The UK electricity sector – background and investment challenges Webegininthissectionbybrieflyoutliningkeyaspectsofthepolicybackgroundtoelectricity sectortransformationandlowcarboninvestm
Trang 1j o u r n a l h o m e p a g e :w w w e l s e v i e r c o m / l o c a t e / e i s t
policy
a Science Technology and Innovation Studies, School of Social and Political Science, University of Edinburgh,
Old Surgeons’ Hall, High School Yards, Edinburgh EH1 1LZ, Scotland, United Kingdom
b School of Earth and Environment, Maths/Earth and Environment Building, The University of Leeds, Leeds
LS2 9JT, United Kingdom
a r t i c l e i n f o
Article history:
Available online 2 September 2014
Keywords:
Electricity generation
Low carbon investment
Socio-technical systems
a b s t r a c t
TheUKismovingintoanewphaseofenergygovernancewhich
is characterised by significant demand fornew investment to meetlongtermclimatepolicyobjectivesandtoaddressshorter termenergysecuritychallenges.Thispaperexamineshow con-tributions from the socio-technical systems approach can be operationalisedtoaddressthepolicyandsocietalchallengeoflarge scaleinvestmentsinlowcarbonenergyinfrastructure.Research
onsocio-technicaltransitionsexploresthedynamicsoflongterm structuralchangeincapitalintensivesystemssuchasenergy, hous-ingand water supply, seeking toredirect them towards more sustainablelongtermtrajectories FocusingontheUK electric-itygenerationsector,thepaperexpandsonthreekeylowcarbon investmentchallengeswheresocio-technicalresearchcanprovide useful insights – (1)understanding longterm uncertaintyand investmentrisks;(2)avoidingtechnologicallock-in;and(3) accel-eratingthediffusionoflowcarbonfinance‘niches’
©2014TheAuthors.PublishedbyElsevierB.V.Thisisanopen
accessarticleundertheCCBYlicense (http://creativecommons.org/licenses/by/3.0/)
∗ Corresponding author Tel.: +44 0131 650 6366.
E-mail address: Ronan.Bolton@ed.ac.uk (R Bolton).
http://dx.doi.org/10.1016/j.eist.2014.07.005
2210-4224/© 2014 The Authors Published by Elsevier B.V This is an open access article under the CC BY license
Trang 21 Introduction
Inorderforlowcarbonenergytransitionstoberealisedlargescaleandlongtermcapitalinvestment willberequiredinarangeofnewinfrastructureassets.Infrastructure,inageneralsense,referstothe materialbasisofsocio-technicalsystems–powerstations,railnetworks,ports,airports,pipesand wiresetc.Thishasalwaysbeenanimportantpublicpolicyissuebecauseinfrastructuresupportsthe deliveryofessentialsocietalservices,suchaspowerforelectricaldevicesandmobility.Governments havehistoricallyplayedacentralroleininfrastructureinvestmentbecauseofthewidersocialand economicbenefitsthatitbrings,butalsobecausesecuringinvestmentintheseassetsrequiresalong termandconsistentgovernanceframework.Thebalancebetweenpublicandprivateinvestmenthas varied,though,betweendifferenttypesofinfrastructureandaccordingtotherelativedominanceof differentpoliticalviewsoftheroleofmarketsineconomicdecision-making
Astronglymarket-orientedframeworkforenergyinfrastructureinvestmenthasbeenfollowedin theUKsincetheearly1990s,withthismodelincreasinglybeingfollowedinothercountries.This reflectsaviewthatmarketsforthedeliveryofsocietalserviceswouldbringabouttheincentivesfor privateactorstoinvestininfrastructureassets,leadingtogreatereconomicefficiencyandsocially optimaloutcomes.Thismodelwasstronglyinfluencedbyneo-classicaleconomicthinking(Helm, 2003).However,thisframeworkisincreasinglychallengedbytheneedforhighlevelsofinvestment
tomeetothersocietalobjectivesofreducingcarbonemissionsandmaintainingenergysecurity,whilst maintainingaffordabilityofenergyservicestoconsumersandbusinesses.Inordertodealwiththese newcomplexitiesitislikelythatarebalancingoftherelationshipbetweengovernmentsandmarkets willberequired(PearsonandFoxon,2012).Theenergypolicyframeworkwhichemergeswillneedto addressanumberofkeyquestions:Whatkindsofpoliciescaneffectivelymobilisefinanceanddeliver lowcarbonformsofinfrastructureinvestment?Howisuncertaintyandinvestmentriskmanagedby publicandprivateactors?Andhowarelongandshorttermpolicyobjectivesreconciled?
