The arduous transition to low-carbon energy

A multi-level analysis of renewable electricity niches and resilient regimes

Prof. Frank W. GeelsManchester Business School + King Abdulaziz University

24 April 2014, Jeddah, KSAConference organised by Faculty of Economics and

Administration

Structure1. Introduction

2. Multi-level perspective

3. Empirical application and assessment3.1. Positive developments in (global) renewable electricity

niches3.2. Negative developments in (global) electricity regimes

4. Conclusions

- Worldwide CO2 emissions rising fast- Current trends are in the upper scenario range- Timely transition will be difficult/arduous

1. Introduction/background

Addressing climate change requires major change in various sectors/systems (IPCC, 2007) Focus here on electricity supply

Confusing picture with conflicting trends

Some positive trends:• Rise of renewable electricity• Decreasing CO2 emissions in Europe and US

(shale gas, recession, offshoring, renewables)

• Many city initiatives

But also negative trends• Increasing worldwide coal use• Steep emission rise

Rising CO2 emissions mainly non-OECD (IEA, 2013)

Aims of presentation

1. Introduce MLP as analytic sensemaking framework

2. Make empirical assessment of transition to renewable electricitya) Positive (niche) developmentsb) Negative (regime) developments (coal, gas, nuclear)

2. Multi-level perspective (MLP)

Widely used in debate on socio-technical transitions.Some characteristics:

• Looks at systems, but also at actors(different from system dynamic models)

• Looks at multiple dimensions (multi-disciplinary!)

• Socio-technical systems as meso-level unit of analysis(not entire society, not individual innovations)

Socio- technical systemfor transportation

Culture and sym bolicm eaning (e.g . Freedom , ind ividuality)

Regulations and po licies(e.g. traffi c ru les,parking fees,em ission standards, car tax)

Road in frastructureand traffi c system(e.g. lights, signs)

Vehicle (artefact)

M arkets and user practices(m obility patterns, driver preferences)

I ndustry structure (e.g. car m anufacturers,suppliers)

M aintenance and d istribution netw ork (e.g. repair shops, dealers)

Fuel infrastructure (o il com panies, petro l stations)

Socio-technical system (Geels, 2004)

Analyse social interactions in organizational field

S up p ly ch ain : * m a te r ia l su p lie r s * co m p o n e n t su p p lie r s * m a c h in e s u p p lie rs

U sers

P ro duc tion ,indu stry :* f irm s* e n g in ee r s , d e s ig n e r s

R esearch :* u n iv e rs itie s* te c h n ic a l in s ti tu te s* R & D la b o ra to r ie s

P o licy, pub lic au tho ritie s :* E u ro p e a n C o m m is s io n , W T O , G AT T* G o v e rn m e n t , M in is tr ie s , P a r lia m e n t* L o c a l a u th o ri tie s a n d e x e c u t iv e b ra n c h e s

S oc ieta l g ro ups:(e .g . G re e n p e a c e ,m e d ia , b ran c ho rg a n is a tio n s)

Static multi-level perspective (nested hierarchy)* Radical innovation in niches (variation/novelty)* Struggling against existing regimes* In context of broader ‘landscape trends’

N ich es(n ove lty )

S ystem /reg im e

L an dscap e

In crea sing s truc tu ra tion o f ac tiv ities in lo ca l p rac tices

1) Existing regime is locked-in + path dependent

Economic: a)vested interestsb)sunk investments (competence, infrastructure) c)scale advantages, low cost

Social: d)cognitive routines make ‘blind’ (beliefs) e)alignment between social groups (‘social capital’) f)user practices, values and life styles

Politics and power: g)Opposition to change from vested interestsh)Uneven playing field + policy networks

•Nurturing of ‘hopeful monstrosities’ (Mokyr)•Protection from mainstream market selection•Carried by entrepreneurs, outsiders, small social networks

Time

Product performance Invading product

Established product

T (1) T (2)

2) Niches for radical innovation

Invention Innovation Time lag (years)electronic digital computers

1939 1943 4

float glass 1902 1943 41fluorescent lighting 1901 1938 37helicopter 1904 1936 32jet engine 1928 1941 13magnetic tape-recording

1898 1937 39

radar 1925 1934 9radio 1900 1918 18synthetic detergents 1886 1928 42television 1923 1936 13transistor 1948 1950 2zipper 1891 1923 32

