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

The institutionalisation of green electricity 181
to loss of captive consumers, new strategic orientation vis à vis future
competitors, development of marketing competences) in combination with
the acquired competences in renewable energy production due to policy
pressure led to the conception of green electricity. The company perceived
increasing societal attention on climate change as an opportunity to
distinguish itself from its competitors by developing a green profile and
exploiting the shifting preferences of open-minded users. Cooperation with
an environmental organisation was entered into in order to increase the
product’s legitimacy, which was also an illustration of the changed culture in
the electricity distributor. This coalition of actors turned out to be able to
successfully introduce the concept of green electricity, and a specific
governance arrangement that supported it. Momentum for the new product
increased as competitors imitated the product and familiarity with the
concept became widespread.
The role of policy was significant for accelerated diffusion and scaling up of
the concept through the introduction of the regulatory energy tax and the
exemption of green electricity from the tax. The introduction of the
regulatory energy tax, already discussed from the beginning of the nineties,
happened to coincide with the emergence of green electricity. Due to the
infeasibility of introducing an energy tax throughout Europe, the tax was
solely oriented to small consumers to prevent inflicting costs and loss of
international competitiveness of Dutch business. The main pillar of
legitimacy on which the tax rested, providing incentives for energy saving of
households, was soon complemented by another pillar of promoting demand
for green electricity. The introduction of the tax also coincided with a shift in
problem perception regarding slow penetration of renewable energy. A bias
to supply-driven incentives and a lack of market incentives was increasingly
seen as a main barrier for further spread of renewable energy. The second
significant policy development was the decision to accelerate the
liberalisation of the retail green electricity market prior to the full
liberalisation of the retail market for conventional electricity. What was not
well thought out however was the effect of mismatches between national
regulatory frameworks on strategies of energy companies 27 . Especially in the
light of governance arrangements to account for green electricity still in their
27 Prof. Van Wijnbergen, a previous top-level civil servant at Economic Affairs, phrased it in
a more outspoken way: ‘It was plain stupidity; they just did not know what they were
doing’ (Köper, 2003). Also the fact that energy policy experts at ECN had clearly pointed
these implications contributes to the conclusion that the dynamics and effects of
companies shifting their strategies to exploit these differences were severely
underestimated.