Theoretical Understanding of Energy Transition in Germany Part 1

In the last post, I looked through the history of Germany's Energiewende (Energy Transition). Based upon the historical narratives, what I would like to do today is to make some literature reviews on community initiatives in renewable energy (RE) development.

First and foremost, let me clarify some basic terms. Community initiatives are defined as 'decentralized, non-governmental initiatives of local communities and citizens to promote the production of particular goods or services (in this case RE)' (Oteman et al, 2014). In Germany, such RE schemes were quickly introduced following the first FIT scheme in 1990 and further accelerated in 2000 when Renewable Energy Act was passed through the Bundestag (Energy Transition, 2015).

Photo.1. Wind turbines in Ockholm Schleswig-Holstein, near the planned start of the new high-voltage power line (The Gurdian, 2014)

In the study undertaken by Oteman et al, (2014), there are three major theoretical explanations about the emergence and opportunities for community initiatives; agency-oriented; structure approach; and biophysical conditions. They share some common understanding about RE development, however, their approach is slightly different from each other.

Firstly, agency-oriented approach focuses on different individual features such as detailed local knowledge, intrinsic motivation and leadership capabilities. It comprises of four sub-components; cultural capacity; organizational capacity; infrastructural capacity and personal capacity. Cultural capacity describes what is considered to be legitimate and socially accepted as sustainable objectives. These are inherently embedded in their community values, and examples include autarky, anti-capitalism, energy security and anti-nuclear sentiments (Oteman et al, 2014). Organizational capacity looks at the position of community RE initiatives within the wider local community. It determines how socio-politically powerful they can be to engage people or key stakeholders to make initiatives prosperous (Oteman et al, 2014). When it succeeds, it creates a sense of ownership and responsibility, reducing the effects of Not-In-My-Back-Yard. Infrastructural capacity looks at the provision of facilities by government or the market, such as grid access. Lastly, personal capacity focuses on resources of the individual memebers of an initiatives such as voluntary contributions, skills, knowledge and leadership qualities, values and enthusiasm (Oteman et al, 2014).

I think the theory is very useful when it comes to describing the characteristics of individual RE initiatives. For instance, Germany displays great cultural capacity of 'green' values, which has been exemplified in the demolition movement of nuclear power plants and fossil fuel-based energy system (National Geographic, 2015). However, it does not really explain 'WHY' different countries display distinct patterns of appearance of RE community initiatives and their degree of success.

Secondly, structural approach looks into community RE initiatives from three different attributes; socio-cultural; economic; and legal (Oteman et al, 2014). Socio-cultural subsystem describes the public perception of energy and the role of community in this and attitude towards experimenting and innovation. This is equivalent to the cultural capacity in the agency-oriented approach. Economic attribute, however, is a very different approach to the former. It essentially looks at the division & allocation of financial and other material resources among the actors or general economic climate (Oteman et al, 2014). This emphasizes the fact that whether an initiative is economically viable and successful is highly dependent on the expected profitability of the project.

Legal attribute refers to the formal legislation that directly favours RE, for example, Electricity Acts, grid access, degree of territorial functional decentralization, structure of the policy and procedures for collective decision-making. It is a critical part that both promote and restrain the development of RE. Arguably, Germany would not have been able to achieve the current levels of community RE without a series of law that favours their development (Nolden, 2013). I suppose it is because, in market economy, large utility companies can easily price out the small-scale community energy companies / associations through economies of scale. It is an example of oligopoly where a relatively small number of firms dominate the industry (Gutiérrez-Alcaraz and Sheblé, 2006). Therefore, there needs to be government's intervention in supply side if community-level energy companies want to enter the industry. What I think the structure approach is significant is that it can be used to compare and explain the patterns of RE development in different countries because of the quantitative economic and legal approaches.

Thirdly, biological conditions fundamentally look into the biological and physical availability of RE production (Oteman et al, 2014). This includes the annual sunlight hours and wind potential which determine the potential energy production. It also refers to the spatial planning of the project such as the degree of urbanization and remoteness of rural regions. These spatial layout is an important physical condition that influences local structure and agency characteristics of RE development. In Germany, for instance, the north is frequently characterized by high wind potential and therefore most wind turbines are found there. By contrast, the south has historically struggled with implementing RE despite some solar panels and community-level wind turbines being increasingly introduced. In fact, it is still heavily reliant upon nuclear power (The Guardian, 2014). Although some cities like Munich have adopted a strategic plan to produce wind energy in the North Sea and feed their electricity demand, known as Dantysk project, to me, the true 'local energy security' does not seem to be met. I guess they also need to develop locally-produced alternatives such as biogas, so that in case the energy transmission is to be shut down or politically targeted.

Among these three approaches, Oteman et al (2014) put a great emphasis on the structural characteristics of the energy sector to give the theoretical understanding of the occurrence and development of RE. They argue that governance of the energy sector is managed through the combination of the following four institutional logics; market-oriented system; state-oriented system; community-oriented system; and corporatist associational order (Oteman et al, 2014). These essentially form a set of interrelated incentives & constraints that influence agent's behaviour and strategies. Here, the extent to which the state, market and associations are complementary to community RE initiatives and offer them 'institutional space' is studied as 'institutional arrangements theory' (Oteman et al, 2014). Halls and Taylor (2006) defines it as 'the formal/informal procedures, routines, norms and conventions embedded in the organizational structure of the polity/political economy', which are reflected in the structure approach. In other words, it describes the degree of discrepancy freedom of community initiatives to decide autonomously about the design a project its contents' (Oteman et al, 2014).

Now, the question is which kind of institutional arrangements Germany has made over the last few decades to achieve the famous energy transition. Has it always been community-oriented or a mixture with the market-oriented system? In the next post, I will further look into the theoretical understanding of energy transition in Germany with a particular focus on this institutitonal arrangements theory. Any thoughts or questions are more than welcome as always. :)