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

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

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Transition to a sustainable electricity system 7 economic and technological developments 9 and the associated reduction in social capital 10 (Pretty and Ward, 2001). Thus, it can be concluded that effective institutional arrangements need to be able to adapt to changing conditions and circumstances, or in other words successful commons governance require that rules (co-)evolve (Dietz et al., 2003: 1908). Moreover, in complex systems such as the electricity system there are different sets and layers of institutional arrangements at work. This involves for example economic relations where market arrangements through prices and contracts play a central role, relations regarding knowledge and R&D where network relations and trust may play a more important role, and grid operation where with more hierarchical relations and rules regarding access and use. The development and implementation of the Kyoto-protocol involves then a new institutional arrangement directly influencing activities of actors within the electricity system and indirectly through influence on other institutional arrangements. Important aspects to take into account are whether some sort of order exists between these arrangements and how this order evolves; and the way these arrangements may work out differently at local, regional, national, and international scales. This had led some to point out some potential conflicts between different institutional arrangements, e.g. Jörgensen (2005) argues how the recent shift to market models for electricity in Denmark has induced abandonment of national support schemes for renewable energy and is at odds with the public commitment to a sustainable energy system. In a more fundamental focus on governance for sustainable development, Lafferty (1998, 2001) identifies mismatches between existing decision-making procedures in democratic market economies and the type of institutional arrangements reconcilable with sustainable development. Lafferty argues that a strengthening of regional ecological community building needs to complement and counteract political and economic globalization. The main purpose of this overview is to make clear the range of different positions in the way sustainable development may be achieved. Our concern is not to choose a particular approach but more how useful elements of the approaches can be combined. The main proposition we start from is that it will be essential to bring various elements together, and create alignment and 9 For example, the traditional muang-fai system of irrigation was designed by local communities in the North of Thailand and has long been successful in managing the allocation of water. However, many muang-fai organisations disintegrated under the pressure of rapid economic and social change (industrialisation and globalisation) and were unable to manage the rising conflicts over water provoked by growing demand, the rising number of consumers, and new power relations (Hofman, 1998a: 290-291). 10 The term social capital “captures the idea that social bonds and social norms are an important part of the basis for sustainable livelihoods” (Pretty and Ward, 2001: 210).

8 Chapter 1 specific momentum for processes towards systems change and sustainable development. Central is further the recognition that the nature of changes necessary in the pursuit of a sustainable electricity system demand new paths that involve co-evolution of innovation and institutional change. Understanding the nature of this co-evolution is a first objective of this dissertation. Analysing how this co-evolution has shaped the way certain paths have unfolded for electricity production and consumption is a second objective. The final objective is to utilise these insights to provoke, redirect or reinforce more sustainable patterns of co-evolution. 1.3 Research questions and outline of the chapters Central to this book is the understanding that transformation of systems of production and consumption involves a process of co-evolution of institutional and technological change and involves changes in institutions at different levels and between those levels. At the micro level it involves the development of a new product, technology or concept, made possible as a variety of actors, such as firms, policy-makers, customers, change their way of doing things. At the meso-level it involves changes in practices at the level of sectors, and at the macro-level it involves changes in systems of innovation and regulation. Systems change slowly occurs as changes at different levels start to connect and synchronise, leading to the emergence of new institutional fabric that creates linkages between the different levels. The aim of this book is to specify this perspective by analysing patterns of change in the electricity system. Scientifically, the relevance of the book is in its analysis and explanation of fundamental processes of change, a topic relevant for a range of scientific disciplines, from economics, sociology, technology studies, to policy science. Its societal relevance lies mainly in its use for gaining insight in the way systems change can be directed towards the normative goal of sustainable development. The overall research questions by which this research is guided are: To what extent can the dynamics of transformation in the electricity system be understood as the interaction between technological and institutional change?, applied more specifically to: a. how does this dynamics take place at and between different levels?; b. when and how does this dynamics reinforce the existing system, representing processes of lock-in, or destabilise the existing system, representing processes of escaping lock-in?; and,

