionnaires were used (1.86; 1.55 to 2.24). (The questionnaire comprising two sides of A4
paper is not unduly onerous.) Personalised questionnaires and letters increased response (1.16;
1.06 to 1.28), (Where possible a named contact to send the questionnaire to was sought. as
did the use of coloured ink (1.39; 1.16 to 1.67). (The questionnaire was printed on brightly
coloured paper to ensure visibility) The odds of response were more than doubled when the
questionnaires were sent by recorded delivery (2.21; 1.51 to 3.25) and increased when stamped
return envelopes were used (1.26; 1.13 to 1.41) (These are both options that could be
explored for further questionnaires – addressed pre-printed envelopes were included,
however, due to the problematic nature of pre-paying for international postage, this would
not be an option for questionnaires sent abroad.) and questionnaires were sent by first class
post (1.12; 1.02 to 1.23). (Questionnaires were sent first class franked mail) Contacting
participants before sending questionnaires increased response (1.54; 1.24 to 1.92), (This is a
learning point for a follow-up study) as did follow up contact (1.44; 1.22 to 1.70) (follow-ups
were conducted where a named-contact was present) and providing non-respondents with a
second copy of the questionnaire (1.41; 1.02 to 1.94). (a second copy of the questionnaire was
sent to non-respondents) Questionnaires designed to be of more interest to participants were
more likely to be returned (2.44; 1.99 to 3.01), but questionnaires containing questions of a
sensitive nature were less likely to be returned (0.92; 0.87 to 0.98). (Some data asked for in the
questionnaire could be considered sensitive; however, the response from organisations that
did complete the questionnaire seems to indicate that some organisations are comfortable
with this information entering the public domain. Questionnaires originating from universities
were more likely to be returned than were questionnaires from other sources, such as commercial
organisations (1.31; 1.11 to 1.54). (The questionnaire originated from Cardiff University – the
franked postage mark on the envelope, and covering letter inside would indicate this,
however, perhaps this could be made more explicit in future questionnaires.
P a g e | 38
Throughout the research process overt methods of data collection were used, with
participants being aware that the data they were providing was to be used in the course of
scholarly research.
Chapter Four: Fuel Cells & Hydrogen in Global Context P a g e | 39
Chapter Four: Fuel Cells & Hydrogen in Global Context
Drivers for Change
There are significant reasons why we should move away from automobility based on
hydrocarbons of finite supply.
Furthermore, these reasons take differing priority depending on the scale at which the
problem is examined. Whilst the problems of climate change, environmental degradation
and resource scarcity are lucidly apparent on a global scale, these problems can manifest in
different ways on the macro scale, creating local precedents and context for cluster
development.
Air quality is an example of a regional problem, which creates local factor conditions for
legislation, which in turn drives the development of clean vehicle technologies in the State
of California.
Furthermore, a range of different responses have emerged in different regions to respond
to rising fuel prices. Whilst hydrogen and fuel cell technology is not accessible to
consumers at the moment, alternatives are observed keenly in the public imagination at a
time of rising energy prices.
Fuel Scarcity, Hubbert's Peak
(Duncan and Youngquist 1999) open their paper with the phrase “The peak of world oil
production, followed by an irreversible decline, will be a watershed in human history.” – Indeed in
1999, they predicted 2007 to be the date for the world oil production peak. Whilst it is
possible to develop hydrocarbon production streams from non-conventional sources of oil;
e.g. Oil Shale extraction, Duncan and Youngquist observe that the technologies required to
deliver oil production from these resources are far-term, augmenting the ‘tail’ of the bell
curve, without contributing significantly to the peak.
It must also be observed that oil is used for a much more diverse range of uses than simply
as a provider of energy. As the base feedstock for a huge range of petrochemical products,
oil is used to produce pharmaceuticals, paints and finishes, plastics; and so any potential
strategy evaluating oil as a transport fuel (or as a future feedstock for hydrogen
production) must take into account our societies dependence on oil for uses other than
transport. (Tverberg 2007).
Natural gas must also be mentioned, as it is another hydrocarbon fuel that has the
capability to operate in an internal combustion engine with relatively modest modifications.
Autogas is seen as an alternative and has gained popularity in some areas, where the capital
cost of a conversion, can be offset by lower running costs – although it must be observed,
that as with oil, natural gas is a finite resource, and subject to the same inevitable long-term
consumption constraints as oil.
The tables on the following page indicate the size of the remaining reserves of oil and
where they are located. It is clear that the prospect of importing large quantities of oil from
afar has the potential to create national and regional demand conditions to prompt
investigation into alternative vehicles and fuels.
International Fuel Supply & Prices
Oil: Proven Reserves to 2007 end

Figures in Thousand million barrels
755.3
143.7
111.2 117.5
69.3
40.8
Asia North South & Africa Europe Middle East

Pacific America Central &
America Eurasia
Figure 10 – Oil : Proven Reserves to 2007 end
Figure 11 – Gas: Proven Reserves to 2007 end
Regional Sensitivities to Imported Oil
Since the Carter administration, and oil shocks of the 1970’s, there has been a heightened
awareness of energy security and dependency in the United States. The UK, to some
degree, has been shielded from the worst of these effect by a steady supply of North Sea
oil, however, as supplies dwindle, there is increasing cogniscence of the international
dimension of oil supply and demand; concern about dependency on ‘unfriendly’ nations and
renewed impetus and drive to investigate the alternatives.
Within a fortnight of coming to office, President George W. Bush established the ‘National
Energy Policy Development Group’, NEPDG, to report on ‘energy security’ in the United
States. The conclusions of the report, in summary, were that (Bahgat 2003) as the
consumer of a quarter of world oil demand – representing the biggest international
consumer of oil, the U.S. was too dependent on a single energy source; which in turn was
supplied by a relatively small number of producers (largely concentrated in the Middle
East).
There is a serious economic cost with importing such vast quantities of oil – in 2001, the
value of petroleum imports to the U.S. was estimates at $94 billion – with predictions that
this figure would escalate to $286 billion by 2020 (EIA 2003).
Whilst attempts to reduce oil consumption in other sectors has shown a measure of
success, transportation applications present a particularly difficult challenge – the energy-
dense nature of hydrocarbon fuels make them well suited to an application where a small
amount of energy needs to be store in a small place.
In a article published in regarding the price of oil, (Myers Jaffe and Manning 2000) warn that
cheap oil prices are as dangerous as expensive oil, as they send out the wrong signal to
policy makers and create a path-dependency on cheap oil. This much is true – however, the
article goes on to reflect that oil prices have been ‘flirting with $25-$30 a barrel’, and warns
against “doom-mongering” and the‘ "sky-is-falling" school of oil forecasting’. Going on to insist
that prices of $100 a barrel are ‘wrong and backward’, the article provides an interesting
retrospective on oil prices in a post September 11th world -an event which marked a
pivotal turning point in America’s self-conception of security.
The $100 barrel of oil arrived in early 2008; and has marked a wholesale change in
consumer attitudes and confidence.
Projecting forward as to how these changes in global oil markets will affect the
development of alternative vehicles and fuels (Mitchell, Morita et al. 2001) concisely
summarise Chapter Four of their book ‘The New Economy of Oil’ by stating:
Transport in transition: Competition among alternative technologies for road transport is