Time lag between invention and innovation (Clark, Freeman, Soete, 1981)

3. Situated in exogenous socio-technical landscape

•Exogeneous backdrop •Slow-changing secular trends (demographics, macro-economics, ideology, climate change)

T im eT im e

L a n d sc a p e d e v e lo p m e n ts p u t p re s su re o n e x is tin g re g im e , w h ic h o p e n s u p , c re a tin g w in d o w s o f o p p o rtu n ity fo r n o v e lt ie s

S o c io - te c h n ic a l re g im e is ‘d y n a m ic a lly s ta b le ’ .O n d iffe re n t d im e n s io n s th e re a re o n g o in g p ro c e ss e s

N e w c o n f ig u ra tio n b re a k s th ro u g h , ta k in ga d v a n ta g e o f ‘w in d o w s o f o p p o rtu n ity ’ . A d ju s tm e n ts o c c u r in so c io - te c h n ic a l re g im e .

E le m e n ts a re g ra d u a lly l in k e d to g e th e r,a n d s ta b ilis e in a d o m in a n t d e s ig n .In te rn a l m o m e n tu m in c re a se s .

S m a ll n e tw o rk s o f a c to rs s u p p o r t n o v e lt ie s o n th e b a s is o f e x p e c ta tio n s a n d fu tu re v is io n s .L e a rn in g p ro c e s se s ta k e p la c e o n m u ltip le d im e n s io n s .D iffe re n t e le m e n ts a re g ra d u a lly l in k e d to g e th e r in a se a m le ss w e b .

N e w s o c io - te c h n ic a lre g im e in f lu e n c e s la n d s c a p e

Tech n o log ica ln ich es

S oc io -tech n ica l’lan d scap e

S oc io -tech n ica lreg im e

Tec hno logy

M arke ts, u se r p re ferences

C u ltu reP o lic y

Scienc eIndustry

E x te rn a l in f lu e n c e s o n n ic h e s(v ia e x p e c ta tio n s a n d n e tw o rk s)

Transitions involve multi-dimensional struggles between niche-innovations and existing regimes (in context of wider

landscape change)

• Business/firms: New entrants vs. incumbents

• Economic: Competition between ‘grey’ and ‘green’ technologies in uneven playing field

• Political: Political struggles over adjustments in policies. Status quo defended by incumbent ‘elites’ (politicians, big firms).

• Cultural: Discursive struggles about importance and framing of

problems (e.g. ‘market failure’ vs. ‘planetary boundaries’)

3. Empirical application and assessment of low-carbon electricity transition

3.1. Positive developments in (global) renewable electricity niches

3.2. Negative developments in (global) electricity regimes

Overall MLP-interpretation: Niche-innovations are gaining momentum, but regimes are not (yet) falling apart Resilient regimes hinder transition

3.1. Positive developments in (global) renewable electricity niches

World-wide growth in installed capacity of renewable electricity options (in GW): wind, solar-PV and bio-power

2004 2005 2006 2007 2008 2009 2010 2011 20120

50

100

150

200

250

300

WindSolar-PVBio-power

- Most investments (cumulatively) in Europe (2004-2012), but 29% decrease in 2012

- China single largest country investor- US: boom and bust pattern

New investment in renewable energy (excluding large hydro) (Frankfurt School, 2013): billion $

Cumulative world-wide investment ($ billion) per type (data from Frankfurt School, 2013)- Most investments in wind and solar-PV- Global investment decreased in 2012

2004 2005 2006 2007 2008 2009 2010 2011 20120

50

100

150

200

250

300

MarineGeo-thermalSmall hydroBio-powerBiofuelsSolarWind

Investment in Europe led to substantial rise in renewable electricity

From 12.2% in 1990 to 19.6% in 2010:- Old renewables (hydro, biomass/wood) - New renewables (wind, solar, biogas)

- Europe is global leader in ‘new’ renewable electricity- Global renewable electricity = 20.5%- ‘old’ renewables dominate- Germany one of European leaders in new renewables, after Portugal (41.2%),

Denmark (32.9%) and Spain (29.5%)- China relatively small % new renewable (despite investments)

Relative composition (%) of electricity in 2011

Driving factors of positive niche-developments

1) Price/performance improvements in wind turbines and PV-modules (overproduction and dumping)