8 Chapter 1<br />

specific momentum for processes <strong>to</strong>wards systems <strong>change</strong> <strong>and</strong> <strong>sustainable</strong><br />

development. Central is fur<strong>the</strong>r <strong>the</strong> recognition that <strong>the</strong> nature of <strong>change</strong>s<br />

necessary in <strong>the</strong> pursuit of a <strong>sustainable</strong> electricity system dem<strong>and</strong> new paths<br />

that involve co-evolution of innovation <strong>and</strong> <strong>institutional</strong> <strong>change</strong>.<br />

Underst<strong>and</strong>ing <strong>the</strong> nature of this co-evolution is a first objective of this<br />

dissertation. Analysing how this co-evolution has shaped <strong>the</strong> way certain<br />

paths have unfolded for electricity production <strong>and</strong> consumption is a second<br />

objective. The final objective is <strong>to</strong> utilise <strong>the</strong>se insights <strong>to</strong> provoke, redirect<br />

or reinforce more <strong>sustainable</strong> patterns of co-evolution.<br />

1.3 Research questions <strong>and</strong> outline of <strong>the</strong> chapters<br />

Central <strong>to</strong> this book is <strong>the</strong> underst<strong>and</strong>ing that transformation of systems of<br />

production <strong>and</strong> consumption involves a process of co-evolution of<br />

<strong>institutional</strong> <strong>and</strong> technological <strong>change</strong> <strong>and</strong> involves <strong>change</strong>s in institutions at<br />

different levels <strong>and</strong> between those levels. At <strong>the</strong> micro level it involves <strong>the</strong><br />

development of a new product, technology or concept, made possible as a<br />

variety of ac<strong>to</strong>rs, such as firms, policy-makers, cus<strong>to</strong>mers, <strong>change</strong> <strong>the</strong>ir way<br />

of doing things. At <strong>the</strong> meso-level it involves <strong>change</strong>s in practices at <strong>the</strong><br />

level of sec<strong>to</strong>rs, <strong>and</strong> at <strong>the</strong> macro-level it involves <strong>change</strong>s in systems of<br />

innovation <strong>and</strong> regulation. Systems <strong>change</strong> slowly occurs as <strong>change</strong>s at<br />

different levels start <strong>to</strong> connect <strong>and</strong> synchronise, leading <strong>to</strong> <strong>the</strong> emergence of<br />

new <strong>institutional</strong> fabric that creates linkages between <strong>the</strong> different levels.<br />

The aim of this book is <strong>to</strong> specify this perspective by analysing patterns of<br />

<strong>change</strong> in <strong>the</strong> electricity system. Scientifically, <strong>the</strong> relevance of <strong>the</strong> book is<br />

in its analysis <strong>and</strong> explanation of fundamental processes of <strong>change</strong>, a <strong>to</strong>pic<br />

relevant for a range of scientific disciplines, from economics, sociology,<br />

technology studies, <strong>to</strong> policy science. Its societal relevance lies mainly in its<br />

use for gaining insight in <strong>the</strong> way systems <strong>change</strong> can be directed <strong>to</strong>wards<br />

<strong>the</strong> normative goal of <strong>sustainable</strong> development.<br />

The overall research questions by which this research is guided are:<br />

To what extent can <strong>the</strong> dynamics of transformation in <strong>the</strong> electricity system<br />

be unders<strong>to</strong>od as <strong>the</strong> interaction between technological <strong>and</strong> <strong>institutional</strong><br />

<strong>change</strong>?, applied more specifically <strong>to</strong>:<br />

a. how does this dynamics take place at <strong>and</strong> between different levels?;<br />

b. when <strong>and</strong> how does this dynamics reinforce <strong>the</strong> existing system,<br />

representing processes of lock-in, or destabilise <strong>the</strong> existing system,<br />

representing processes of escaping lock-in?; <strong>and</strong>,

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