Innovation and institutional change: the transition to a sustainable ...

144 Chapter 5
10-12). The third issue involved the role of energy distributors. The AER
argued that the realisation of the potential of cogeneration can be
considerably improved with a more active role of distribution companies, for
example through establishing joint ventures with the private sector in which
risk and benefits of cogeneration can be distributed over the two parties. This
could facilitate cogeneration units dimensioned on heat demand instead of
electricity demand, which would increase the potential for cogeneration and
energy saving. The AER also argued that the reorganisation of the
distribution sector and the separation between electricity production and
distribution could be an incentive for competition based on cogeneration by
the distribution sector relative to the production sector, as was proposed in
the draft 1987 electricity act (AER, 1987: 12-13). Also the advisory
committee for industrial cogeneration pointed at the potential role of
distribution companies, for example in the form of setting up joint-ventures
with industry as this could induce the set up of cogeneration units
dimensioned on heat demand and would realise more re-delivery of
electricity to the grid (EZ, 1987).
Based on the recommendations of general energy council and the advisory
committee for industrial cogeneration, the Ministry for Economic Affairs
initiated a stimulation program for cogeneration. The program included
measures such as an increase of the investment grant to 25% (Blok, 1991:
144) and rules regarding the special tariff for natural gas for cogeneration
(especially attractive for smaller units). The remuneration system also
changed in anticipation of the vertical disintegration of production and
distribution companies, under way at that time. The new system remunerated
all deliveries to the grid by a tariff based on avoided fuel costs and saved
capacity costs (Arentsen, Hofman, Marquart, 2000: 28). Finally, the program
introduced a special project office for the promotion and support of
cogeneration, set up in 1988 to function as a broker in the realisation of
cogeneration projects and to stimulate cooperation between utilities and the
private sector, such as in the form of joint-ventures (Blok, 1991: 143).
A new setting for cogeneration: Policy change and a new role for energy
distributors
Two factors drastically changed the climate for cogeneration at the end of
the eighties. The first factor was the effect of the reorganisation of the
electricity sector on strategies of energy distributors. The second factor was
the emergence of environmental policy oriented at target groups, with the
energy sector as one of the target groups, under the first national
environmental policy plan. The process of concentration in the electricity