Thepurposeofthispaperistoexplorethewaysinwhichstudiesofsocio-technicalsystemsand theirlongtermdynamicscanprovideusefulinsightswhichhelptoaddressthesecomplexquestions TheoriginsofthefieldcanbetracedbacktotheworkofthehistorianoftechnologyThomasHughes whochartedtheearlyemergenceandexpansionof‘largetechnicalsystems’(LTS)suchaselectricity supply(Hughes,1983).Hughesandcolleagueshighlightedtheroleofpioneer‘systembuilders’such
asThomasEdison,andhow,overtime,theseinfrastructuresdevelopasystemiccharacterthrough
aprocessofmutualshapingofthetechnicalsystemanditswidersocialenvironment(Summerton, 1994;Coutard,1999;Vleuten,2004).Morerecentcontributionshavesoughttoaccountforthe trans-formationofthesenowmaturesystemsinthecontextofclimatechange,energysecurityandother driversofchange(Magnusson,2012;Foxon,2013)
BoththehistoricallyorientatedLTSapproachandthetransitionsperspectivearegroundedinthe widerfieldoftechnologystudieswhichseekstoaccountforthesocialcharacterandimplicationsof technicalchange(WilliamsandEdge,1996;BoltonandFoxon,2014;MackenzieandWacjman,1999) Unlikeneo-classicaleconomics,whichhasformedtheintellectualbasisforenergypolicyintheUK sincethe1980s,strandsoftechnologystudiessuchasthisviewtechnicalchangeasadynamic non-linearprocess,whereoutcomesarenotdeterminedbymarkets,butshapedbyawidersetofsocial processes.Asystemsframingisadoptedinwhichthemarketisembeddedinsocio-technical‘regimes’ whicharealignmentsofinstitutions,infrastructuresandactorswhichprovidestabilitytoandunderpin thedeliveryofessentialsocietalservices.Centraltotheanalysisishowfundamentalandlongterm changestoregimesoccur,focusingonthede-stablingeffectsofradicalinnovationswhichemergefrom typicallydispersed‘niche’spaces,andchangesinwidersocio-technical‘landscapes’,includingmacro levelsocial,economicandtechnologicaltrends(RipandKemp,1998;Geels,2002b).Ourpurposeis nottoundertakeasystematicreviewoftheentirebodyofsocio-technicalsystemsliterature(For overviewssee:Markardetal.,2012;Smithetal.,2010;vandenBerghetal.,2011;Vleuten,2004), ratherwedrawselectivelyfromkeyconceptsandcontributionstothefieldtoconsiderspecificareas wherewebelievesocio-technicalthinkingcanhelptocontributetothelowcarboninvestmentdebate Althoughquestionsoffinanceandinvestmenthavenotbeenanexplicitfocusofthisfieldofresearch
todate,thoughsee(Geels,2013),therehasbeensomeengagementwiththeissue,forexamplewitha recentspecialissueofthisjournalfocusingontheimplicationsoftheeconomic-financialcrisisforthe
Trang 3prospectsoftransitionstomoreenvironmentallysustainablesystems(vandenBergh,2013).While thishasbeenhighlyrelevanttothepotentialeffectsofchangesatamacroor‘landscape’level(Antal andvandenBergh,2013;LoorbachandLijnisHuffenreuter,2013),thereisaneedtounderstandin moredepthhowinstitutionalrealignmentsandpolicychangesinfluenceinfrastructureinvestments
inspecificcontextsandinrelationtoindividualsocio-technical‘regimes’e.g.theelectricity genera-tionandsupplyregime.Throughanumberofillustrativeexamplesthepaperhighlightshowamore nuancedunderstandingofthecomplexinterrelationshipsbetweenlongtermtechnicalchangeand socialcontexts,andthenon-lineardynamicsofinnovationprocessesimplicitinsocio-technicalstudies canusefullyinformpolicydebatesinrelationtolowcarboninvestments
ThemainempiricalfocusofthepaperisontheUKelectricitygenerationsector.Theneedtoprovide adequateandappropriateformsofpublicfinancialsupporttoincentivisehighlevelsofprivate invest-mentinpowergenerationiscurrentlyframingthedesignofoneofthemainUKlowcarbonpolicies –ElectricityMarketReform.Section2outlinesthespecificpolicyissuesbeingdebatedintheUK.In Section3,weexpanduponthreeareasinwhichsocio-technicalstudiescancontributetoananalysisof lowcarboninvestmentinthissector:(1)framingandunderstandinguncertaintyandinvestmentrisks throughthearticulationoftransitionpathways,(2)emphasisinglongtermtimehorizonsandavoiding technologicallock-in,and(3)acceleratingthediffusionoflowcarbonfinance‘niches’.InSection4we reflectonthecontributionofsocio-technicalresearchtoaddressingthelowcarboninvestmentpolicy challengesandthelimitsoftheapproach.Wehighlightthatthenatureofthecontributionisin pro-vidingsystemicframeworksbasedonanunderstandingofthelongtermdynamicsofinfrastructure change,ratherthaninstrumentalandspecificpolicyrecommendations.Wealsonotethathighlevel systemicframeworkssuchasthisdonotprovidein-depthinsightsintothepoliticalnegotiationof differentpolicyprioritiesandtrade-offsbeingmade.Inthefinalsectionwedrawkeyconclusions
2 The UK electricity sector – background and investment challenges