likely to intensify as 2020 approaches. New choices of transport fuel will be involved in the
competition between vehicle manufacturers; new approaches to the offer of transport
services will be tried.
Geopolitics of Oil
(Hoffman 2002) cites a quote by the Oil Minister of Saudi Arabia during the Seventies:
“The big powers are seriously trying to find alternatives to oil by seeking to draw energy from the
sun or water. We hope to God they will not succeed quickly, because our position in that case will
be painful.”
Sheikh Ahmad Zaki Yamani, 1976.
There is also a new geopolitics of oil, with nations such as India and China, (Bustelo 2005)
competing with Western countries for oil and resources. This is causing escalating tension
with ‘the West’ as China seeks to gain control of oil production and transportation
infrastructure.
As (Hoffman 2002) postures “The question is not whether nations like India and China will
develop or whether they will consume more energy than they do now. They will and they should.
They have a right to seek a better life just as we did”.
Climate Change
The future direction of policy relating to climate change, will impact the business strategy of
both Automobile Companies, and the Energy Providers. Levy & Rothenburg (2002) assert
that strategy is “often developed in light of expectations and assumptions concerning a firm's
internal competencies and the external market and nonmarket environments.”. In this context,
climate change provides two drivers for change in these industries – as a direct driver for
change in the case of automobility.
Rio
The United Nations Conference on Environment and Development, also known as the Rio
Summit, Earth Summit marked a turning point in the way that governments address the
problems connected with the environment. Whilst there has been criticism of the fact that
the promises made at Rio have hitherto not been fully adhered to, the conference was at
least in part a global commitment to examine alternatives to fossil based fuels, scrutinise
energy use for transportation applications and look at alternatives amongst other issues
discussed.
The realisation that emissions from fossil fuels were responsible in part for anthropogenic
climate change, and that fossil fuels were responsible for health impact and environmental
degradation was noted by the 172 participating governments and 2400 representatives of
NGO’s in attendance.
Stern
The Stern report marked a landmark change of direction, in quantifying and attributing
direct costs to the effects of climate change, and recommending that one percent of annual
GDP be invested in attempting to avoid climate change, to avoid its potential effects, which
are quantified to be as great as twenty percent of GDP.
This is significant, as potentially fuel cell and hydrogen technologies are one of the potential
avenues for investment, to mitigate the carbon emissions from the transport sector.
The Stern report stated that the ‘welfare costs for reducing transport are high’, however,
(Woodcock, Banister et al. 2007) provide a critique for this standpoint arguing that many
journeys can be reduced stating that the assumptions implicit in models for calculating the
welfare benefit derived from transport can be challenged.
IPCC
The impact of the IPCC’s report cannot be underestimated – the magnitude of awareness
that the report left in its wake was in part acknowledged by the 2007 Nobel Peace Prize
which the scientists of the IPCC shared with former Vice President Al Gore.
Kyoto & Beyond
There is also a need to address carbon reduction beyond 2012- the first phase of the
Kyoto Protocol. There are tensions surrounding who should carry the burden of reducing
emissions – the developed countries, or fast growing developing nations – and what
support mechanisms and trading platforms should be put in place to address this change.
(Halvorssen 2007) Considering the rise in automobility in both developed and developing
nations, alternative vehicles and fuels will play an important part in achieving sustainable
low-carbon transportation in a post-carbon world.
Global Trends in the Automotive Environment
"I believe fuel cell vehicles will finally end the hundred-year reign of the internal combustion engine
as the dominant source of power for personal transportation. It's going to be a winning situation all
the way around - consumers will get an efficient power source, communities will get zero emissions,
and automakers will get another major business opportunity - a growth opportunity."
William C. Ford, Jr., Ford Chairman, International Auto Show, January 2000
In the United States, CAFE standards mandate improvements in vehicle fuel consumption
as a corporate average, the EU has also set progressive emissions targets that have driven
auto makers to refine the technology of the internal combustion engine to produce more
efficient, cleaner vehicles; however the real driver for clean innovation has been the
California Zero Emissions Mandate. California's role in driving automotive innovation
cannot be understated. As the most progressive U.S state in terms of environmental
regulation, California has for many years set the automotive environmental performance
agenda.
However, there is resistance from automakers, especially in the U.S. to adopt new
technologies which are seen as damaging profitability and increasing price; here there are
cultural differences between the U.S. and E.U. auto industries Levy & Rothenburg (2002)
observe:
“U.S. companies responded relatively early to the issue, aggressively challenged the
need for emission controls, and have invested in a range of long-term technological
approaches to emission reductions without committing to production vehicles.
European companies, by contrast, have been less engaged in public debates about
climate science, have accommodated regulatory demands for significant emission
reductions, and have invested in more incremental, short-term improvements to
conventional internal combustion engine technology.”
Kolk & Levy (2004) espy that “local context[s] influenc[e] initial corporate reactions, but that
‘convergent pressures’ predominate as the issue matures”, with the drivers for these
‘convergent pressures’ coming in the form of ‘global issue arenas’ such as Climate Change.
Hydrogen & Fuel Cells as a Disruptive Technology
(Kuran 1987) quotes the former Soviet head of state, complaining at a time in which he was
frustrated at his countries economic woes that enterprise managers shy away from
innovation 'as the devil shies away from incense’‡‡‡. The U.S. Auto-Industry is facing a time like
none-before, with the shares of it’s largest automakers all classed as ‘junk stocks’, whilst
rivals from the Far East continue to encroach on it’s domestic sales. It is clear whatever the
political ideology, those organisations that resist innovation produce lacklustre
performance, which stems from a desire to maintain the status quo.
When evaluating the prospects of new vehicle technologies, we must be aware of ‘path
dependency’ which arises out of successive choices being built on the bedrock of choices
made in the past (which may no longer be appropriate for the present context). (Kuran
1987) states “continuity is generated, at least partly, by society's attachment to its past choices”.
Clearly, the auto industry has a long-standing attachment to the technologies which once
made it great – the internal combustion engine, and pressed steel bodywork for many years
provided a winning formula, which enabled personal automobility for millions – however, in
the present context of rising materials prices, rising fuel prices and the stagnation of the
economic performance of many large automakers, this solution is open to challenge.
Fuel cell technology is undoubtedly a disruptive innovation; requiring radically new
infrastructure for refuelling, maintenance and production, fuel cell vehicle demand change
from both vehicle manufacturers and consumers.
(Karlsson, Johansson et al. 2005) state that “New ‘disruptive’ technologies [See Figure Below]
may trigger the emergence of new industrial clusters, and create new opportunities for the further
‡‡‡
Pravda, March 31, 1971 quoted in Kuran, T. (1987). "Preference Falsification, Policy Continuity
and Collective Conservatism." The Economic Journal 97(387): 642-665.
development of existing ones’. In the case of the fuel cell industry, we see new agglomerations
of companies centred around areas of new demand (the Californian example), however, we
also see examples of existing industrial clusters that develop around existing clusters of
industrial activity - who see hydrogen and fuel cells as an opportunity to revitalise their
competitive advantage by capitalising on the benefits associated with new technology.
Technological Trajectory
Disruptive Technologies
Redrawn From: Karlsson, Johansson & Slough (2005)
Figure 12 – Technological Trajectory: Disruptive Technologies
In the North East of England, Blyth, a traditional home of the chemical industry in the UK,
is seen as an existing cluster of industrial activity (Hopwood 2008), which aims to revitalise
its economy by looking to hydrogen, fuel cells and cleaner production. Vast quantities of
hydrogen are produced and consumed by different industrial agents in the course of
producing chemicals. Due to this existing infrastructure, and tacit knowledge for working
with hydrogen, there are pre-existing conditions for the development of hydrogen
technology. Looking outside of Californian and British examples, North Rhineland
Westphalia, is an example of a cluster in Germany, which is building on an existing
industrial base, with infrastructure in place for existing industrial clusters – including a
220km long hydrogen pipeline (Lück, Michelatsch et al. 2007).
Whether building from an existing strategic position, or trying to create a new cluster from
scratch, there remains the problem of scale. There are many potential mechanisms for
failure in transitioning from a low-volume, low-production technology, to mass-production
and widespread market acceptance.
‘Crossing the Chasm’ is a phrase which has entered popular business parlance, and is the
title of a book of the same name by Geoffrey Moore (Moore 2002)– this refers to making
the leap from small scale production in low-volume, to mass-production, for fuel cell
vehicles to impact on transport emissions, ‘crossing the chasm’ is a key challenge in order
to reach advanced commercialisation and market penetration.
Cluster Growth & Technology Adoption

Development and the Product Lifecycle Model
Consumer Typology
Early Early Late
Innovators Laggards (Rogers)
Adopters The Majority Majority
Technology Chasm
Enthusiasts Visionaries Pragmatists Conservatives Skeptics (Moore)
Percentage of Adoption Population
Climate Change
Resource Scarcity
Time
Innovation Institutionalisation Commercialisation
Redrawn From: Wells & Harper (2008)
Figure 13 – Cluster Growth & Technology Adoption: Development and the Product Lifecycle Model.
Chapter Five: The Fuel Cells & Hydrogen Industry: California P a g e | 50
Chapter Five: The Fuel Cells & Hydrogen Industry: California
Overview of the Californian Fuel Cell Cluster

“Our long-term goal is very simple: zero emissions in the air. To meet this goal, California has
teamed with some of the best automotive manufacturers and energy providers in the world to
develop and exciting new technology that is both environmentally safe and commercially viable.”
Gray Davis, Governor of California 1999 in (Hoffman 2002)
Hydrogen Refuelling Stations in the Californian Fuel Cell Cluster

Planned & Operating as of 2007
Station In Operation
Station Planned
Data Compiled From:

http://www.cafcp.org/media/fuelcell_media/small_map.jpg
http://www.aqmd.gov/hb/2002/02097a00.gif
http://www.h2carco.com/CA_h2stations.gif
Figure 14 – Hydrogen Refuelling Stations in the Californian Fuel Cell Cluster
Contextual Factors
The particularly progressive environmental legislation in the State of California,
differentiates the region from other U.S. states, and creates a unique context for clean
vehicle development.
Economic Performance
California has the largest GSP of any U.S. state and is responsible for 13% of the U.S.’s GSP.
Demand Conditions
This, coupled with other cultural factors has led to a culture of consumption in California
and an appetite for elite products explored in (Wells and Harper 2008)
Cultural Factors
California is the centre of America’s movie and media industry; combined with a high
density of elite and high-net worth individuals and people in the public eye has led to
California becoming a trend-setting nation. A U.S. saying echoed by a number of
interviewees “As California goes, so the world follows”
Culture of Automobility
More motor vehicles are registered in California than any other state. The state’s 34
million residents own 25 million cars.
Geography
The state of California can be divided into two clear regions – Northern California and
Southern California. Early views on stimulating hydrogen in the state centred around
creating a corridor, a ‘hydrogen highway’ between these two clusters of activity, however,
more recently, the focus has been on achieving a critical mass of infrastructure in urban
centres to allow more local journeys to be undertaken.
Differences Between Northern & Southern California

Southern California has suffered from particularly acute problems of environmental
degradation in the Greater Los Angeles area with severe air quality problems, the greater
Los Angeles area is the focus of a concerted effort to deploy hydrogen infrastructure.
Legislative Environment
California has a uniquely progressive legislative environment in as far as environmental
protection and regulation. A number of particular policy features have stimulated interest
in developing low and zero emission vehicles in the state.
(Davide Parrilli and Sacchetti 2008) discuss how the legislative environment can be a tool
for education within a cluster, with governance and learning being intertwined themes
within cluster development. They describe how a ‘dynamic development trajectory’ can be
driven by the co-shaping of the system of legislation and the process of learning within a
cluster. This is strongly evidenced by the Californian case study. The legislative
environment in California has surely driven the automakers to discover new technologies
and ways of implementation – many innovations; catalytic converters, three way catalysts
and engine management systems can almost directly be traced back to Californian
legislation. In a similar vein, the legislation in California has been driven by learning – the
situation surrounding the ZEV mandate and the subsequent malaise that ensued can be
read in many different ways, however, one interpretation could be that the ‘legislation’ was
shaped by automakers ‘learning process’; which would appear to give credence to (Davide
Parrilli and Sacchetti 2008).
Two different perspectives are outlined – a ‘governance perspective’ which makes the
development of the locale dependent on the actions of legislative and governance actors;
with the alternative perspective being a ‘competence based approach’ where the
development is driven by the competence and skill of industry actors and other
stakeholders.
Neither of these perspectives can fully explain the development of the Californian cluster.
(Davide Parrilli and Sacchetti 2008) present an alternative hypothesis that the
interdependence between these two attributes means that legislation drives industry actors
learning, whilst the product of industry actors learning drives the legislative regime.
Key Policy Milestones
California has a history of legislating for environmental improvement that stretches back as
far as 1945 when the Bureau of Smoke Control was established in L.A. In 1959, air quality
standards were set for key pollutants, and the Federal Motor Vehicle act of 1960 addressed
the problem of researching motor vehicle pollutants. In 1961, California was the first to
mandate for vehicle technology improvements to improve emissions, with crankcase
emission recirculation being the first emissions control technology, later followed by two-
way catalysts in 1975. In 1996, a number of large automakers committed to build Zero-
Emissions Vehicles, this mandate was upheld in 2000, and in 2001, revisions were made
requiring automakers to produce between 4,450 and 15,450 ZEVs in 2003. §§§
This was very publicly fought by the automakers (and also privately by establishing a
number of ‘public interest’ groups who they funded to oppose the ZEV mandate).
This culminated in a disagreement between federal and state government resulting in the
ZEV mandate being revoked.
§§§
A more complete history of Californian legislation relating to air-quality improvement can be
found at http://www.arb.ca.gov/html/brochure/history.htm
Multi-Level Legislation
One of the complexities of legislating for clean vehicle development is the conflict between
decision-making at state, federal and local level. This is further exacerbated, by differences
of direction from Federal and State government. This was highlighted by a number of
interviewees. Further conflicts arise between the state and local level, where ‘state policy’
mandates for development of hydrogen infrastructure, but local opposition is encountered
from, for example local fire Marshalls, where a particular application contravenes a local
code.
Regional Competitiveness
In many other spheres of technology, California bases its regional competitiveness around a
mantra of staying ‘ahead of the curve’ developing cutting edge innovations in many fields.
California is recognised as a progressive, trend-setting state, and the location of other high
technology clusters within the state, such as Silicon Valley all confirm this.
"Over the long term, improvements in environmental technology, particularly when it

comes to pollution prevention, are going to be critical to the ability of American companies
to compete. Not only do new technologies reduce compliance costs, they improve
competitiveness because they lead to greater efficiency."
U.S. Senator Joseph Lieberman
Educational Context
The university focus within Northern California can be described as looking at the policy
implications and the socio-technical nature of adopting radically disruptive technologies.
There is certainly an evident process of information transfer between universities and
other regional stakeholders. In Southern California, the University of California, Irvine, is
home to the National Fuel Cell Research Centre.
University vs. Cluster