2) New political discourse (‘green growth’, ‘transitions to green economy), targets (e.g. Europe 2020 goals) and some favourable policies, e.g. generous feed-in tariffs

http://www.google.co.uk/url?sa=i&rct=j&q=energiewende+germany&source=images&cd=&cad=rja&docid=1VIe_Ox-Wm58vM&tbnid=OsBKMJPxYeOD4M:&ved=0CAUQjRw&url=http://www.pv-magazine.com/news/details/beitrag/web-portal-for-germanys-energiewende_100009483/&ei=YjHMUcyKCojC0QXso4CYBA&v6u=http://s-v6exp1-ds.metric.gstatic.com/gen_204?ip=130.88.40.176&ts=1372336429362549&auth=onhkexqqagbko57jgygvycvu62rf2zwu&rndm=0.7265682938550385&v6s=2&v6t=54210&bvm=bv.48340889,d.d2k&psig=AFQjCNG-FP_QpN1CmQEKbaZtZJn_K_1l9g&ust=1372422829398409

3. Rising public concerns after 2005: Hurricane Katrina (2005), All Gore’s movie (2005), Stern Review (2006) , IPCC report (2007), Nobel Prize (2007)

Public attention to climate change (UK)

normalized: max=1

0,0

0,2

0,4

0,6

0,8

1,0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011*

The Guardian

The Times

The Independent

Daily Express

4. Green stimulus packages (2009): $522 billion

Varying country commitments- Korea + China- UK low green stimulus

But also some weakening of drivers

1) Decline in public attention for climate change

2) Decline of global investment in 2012

3) Weakening of green policies

a) Reductions in feed-in tariffs (UK, Germany, Spain, Italy)

b) No successor of Kyoto; no international action until 2020

c) Green stimulus packages winding down (2011-2012)

d) EU ETS is not (yet) working: carbon price is low and variable

d) EU ETS carbon price: low, decreasing, fluctuating

3.2. Negative developments in (global) electricity regimes

1) Shale gas revolution• started in US and now spreading to China, UK, Poland• IEA (2011) predicts ‘golden age for natural gas’ Lower gas prices in US

Double edged sword• Positive: gas replacing coal in US (gradually)

US power generation (IEA, 2013)

Negative effectsa) Immediate risks (groundwater, tremors) controversial debates

b) May wipe out renewables investment wave

c) May lock us into new fossil fuel (for next 30 years)

d) cheap US coal flooding world-market, leading to 6% increase in coal use in Germany in 2012 and 32% increase in UK

2) Nuclear renaissance?• Nuclear seemed on its way out (expensive, risky)• Nuclear phase-out in Germany, Japan, Belgium

• But made comeback as low-carbon option + energy security

But ‘nuclear renaissance’ in UK, China, India, Russia• Also IPCC, IEA argue for doubling of nuclear capacity to

address climate change• This will be quite a challenge given recent stagnation

Worldwide installed nuclear capacity (in GW(e))

Actual decrease since 2006 (Schneider and Froggatt, 2013)

- New nuclear expansion would compete with renewables- Probably requires public subsidies (to cover risks)

3) Coal expansion

“For all the talk about natural gas and renewables, coal unquestionably won the energy race in the first decade of the 21st century” (IEA, 2011)

• South Africa (93%), Poland (90%), China (79%), Australia (70%), India (69%), US (45%), Germany (44%)

• Coal-fired generation grew 45% between 2000 and 2010 • Projected to keep growing in line with 6-degree climate

change

• Coal regime actors defend themselves with ‘clean coal’ discourse and promise of CCS

• Slow CCS progress (90 Mt CO2 is less than 1% of power sector CO2 emissions)

• Leads to ‘capture ready’ promise (contested)

CCS capacity by region and project status, 2012 (IEA: 2013: 25)

4) Regime conclusion: Fossil fuel regimes are resilient + adaptive Renewables mainly additional to fossil fuels We can only burn 1/3 of proven fossil fuel reserves to stay within 2-degree target

(Berners-Lee and Clark 2013; IEA, 2013)

So, we need accelerated diffusion of green niche-innovations (investments, market creation, cultural enthusiasm) and managed decline of ‘grey’ regimes (taxes, regulations, standards)Transition research should also look at destabilisation of existing regimes

4. Conclusions

Conceptual• Transitions are complex, multi-dimensional processes

• MLP is useful heuristic framework, not a ‘truth machine’