Webegininthissectionbybrieflyoutliningkeyaspectsofthepolicybackgroundtoelectricity sectortransformationandlowcarboninvestmentintheUK.TheUK,likemanyotherindustrialised nations,iscurrentlyfacingtheprospectofradicaldecarbonisationofitsenergysupplysystems.The
2008ClimateChangeActsetalegallybindinggoalofreducingtheUK’sgreenhousegasemissionsby 80%by2050,from1990levels,withintermediatecarbonbudgetstobesettowardsthisgoal,based
onrecommendationsofanindependentCommitteeofClimateChange(CCC).InitsFourthCarbon Budgetreport,theCommittee(CCC,2010)recommendedthattheUKshouldaimforareductionin thecarbonintensityofelectricitygenerationfromitscurrentlevelofapproximately500gCO2/kWhto around50gCO2/kWhby2030,asakeyelementofreducingtheUK’scarbonemissionstothistime.1 Particularemphasishasbeenplacedontheelectricitysector,becauserelativetootherenergyintensive areasofsocio-economicactivity,itisseenaslikelytobecheaperandmorefeasibletodecarbonise electricitysupplyfirstduetotheavailabilityofalternatives(i.e.arangeofrenewablesandnuclear power).Electricitygeneratedfromlowcarbonsourcescouldthenincreasinglybeusedtomeetother energyserviceneedsforheatingandtransport.2
Fig.1belowprovidessomebackgroundbyshowingthelargecoal,nuclear,combinedcyclegas turbine(CCGT)generationplantsandwindfarmscurrentlyoperatingintheUKandtheyearthey cameontothesystem.Ascanbeseen,thevastmajorityofoperatingcoalplantswereconstructedin thelate1960s/early1970sandmostoftheUK’sexistingnuclearinvestmentstookplaceduringthe 1970sand80swhenthesystemwasoperatedbyastateownedbody,theCentralElectricityGenerating Board(CEGB)
Muchoftheinvestmentmadebyprivatecompaniesfollowingprivatisationand liberalisation reformsinthe1990shasbeeninlowercapitalcostandflexibleCCGT(gas)plant.Despitethenew
1 In 2011, the UK Parliament accepted the Committee’s recommendation for overall carbon emissions reductions for the period 2023–2027, but did not agree to set a specific reduction target for carbon intensity of electricity generation.
2 It should be noted that this view of an ‘all-electric future’ is not universally accepted Some argue that there is too much emphasis on electrification, at the expense of potentially more effective means of decarbonisation of the heat and transport.
Trang 45
10
15
20
25
30
35
1960 197 0 198 0 199 0 200 0 201 0 202 0
Powe r staons in the UK
CCGT Coal Nuclear Wind (onshore) Wind (offshore)
Fig 1.Cumulative installed capacity (GW) of major power stations currently operating in the UK, with dates of installation ( DECC, 2012a : data from Table 5.11) (In the interests of clarity this figure does not include non CCGT gas-fired generation, oil and diesel-fired generation, small scale solar and CHP, along with and other renewables such as hydro and biomass Total generating capacity connected to the UK transmission network in 2012 was in the region of 90 GW.)
investmentsinCCGTsandwindfarmswhichhavetakenplaceoverthepastnumberofdecades,the
UKfacesapotential‘generationgap’asmanyoftheexistingcoalandnuclearplantshowninthefigure willcomeoffthesystemoverthecomingdecadeduetoageingplantandalackofcompliancewith environmentallegislation(DECC,2012b).3Thishasledtoconcernsoverashorttermthreattoenergy securityduetoareductioninthelevelofsparecapacityonthesystem–thecapacitymargin.The
UKenergymarketregulatorhasrecentlyestimatedthatthecapacitymargincouldfalltoabout4%by
2015,fromcurrentlevelsof14%(OFGEM,2012)
Itisonlysincetheintroductionofatradableobligationcertificateprogramme,theRenewables Obligation(RO),intheearly2000sthatsignificantlevelsofinvestmenthavetakenplacein renew-ablegeneration,primarilyonshorewindfarms.AnotablefeatureoftheUKapproachhasbeenthe embeddingoflowcarbontechnologypolicy,suchastheRO,intheday-to-dayoperationofenergy markets.Broadly,thishasmeantthatgovernmentisreluctanttointerfereintheday-to-dayoperation
ofmarketsandinfluencethepricelevelsforrenewableoutput,ratherithassetthequantityoflow carbongeneration(e.g.numberofRenewableObligationCertificates),andthepriceforthiswouldbe setbythemarket
Akeyunderpinningofthe‘handsoff’relationshipwhichemergedsincethe1980sbetween govern-mentandtheindustryhasbeenbasicassumptionsofneo-classicaleconomictheory(Mitchell,2008) –thatinvestmentismostefficientlymadebyprivateactorsonthebasisofpricesignalsmediated throughtheenergymarkets.Themainaimofthisapproachhasbeentoutilisemarketbased incen-tivestoimprovetheefficiencyofthepreviouslystateownedenergyindustries,andthefocusofpolicy hasbeenonshortratherthanlongtermobjectives–toreducetheday-to-dayoperationalcostsof generatinganddistributingenergytoendusers.OnthesetermstheUKprogrammeofprivatisation andliberalisationcanperhapsberegardedasasuccess(Pollitt,2008),however,theUKismoving
3 The Large Combustion Plant Directive requires large electricity generators to meet more stringent air quality standards as