Intensity, Concentration & Alignment
Cluster Concentration
High
University &
Cluster Is
Cluster Are
Dominant: Aligned:
Focus on Building
Research and Focus on efficiency
Research Intensity
Development and Knowledge-

Transfer
High
Low
Limited University Is
Foundation: Dominant:
Focus on “All or Focus on Cluster
Nothing” Development
Low
Paytas et.al. (2005)
Figure 15 – University vs. Cluster: Intensity, Concentration & Alignment
From the perspective of the suppliers the fuel cell technology being deployed within the
Californian fuel cell cluster, California is seen as a ‘market incubator’ for the technology
rather than a technology provider.
Motivations for Cluster Development
The culture of automobility in California, and design of the built environment which
encourages urban sprawl and the use of the motor-car, has caused severe air-pollution
problems in the Greater Los Angeles Area. This has acted as a catalyst for stringent
environmental regulation, which creates a unique context for cluster development.
Analysis of the Californian Fuel Cell Cluster
Structure of the Cluster & 'Diamond Analysis'
Context for Firm Strategy & Rivalry
Intense competition is a catalyst for innovation; whilst no profits are being made on present
fuel cell vehicles, attaining brand-visibility and the positive connotations that come with
being associated with progressive environmental values, is creating the context for firm
strategy and rivalry in California.
Related & Supporting Industries
In addition to the Fuel Cell vehicle industry, there is also a growing electric vehicle industry
in California; with Tesla and ‘ZAP’ vehicles setting up production sites in California, there is
potential for future collaboration as fuel cell vehicles are based on an electric drivetrain.
Whilst EV’s and FCV’s are viewed as competing technologies by some, they have the
potential to share many components, which could yield interesting opportunities for future
cluster development.
It is interesting how these electric vehicle companies have emerged in California as a
response to the ZEV mandate; California is not the traditional home of the auto-industry in
the U.S. however, the Tesla Roadster is being developed by entrepreneurs previously from
the portable electronics industry who are using their knowledge of power electronics and
power management to design superior electric vehicles.
Factor Conditions
Factor conditions which create the environment for a Fuel Cell Cluster in California, is
primarily the infrastructure that is being developed, and the mechanisms that are being put
in place to encourage collaboration to develop that infrastructure. California also is a
centre for innovative research in Silicon Valley, and possesses a large number of highly
skilled, motivated and entrepreneurial individuals.
Demand Conditions
The unique legislative environment that California possesses, with it’s track record of
powerful environmental regulation that in many cases exceeds the Federal standards
creates unique demand conditions within California. This in turn is driven by the
environmental degradation caused by the culture of Automobility in California.
Analysis of Customer Demand
Whilst there is customer interest in Fuel Cell Vehicles, the high price point makes them
prohibitive for general purchase. (Wells and Harper 2008) argue that the role of elite
consumers in the development of alternative vehicle clusters is significantly underplayed –
that the culture of consumption in California, prevalence of elites and high-net worth visible
individuals has contributed to the success of alternative vehicles in California. High-net
worth individuals have the ability to purchase early-stage fuel cell vehicles at a high price-
point, which in turn would stimulate the market; however, the lack of available
infrastructure is still a barrier to consumer demand:
“The problem with the mobile market right now is the infrastructure. You simply cannot
drive in the United States between New York and Los Angeles at any time of the day or
night and fill up with hydrogen. So until then the market is stagnant. …and the reason it
is stagnant is because no body can buy it or use it. Which brings me to my next point...?
This little saying I have stolen from the movie “The Right Stuff” is that if “there is no
Bucks, there is no Buck Rogers!” If you don’t have people buying it as consumers, there is
no money to put into it.... you gotta get it out of the lab and onto the street.”
However, it is not only the number of geographical locations that present a barrier to
infrastructure; it is also the convenience with which users can access this infrastructure. At
present, whilst there are filling stations located in a variety of locations, on university
campuses e.t.c., there is a need to develop protocols and customer friendly modes of
exchanging fuel – at present, in some instances, whether the technology is so new, one
interviewee highlighted the need to ‘exchange contracts’ to fill up, in order to comply with
safety legislation.
Actors in the Californian Fuel Cell Cluster(s)
The California Fuel Cell Cluster has a large diverse group of interested participants;
however, unlike a ‘traditional’ monocentric cluster with a large organisation at the centre
of the cluster (e.g. Ballard in the ‘Vancouver/British Columbia Cluster’, the Californian
cluster is more nebulous.
Associations, Industry Bodies & Groups
The Californian Hydrogen Business Council [http://www.californiahydrogen.org/] is a group
set up to represent the interests of commercial players in the emergent Californian
Hydrogen Industry as a not-for-profit organisation. Realising the importance of the
Californian cluster, the National Hydrogen Association has offices in Sausalito, CA. The
California Fuel Cell Partnership has acted as a co-ordinating body for many ventures in the
cluster and provides members with physical offices in West Sacramento.
Auto Manufacturers
California is not a traditional home of the U.S. auto industry, although some Electric
Vehicle manufacturers are setting up operations in California.
“In terms of technical development on the fuel cell side, the U.S. companies have their R&D efforts
in Detroit for Ford, um.. New York for General Motors, who also do a lot of work with their Opel
division in Germany on the development side. Chrysler is in a joint effort with Daimler-Benz and
they do vehicle platform development together, although they sub-contract out fuel cell work to
Ballard in Vancouver to do system work.”
“The Japanese companies all do their PURE R&D work in Japan, but they do a lot of systems
testing in the U.S., with the California Fuel Cell Partnership in West Sac[ramento] has… it varies
by company – for example, Nissan has their American fuel cell office there at the Fuel Cell
Partnership, so they do a lot of work in terms of getting miles on their cars, and ..kind of
…replacing parts and components. {Interview recording unclear Hyundai?} does their work out of
that office but they also have a demonstration project down in the Bay area [San Francisco Bay]
with AC Transit Bus so they have a partnership there. Honda doesn't use their Fuel Cell Partnership
Office, they work solely out of their Torrance office in Southern California. Their core vehicle
development happens in Japan, but they do do their evaluation here – this summer they are going
to be launching a large fleet {Honda FCX Clarity Vehicles} aahhhh in L.A…. it's a biiig deal. It's the
first time they've got several hundred cars in consumer’s hands, but the main vehicle development
happens in Japan.”
Component Manufacturers
Component manufacturers were in evidence at the fuel cell conference attended in
California; in a group interview, talking to two component manufacturers, asking about
their motivations for attending the conference and engaging with the Fuel Cell Industry, it
became clear that they saw the Fuel Cell Industry as a new opportunity that had the
potential to grow dramatically, and potentially replace existing markets:
“...we supply a lot of product to the battery industry where our material is used as a
current collector, and a substrate for holding the active material together. Our interest in
the Fuel Cell industry is to keep tabs on what is going on in the industry, and hopefully
have our product in a fuel cell should it replace our battery markets...”
Furthermore, it became clear that some suppliers were engaging with the market at this
early stage, as they saw it as an opportunity to gain an education in Fuel Cell technology to
give them an early lead over their competititors, and build relationships with companies
developing prototype components, in the hope that should their product reach mass-
production, the business relationships were already in place from prototype development.
“...[We are] waiting for the industry to get to the point where ....we need to do volume, so
what we are trying to do is let everyone know that ... well, if you need a prototype, we are
willing to work with you to develop a piece, a part, if there is a potential for ‘high volume’.
... and we are willing to define ‘high volume’ differently for the fuel cell industry, moreso,
than say we would for another industry, because we realise that there is definitely
potential in the fuel cell industry. And a lot of it is definately educational, I mean, I feel like
I am reaching out there, and when you reach the right person, well, you definately know
that there is a place they can go a resource that they can go to, if not now, then in the
future so, a lot of this is .. in a way, educational for everybody.
Asking as to whether their involvement in the cluster was driven by a ‘market pull’ from
members of the cluster, or a ‘push’ on their behalf, the respondents agreed:
“The fuel cell market, well, we are trying to push more than we are being pulled.”
Energy Companies
(Ogden, Steinbugler et al. 1999) discus the economics of building Hydrogen refuelling
infrastructure, and assessing a range of options, advances the figure that to support a
cluster of 18,400 hydrogen vehicles, the costs of producing infrastructure would be in the
region of $80-620 per vehicle in capital costs.
'Oil' Companies
The U.S. passed the peak of it’s oil production in 1970, (Duncan & Youngquist,1999)
The U.S. is dependent on Petroleum for 97% of it transportation energy needs. (Mintz,
Molburg et al. 2003). (Melendez 2005) of the U.S. National Renewable Energy Laboratory
estimates that in order to support 1% of road vehicles transitioning to hydrogen in 2020, an
investment of $1.1 Billion would be required.
Industrial Gas Suppliers
Companies such as ‘Air Products’, ‘Air Liquide’ and other suppliers of specialised gases for
industrial use, are currently helping to meet the small-scale hydrogen supply needs of the
industry at this time.
Electricity Companies
Pacific Gas and Electric is the utility for the area, and is increasingly becoming involved in
hydrogen projects. California derives around 20% of its electricity from hydro-electric
power, with gas-fired generation accounting for 50% of electricity production and nuclear
another fifth. Although not a significant provider of hydrogen at the moment, hydrogen
from electrolysis of water using renewable power has the potential to produce hydrogen
cleanly. The Mojave Desert has been the site of a number of concentrating solar plants,
which is a technology that has the potential to utilise solar power to produce electricity
economically from renewables – this is another avenue that could be explored for
hydrogen production.
What Does The Cluster Want To Achieve?
The main agenda in California is driven by improvement of air quality through the
legislation in the area which has already been discussed. Furthermore, development of
clean-vehicles and supporting infrastructure would cement California’s reputation as a
forward-looking provider of cutting edge technology.
What Is The Focal Point Of The Cluster
In California, the focal point of the clusters is undoubtedly the infrastructure developments
that are taking place, enabling relatively large-scale demonstrator projects to take place.
Divided into Northern and Southern California, Sacramento, the capital of California,
provides the legislative base and centre for Californian policy-making. With the California
Air Resources Board located here, and the California Fuel Cell Partnership, Sacramento is a
location of undoubtable influence.
In Southern California, Irvine is home to the National Fuel Cell Research Centre, and also
some hydrogen infrastructure. It’s proximity to the metropolitan area of Greater Los
Angeles, gives it a central role in co-ordinated fuel cell activity in Southern California.
Conclusions
Strengths
Through setting challenging policy goals combined with progressive regulation, California
has created an environment which has attracted inward investment and interest from
major automotive concerns. This is aided by the economic prosperity of the region and
culture of consumption. The networks and forums for discussion and collaboration that
have been created in California are conducive to vibrant cluster activity and have resulted
in the emergence of an innovative response to the challenge of producing Fuel Cell Vehicles
and their supporting infrastructure.
Challenges
Whilst California has undoubtedly created market conditions that make it ripe for the
adoption of new alternative vehicle technologies, it cannot be considered an ‘industry
cluster’ in a holistic sense. Whilst there are some new entrants to vehicle manufacture in
this area focusing on the development of electric vehicle – notably ‘Tesla’ and ‘Zap’, most
of the major vehicles and demonstrators are technology that has been developed outside
the state. (Stoup 2001) notes that:
“Although some states have higher concentrations of fuel cell related employment, to date
no state can claim having a complete fuel cell cluster, with all the networking activities and
rich synergies among research labs, suppliers, manufacturers and systems developers that
define an industry cluster. To some degree this suggests that the market has not yet
chosen a winner.”
There are examples of other states, Connecticut and Ohio to name a couple, where
although there is not the market appetite for AVF’s, necessary infrastructure to support
AVF adoption or particularly progressive legislative regime, there is a much more active
process of technology development, incubation and commercialisation. This is lacking from
the California cluster presently.
It is an interesting dichotomy, that the motoring industry, which in recent years has
struggled to make profits, is incredibly regulated, whilst the energy providers whose profits
continue to soar with the rising cost of oil is subject to far fewer mandates.
Interviews with legislators in California reveal that there are proposals in progress that
would redress this inequity.
Chapter Six: The Fuel Cells & Hydrogen Industry: The U.K. P a g e | 64
Chapter Six: The Fuel Cells & Hydrogen Industry: The U.K.
Overview of the UK Fuel Cell Cluster(s)
Within the UK, there are what can be described as a number of ‘Regional’ clusters of Fuel
Cell activity. Investigation reveals that these clusters can be divided quite neatly into areas
of activity delineated by administrative boundaries in the UK. Whilst there is collaboration
between different UK companies and trans-cluster collaboration, there are strong links
between regional partners in each cluster hoping to promote their region as a forward
thinking exponent of clean technology.
The Regional Development Agencies in the UK have played a significant role in funding and
establishing demonstrator projects, and this can partly account for the regional focus of
hydrogen activities.
The main centres of fuel cell activity in the UK are to be found in:
• London
• Scotland
• Wales
• North West
• Midlands
• Yorkshire & Humberside
There are no particular legislative instruments or policy that is driving the development of
clean vehicle technologies in the UK, unlike California. We have no similar policy
instrument to compare to the Zero Emission Vehicle mandate.
Instead, fuel cell vehicle development in many cases is being driven by an agenda of regional
development, trying to establish technology demonstration and incubation centres that can
act as a focal point for regional development (Hydrogen Office, Yorkshire EETC e.t.c)
Contextual Factors
For many years, the UK has enjoyed a steady supply of oil from the North Sea, which to
some degree has shielded the UK from the extreme volatility of the energy markets.
As North Sea oil production declines, there is a prescient awareness that the UK will have
to look for energy alternatives, or depend heavily on foreign interests to meet its transport
energy needs.
North Sea Oil Production

