1

Bilateral: The politics of low carbon innovation: towards a theory of niche protection Researchers in this proposal: Dr Adrian Smith (Principal Investigator, UK) Senior Research Fellow SPRU – Science & Technology Policy Research University of Sussex Dr Rob Raven (Principal Investigator, Netherlands) Assistant Professor Industrial Engineering & Innovation Sciences Technology, Innovation & Society Eindhoven University of Technology

Introduction Dutch and UK governments have ambitious carbon reduction targets. These imply transitions to low carbon electricity systems (Committee on Climate Change, 2008; VROM, 2001), which feature centrally in debates about desirable low carbon pathways (Giddens, 2009). We focus on this sector, and will analyse three low carbon technologies prominent in UK and Dutch policy debates: solar photovoltaics, offshore wind, and carbon capture and storage (CCS). Evolutionary theories of technological change consider incumbent technology systems as constituting a disadvantageous selection environment for low carbon alternatives (Nelson and Winter, 1982; Dosi, 1982). Alternatives develop in niches shielded (temporarily) from full competition with the incumbent ‘regime’ (Leventhal, 1998; Schot and Geels, 2007). Niches where experimentation and innovation is successful create socio-technical practices capable of influencing their selection environment and competing with the incumbent systems; whilst niches where experimentation does not generate improvements lose support and collapse. This niche theory attracts growing research and policy interest. It promises a more rounded approach to transitions than conventional frameworks, which are based narrowly in supply-side R&D subsidy and demand-side market signals (Kemp et al, 1998). The Dutch government adopted niche ideas in its Fourth National Environmental Policy Plan in 2001 (Smith and Kern, 2009); whilst an imminent low carbon industrial strategy, and papers on low carbon transitions, suggest important developments in the UK. The temporary provision of ‘protective space’ is essential to niche theory. This shelter enables real world experimentation of alternative low carbon practices. Surprisingly, the central concept of ‘protective space’ has been neither fully defined in the literature nor a focus for empirical investigation (Rip, 1992; Schot et al, 1994; Raven, 2005; Hommels et al, 2007; Smith, 2007; Raven et al, 2008; Schot and Geels, 2008). The processes for securing (and withdrawing) that protection, its (varied and dynamic) characteristics, and the consequences on the development of the niche, are poorly understood. The principal outcome of our research will be to address this major oversight: understanding how ‘protective spaces’ operate and evolve.

2

Moreover, there is a tendency to treat niche experimentation as a singularly rational and consensual process that achieves social learning (Kemp et al, 1998; Rotmans et al, 2001). Learning becomes embedded and embodied in institutional changes that further successful niche development (Hoogma et al, 2002). Yet as more political and economic attention and public resources are committed to low carbon transitions, so a growing variety of technology advocates will lobby for those resources, and try and realise their own interests in lower carbon ways. It consequently becomes increasingly important to develop an argumentative understanding of how protection is developed, applied, and withdrawn. Our innovation is to research this politics of securing ‘protective space’. This will help policy-makers reflect on their support activities over time for some key low carbon technologies. In particular we anticipate our political insights engaging practitioners concerned about building legitimacy behind increasingly urgent yet contentious low carbon innovations.

Research Questions Comparative case study analysis of photovoltaics, carbon capture and storage, and offshore wind in the Netherlands and the UK over the last 30 years will allow us to explore protective space dynamics. In each case we will answer the following research questions:

1. How have CCS, offshore wind, and photovoltaics niches developed in the UK and Netherlands?

2. What forms of protection against prevailing regimes have assisted these development processes; how has protection altered qualitatively over time; and how have advocates of these niches been able to secure these protections?

3. How is the gradual withdrawal of these protections anticipated (if at all), and under what circumstances?

4. How does this emerging theory of ‘protective space’ relate to processes of social learning, expectation development and actor network growth so central to niche theory?

5. What advantages does a political appreciation of niche development bring to our understanding of low carbon innovation?