of January 2008 In many cases it will be too expensive for coal and oil plants to meet these standards and will therefore need
to ‘opt out’ which means that they have to close by the end of 2015 or upon reaching 20,000 h of operation after 2008 DECC note that ‘By the end of 2015 .around 8 GW of coal-fired power generation capacity closes due to the Large Combustion Plant Directive’ In the medium/longer term there is uncertainty as to what effect the EU’s Industrial Emissions Directive will have
on coal plant closures All but one of the UK’s nuclear fleet is due to close by 2023, with Sizewell B expected to close in 2035 There is a great deal of uncertainty as to the exact timing of plant closures, in the case of Nuclear plant life extensions have been granted in the past, and in the case of coal plant market factors such as the carbon price and international coal prices influence
Trang 5intoanewphaseofenergygovernancewherenewinvestmenttomeetlongtermclimatepolicyand energysecurityobjectivesisthemainpriority
ArecentlypublishedUKEnergyResearchCentreworkingpapercontainingprovisionalresultsofa studyonfinancingthelowcarbontransitionhassoughttoaccountfortheinvestmentcostsofreplacing thiscapacityandmeetingclimatechangetargetsintheUKcontext(Blythetal.,2014).Followinga reviewofpreviouslypublishedestimatesBlythetal.notethat“Acrossallthescenariosassessedinthis study,theaverageamountofnewcapacityneedingtobeaddedtothesystemwas3.4GWeachyear
upto2020”,andintermsofinvestment,“Estimatesofthesizeoftheinvestmentchallengerangefrom theoftenquotedDECC/OFGEM4figureof£110bnby2020(includingtransmissionandgeneration)to muchhigherfiguresrangingfrom£200bntoover£300bnby2030fromorganisationssuchasNational Grid,theCommitteeonClimateChangeandLondonSchoolofEconomics”(p.iii).Theyhighlightthat
“Thesefiguresareconsiderablyhigherthanthebuildrateduringthe2000swhichaveraged1.2GW capacityaddedperyear,withCAPEXof£1.1bnperyear”(p.iii)
Beforeitsendoftermin2010thethenLabourgovernmentcametotheconclusionthatthecurrent electricitymarketframeworkandassociatedsupportmechanisms,includingtheRO,didnotprovide sufficientincentiveforprivateenergycompaniestoinvestinthelevelsoflowcarbonpowergeneration neededtomeetUKandEUrenewableenergyandcarbonreductiontargets.Thedeficienciesofthe currentmarketarrangementinrelationtonewlowcarboninvestmentwascentraltoitsettingintrain
anElectricityMarketReform(EMR)process,whichwastakenupbythenewcoalitiongovernment andisembodiedinmeasuresinthe2012FinanceAct(risingcarbonfloorpriceforpowergeneration) andthe2013EnergyAct(contractfordifferencefeed-intariffs(CfDFITs),capacitymechanismand emissionsperformancestandard).Thelikelysuccessofthesemeasuresinstimulatinghighlevels
ofinvestmentinlowcarbongenerationhasbeenthesubjectofmuchdebate,withsomeobservers arguingthattheEMRprocesswaslargelydrivenbytheneedtoprovideanincentiveframeworkto supportthebuildingofnewnuclearpowerstations5(Toke,2011;Mitchelletal.,2011)
TheproposedCfDFITmodelintroduceslongtermcontractsforlowcarbongeneration(renewables, nuclearandCCS)wherebya‘strikeprice’willbepredeterminedforeachofthequalifyingtechnologies, andgeneratorswillberemuneratedifthemarketpriceisbelowthislevel.Akeydifferencewiththe previousapproachisthatpricewillnotbesolelyanoutcomeofmarketoperation, buttoalarge extentdeterminedbygovernmentdecision.Thisisclearlyadeviationfromneo-classicaleconomic principleswhichischaracterisedbyincreasinggovernmentinterventionintheenergymarket.Itnow seemsthattheUKgovernmentisreluctanttoletpricesrisetoalevelrequiredfornewlowcarbon investmentbecauseofconcernsovertheimpactontheaffordabilityofenergytoconsumers.Instead,
itisseekingtointerveneinthemarkettospreadoutthecostsofinvestmentoveralongertimescale andtosocialiseelementsofinvestmentrisk,whichitishopedwillreducethecostofborrowingfor privateinvestors.Akeyargumentofthispaperisthatgovernmentneedstodomorethanhelpprivate investorsrealiseareturnonlargescalelowcarboninvestmentsbysocialisingrisk,ifitistoachieveits carbonreductiontargets.Theremaybepotentialtoutilisethiswindowofopportunitytorethinkthe basisonwhichenergypolicyismadeandimplementamorelongtermorientatedapproachwhichis basedonanassessmentofoptionsandinnovationoutcomes,ratherthanlike-for-likereplacementof thecurrentsystem
3 Specific insights from socio-technical studies on low carbon investment in the UK power sector
Thepurposeofthismainbodyofthepaperistodiscusswaysinwhichinsightsfromsocio-technical studiescanbedeployedwithaviewtowardscontributingtoanewenergypolicyframeworkwhich
isbetterequippedtoaddressthechallengesoflowcarboninvestmentandlongtermtransformation