Figures in Millions of Barrels per day
7.0
6.0
5.0
Oil Production
4.0
3.0
2.0
1.0
0.0
Year
Source: Tverberg (2007) citing U.S. E.I.A.
Figure 16 – Graph Showing North Sea Oil Production to 2005 end
Differences Between UK Regions
London is naturally the focal point for the UK, due to the fact it is the UK’s main economic
engine, and has been the location of a number of high-profile demonstration projects,
although relatively little engineering activity takes place in the region. The North West,
Yorkshire and Humber and Midlands are all areas of great industrial prominence; however,
as the UK tries to retain its competitive advantage, these regions are looking to new
technologies and innovation as a way to strengthen their portfolio of regional skills and
capability. With measures of devolved power, the Welsh Assembly and Scottish Executive
now have greater power to stimulate investments in these regions, and are encourage
clean-technology development as a tool for building national competitiveness.
Relevant History
The UK’s traditional manufacturing base is in decline, symbolically, Britain, once the home
of a plethora of famous world-leading automotive Marques, now has indigenously owned
car manufacturer. However, there are a number of international companies that produce
vehicles in the UK and carry out R&D activity in the UK.
UK Passenger Car Production

Period 2002-2007
Jaguar – Coventry, Bromwich, Halewood

Honda – Swindon
Nissan – Sunderland
Peugeot – Coventry
BMW – Cowley
Rover – Longbridge, Swindon
Landrover – Solihull
Toyota – Burnaston, Deeside
Vauxhall – Ellesmere Port, Luton
Rolls-Royce- Crewe
Plants Highlighted in Red Closed
During The Period 2002‐2007
Figure 17 UK Passenger Car Production – Period 2002-2007
The UK’s competitive position is hard to maintain in the face of competition from other
countries with a more cost-effective work force and less regulation, however, the UK hasa
strong knowledge-base, and government policy is to position the UK as a ‘knowledge
economy’.
Public Expenditure
In the United Kingdom, the government has tasked Regional Development Agencies,
(Bristow 2005) with the task of increasing their respective regions regional
competitiveness.
Regional Economic Structure
Whole regional economies have been built around manufacturing capability and heavy
industry. These regional economies have to respond to change that has been taking place
over the past couple of decades, as these regions face intense competition from the Far
East and Eastern Europe, who offer the possibility of manufacturing the same product at a
cheaper price point. Many regional economies based on industry and manufacturing are
undergoing a period of transition.
Regional Competitiveness
Strengths
Despite the decline in UK manufacturing, the UK possesses a thriving higher-education
sector, and there are many opportunities emerging from commercialisation of technologies
being developed within the UK’s universities.
Weaknesses
The UK has a mixed history of commercialising innovation. Whilst the UK was at the
leading edge of science and technology during the ‘white heat of technology’ making some
notable breakthroughs – Concorde, the Advanced Passenger Train, the UK has not always
been successful in translating this first-mover advantage.
Demand Conditions
The legislation which has created an ‘artificial’ demand for ZEV’s has no parallel in the UK.
Some concessions for less polluting vehicles, such as reduced VED and exemption from the
congestion charge has created a market for small, cost-effective electric vehicles in London,
however, fuel cell vehicles still remain too costly for there to be any significant demand
from consumers.
Whilst there is a significant interest in alternatives to traditional vehicle technologies,
Analysis of the UK Fuel Cell Cluster(s)
The UK is a cluster or clusters, whilst a small nation, (California is larger than England) we
see distinct patterns of activity centred around regional projects. These projects carry their
own regional identities and this ‘branding’ of the region as a hydrogen centre of excellence
is key to the positioning of the individual clusters.
The following graph is redrawn from an original supplied by Jon Heliwell of CPI presented
at the SCRATCH conference, exploring the meaning behind the graph through an
interview:
“[The graph was based on] my interpretation, based on the project list for each region. There is
some more work taking place. We are looking at firming that diagram up and really painting a
bigger picture in the UK. We believe there is not a holistic view. We believe that skills for different
regions need to be identified, so the skills match the skills for the region to match resources and
skills available, because money and funding is limited. [e.g.] If there are six people doing identical
wind to hydrogen projects, it is not a sensible use of resource. Rather than list projects, [as current
analyses of the UK hydrogen industry do] we translated that into “what are the projects that we
are doing [and what do they] tell us. What SHOULD we be doing not what is easy to do, but
looking at the industry strategically and matching what each region is doing to the skills and
resources available. Otherwise, you just get duplication.”
Analysis of UK Cluster Activity

By Region & Capability
Scotland N.E. Wales Yorkshire Midlands London
Fuel
Production
Fuel
Storage
Fuel
Distribution
Fuel Cell Use
Companies
Support
Helliwell (2008)
Structure of the Cluster & 'Diamond Analysis'

Context for Firm Strategy & Rivalry
A set of distinct cluster responses has emerged within the UK in answer to local demand
conditions. The Regional Development Agencies were set up in response to developing and
re-generating UK regions. In the transition to a knowledge-based high-skill economy, many
regions have suffered, as manufacturing and production jobs migrate to centres of
production with cheaper labour. The UK car industry is one sector that is indicative of this
general trend.
Fuel Cell and Hydrogen technology is seen as a next-generation innovative technology that
can be capitalised upon by regions who develop an early, competitive lead in developing
these technologies and the infrastructure(s) that support them.
Related & Supporting Industries
Within the United Kingdom, there are many areas formerly associated with a prosperous
and vibrant industrial base, that are now undergoing transition, as the UK positions itself as
a ‘knowledge economy’. With the loss of many jobs in industry to countries where labour
and overhead costs are cheaper, new innovative bleeding edge technologies are seen as a
way of re-invigorating industry, and building new prosperity based on sustainable
engineering.
For existing UK companies that are seeking new markets for their products, the emerging
fuel cell industry is ripe with opportunities.
Factor Conditions
This was revealed in one of the interviews:
… [the organisation is comprised of] ex-industrialists who brought own their networks to [The
Organisation]. [The organisation supports] number of technology platforms, Advanced Processes,
Functional Materials, Low Carbon Energy, Printable Electronics, Biotech. and Nanotech. Just merged
the former [incarnation of The Organisation] and an organisation [concerned with Nanotechnology
& Optical Materials]...
The UK’s industrial base is seeking new markets and opportunities in order to remain
competitive, a highly skilled workforce and wealth of research and development capability
distinguishes the UK from many of its competitors, who whilst able to manufacture
products at lower cost, are still developing research and development capability.
In some circles “R & D” has earned the moniker “Rob and Duplicate”; in order to retain
it’s competitive advantage, UK clusters need to retain skills and tacit knowledge through
prototyping and market acceptance all the way through to commercialisation if the UK is to
reap the rewards of investing in cluster development at this early stage.
Demand Conditions
Analysis of Customer Demand
In the UK, whilst there is public interest in some segments of society in Fuel Cell Vehicles
and clean alternatives, there is not ‘customer demand’ at present – we have seen how
concessions, such as exemption from the congestion charge has prompted consumers to
look to ZEV’s such as the ‘G-Wiz’ vehicle (Lane and Potter 2007), however, outside of
London, there has been comparatively little uptake. Increasing fuel prices are fuelling
consumers to investigate cheaper transport options, however, without significant
government subsidy, fuel cell vehicles do not represent a more cost-effective alternative to
gasoline based vehicles.
Actors in the UK Fuel Cell Cluster(s)

