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

The institutionalisation of green electricity 163
on sustainability aspects he invented the concept of ‘green electricity’
(Wiechers, 2005). To be clear, green electricity as electricity based on the
use of renewable sources already existed, however, selling ‘green electricity’
as a specific product to customers as something different from conventional
electricity was new.
Invention of the concept of green electricity by an energy distributor
Before 1993 the energy distribution company PNEM was involved in several
renewable energy projects that were mainly policy driven. In 1989 the
company had published an environmental action plan with CO2 reduction as
an important objective. This was part of an agreement between the energy
distribution sector and the Ministry of Economic Affairs, where an overall
target for CO2 reduction for the distribution sector was set and a framework
for raising the financial resources for the various projects was introduced. In
parallel the Ministry of Economic Affairs provided financial resources
through subsidies on projects for energy saving, combined heat and power
and renewable energy (see also Chapter 5). With the relative volatility and
uncertainty of money flows from subsidies for renewable energy projects the
question arose whether PNEM could achieve more independence through
market funding of these projects and also differentiate the product in
anticipation of increasing competition within the sector. In 1993 the idea
emerged to have customers pay a premium for so-called ‘green’ electricity in
order to use the premium for financing renewable energy projects, thus
letting the market become more influential in deciding the development of
renewable energy. This was also part of a broader process within the
company with top management committed to further development of
renewable energy, and this initially mainly policy driven commitment
became more and more based on a strategy to develop a green profile for the
company. Inside the company there was resistance to this concept because it
complicated sale of electricity and implied changes in routines. Green
electricity would have to be marketed and specific administrative channels
would have to be created. Moreover, it implied that customers would pay
more for something that physically is the same: the electricity provided to
their house 4 .
Various factors explain the emergence and acceptance of the concept.
Developing a green profile in a strategy of product differentiation was part
of the stronger market orientation the company developed in anticipation of
4 In this respect green electricity differs from most other green products that are not only
processed differently (similar to the different process for green electricity relative to
conventional electricity) but also have different qualities, such as different taste and
absence of traces of pesticides (e.g. ecologically grown vegetables).