Background: niche theory and the politics of protection Innovation is considered vital for low carbon transitions: political, business and civil society leaders with diverse ideological positions all speak of the opportunities for and benefits of a low carbon technological revolution (Steward, 2008). The challenge is to put in place adequate learning mechanisms and mobilise resources behind the most promising low carbon electricity systems. A generation of innovation studies has recognised that this involves social and institutional changes (e.g. new business models, institutional reforms, skills) working in tandem with the economic development of technological hardware (e.g. Russell and Williams, 2002). Drawing on this research tradition, transition studies theory argues radically transformative innovation is nurtured in partial and temporary ‘protective spaces’ where alternative ‘socio-technical practices’ can develop. A growing body of case studies point to the importance of social learning, the development of positive expectations, and supportive actor networks in the development of influential niches (see Schot and Geels, 2008, for a review). Niches deemed to be performing well attract increasing attention and

3

widening support, leading to institutional reforms that furthers growth and momentum, which displaces incumbent electricity systems. The temporary development and gradual withdrawal of a ‘protective space’ around niche experimentation is central to the theory. Indeed, existing markets, capabilities, business models, institutions, infrastructures, user routines, and so forth have all co-evolved in tandem with incumbent electricity generation technologies. These incumbent ‘socio-technical regimes’ constitute an unfavourable selection environment for low carbon alternatives. The argument goes that niches offer alternatives a more lenient environment where they can develop into robust and competitive forms that promise to supplant the incumbent practices.1 And yet, for a concept so central to niche theory, the notion of ‘protective space’ has not really been interrogated systematically. Empirical studies identify a variety of forms of protection that can inform a framework for analysing the concept more rigorously (Jacobsson and Lauber, 2006; Ulmanen et al, forthcoming). It is our intent to draw this into more coherent theory through further empirical research. Perhaps the most common notion of protection is economic: the provision of a subsidy (e.g. investment grant, or feed-in tariff) compensates for higher costs of technologies (Kemp, 1997). Over time, learning effects bring down the costs of the niche practice, such that subsidy requirements fall and the low carbon alternative can compete for investment and customers in a growing number of competitive markets (Zwaan and Rabl, 2004; Junginger et al, 2003; Pan and Kohler, 2007). This view considers grants or price supports to be sufficient to create proto-markets and draw in other resources necessary for furthering niche practices and assessing what levels of continued subsidy (if any) are worth maintaining. However, evidence suggests responses to economic incentives can be sticky and inelastic. Even generous financial incentives can fail to generate positive niche development. Fields like evolutionary economics and neo-institutional theories have suggested routine behaviour and institutional contexts to be extremely important (Nelson and Winter, 1982; Scott, 1995). It takes time to develop important new skill sets, for example, or to put in place the necessary planning permits for an experimental project. Thus an additional form of protection is institutional: securing alterations to norms and rules so that niche experimentation can proceed more smoothly. This might involve the modification of regulations, or suspending (temporarily) the normal rules and charges for connecting to electricity grids. Another form is socio-cognitive protection: space for new knowledge production. Indeed, niche innovations tend to require substantially different and distinct generalised knowledge, e.g. in the form of handbooks, best-practice publications, dedicated conferences and workshops, training programmes in order to familiarise workers or users with the new practice, and the like (Deuten, 2003). Obviously, this view considers R&D crucial to niche development, but also learning-by-doing and learning–by-using, and the establishment of intermediary actors that organise field-level learning processes and relate new knowledge to prevailing regimes (Raven et al, 2008). Cultural protection relates to the symbolic meaning and social value that the niche alternative signifies. Early users, for example, are prepared to accept poorer performance 1 This transition from incumbent ‘regime’ to low carbon alternatives also requires broader policy pressure to cut carbon, and which disadvantages the high carbon regime relative to promising niches (Rotmans et al, 2001).