Associations, Industry Bodies & Groups
There are a number of on the national level, the UK Hydrogen Association and Fuel Cells
UK provide National Oversight, whilst regional associations and networks have formed to
managed local interaction. The Wales Hydrogen Valley cluster has been encouraged by the
Welsh Assembly Government, and the Scottish Hydrogen and Fuel Cells Association
provides representation for Scottish Fuel Cell and Hydrogen organisations.
Yorkshire and Humber Hydrogen City, and the British Midlands Hydrogen Forum as well
as representation in the North East co-ordinate activity in these areas and are strongly
supported by their respective regional development agencies. In London, the London
Hydrogen Partnership has been set up by the Mayor of London, to co-ordinate the
development of hydrogen and fuel cells in the capital.
Auto Manufacturers
The UK no longer has any domestically owned large-scale auto-companies, however, there
are a thriving number of low volume and specialist vehicle manufacturers. Lotus in Norfolk
have been lending their expertise to the Californian car maker Tesla, with 10% of the Tesla
Roadster being based on Lotus components. The low-volume sports car industry thrives in
the UK – ultimately the low-scales of production and high-value of the final product may
make the British sports car industry well suited to production of Hydrogen vehicles.
Morgan, whose employees’ number 150, has a prototype hydrogen fuel cell vehicle that has
been developed in partnership with Qinetiq and Oxford and Cranfield Universities.
Component Manufacturers
The UK is home to a number of auto-parts manufacturers. These have faced competition
from overseas competititors who can produce products more cheaply, so increasingly
these companies are forced to look at different business models and markets for their
products in order to diversify their customer base.
Universities
The Higher Education sector in the UK thrives with a lot of interest in UK universities into
Fuel Cell Technology Glamorgan, Coventry, Cranfield, Birmingham, Oxford, Imperial
College, Loughborough, Aberdeen, all have publicly demonstrated Fuel Cell vehicles
What Does The Cluster Want To Achieve?

Regional Development
Outside of the capital, regional development has been a key-driver in encouraging the
emergent fuel cell industry. Fuel Cell and Hydrogen endeavours have been seen by regional
development agencies as crucial to helping position their respective regions as exponents of
clean technology.
Innovation
Within London, the focus on Fuel Cells is not so much to encourage economic growth, but
to encourage innovation, and more specifically the visibility of innovation to consumers. As
one interviewee revealed:
“Our public good activity was really about setting up demonstrator projects, and showing people
what fuel cells can do and the benefit of fuel cells. In doing that we have worked on projects with
other partners. And there is commercial benefit for those partners although it is a public good
project. It is also good from us because we can use these skills to develop different income
streams. This is where we differ from [Industry Associations] because we have a commercialisation
agenda, we want to be self-sustaining, ultimately. Unlike a trade association, we have 20million
assets on the ground. We have stuff we can do things with. In Fuel Cells we have £1million of kit.”
Improved Sustainability
The UK has a commitment with the European Union to reduce carbon emissions by 20%
by 2020 – however, it is unclear what combination of technologies will be used to achieve
this reduction, in the context of growing UK energy demand. Fuel Cells and Hydrogen
could potentially play a role post-2020 to achieve further emissions reductions, but this is
dependent on the technology reaching economic and technical maturity, and infrastructure
being in place to support the roll-out of fuel cell vehicles.
What Is The Focal Point Of The Cluster
Scotland
The Hydrogen Office is a 1200 square metre office space, with heating and power
produced by a Hydrogen Combined Heat and Power Fuel Cell. The Hydrogen is produced
on-site by electrolysis using electricity from on-site renewable generation. The project has
been designed with transport applications in mind: “In the future the project could generate
sufficient hydrogen to power a car or minibus, demonstrating the potential to generate the
energy to meet the transport needs arising from the building's activities”. (The Hydrogen
Office 2008)
The PURE Energy Centre is another demonstration site in the Shetland Islands, who have
used their experience with developing an island-based hydrogen production, storage and
use system as a springboard for consultancy applications internationally. Hydrogen
produced on site by wind generation (an ambient energy source that is abundant in
Shetland) is stored on-site, and used to power a first-generation hydrogen vehicle
prototype based on a G-Wiz electric vehicle. (PURE Energy Centre 2008)
North West
There are a large number of industrial users of hydrogen in the chemical and process
industry in the North West of England. Current projects have focused on hydrogen use in
the built environment.
Wales
The co-ordinated efforts of entities working on Hydrogen & Fuel Cell projects in Wales
are unusual, in that they are explicitly branded as a ‘cluster’ – the “Hydrogen Valley
Cluster”. (Welsh Assembly Government 2008). There are attempts to establish a
‘hydrogen corridor’ along the M4 motorway where there are a number of strategic sites
that use hydrogen in industrial processes, and where new energy technologies are being
integrated into business parks such as the Baglan energy park.
Midlands
Birmingham University has opened a hydrogen filling station, and Nottingham and
Loughborough have plans to follow suit. There is renewable hydrogen production at the
HARI project at Beacon Farm, and there are plans to develop a hydrogen vehicle that can
be powered from this installation. The Midlands group is proactive in its vision to develop a
number of station sites, to allow transport within the region. One interviewee revealed
their belief that being in the centre of the country, the Midlands is an area of ‘strategic
importance’ to developing hydrogen infrastructure in the UK, as it is the ‘centre’ of the
country, and has the potential to link-up hydrogen efforts in adjoining clusters to allow UK-
wide transport.
Yorkshire
The Energy and Environment Technology Centre is the main focal point of Yorkshire’s
hydrogen endeavours. The planned centre will generate hydrogen from renewables, and
there are plans for this hydrogen to be used by industrial and research endeavours within
the EETC, with the potential that this hydrogen could be used for transport applications.
London
The United Kingdom does not have the same large-scale demonstrator focus that
California has. In the Transport context, the London ‘CUTE’ buses project (Transport for
London) was the first medium scale demonstration of fuel cell vehicles in the United
Kingdom.
“Hydrogen technology is still being developed and we are paying a premium for these early models.
However, we firmly believe this is a worthwhile investment in developing clean, green technology,
and we expect costs to reduce over time."
Mike Weston, Operations Director for London Buses (Transport for London 2007)
BMW have established their own private filling station in the Greater London area for their
Hydrogen 7 vehicles.
Who Organises The Cluster
In the United Kingdom, the driving force behind cluster development appears to be groups
working closely with, or under the auspices of Regional Development Agencies, there are
National, and some regional fuel cell industry associations and networks, which to some
extent play a role in co-ordinating cluster activity.
Who Can Cause The Cluster To 'Cease To Exist'
Examining the case of the Welsh Hydrogen and Fuel Cell cluster; whilst Wales has had
great success with attracting foreign direct investment (FDI), there is a perception that
(Huggins 2001) “companies undertaking investment in plants and sites overseas
where widely regarded as `snatchers' as opposed to `stickers’ ”, Wales has benefitted from
overseas investment in high-technology ventures, only to find that the overseas partner
pulls out as soon as the funding for the project tails off. This mode of developing high-tech
industry is transient, and leaves locales and regions vulnerable to the changing whims of
external investors.
However, in the case of the developing fuel cell cluster, the knowledge that is being
developed and brought to fruition, is tacit and comes from within.
This is a pattern that is being repeated in many of the regions in the UK – local clusters of
knowledge, reliant on local firms
Conclusions
Challenges
If the UK wants to emulate the success of California, there remains challenges concerning
public acceptance of Hydrogen Refuelling Infrastructure.
Regulatory Infrastructure
Maintaining
Government’s have the potential to influence all of the determinants of Porter’s diamond
model, in order to maintain and encourage cluster growth. This can be accomplished
through subsidies to firms, favourable tax regimes, creating opportunities for education and
through the enforcement of standards. (Ruckman 1998)
It is clear that in both clusters, the commitment by both regions to creating a highly-skilled
workforce, and the raw knowledge located in both areas, has been a key in creating the
factor conditions to allow the cluster to evolve. However, there are challenges in
translating this ‘knowledge’ into grounded, practical and profitable products.
One interviewer was particularly lucid about the challenges facing the UK Hydrogen and
Fuel Cell clusters -
…[the] UK is good at generating ideas in R&D and we have some good companies, but
the problem is commercialising this and getting value from it. [the organisation] fills this
gap, turning ideas into cash. I’ve heard lots of names for what we do. We take and idea
and if it has legs we will set up a demonstrator…
Constraints
Skills
The UK is developing a skills base for hydrogen and fuel cell technologies; however, as was
observed on Newsnight by Dave Mc Grath, there are single factories in Japan with more
hydrogen engineers than the whole of the UK. Regions such as the North East, are trying
to use knowledge in handling hydrogen from the process and chemical industry, and apply it
in a new context; however, the majority of activity is driven by SME’s and the clusters all
lack large companies to act as a focal point and drive the agenda:
“…generally, you will find that clusters in our region are missing a large company to act as
a focal point, we don’t have a fuel cell manufacturer in the region, that is what you really
need, Porter has said this, you need a big organisation you can organise a cluster around,
if you haven’t got that you need an anchor project.”
Infrastructure
Attempts by large companies to establish hydrogen filling stations have met with
opposition, as with the example of BP’s Hornchurch station which faced local opposition
and was closed. However, the pattern of station development appears to follow individual
hydrogen vehicle development projects, and in common with some of the stations in
California, tend to be located on university campuses where hydrogen research is taking
place. There is also strong move to establish ‘Industrial Parks’ with elements of hydrogen
infrastructure and the potential for vehicle refuelling. However, there is no one
organisation or entity that is driving the agenda forward nationally in the same way that the
CFCP is doing in the U.S.- co-ordinating planning and arranging interaction between
different stakeholder groups. The UK approach is altogether more ‘piecemeal’.
“[I was appointed to write a report to appraise] is the fuel cell and hydrogen sector
advanced enough within the [region] to support a hydrogen cluster, and would cluster
methodology be appropriate. The main conclusion of that report was that whereas within
classic clusters where you have a large company or manufacturer which anchors the
cluster [in our region] there was no one anchor-company. Actually there are very few
examples around the world – e.g. Ballard in Canada which could be considered as a
[classic] cluster – the report said that [in our region] there isn’t anything like that – but it
said that cluster methodology could be implemented in another way by artificially creating
a network and letting the cluster evolve. The report said that rather than having an anchor
company such as Ballard, we have anchor projects – obviously you cant just ‘magic a
project out of thin air’ so we needed to think of a mechanism that could underpin the
cluster”
Opportunities
The UK model for fuel cell cluster development is different to the US – with technology
being developed indigenously by small groups, and collaborations between universities and
SME’s, this has resulted in a hydrogen landscape that is being developed to accommodate
regional contexts and problems. Whilst the large automakers and energy concerns are
taking an interest in the UK, there is not the same market focus that has been achieved in
California.
“There are lots of ‘formal network organisations’ but a lot of ‘informal networks associated with the
technology platforms. Hate to use the ‘S’ word, but it unlocks many ‘synergies’.”
As the regions of UK cluster activity grow, the Industry and co-ordinating organisations will
doubtless adapt to accommodate the changes in scale and size of the industry.
“…I think the cluster is a good model initially, but as it grows it turns into something
else…”
“…Clusters will facilitate different segments of the market, a cluster becomes a trade
association, [Trade Association] still act as [a hub for] a cluster, but when you get big
enough more formal arrangements with membership fees start to come under
consideration…”
There are rich opportunities for UK SME’s and businesses, however, to fully realise the
potential of the nascent fuel cell industry, there needs to be some larger market pull,
created either by legislation or direct intervention. Funding from RDA’s and the EU as well
as those income streams from academic research is currently providing the market
demand.
Chapter Seven: Conclusions P a g e | 80
Chapter Seven: Conclusions
How Do We Define A Cluster
The problem of cluster definition is highlighted by Martin and Sunley (2003) who state that
there is no single method for identifying the composition and geography of a cluster.
Whilst there are elements of the clusters under examination that are atypical from many of
the examples of clustering in the literature – i.e. they do not possess a single company as
the focus point, they both share many of the attributes essential to the “cluster concept”,
namely they consist of non-random agglomerations of firms and related industries working
together around projects with commonalities and complementarities.
The clustering activity in the United Kingdom appears to be driven by an agenda of
‘innovation as a tool for regional regeneration; this is a distinctly different remit from the
Californian cluster activity, which is driven by the “pull” created by the legislative agenda. In
the UK, the supply chains to produce fuel cell vehicles are beginning to tentatively form;
however, these supply chains are forming for a perceived market that does not yet exist.
Without the appropriate legislative instruments to encourage the development of
infrastructure, and to create demand for these products, the market may never materialise.
At the moment, the ‘consumers’ of the clustering activity in the UK are largely the Regional
Development Agencies, Government and EU all of whom supply the necessary funding
stream to make projects viable.
However, the Californian cluster is driven by demand, not supply, ‘demand’ in this case
being artificially created by legislative instruments in the absence of real consumer pull– the
culture of consumption and automobility, in many ways unique to California, has created a
cluster of social interactions between automakers, policy makers and energy providers. In
the typology of (Gordon and McCann 2000; Morgan 2004), we can define the Californian
Cluster as a Social Network – there is a rich vein of ‘non-market interaction’ taking place in
both a competitive and collaborative arena. Whilst the large auto-makers are competing to
further their own technology platform, there is also a commonality between their shared
mission which encourages collaboration – developing infrastructure, and ensuring that
there are sufficient ‘incentives’ for energy providers to develop the said infrastructure are
shared goals which will benefit all who participate in the cluster.
It is clear how the Californian cluster has given rise to a number of Industry Associations
who facilitate opportunities for interaction and networking both on a formal and informal
level in the area – further evidence of this being a ‘Social Network’ in the typology of
(Gordon and McCann 2000; Morgan 2004).
By contrast, whilst this social network is still evident in the UK, the UK’s centres of
Hydrogen and Fuel Cell activity take a different form. These clusters are shaped not by a
demand imperative – we have nothing in the UK to equal the ZEV legislation that has
prompted such frenetic activity in California – moreover, the clusters of fuel cell activity in
the UK are driven by two key factors - research and development; from universities which
is undergoing a process of commercialisation, and regional development.
As part of a long term vision to position the UK as a ‘knowledge economy’, there is a need
to find new roles and identities for industrial regions in transition. ‘Sustainable
Technologies’ have been welcomed by Regional Development Agencies as technologies
that can give their ageing industrial districts, fresh identities, and allow them to compete
with ‘cheaper and dirtier’ locations for manufacturing overseas. The green agenda pursued
by the RDA’s is creating a research and development base and limited numbers of
prototype products – this can be contrasted to the Californian model, whereby whilst
there is a wealth of ‘kit on the ground’ it is mainly imported from large automakers – in the
UK there is now a sufficient body of indigenous enterprises and organisations developing
these technologies.
However, in order to support the growth of these clusters in the United Kingdom, there
needs to be a market for these products. Whilst there have been a flurry of demonstrator
projects supported with funding as part of a ‘public good’ initiative, and whilst there has
been some public demonstration projects in the capital, there is a large disparity between
the rhetoric of politicians who dream of a ‘green future’ and the reality of the amount of
technology actually on the ground. Ruckman (1998) states how government’s can create
the factor conditions for favourable cluster development; it appears that investment in
projects concentrated in a small region [a cluster] could be a better investment of capital
to encourage Alternative Vehicles and Fuels and generate the most impact than random
geographical distribution of funds – however, inevitably this will raise the spectre of equity
and fairness in spending public funds.
Do Our Existing Definitions of Clusters Fit Emerging Industries?
Porter’s definition of ‘industry clusters’ tends to focus on regions where there is a central
anchor company or organisation driving the regions specialisation, whilst this can be
observed outside of the two case-studies featured, for example in fuel cell clusters such as
‘Vancouver’, we see no clear locus of attention in either Calfornia or the UK – instead,
infrastructure forms a ‘proxy focus point’ for the cluster. In this respect, as well as
providing a focus point for the cluster, Infrastructure also contributes to the ‘Factor
Conditions’ that support the viability of the cluster.
Cluster / Market Incubator-Laboratory?
It is arguable whether anywhere in the world possesses a complete set of components in
order to justify the status of ‘Fuel Cell Cluster’; whilst areas such as California possess the
sophisticate consumers and market demand conditions that have attracted a range of
stakeholders to look to the region as an early-market for fuel cell vehicles, the full supply-
chain for producing and supporting fuel cell vehicles is not in evidence – manufacturers
bringing technologies that have been developed and manufactured from outside of
California in to ‘test the market’.
By contrast, whilst other regions (with evidence of this in the UK study) are starting to
construct the elements of a fuel cell supply chain, and companies that can integrate these
technologies into working systems, the UK does not possess the sophisticated demand
conditions required to support an early-stage fuel cell market.
To understand why California’s performance has been spectacular, we need to look at the
differences between these two markets.
Regional Differences in UK & California
Whereas the Californian cluster is driven mainly by large multinational energy and
automotive giants, who see California as a market-incubator for their products, the
situations in the UK is different. Whilst there are still the large corporates’ looking at the
UK as a potential ‘future’ market, the majority of UK Fuel Cell activity is being conducted
by SME’s who see the technology as providing future opportunities. This was revealed by
one of the interviewees who disclosed: “SME’s form a key component of the overall cluster”.
There are differences that can be observed between the UK and California – California has
been highly successful in attracting inward attention from automakers the world over; by
contrast, in the UK, the clustering that is emerging in the regions, takes more of the form
of a ‘supply-chain’ cluster, as evidence for this in Wales the “Tri-brid” Bus concept has
been developed using components from suppliers in Wales and developed as the result of
collaboration between different firms. Furthermore examination of concept vehicles such
as Birmingham and Coventry University’s ‘MicroCab’ concept shows collaboration between
a range of regional partners as does Morgan’s ‘LifeCar’ concept, developed in collaboration
with UK defence contractors Qinetiq and a Oxford and Cranfield University’s. In all these
instances, there is a clear emphasis on partners from within a region collaborating to
develop a concept, rather than technology being ‘shipped in’ from large automakers.
Chapter Eight: Recommendations P a g e | 85
Chapter Eight: Recommendations