4 Department of Energy and Climate Change (DECC), Office of Gas and Electricity Markets (OFGEM).
5 On 21 October 2013, the UK Government announced an agreement with French energy company EDF and its Chinese energy company partners to provide support for the building of a new 2 reactor 3.2 GW nuclear power station at Hinkley Point in South-West England, guaranteeing an index-linked price of at least£89.50 for each MWh generated for 35 years,
Trang 6Theanalysisisinformedbytwosources:themainsourceisworkconductedaspartofthe‘Transition PathwaystoaLowCarbonEconomy’researchconsortiumwhichbothauthorshavebeeninvolvedwith (Foxon,2013;Foxonetal.,2010).Theinterdisciplinaryconsortium,comprisingengineers,economists andsocialscientists,hasbeendevelopingandanalysingalternativesocio-technicalscenarios,or path-ways,fortheUKtoachieveits2050climatetargets.Inconstructingthesealternativefutures,the consortiumhasdrawnuponsocio-technicalinsightstodevelopmorerobustmethodologiesforthe analysisofthelongtermscenariosinenergysystems.InSection3.1below,wearguethatthisapproach canhelptobetterframeuncertaintyinenergytransitionsandtocharacteriseassociatedinvestment risks
OursecondsourceisaqualitativeanalysisofkeypolicydocumentsrelatingtoUKgovernment’s approachtoaddressingtheissueofpowersectorinvestmentandaseriesofsemi-structuredinterviews withactorsintheenergy/infrastructureinvestmentchain;focusingonlargeinstitutionalinvestors, investmentmanagers,communityscaleinvestors,industrybodiesandNGOs.Todate15interviews havebeenconductedaspartofascopingstudydesignedtodevelopamorein-depthunderstanding
oftheevolvingrelationshipbetweenenergypolicyandtheinvestmentcommunity.Alistofthose interviewediscontainedinanappendixattheendofthisarticle.Theinterviewsmostlyprovided backgroundinformationtoinformthemainargumentsinthispaper.OurdiscussioninSection3.3
ofalternativeinvestmentmodelsdrawsprimarilyfromourinterviewswithindividualswhohave knowledgeoftheinstitutionalinvestmentcommunity(primarilyinterviews:1,5,6,and9),andthree individualswhoareinvolvedinthefinancingofsmallscalerenewables(interviews:3,7and10) Subsequentpublicationswilldrawmorespecificallyontheinsightsfromtheseinterviews
ThesectionsbelowdrawfromaninitialanalysisofthismaterialandtheworkoftheTransition Pathwaysprojectwhereweidentifyanumberofchallengestobeconfrontedbypolicymakersin relationtolowcarboninvestment,highlightingkeycontributionsfromsocio-technicalthinking
3.1 Exploringuncertaintythroughcoevolutionarypathways
AsoutlinedinSection2thereisagreatdegreeofuncertaintyanddebateregardingtheoptimal technicalconfigurationandinvestmentcostofdecarbonisingtheUKelectricitygrid,particularlyin themediumandlongterm.ArecentlypublishedreportfromtheUKEnergyResearchCentrehas beguntoidentifytherangeofpolitical,economicandtechnologicaluncertaintieswhichcouldslow downorpotentiallyderailtheUK’slowcarbontransition(Watsonetal.,2014).Keyuncertaintiesare technological(relatingtotechnologycostsandsystemintegrationofrenewables),economic(financial issuesdiscussedabove),naturalresourceavailability,andpolitical(whatchoicesaremadeandby whom,publicattitudestodifferenttechnologyoptions)intheircharacter.Anunderstandingofthe natureandoriginsofsuchuncertaintyisofcoursecriticalinthecontextofinvestmentincapital intensiveassetswherereturnsoverthelongdurationoftheinvestmentneedtobeprotectedagainst uncertainty
In hishistoryof‘GreatTransformations’throughoutthetwentiethcentury,Blyth(2002)argues thatstructuralchangeandeconomiccrisesarecharacterisedbyperiodsof“Knightian”uncertainty i.e.‘situationsinwhichagentscannotanticipatetheoutcomeofadecisionandcannotassign prob-abilitiestotheoutcome’ (Beckert,1996).Under thesecircumstancesconventional approaches to evaluatinginvestmentrisk,forexamplebasedonfinancialappraisalmethodologieswhichrelyon
anidentificationandmeasurementofrisks,becomeproblematic
Structuraluncertaintiesatasystemlevelwhichareinfluencedbypolicyandregulatoryregimes tendtobepoorlyunderstood,oneoftheimplicationsbeingthatwidersocialrisksanddistributional effectsareoftenpoorlyaccountedfor.Thereisthereforeaneedtothinkaboutuncertaintiesinan integratedandsystemicway.Inthepast,scenarioplanninghasbeenreliedupontoexploretherange
