Fuel cells are still in development as power generation technologies. They are potentially efficient and low-emissions power generation technologies with a wide range of applications. Their deployment world wide and in developing countries in particular could result in mitigation of future greenhouse gas emissions and possibly other environmental and social benefits. The economics of the systems and their competitiveness with other power generation systems will be heavily dependent on local costs and infrastructure. Modelling, based energy demand projection and on fuel cell demand curves derived from expert interviews, suggests that worldwide, projected future cost reductions in fuel cells could result in fuel cell penetration of up to 50% of the world distributed generation market by 2020. This penetration, coupled with the use of a mix of low-carbon fuels, such as natural gas, would result in significant avoided emissions Of CO2 over the same period. Also, a comparison of the levelised costs of generation for the Philippines and South Africa suggests that some fuel cell technologies could become competitive with centralised generation within the next decade. Assuming that fuel cell durability can be demonstrated, the potential for fuel cells to be introduced into distributed generation in certain developing countries appears high, from a technical, economic and environmental perspective. (C) 2003 International Association for Hydrogen Energy. Published by Elsevier Science Ltd. All rights reserved.