A Long Term Cross-Partite Legislative Vision For Hydrogen
Investing in the infrastructure required to support any large scale application of fuel cell
vehicles, requires a long-term vision and commitment. One of the frustrations in both of
the case studies, is that the support for such projects ebbs and flows with the cycle of
elections, and change in the balance of power between different parties.
This frustration has been evident in the London cluster, in the transition between Mayor’s
plans for 60 hydrogen cars in the capital were scrapped, this follows opposition to
London’s first hydrogen filling station in Hornchurch by a Conservative MP which led to the
project being closed. In the London cluster, mixed messages have been sent to
manufacturers and industry as was revealed in a number of interviews with UK companies.
However, outside of London, hydrogen projects supported by Regional Development
Agencies have been flourishing, support from RDA’s has been consistent and unwavering,
allowing clusters to grow and giving stakeholders confidence in the regions in which they
invest.
“Porter has argued that whilst it is firms that compete, it is governments that create the market
conditions to allow firms to exploit each economy’s inherent competitive advantage.” (Bristow
2005) This is a view that is supported by (Wolfe 2008) who argues that whilst there is a
commonplace notion in the literature that clusters cannot be initiated by “…fiat or direct
policy intervention…” government actors play a crucial role from the genesis of a cluster
throughout its development to maturity.
Looking at the case studies presented here, California and the UK; it is clear how these
clusters have emerged as the result of legislation and government action in two different
domains – we can consider the Californian cluster a product of environmental and
emissions legislation. As we have discussed throughout this thesis, California with it’s long
history of environmental and emissions regulation provides fertile ground for planting the
first clusters of fuel cell vehicles and infrastructure, and with the appropriate nurturing
provided by the progressive legislative environment and bipartisan support in the state, the
cluster is beginning to grow.
Increasing The Lifetime Of Legislation to the Lifetime of Infrastructure Developments
Hydrogen and Fuel Cell vehicles will require a significant, long-term investment in order to
support the industry from small beginnings to a fully fledged hydrogen economy. Once the
industry gains momentum, and suitable scales of production are reached, the industry will
become self-sustaining, however, in the early stages, the fragile clusters require legislation
that matches the long-term investment horizons of stakeholders in order to provide
consistent support for these embryonic clusters.
Vertical Policy Co-ordination
There is also a need to co-ordinate policy vertically, from central government all the way
down to the local level. Interviews revealed conflicts of power in California where Federal
legislations was at variance with state level legislation resulting in the well publicised demise
of the ZEV mandate. Furthermore, conflicts between different legislative stakeholder
groups – e.g. local fire chiefs contesting a filling station development, whilst state-level
policy is in favour – can only be resolved by clear vertical policy co-ordination. In the UK,
we see variance between regional government policies and central government, particularly
in evidence in London. For clusters to flourish, the clear and consistent level of support
needs to come from all levels of government.
Subsidies & Funding
Hydrogen and Fuel Cell vehicles need to reach a point where they are technically and
economically plausible, before widespread adoption can take place (Thomas, James et al.
1998). However, at the present stage of development, careful government support is
needed for the technologies to reach the point where this is even a possibility. Ruckman
(1998) notes that Porter states that the factor conditions for cluster development can be
created by government intervention. Subsidies and funding are ways that this can be
achieved.
Increasing Stakeholders In The Hydrogen & Fuel Cell Industry