4

and higher costs because the green credentials of, say, micro-renewables resonate with their strongly held identities and ideals (Smith, 2002). Likewise, large-scale innovations like off-shore wind and CCS may resonate with the engineering identities and business cultures of research and industrial communities. This view considers the establishment of user groups or diffusion of images, movies and stories that link the new innovation to wider cultural categories to be important. Wind turbines, for example, have become typical elements in images of how to escape from the current global financial crisis. Similarly, Al Gore’s climate movie has become a cultural reference point for many advocates to legitimise activities in green electricity systems. Evolutionary theories (see Schot and Geels, 2007 for a review) and economic geography (e.g. Asheim and Coenen, 2005) emphasise geographical protection: certain geographical locations provide specific resources for niche-innovations. Examples in low carbon niches might be proximity to depleting oil and gas wells in the North Sea in the case of CCS, or high winds and shallow waters in the case of offshore wind. Local (socio-economic) problem agenda’s such as regional development issues or historic knowledge and competence bases or local cultures can also concentrate low-carbon innovations in specific geographical areas. Hence, this view emphasises finding ‘the best available locations’ with an abundance of required resources. Political protection arises when technologies come to embody a practical expression of political programmes (Scrase and Smith, 2009). Constituencies that see the realisation of their social goals through certain technologies, at least in part, insert the support of those technologies within their demands upon the state. Governments too, can mobilise state resources behind technologies that fit their political agendas for, say, job creation. The way that pro- and anti-CCS groups put pressure not just on the government, but also lobby businesses, trades unions, and undertake public relations campaigns, and try and get political parties to back their technology is illustrative of seeking political protection. Protective space is multi-dimensional. Our hypothesis is that technology advocates engage politically to try and secure variations of these protections, and it is the above processes in combination that help shield an experimental socio-technical configuration from its selection environment. In terms of theory development, not only are we interested in how that protection arises, but also how it is woven into niche development processes deemed central to current theory, notably social learning, expectation dynamics and actor network formation in niches. This is the puzzle for us to solve, and is central to our research.

Our case study niches We have deliberately chosen case studies that represent contrasting technologies in terms of their relationship to incumbent electricity regimes. Each technology challenges current electricity regimes in different ways. This suggests advocates need to tailor protective space for different challenges and demonstrate successes in different ways. The generic features of the cases are summarised in table 1.

5

Table 1: rationales for case study selections.

Various forms of protection have been provided for our case study technologies in the UK and the Netherlands. Coal in the UK has seen a revival under plans for CCS. A long-standing programme of research into clean coal had provided the UK with some expertise in the area (socio-cognitive protection). Ideas for CCS appear to have revived this niche. There are plans for the demonstration of CCS on 300-400MW of capacity at between 2-4 new coal-fired power stations in the UK. Funding is currently uncertain, but it is likely to be a combination of up-front grants and a levy on consumer bills. Up-front engineering design costs will be met with £90m of public money. Yet CCS remains a controversial and unproven option, and providing legitimate support is difficult, even with powerful industry and high level political backing (i.e. political protection). The government is making clear its expectations that all new coal plant will need CCS by 2025, and is discussing the possibility of clustering plants to make CCS infrastructure easier (geographical protection). Publicly funded research into solar PV in the UK extends back many years. Support for the deployment of solar PV in the UK has been provided through a succession of demonstration and other funding programmes; most recently the Low Carbon Buildings Programme. These provide installation grants, and have often been over-subscribed.

6

Recent reforms have made PV less attractive for householders since the grant per household is capped at £2,500. Moreover, import and export arrangements for household PV under the Renewables Obligation have not been particularly conducive in the UK. This lack of institutional protection is being remedied through the creation of a feed-in-tariff for small generators, and legal requirements for electricity distributors to buy back PV electricity. Some analysts remain sceptical that these packages will kick-start the commercial deployment of this proven technology (Allen et al, 2007). The UK has considerable offshore engineering expertise (from oil and gas). There are hopes that UK-based firms can adapt their expertise to develop offshore wind. This suggests a certain degree of socio-cognitive protection is available, in addition to the favourable wind resources off the UK coast (geographic protection). A small cluster of offshore turbines was built in Blyth in 2000. Since then the government has leased concessions for a number of sites around its coast. The largest currently is the London Array in the Thames Estuary, whose progress has been complicated by changes in private sector ownership, partly due to uncertainties about the risky financial returns under the UK protective space for offshore development. Whilst the UK has ambitions for 25GW of offshore wind, its policy and support for infrastructure provision (particularly the funding of new offshore electricity grids), and market support for offshore electricity appears to be delaying progress. The recent budget recognised these barriers and boosted the amount of funding available to offshore wind. It remains to be seen whether this will lead to faster progress. Coal has always been an important resource for electricity generation in the Netherlands and it contributes to ~25% of total electricity generation. Currently energy utilities are considering the construction of 3-4 new ‘clean coal’ fired power plants. Proponents of wind and photovoltaics oppose these developments. Nevertheless, CCS advocates have secured various forms of protection. The national CCS research program CATO provides significant socio-cognitive space for new knowledge development. An abundance of (almost empty) natural gas fields in the Netherlands are said to be a crucially important geographical resource. High-level policy actors promote CCS, which is a critical element in the recent Dutch policy program ‘Clean and Efficient’. Several CCS projects are planned or ongoing. The most recent project is under an urban area in the municipality of Barendrecht, initiated by Shell and supported with a public grant of 30 million Euros. Stakeholders such as the Barendrecht municipality and local citizens oppose the project and question its desirability in fear of future leakage risks and collapsing house prices. Photovoltaic (PV) has seen remarkable protective space dynamics in the Netherlands since the 1970s (Verbong et al., 2008). Originally only university researchers supported PV, because the majority of policy actors perceived the geographical area of the Netherlands not beneficial to PV (‘the sun never shines in Holland’). Things changed in the 1990s, when lobbyists succeeded in convincing the Dutch government to embrace PV as the main long-term energy option. Shell made PV part of their long-term scenarios. Broad societal support led to vastly increased budgets for R&D and pilot projects. However, a re-evaluation of options for greenhouse gas reduction in the late 1990s turned out bad for PV: it scored poor on contribution to renewable energy and price. Shell decided to move its factory to Germany and policy focus shifted back to wind and bioenergy. PV, however, continues to find a protective space in research networks such as at the Energy Research Centre of the Netherlands. Financial protection was re-established last year with a feed-in arrangement for small and medium scale

