Theoretical Understanding of Energy Transition in Germany Part 2

Last week, I discussed brief theoretical analogy that explains how community energy can be developed. If you have not read it yet, you may find it useful to have a quick read though it from here. To recap some basic points, there are three different ways to describe the occurrence and opportunities for community initiatives; agency-oriented; structure approach; and biophysical conditions (Oteman et al, 2014). Among these, structure approach is considered the most appropriate because the governance of energy is managed through the combination of the following sets of institutional logics; market-oriented system; state-oriented system; community-oriented system; and corporatist association order (Oteman et al, 2014). Today, I will look into the structural aspects of Germany's energy transition considering the institutional arrangements theory.

Photo.1 Energy turbine in Germany (Reference: North East Windmills, 2013)

To begin with, let me clarify some key terminologies introduced above. Hall and Taylor (2006) define the theory as 'the formal / informal procedures, routines, norms and conventions embedded in the organizational structure of the polity or political economy'. In other words, it is a way of describing how politics is structured by non-political traits such as socio-cultural and economic aspects of the community. Oteman et al (2014) argue that the extent to which community initiatives become prosperous is highly dependent upon the degree of significance of each component. As I mentioned above, there are mainly four systems that can explain how initiatives are organized locally; market-oriented; state-oriented; community-oriented; and corporatist associational order. Now, let's explore each of these arrangements theory.

First of all, market-oriented system refers to a system in which the principle of dispersed competition and profit-making market players are the most influential actors (Oteman et al, 2014). It essentially favours larger market parties due to economies of scale therefore the entry of small-scale or non-profit players are almost impossible. Also, this provides little uniformity in rules and policies at local level since the government's intervention is limited. The consequence is lack of knowledge, resources and subsidies which are essential for community projects to be successful (Oteman et al, 2014). This further leads to lowering the availability of funding from private investors. Therefore, in this system, community initiatives are least likely to develop.

By contrast, in state-oriented order, a system is guided by hierarchical control with the government's intervention (Oteman et al, 2014). The advantages are the greater levels of funding, tenders and permission grants in comparison to the market-oriented system. However, it comes with some drawbacks such as little chance for new technology or experimental designs which do not fit into the institutional structure of rules and finance of the state (Oteman et al, 2014). In addition, there is sometimes friction in land use between the government and the locals because they do not always understand community values of land. For instance, if the government decides to cut and burn the part of local forests to construct solar PVs whilst local residents perceive natural beauty as one of the most valuable property of the community, the community incentives are likely to be lowered.

Next, community-oriented system is based on spontaneous solidarity of community actors (Oteman et al, 2014). Fundamentally, the incentives for community initiatives in this system are derived from their own experiences such as deforestation, pollution, security concern, and aspiration for socio-economic revitalization. In contrast to the state-oriented order, it leaves larger room for decentralized policy and local variation that is adjusted to specific circumstances, preferences or dominant ideas prevailing in the community. This enables to develop the local-specific knowledge and resources needed for the projects. Also, whether community initiatives develop capacity are counting upon the strength of the network among the community and other stakeholders. It provides good institutional space, namely, discrepancy freedom of community initiatives to decide autonomously about the design a project and its contents (Oteman et al, 2014). Nonetheless, some of the challenges they must face are limited funding from outside if the network is limited at the onset of projects, and voluntary attitudes of the locals are not always promising and therefore can deteriorate in long term.

Lastly, in corporatist associational order, a system is governed through an institutionalized and organized associational structure (Oteman et al, 2014). It is considered a new hybrid institution where societal roots of shared responsibility and environmental concerns are combined with market tasks such as profitability, security and access and governmental responsibilities (Oteman et al, 2014). This form of governance has already been seen in other sectors, for example, agricultural and housing associations (Oteman et al, 2014). In energy system, institutions are originally developed from community initiatives but are greatly institutionalized into a formal decision making body. It does not need to follow a full corporatist system, rather, it could also lead the system into the one in which state and civil society cooperate together to develop regulatory framework that brings about new modes of cooperation (Oteman et al, 2014).

These four institutional logics are not solely dominating one's energy sector, yet, countries show a various degree of combination of these systems. In Germany, (Oteman et al, 2014) aruge that the nation's energy transition shows the strongest trait of state-oriented system. As I described in the last two post, Germany's RE installation capacity started to increase rapidly once the FIT bill was passed through the Bundestag in 1990 and further accelerated in 2000 when Renewable Energy Act was introduced (Energy Transition, 2015). Until then, community initiatives were very limited because of the lack of knowledge, investor's confidence and funding.

Nonetheless, I think it is important to note that Germany's energy transition did not emerge out of the state. As explained in the earlier post, the key to the nation's oldest FIT legislation is the emergence of anti-nuclear sentiments in 70-80s (National Geographic, 2015). These local collective actions across the nation gradually led to the formation of Green Party, which contributed to introducing 'green' ideas to the Bundestag later on (National Geographic, 2015). This is also regarded as an example of the corporatist association order because the nationwide green movement resulted in the environmental associational structure, which then was formed into the Green Party that is now politically powerful in Germany today. Therefore, the emergence of Germany's energy transition was achieved in community-oriented system and was further developed through the state's intervention.

In the next post, I would like to discuss the future of Germany's energy transition. Any comments or questions are much appreciated!