Closer Ties Between Stationary & Mobile Application of Hydrogen
One of the comments to come out of the interviews that were conducted is that there is a
lack of synergy between development of hydrogen in stationary applications, and the use of
hydrogen in mobile applications.
Holistic View of Infrastructure
The prevailing view from many stakeholders is that development of hydrogen infrastructure
is the key priority in the early stages of the industries development, and that the additional
complexity of generating hydrogen from renewable sources is an unwanted encumbrance in
the early stages of the cluster development, as any emissions from ‘dirty’ hydrogen
production techniques are negligible at the low levels of hydrogen consumption.
Realising Synergies
At present, there are unrealised synergies between hydrogen projects for transportation
applications, and hydrogen for built-environment applications. Projects such as the Honda
Home Power Station, (Business Week 2007) attempt to integrate hydrogen refuelling
infrastructure into the Built Environment; other endeavours such as the PURE Energy
Centre and Hydrogen Office, as part of the Scottish cluster, make hydrogen generated as
part of a built-environment project available for transportation applications. Growth of
such projects that treat hydrogen not just as a transport fuel, but also as a clean energy
vector for other applications help in the march towards the ‘hydrogen economy’.
Infrastructure Development and 'Energy Utilities'
In order to support the deployment of hydrogen vehicles, refuelling infrastructure is
required. There is still uncertainty over the exact form that infrastructure will take, and
debate about the refuelling pressure to be used for different vehicle models. The sooner
that concord is reached – and refuelling options standardised, the quicker infrastructure
can be developed.
From interviews conducted with a member of the Welsh cluster of fuel cell activity; it is
clear that early standards are playing an important part in vehicle prototype development.
The choice was taken to develop a start-up project using a precision engineered ‘European
Standard’ hydrogen refuelling nozzle, at a cost of several thousand pounds – when a
cheaper proprietary alternative could have been engineered. Whilst there is still
uncertainty as to what standards will eventually be adopted, and how these might change in
the future, investment in a ‘common interface’ was seen as worthwhile to enable this
project to benefit from other anticipated developments in the Welsh Fuel Cell cluster.
The polarisation between different alternative vehicle technologies is unhelpful, as
previously discussed. At the present stage of technology readiness, this is not an ‘either-or’
debate; more efficient drive-trains will doubtless rely on sophisticated power electronics,
and new forms of advanced efficient motors, incorporating regenerative braking and energy
capture. There are commonalities to some aspects of technology development for Hybrid
vehicles, Electric Vehicles and Fuel Cell Vehicles, and the shared development costs and
shared learning curve should be taken into account before discounting any particular
solution.
Engaging 'Traditional Energy Suppliers' (Oil)
There is an unusual dichotomy, in the fact that it is the auto-giants whose profits are
steadily dwindling, are subject to intense regulation, whilst the energy-suppliers (oil) whose
profits continue to escalate with the rising cost of crude oil have remained relatively
unregulated.
The problem of what comes first, the vehicles, or the infrastructure is often compared with
the analogy of “what came first the chicken or the egg” (Thomas, James et al. 1998; Mintz,
Molburg et al. 2003). Vehicle manufacturers are wary to develop solutions for sale to a
public who are unwilling to purchase them because there is no supporting infrastructure,
whilst energy-suppliers are unwilling to develop refuelling infrastructure, for technologies
that are potentially immature, unlikely to make mass-market for a number of years, and
could potentially sap profits.
In this respect, the clustering approach used in California, with the informal social networks
and process of knowledge exchange encourages these diverse groups of stakeholders to
work together on such common problems.
‘Regional Hydrogen Task Forces’ whether these come under the auspices of organisations
such as the ‘California Fuel Cell Partnership’, or in the UK, where these organisations have
grown out of endeavours supported by regional development agencies are observed to
perform a key role in mediating between potential stakeholders in a cluster in order to
encourage collaboration and co-operation between such different groups with different
agendas.
Furthermore, by engaging stakeholders such as potential fleet operators of fuel cell
vehicles, it is possible to develop refuelling infrastructure to support localised pools of
vehicles, that make local trips of known routes and distances. From participant observation,
this researcher found a number of potential industrial users of hydrogen in logistics
operations, employing delivery vehicles and equipment for handling stock, who favoured
the fast-fill times of a fuel-cell hydrogen solution, over the lead-acid battery vehicles they
were replacing. However, whilst these localised applications will undoubtedly help to
realise the economies of scale that the industry needs to increase production of fuel cell
vehicles, it does not help to answer the question of expanding the applications for these
vehicles into the public domain illustrated in this quote from (Ogden, Steinbugler et al.
1999) “hydrogen faces the issue of reaching beyond centrally refueled fleet markets.”.
“Um… so yes, what primarily happens in California is that this is the frontier for markets,
we have the largest cluster of actual stations, the largest cluster of vehicle demonstrations
in terms of cars on the road. We have 150 fuel cell cars driving nowadays on the road, so
that is a combination of demonstration, driver reactions, fleet vehicles, state agenicies,
utility companies, other groups, non-consumers who are driving two of them, we have here
at our university”
Bringing in 'New Stakeholders' Into The Debate

'Electricity Utilities'
There is a perception, revealed through interviews, that ‘energy companies’ that have the
potential to supply hydrogen, are confined in many people’s imagination to the ‘traditional’
suppliers of energy to the automotive industry – those companies that produce
hydrocarbon fuels. This is further evidence for ‘path dependency’ in the automotive
industry.
The ‘end-game’ of pursuing the dream of a hydrogen economy is the prospect of a carbon-
neutral fuel, with the only emissions at source being water. However; there is a chasm
between the rhetoric and reality – at the moment, the bulk of hydrogen produced for
vehicle demonstrator projects comes from reformation of hydrocarbons. Whilst this is
economically attractive, production of hydrogen from the electrolysis of water is an
environmentally superior alternative.
'New Renewables'
From investigation, it appears that there is a greater enthusiasm in the United Kingdom
than in California for generating hydrogen from renewables; a number of projects, the
PURE Project, H.A.R.I. at Beacon Farm, The Hydrogen Office, Baglan Energy Park are
notable examples.
Hydrogen production from fossil fuels is currently much cheaper than production from
renewables (Thomas, James et al. 1998), however, there is an associated environmental
penalty with fossil fuels that is not internalised and reflected in their cost. As we undergo a
transition in becoming more aware of the impacts of our energy consumption, and find
ways to alleviate mitigate, minimise and if possible eliminate these impacts, then low-carbon
alternatives, such as hydrogen from renewables, may become more attractive and cost-
competitive as the technology reaches economic maturity.
There are a range of proposed scenarios involving various commitments to carbon
credit/tax/trading schemes, (Poterba 1991; Black 1996; Ekins 1996)
which would have the potential to change the economic costs of carbon-based fuels vs. low
carbon fuels such as hydrogen from renewables.
In the same way that the automotive industry has created “Path Dependencies” on certain
technologies, so there is the risk that if we follow a certain route because it is
‘economically attractive’ and invest resources in this area, we will create further ‘Path
Dependencies’ on inferior, compromise technologies.
Suggested Further Research
The critical review of the clustering literature yields a number of potentially fruitful avenues
of further exploration.
The success of the Californian cluster in deploying fuel cell demonstrator vehicles,
developing preliminary infrastructure to support those vehicles, and generating a ‘hubbub’
of enthusiasm around alternative vehicle technologies is something which other clusters
hoping to develop a ‘hydrogen economy’ in the coming years should be mindful of. Indeed,
there is room for further investigation of transferable lessons from California to the wider
world, and as the Californian cluster evolves, there will doubtless be further learning points
generated. All research is historical, and we have only managed to capture the fuel cell
clusters under examination in their present state.
Appendix I – Interview P a g e | 93
Appendix I – Interview
Ethical Statement
BRASS / CARDIFF BUSINESS SCHOOL
RESEARCH ETHICS
Interview Consent Form - Confidential data
I understand that my participation in this project will involve a short semi-structured

interview that will take between 30 minutes to an hour.
I understand that participation in this study is entirely voluntary and that I can withdraw
from the study at any time without giving a reason.
I understand that I am free to ask any questions at any time. If for any reason I experience
discomfort during participation in this project, I am free to withdraw or discuss my
concerns with Dr. Peter Wells, Dr. Paul Nieuwenhuis or Professor Ken Peattie of BRASS /
Cardiff Business School.
I understand that the information provided by me will be held confidentially, such that only
the Researcher can trace this information back to me individually. The information will be
retained for the duration of the research project, four years, and will then be stored in an
archive in such a form that the responses are anonymised. I understand that I can ask for
the information I provide to be deleted/destroyed at any time and, in accordance with the
Data Protection Act, I can have access to the information at any time.
I also understand that at the end of the study I will be provided with additional information
and feedback about the purpose of the study.
I, __________________________________(NAME) consent to participate in the study

conducted by Gavin D. J. Harper of Cardiff Business School, BRASS / Cardiff University,
under the supervision of Dr. Peter Wells, Dr. Paul Nieuwenhuis or Professor Ken Peattie
Signed:
Date:
Appendix II – Questionnaire P a g e | 94
Appendix II – Questionnaire
Ethical Statement
BRASS / CARDIFF BUSINESS SCHOOL
RESEARCH ETHICS
Questionnaire Consent Form - Confidential data
I understand that my participation in this project will involve a questionnaire.
I understand that participation in this study is entirely voluntary and that I can withdraw
from the study at any time without giving a reason.
I understand that I am free to ask any questions at any time. If for any reason I experience
discomfort during participation in this project, I am free to withdraw or discuss my
concerns with Dr. Peter Wells, Dr. Paul Nieuwenhuis or Professor Ken Peattie of BRASS /
Cardiff Business School.
I understand that the information provided by me will be held confidentially, such that only
the Researcher can trace this information back to me individually. However, the data I
supply will be linked to my organisation, and is correct to the best of my knowledge.
I confirm that my position is such that I am authorised to produce this information on

behalf of the organisation.
The information will be retained for the duration of the research project, four years, and
will then be stored in an archive in such a form that the responses are anonymised. I
understand that I can ask for the information I provide to be deleted/destroyed at any time
and, in accordance with the Data Protection Act, I can have access to the information at
any time.
I also understand that at the end of the study I will be provided with additional information
and feedback about the purpose of the study.
I, __________________________________(NAME) consent to participate in the study

conducted by Gavin D. J. Harper of Cardiff Business School, BRASS / Cardiff University,
under the supervision of Dr. Peter Wells, Dr. Paul Nieuwenhuis or Professor Ken Peattie
Signed:
Date:
Covering Letter
Gavin Harper,
The ESRC BRASS Centre,
Cardiff University,
55 Park Place,
Cardiff,
CF10 3AT,
harpergd@cf.ac.uk,
www.brass.cf.ac.uk,
<<Addressee Details>>
Dear Sir / Madam,
I am a Doctoral Researcher at Cardiff Business School investigating the notion of Industry