ofuncertaintiesinfluencingenergysystems,particularlyinthewakeofthe1970soilcrises.Howevera recentreviewoflowcarbonscenarios,whichareoftenbasedonconventionalscenariomethodologies, conductedbyHughesandStrachan(2010),identifiedanumberofshortcomingsofsuchapproaches; primarilyan“over-relianceonconstructs,notablyexogenousemissionsconstraintsandhighlevel trends,whichdiminishtheabilitytounderstandhowthevariousfuturescenarioscouldbebrought
Trang 7aboutoravoided”(HughesandStrachan(2010:p.6065).Geelsdiagnosestwofailuresoftraditional scenariomethodologies(Geels,2002a):
1.‘animplicitlinearmodeloftechnologicaldevelopment’
2.‘undueemphasisonmacro-logicandneglectofmeso-logic’
Anumberofrecentcontributionstosocio-technicalstudieshavebeguntodevelopnew method-ologiesforscenarioconstructionwhicharegroundedinanappreciationoftheinterconnectedness
ofthesocialandtechnicalandhowfuturepathwaysofchangeareshapedbytheircoevolution.The methodofsocio-technicalscenariosdevelopedinthefieldhasbeendeployedtoexaminehowsocial andtechnicalfactorscoevolvetoshapealternativepathwaysoflongtermsystemchange(Hofman andElzen,2010;Hofmanetal.,2004).Geels(2002a)arguesthatthemethod‘canbeparticularlyuseful
in‘fluid’and‘hot’situations,i.e.whenthedominanceofexistingtechnologiesischallengedbynewly emergingtechnologies’(p.361).Hegoesontoarguethatthereisaneedtothinkaboutscenariosin
amulti-levelway,incorporatingthemacrotrendswithanunderstandingofmeso,orindustrylevel, processesandspecificmicrolevelactordynamics
Thismethodologyhasbeendeployedinanumberofstudiestodevelopinsightsforlongterm energyinnovationpolicy(VerbongandGeels,2008;Foxon,2013;ShackleyandGreen,2007).These studiesarguethattheapproachcancontributetoamorerealisticaccountofhowtheenergysystem mightchangeovertime.Drawingfromthewidersocio-technicalliterature,thesetypesofscenarios takeintoaccountanumberofcomplexprocessesandmechanismsincluding:
• Co-evolutionary processes – new interactions of technologies, institutions,business strategies, ecosystemsandenduserpractices(Foxon,2011)
• Multi-levelinteractions–howspacesofsocio-technicalreproduction(regimes)and transforma-tion(niches)coexistandinteractwithinasystem,andareinfluencedbyawidersystemcontext (landscape)(GeelsandSchot,2007)
• Actordynamics–theroleandrelativeinfluenceofdifferentmarket,governmentandcivilsociety actorsinshapingtechnicalchange(Foxon,2013)
Thesetypesofpathwayscouldbeusedtoexploreinvestmentuncertaintyinamorestructured andcoherentwayandhowlowcarbontechnologyoptionsmightbeconstrainedorenabledbywider governanceandsystemicfactors
3.1.1 IllustrationofpathwaysfromtheTransitionPathwaysproject
Takingthesemulti-actor/multi-levelsocio-technicalprocessesasabasisforconstructing alterna-tivelowcarbonenergyscenarioshasbeenacentralaimoftheTransitionPathwaysproject.Arecent contributionbyoneoftheauthors(Foxon,2013)drawsonthismethodologytodevelopandanalyse three‘transitionpathways’fortheUKelectricitysystemoutto2050.Thepathwayswereconstructed throughaniterativeprocess,startingwithadialoguebetweentheconsortiummembers, incorporat-inginsightsfromsociology,economicsandengineering,andsubsequentlyanumberofstakeholder workshopswereheldinanefforttobringinexpertisefromindustryactorsandpolicymakers.The finalstagesofpathwayconstructioninvolvedanassessmentofthetechnicalfeasibilityofthescenarios (forafullertechnicalassessmentofthepathwayssee:Foxon,2013,Bartonetal.,2013)
ThethreepathwaysspecifictotheUKcontextwhichemergedarebasedonhowdifferentactor framingsofalowcarbonfuture,orgovernance‘logics’,whichrepresentalternativepolicyand regu-latorycontexts,mightinfluenceandshapekeymulti-levelandco-evolutionaryprocesses:
• A‘marketrules’pathway(Fig.2a)wherealiberalisedmarketframeworkprevailsinwhichlarge energyutilitiesarethedominantinvestors.Thekeypolicymechanismisacarbonpriceandprivate actorsmaketheirinvestmentdecisionsbasedonthisconstraint;
• A‘Centralcoordination’pathway(Fig.2b)wherenationalgovernmentexertsastronginfluenceover theenergysysteminordertodealwiththe‘trilemma’ofaddressingenergysecurity,risingcosts
Trang 85.00
10.00
15.00
20.00
25.00
30.00
35.00
GW
Market Rules
Coal CC S Gas CCGT with CCS Nuclear
Wind ( onshore) Wind ( offshore) Tidal
CHP - Renewable Fuels
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
GW
Central Coordinaon
Coal CC S Gas CC GT with CC S Nuclear Wind (onshore) Wind (offshore) Tidal CHP - Renewable Fuels
0.00
10.00
20.00
30.00
40.00
50.00
60.00
GW
Thousand Flo wers
Gas CC GT with CC S Wind ( onshore) Tidal Solar CHP - Renewable Fuels
(a)
(c)
(b)
Fig 2. (a)–(c) Investment pathways for the UK power sector Data from the Transitions Pathways Project.