7

photovoltaic cells. This feed-in facilitated rapid uptake, which indicates strong support for PV among consumers. Wind turbines have been developed and implemented in the Netherlands since the 1970s. Nevertheless, wind turbine technology has yet to gain significant market share (currently ~4%). Off-shore wind has been pushed by advocates since the late 1990s. A geographical area equivalent to 6000 MW turbine capacity became a leading 2020 target in policy white papers. Initial socio-cognitive protection was created around two small-scale wind parks (2 and 17 MW). After the turn of the century, energy utility consortia constructed two commercial wind farms (108 and 120 MW). A new program ‘We@Sea’ bundled Dutch knowledge an expertise. The current government is committed to realise at least 450 MW, but this target is increasingly considered as being unrealistic. Financial protection in the form of public support measures has seen major fluctuations in the last decade, while proponents continue to question economic feasibility of off-shore wind in the long run. The case introductions above reveal a dynamic protective space situation. Our analytical challenge is to understand each case in greater depth, to reveal the political processes by which these protections were won (and lost) over time, and to study the consequences for the development of each technology. The advantage of a Dutch-UK comparison is that the governance styles in each country are quite distinct, and thus provide contrasting settings for the creation of protective spaces for essentially the same technologies. The Dutch government, in collaboration with business and some ENGOs, has been implementing niche ideas in its policy approach (Kemp et al, 2007; Smith and Kern, 2009). The UK, in contrast, is only recently turning away from an official, market-based policy of being neutral towards low carbon technologies. In practice, its support for the niches studied has been ad hoc, and not followed any common process or shared strategic framework. Our hypothesis is that winning protection is a common political endeavour in both countries, but that these different contexts afford different opportunities and constraints for technology advocates. Consequently, we propose a research design that addresses the politics of protection and niche formation.

Research design Our theory discussion anticipates complex interrelations between many emerging variables; which is why we adopt a case study approach and follow qualitative research methodology. Considering niche protection as an argumentative, political process means our analytical entry point will be niche advocates lobbying and persuading others that their solution promises to deliver on the public goal of deep carbon cuts.2 We will track how advocates secure a protective redistribution of human, material and economic resources (distributed amongst other political, business and social actors) and deploy them into niche experimentation. The basic design framework is to follow a four stage process for each case study. The first stage is to obtain a general appreciation of the history of each case in relation to the prevailing electricity regime. The second stage is to focus on the detailed political processes by which various forms of protection were secured over time. The third stage will explore how the protected space was filled with experiments. The fourth stage provides an analysis by iterating between evidence 2 Note that PV and offshore wind have histories that predate carbon reduction concerns (e.g. in responses to the 1970s energy crises), whilst all three technologies claim to deliver other sustainable development benefits (including enhanced energy security). Our analysis will also consider these claims, which augment the carbon reduction imperative, and build into an overall storyline that argues for public support/protective space.

