Residential fuel cells will be launched to commercial markets as home appliances in the near future, in Japan. In the system, fuel processors to make hydrogen from natural gas are combined with fuel cell stacks. This type of system has limitations in efficiency and flexibility, making the transition process to a hydrogen energy-based society unclear. This paper proposes the separation of the fuel processors from the fuel cell stacks, along with the interconnection of residential dwellings and an energy interchange via a web of electricity, heat, and hydrogen networks. Residential penetration of fuel cells and associated effects over the next 30 years were analyzed under a number of scenarios: two scenarios with and without energy interchange, and seven scenarios examining future uncertainties in fuel prices, fuel cell costs, and product lifetimes, using a multi-objective model of cost reduction and CO2 emission mitigation. The results of the analyses show that the interconnection and the energy interchange provide a gradual penetration from the early stage, the influences of the changes in energy prices are large, and a subsidy for the initial costs of the fuel cell system accelerates the penetration of fuel cells. (c) 2,005 International Association for Hydrogen Energy. Published by Elsevier Ltd. All rights reserved.