Trang 9upofaStrategicEnergyAgency;
• A‘thousandflowers’pathway(Fig.2c)whichseesamoredecentralisedfutureasnon-traditional investorsintheenergysystem,suchascooperativesandlocalauthorities,playaleadingrolein investinginlowcarbontechnologiesandenergyefficiencyprogrammes
Eachofthepathwaysinvolvedifferentmixesoflowcarbongeneration(nuclear,carboncapture andstorageandrenewables)whichdiffuseasoldcoalandnuclearplantsclose(cf.Fig.1)andCCGTis increasinglyusedaspeakingplantratherthanforbaseload.Thegraphsabove,whicharebasedona quantitativeassessmentofthepathwaynarrativessummarisedpreviously,illustratethediffusionof selectedkeylowcarbontechnologiesineachofthepathways
Inthecentralcoordinationpathway(Fig.2a),a‘technologypush’approachseesafocusonlarge scalecentralisedtechnologiessuchasnuclear,CCSandoffshorewind.Marketrulesalsoseesabroadly centralisedelectricitysystembutwithlessrelianceonnuclearpowerduetothelackof govern-mentbackedlongtermcontracts.Thousandflowersontheotherhandseesasignificantroleforlocal anddecentralisedtechnologiessuchasCHPwithdistrictheatingandsmallscalemicrogeneration technologies
Largelyduetotheincreasingelectrificationofheatandtransport,meetingthe2050decarbonisation targetwillnecessitateasignificantincreaseininstalledcapacityin2050(CentralCoordination–140.5
GW,MarketRules–173.7GW,ThousandFlowers–148.5GW,comparedtothecurrentUKgenerating capacityof90GW).Thishighlightsthescaleoftheinvestmentchallengetobefacedinthecoming decadesinnotonlyreplacingexistingfossilfuelcapacitywithlowcarbontechnologies,butalsoin enablingtheincreasingelectrificationofheatandtransportsectors
3.1.2 Unpackinginvestmentrisk
Thisapproachofexploringradicallydifferentsocio-technicalconfigurationscouldallowactorsto thinkinamoresystemicwayabouttherelationshipbetweenriskanduncertaintiesassociatedwith alternativegovernanceprocessesandactoralignments.Thinkingintermsoflongtermintegrated pathways,whereaportfoliooftechnologies,ratherthansingleprojects,canbeconsideredatasystem levelcouldalsobeusefulinformulatingeffectivepolicymeasures.Hereanimportantquestionfor policymakerswillbetounderstandhowtheirdecisionsregardingthedesignofregulatoryframeworks forinfrastructureinvestmentcaninfluenceandpotentiallyhelptomanageinvestmentrisk
For large scale infrastructure systems, investment risk can bebroken downinto early stage financingandconstructionrisks(e.g.planningdelays,costoverruns,exchangeratefluctuations), technical/operationalrisks(e.g.riskoftechnicalfailure,higherthanexpectedmaintenancecosts)and marketrisks(e.g.riskoflowerthanexpecteddemand).Investorsaimtoquantifytheserisksinthe lightoffutureprojections,buttherisksareamplifiedbyfundamentaluncertaintyoverwhich,ifany, lowcarbonpathwaythecountywillfollow.Investmentrisksthereforeneedtobeunderstoodinthe contextofthesealternativesocio-technicalfutures
Inthecentralcoordinationpathwaythereisastrongrelianceonnucleartechnology.Recent expe-riencewithnewnuclearbuildsinFinlandandFrancehashighlightedthehighriskofcostoverruns, thereforeraisingtheconstructionriskinthispathway.Similarlyconstructionriskisaconcernfor investorsinoffshorewindfarms(PWC,2010),whichisanimportanttechnologyinthecentral coor-dinationandmarketrulespathways.Aquestionforgovernmentisthereforewhetherspecificpolicies arerequiredtomitigatethisconstructionriske.g.bycreatingabridgingmechanismwhichspreads riskbetweenprivateinvestorsandtaxpayers/customersduringtheearlyprojectphase.Thiswillhave implicationsforthetypeofpoliciesdesignedtoattractfinance,forexampleoneofourinterviewees notedthat“somepensionfundscouldbeattractedtoinvestdirectly [but]theywouldstrugglewith takingconstructionrisk”(Interview9)
Thisformofconstructionriskisperhapslessafeatureofthemoredistributedthousandflowers pathway.However,marketriskmaybecomeamoresignificantchallengeinthis pathway.Thisis becausethereisfallingdemandduetosuccessfulenergyefficiencymeasures,manycompeting gen-eratorsinthemarket,andastrongrelianceongovernmentsubsidiesintheformoffeed-intariffs Thesemarketrisksmayleadtoboom-bustinvestmentcyclesandcreateinstabilityintheelectricity
Trang 10sector.Mitigatingthisriskcouldnecessitatearadicallyredesignedelectricitymarketstructureanda strongerpoliticalcommitmenttorenewablesupportthanhaspreviouslybeendisplayedonthepart