Clustering in the Fuel Cell Industry. As part of my study, I am comparing the activities of
different associations that represent members of the fuel cell industry, using a questionnaire
format.
As you are no doubt aware, there are only a relatively small number of hydrogen and fuel
cell associations, therefore it is absolutely crucial to my research that I get a good response
rate in order for my data collection to be meaningful.
I have enclosed a questionnaire, which I would be grateful if you could get a representative
of your organisation to fill in and return to me at the address above. It would be extremely
helpful to me if you could return this survey in the next fortnight, either by post, or by
sending your responses to the email address above.
If you would like to check out my credentials, details of my work are on the BRASS
webpage at the following address: http://www.brass.cf.ac.uk/people/PhD_Scholars--
Gavin_Harper.html.
My research is being conducted to Cardiff Business School's strict ethical guidelines. In the
case of the information submitted in this questionnaire, I believe there should be no
'confidential' information required which you would be uncomfortable to enter the public
domain. However, if you are concerned about any of the questions, or wish to seek further
clarification, please do not hesitate to contact me at the email above.
In return, I will be happy to send your organisation outputs from my research, and copies
of the final dissertation in digital format.
I await your response with eager anticipation,
Yours faithfully,
Gavin Harper
Questionnaire Template
Your Name……………………………………………………………………………………………..
Position Held Within Organisation……………………………………………………………………..
I understand that my responses will be used in the course of scholarly research, being conducted in
accordance with the strict ethical guidelines of Cardiff Business School. My name as a respondent
will be anonymised; however, the data will be linked to the name of my association in the finished
research.
Signed……………………………………………………………………………………………………
Name of organisation…………………………………………………………………………………….
In what year was your organisation established? [ ] [ ] [ ] [ ]
Reading the following titles, what title would you say best fits the description of your organisation?
[ ] Incorporated Society
[ ] Trust
[ ] Public Agency Led
[ ] Other Please State……………………………………………………………………...
How many members belong to your organisation? …………………………………………………….
Does your organisation charge a membership fee? Yes/No If Yes, How Much…………………….
Is membership restricted to a specific geographical catchment area? Yes/No

If so, what area…………………………………………………………………………………………...
Out of the list below, are any of the following types of organisation involved in activities with your
organisation?
[ ] Economic Development Agencies
[ ] Local Authorities
[ ] Education / Training Agencies
[ ] Other Non-Business Organisations
…………………………………………………………………………………………………………
Does your organisation offer any opportunities for your members to network? Yes/No
If so, please briefly describe them………………………………………………………………………
…………………………………………………………………………………………………………..
Does your organisation have a ‘mission statement’ or ‘mission statement’? Yes / No

(If the answer is yes, it would be very helpful to me if you could supply it)
Does your organisation produce any document stating the agreed goals and strategy of the
organisation over the next 2-5 years? Yes / No
Does your organisation promote a single ‘brand identity’ amongst its members? Yes / No
If yes, how………………………………………………………………………………………………
…………………………………………………………………………………………………………
…………………………………………………………………………………………………………
Do your members participate in shared marketing activity under the auspices of your organisation?
Yes/No If Yes, How…………………………………………………………………………..
Does your organisation assist individual businesses with business enterprise and development?
(For example by working with individual companies to address current issues faced in their business)
Yes / No
Does your organisation assist with industry planning? Yes / No

If Yes, How………………………………………………………………………………………………
…………………………………………………………………………………………………………...
…………………………………………………………………………………………………………
Are there any shared resources, in the way of physical infrastructure, equipment or facilities that
your members are entitled to use? Yes / No
Does your association assist members in bidding for contract / project work jointly as a consortia?
Yes / No
Dear Participant,
I would like to thank you immensely for the time you have taken to participate in this survey. Your
input is essential in helping me to understand the structure of the hydrogen industry. If you would
like to keep you updated with further information, and outputs of my research, please supply an
email address and I will be happy to provide you with updates regarding my research.
Email
Address……………………………………………………………………………………….@...............
...............
Many Thanks,
Incorporated Public
Established Other Geographic Stakeholder
Society or Agency Membership Membership Fees
Since Structure Membership Involvement
z=Yes
Trust Led
National Hydrogen Association 1989 z 109 $1100-$16500 2 z
US Fuel Cell Council
3. Exclusive of Tax
{=In Development
California Hydrogen Business Council
California Fuel Cell Partnership
California Stationary Fuel Cell Collaborative†
‡Industry Trade Association

European Hydrogen Association
Fuel Cell Europe 2001 z‡ 70 €1000-€8500 1 z
1. Depending on Membership Level

Fuel Cells UK
Questionnaire Responses
UK Hydrogen Association 2006 z 20 £250-£5000 3 z
2. Depending on Size & Type of Organisation

London Hydrogen Partnership
British Midlands Hydrogen Forum
Scottish Hydrogen & Fuel Cell Association 2004 z 55 (112)* £100-£1000 z
Scottish Fuel Cell Consortium

Hydrogen Valley (Wales, UK)
Vision or Agreed Joint Business Industry Consortia Joint

Networking Cluster Brand
{*=Respondent Stated 'No' - However supplementary information:

Mission Strategy Marketing Development Planning Bidding Resource
†Deals with stationary fuel cells not suitable for the automotive industry
National Hydrogen Association z z z z z z z z
US Fuel Cell Council

California Hydrogen Business Council
California Fuel Cell Partnership
California Stationary Fuel Cell Collaborative†
European Hydrogen Association
*Numbers outside brackets are organisational members, backets denote individual members
Fuel Cell Europe z z z z z z z
Fuel Cells UK
UK Hydrogen Association z z {* z z z z
London Hydrogen Partnership
"We produce one annually for the upcoming year, and a policy statement (provided) for long-term goals.
British Midlands Hydrogen Forum
Scottish Hydrogen & Fuel Cell Association z z { z z z z z
Scottish Fuel Cell Consortium

Hydrogen Valley (Wales, UK)
References P a g e | 99
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Viva P a g e | 104
Viva
HARPER, GAVIN DAVID JAMES,
b. Harold Wood, Essex, Eng., Dec. 11, 1986; s. Geoffrey Richard Harper and Cheryl Dawn
Harper nee Carter. Diploma, Vilnius U., Vilnius, Lithuania, Diploma in Design & Innovation,
Open U., Milton Keynes, 2006; BSc in Tech. with Honours, Open U., 2006; MSc in
Architecture, U. E.London, Stratford, Machynlleth Wales, 2007. Author: (books) 50
Awesome Auto Projects for the Evil Genius, Build Your Own Car PC, 50 Model Rocket
Projects for the Evil Genius, Solar Energy Projects for the Evil Genius, Fuel Cell Projects for
the Evil Genius, Domestic Solar Energy, Convert Your Diesel Vehicle To Run On Biofuels
Personal E-mail: gavindavidjamesharper@gmail.com

Gavin D. J. Harper - MSc. Thesis

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2008

The UK & California:

This thesis assumes the perspective that empirical and

Research Supported By:

The UK & California: A Comparative Analysis of Fuel

This thesis is submitted by Gavin D. J. Harper

•Thhis work has not

•Thhis dissertationn is being submmitted in parttial fulfilment of

•Thhis dissertationn is the resultt of my own inndependent work/investigat

•I hereby give coonsent for my dissertation, if accepted, to o be available for

The UK & California: A Comparative

agglomeration, which is a neglected aspect of the development of these evolving new

of clusters using Porter’s Diamond model.

imperative of developing clean transportation solutions to answer the challenges posed by

resource shortage and anthropometric climate change.

Creative Commons Licence / Copyright

Attribution-Non-Commercial-No Derivative Works 2.0 UK: England & Wales

You Are Free:

Under The Following Conditions:

For the full Creative Commons Licence Please Consult:

"Water," replied Harding.

"I should like to see that," observed the sailor.

Jules Verne, The Mysterious Island, 1874

Future’ (Wrigglesworth 2008); elusive as ever, the concept of transportation producing

of the ‘Hydrogen Economy’ debate for many years.

being confined to a few ‘clusters’ of activity worldwide.

through the transition from research and development projects, through to

mechanisms to support this technology to maturity, as in a post-carbon world Hydrogen

could play a vital part in our energy balance.

co-ordinating multiple stakeholders, with varying interests and agendas.

still out of reach. However – we are reminded…

Arthur C. Clarke (1917 - 2008)

"Technology and the Future" (Clarke's second law)

data, commentary and advice on the preparation of this thesis.

Environment Technology Development Ltd. Diedra Wylie of General Motors, Andreas

California Hydrogen Business Council, Johny Lanckriet of Société des Transports

Intercommunaux de Bruxelles, Stephen Tucker of Dexmet Corporation, Donald C. Hughes

is used for the titles and headings in this thesis.

Petersen at the PURE Energy Centre.

glued to the PC!

hydrogen and fuel cell exploration.

List of Figures & Illustrations

List of Abbreviations and Nomenclature

AFV Alternative Fuel Vehicle

AT-PZEV Advanced Technology Partially Zero Emissions Vehicle

BEV Battery Electric Vehicle

CARB California Air Resources Board

CFCP California Fuel Cell Partnership

CHP Combined Heat & Power

CNG Compressed Natural Gas

DMFC Direct Methanol Fuel Cell

FCEV Fuel Cell Electric Vehicle

H2FCEV Hydrogen Fuel Cell Electric Vehicle

H2ICE Hydrogen Internal Combustion Engine

ICE Internal Combustion Engine

Methanol FCEV Methanol Fuel Cell Electric Vehicle

NHA National Hydrogen Association

NOX Oxides of Nitrogen

NFCRC National Fuel Cell Research Centre

PEMFC Proton Exchange Membrane Fuel Cell

PFC Personal / Portable Fuel Cell

PZEV Partial Zero Emissions Vehicle

SULEV Super Ultra Low Emissions Vehicle

Chapter One: Introduction