• MLP is ‘outside-in’ framework focusing on overall patterns

• But one can ‘zoom in’ further and develop ‘inside-out’ understanding (actors, searching, groping, struggling, debating)

Empirical conclusions

• Substantial (European) progress in green electricity

• But renewables face uphill struggles against regimes

• Regimes (coal, gas, nuclear) relatively stable, because of commitment from government and industry

• Transition will be arduous and likely more contentious in next 5-10 years

• We should not just study ‘green’, but also existing regimes + more attention for political economy

Transition pathways

a. Technological substitution

b. Regime transformation (endogenous)

c. Regime reconfiguration

d. De-alignment and re-alignment

a. Technological substitution

Landscape developments

Technology

Markets, user preferences

CulturePolicy

ScienceIndustry

Niche-level

Socio-technicalregime

Increasing structurationof activities in local practices

Specific shock

Time

Landscape developments

Socio-technicalregime

Niche level

Adoption ofsymbioticniche-innovation

Landscape pressure

Increasing structurationof activities in local practices

Time

b. Transformation pathway

c. Reconfiguration pathway

1) Novelties emerge in techno-scientific niches in contextof stable system architecture

2) Diffusion and adoptionof innovations inexisting system

3) Reconfiguration ofelements leads tonew system architecture

Niche level

Regime/systemslevel

Landscape level

d. De-alignment and re-alignment

Technology

Markets, user preferences

CulturePolicy

Science

Industry

Landscape developments

Niche-level

Socio-technicalregime

Increasing structurationof activities in local practices

Time

Two pronged policy strategy

1) Niche-level: Stimulate variety/innovation- Long-term visions + short-term action (projects): learning-by-

doing, network building

2) Regime-level: Tighten selection environment (taxes, regulations, incentives)

Varieties of capitalism: different policy styles

• No single policy recipe for system innovation

• Different policy styles :a) Liberal Market Economies (e.g. USA, UK, Canada).b) Coordinated Market Economies (e.g. Germany, Denmark)c) State-influenced Market Economies (e.g. France, Japan, Korea)d) State capitalism (China, Russia)

Different policy mixes and instrumentsCommand-and-control (top-down steering)

Market model (incentivize bottom up agents)

Policy networks (convening, orchestrating processes)

Governance instruments

Formal rules, regulations, laws

Financial incentives (subsidies, taxes)

Learning processes, projects/experiments, vision/scenario workshops, strategic conferences, public debates, platforms

Foundation scientific disciplines

Classic political science

Neo-classical economics

Sociology, innovation studies, neo-institutional political science

Niche-innovation initially carried by local/urban projects

… is carried bypro jec ts in d iffe ren tloca l p rac tices

G loba l n iche -leve l(e .g . the em erg ing fie ld o f P V so la r ce lls)

Sequence of projects enables niche development trajectories (Geels/Raven, 2006)

S ha red ru le s ( sea rch heu ris tic s ,expec ta tion s, ab strac t theo ries , te ch n ica l m od els)

p rob lem agendas ,

A g g re g a tio n ,le a rn in g

G loba l lev el(com m un ity,fie ld )

L ocal p ro jects ,c arr ied by localne tw ork s,cha rac terisedby loca l va rie ty

E m erg in gtechno lo g ica ltra jec to ry

F ra m in g , c o o rd in a tin g

A c c e p te d v is io n s a n d e x p e c ta tio n s (o n fu n c tio n a l ity ) fo rm a g e n d a o f e m e rg in g f ie ld

R e s o u rc e s + re q u ire m e n ts(f in a n c e , p ro te c t io n ,s p e c if ic a t io n s )

A r te fa c t- a c tiv ity : P ro je c ts in lo c a l p ra c tic e s R & D p ro je c ts , p i lo t p ro je c ts )(

G lo b a l n e tw o rk o f a c to r s (e m e rg in g c o m m u n ity )

O u tc o m e s a n d n e w p ro m is e s b y lo c a l a c to rs

C o g n i tiv e , fo rm a l a n d n o rm a tiv e ru le s(k n o w le d g e , re g u la tio n s , b eh a v io u ra l n o rm s)

L o c a l p rac tices

G lo b a l lev e l (em erg in g fie ld )

L e a rn in g ,a r t ic u la tio na g g re g a tio n

E n ro l m o re a c to r s

A d ju s t e x p e c ta t io n s

Dynamic model of niche development(relations between mechanisms)