ofgovernment
3.2 Understandingtransitiondynamicsandthetimingofinvestmentdecisions
Thediscussionabovehighlightstheimplicationsofstructuraluncertaintyinhowlowcarbon tran-sitionpathwayswillevolve,intermsofnewtechnologies,governancearrangementsandactorroles Operatinginthemidstofthisuncertaintyisofcourseanissueforgovernmentinsettinglongterm regulatoryframeworks,andprivateactorsinmakingcommercialinvestmentdecisions.Thisisdifficult becauseinfrastructureinvestmentshavelongtimehorizonsandinmanycasesinvestmentdecisions needtobemadeintheshorttermtomeetimmediatepolicyandeconomicgoals,raisingtheriskof
lock-intopotentiallyundesirablelongtermtrajectories.Thesecondareathatsocio-technicalresearchcan informpolicyishowanunderstandingofpathdependencyandnon-linearityintransitionpathways canhelptoovercomethislock-in
Thewidertechnologystudiesliteratureonpathdependencyandlock-in(Arthur,1989;David,1985; Unruh,2000)arguesthattechnicalchangeisnotmerelytheproductofanengineeringoreconomic rationality,rather‘timing,strategyandhistoriccircumstance,asmuchasoptimality,determinethe winner’(Unruh,2000).Historicalstudies(David,1985)andmodellingexercises(Arthur,1989,1994) havehighlightedhoweventsanddecisionsmadeintheearlystagesoftechnologicaldiffusioncan
beamplifiedandhaveenduringeffectsas‘winning’technologies,ordominantdesigns,benefitfrom positivefeedbackssuchaseconomiesofscale,learningeffects,adaptiveexpectations,andnetwork effectsassystemsexpandandbecomeincreasinglyinterconnected.Thesemechanismscancreate
asituationoflock-in,arisingfromtheco-evolutionoftechnologieswiththeirwiderinstitutional environment,whichcaninturnconditionfuturedecisionmakingandconstrainthescopeforradical innovation(Unruh,2000)
Thetransitionsliteraturecharacterisesthisprocessoflock-inandpathdependencyintermsof socio-technicalregimes(Geels,2004)whichareunderpinnedbystronginter-relationshipsbetween institutions,userpractises,businessstrategiesandinfrastructures.Viewedthroughthelensofpath dependencyandlock-in,theevolutionofregimescanbecharacterisedbyanumberofdistinctphases (Rotmansetal.,2001;Loorbach,2007):apredevelopmentphasecharacterisedbygradualchangeand experimentation,withmanycompetingtechnologies,atake-offphasewithmoreevidenceofstructural changeswheremechanismsoflock-inbegintotakeeffect,anaccelerationphasewheredominant designsemergeandstructuralchangesbecomemoredeeplyembedded,andfinallyastabilization phasewhereanewsystemstateisreachedandemphasisisonoptimisingtheexistingregimethrough incrementalinnovations.Ofcoursethisframeworksimplifiesamorecomplexandmessyrealitywhere differentphasesoftransitionarenotneatlydefinedandsequential,andthebordersbetweenone phaseandthenextareimpossibletodelineate.However,asatheoreticalconstruct,itmayprovidea structuredwayofthinkingthroughthepolicyandinvestmentchallengeofhavingtomakenearterm investmentdecisionsinthemidstofuncertaintyandwhichwillhavelongtermimplications TheenergytransitionintheUKislikelyinthepredevelopmentphaseortheearlystagesofthe take-offphaseasambitiousdecarbonisationandrenewabledeploymenttargetshavebeenputinplaceand structuralchangestotheelectricitysectorarebeginningtobeimplemented.WinskelandRadcliffe (2014)havecharacterisedtheemergenceofan‘acceleratedinnovation’imperativeintheUKwhere theprioritiesoftheenergyinnovationsystemisshiftingawayfromdiversityandthedevelopmentof nichetechnologies,toachievingcostreductionsinlargescaletechnologyprogrammessuchasCCSand offshorewind,inordertoachieveclimatechangetargets.Duringthisperiodthemainpriorityisonthe decarbonisationoftheelectricitygrid,whichaccordingtotheCommitteeonClimateChangewillneed
tooccurrelativelyrapidlyby2030,andfollowingthisadecarbonisationoftheentireenergysystem willneedtotakeplace,incorporatingtheheatandtransportsectors.AswasoutlinedinSection2,rapid powergriddecarbonisationisseenasafirststepprimarilybecausethereareanumberofrelatively maturelowcarbonoptionsavailable(windandnuclear),andinanycasetheUKwillneedtoreplace
anumberofitsageingcoal,nuclearandgasplantsoverthecomingdecade.Thetechnologyoptions fordecarbonisingheatandtransportarenotsoapparentandasaresultthereismuchlesscertainty