8

gathered in stages two and three. This approach is presented schematically in Figure 1. Each case study forms a separate work package with deliverables. A fifth and final stage will involve comparative analysis and synthesis across cases and countries (see below). Figure 1: A schematic representation of our research design framework

Stage 1: background for each case We will orientate ourselves initially by drawing upon the specialist press (e.g. ENDS Report and Renew in the UK; Milieu, Energie in the Netherlands), and a literature review of scientific articles on each niche (e.g. in Energy Policy). We will complement this with grey literature (e.g. company Annual Reports, think tanks reports, trade association and NGO documents), key policy documents (e.g. White Papers), archives of responses to policy consultations, Parliamentary debates, web-sites of key actors, and Ministerial speeches and announcements. This documentary material will also contribute to the analyses in stages two, three and four below. Clarifications concerning the general background for each case, and how to orientate our analysis will be sought through 6 interviews with expert observers in each country (two per case, e.g. Jim Watson and Philip Vergragt on CCS in the UK and Netherlands). Stage 2: A political analysis of protective space Our political analysis adopts a synthesis of policy analysis frameworks developed by Keeley and Scoones (2003). We will look at the different arguments advanced by advocates of each technology, and the audiences to whom these arguments are made. In other words, we are interested in the policy narratives that are developed and the claims being made for supporting the technology. We will also analyse the networks of actors

9

(coalitions and alliances of individual organisations and institutions) that contribute to the development of these narratives. This includes research teams who evaluate a technology’s promise, energy utilities investing in the technology, supportive environmental NGOs, regions with a comparative advantage in transferring into the new industry, and so on. Of course, all of the actors concerned have their own interests, not least securing resources and protection for their technologies; and some are more powerfully able to assert those interests than others. This includes the interests of the government to remain in power, and the bureaucratic interests of the civil servants administering support systems. With advocacy of low carbon technologies as our entry point, and the processes by which support is built up, we then analyse the way it provides economic, institutional, geographic, cultural, political and socio-cognitive protection. Indicators of evidence we anticipate for each form of protection are summarised in Table 2. Where quantitative measures are readily available, then we will gather that material, otherwise we will rely on qualitative evidence for how policy is giving preferential treatment to the development of each technology. Table 2: A summary of empirical indicators of different forms of niche ‘protective space’.

Stage 3: Analysing experimentation in niches Alongside our political analysis, we will undertake a more conventional analysis of the internal processes of niche development. Hence, this stage will highlight how protected spaces become filled with experiments and investigate their contribution to niche development. Conventional SNM studies have highlighted the crucial role of learning in niche experimentation. In particular these studies have highlighted multi-dimensional learning – i.e. covering not only techno-economic optimisation, but also alignment between the technical (e.g. technical design, infrastructure) and the social (e.g. user preferences, regulations, cultural meaning). Second-order learning is also emphasised, i.e. questioning underlying assumptions such as social values, and the willingness to fundamentally change course. Social networks are considered particularly powerful in experimentation when they are heterogeneous (including technology actors and social

10

actors and regime insiders and outsiders). Articulating expectations is deemed crucial in experimentation. Articulating expectations helps to reduce uncertainty in innovation processes, they enable the mobilisation of resources by providing promises about future benefits and once accepted and transformed in (public or private) agenda’s they act as scripts that position and influence others. As with stage 2, initial documentary analysis (carrying over from stage 1) will be complemented with semi-structured interviews with key protagonists, advocates and critics in the development of each niche. Initial informants, revealed to us by documents, will be complemented through a snowball sampling technique (i.e. asking informants who else we should interview). We plan 15 interviews per case study per country that each focus on both protective measures and experimentation. Stage 4: Analysis of relations between the politics of protective space and experimentation in niches In this stage, the material gathered in stages two and three will be cross-referenced, triangulated and analysed. It is this stage where our research is most promising and exploratory. Hence, we do not have straightforward hypotheses about detailed relationships. The main working method is inductive reasoning from the empirical work towards patterns and relationships between the politics of protective spaces and internal niche dynamics. As we move from case to case we expect to be able to develop more robust theory through pattern matching and international comparison. In answering our five research questions (above), we anticipate analyses of the following relationships to be particularly important:

1. Social networks. Social networks are important for experimentation and for understanding the politics of niche development (see above), but how do they relate? Are the social networks (partly) overlapping? Do we find distinct features of those networks?

2. Expectations and narratives. Promising expectations create legitimacy for experimentation and play a role in drawing in resources into experimentation once accepted by others. How do they relate to narratives considered important in our political analysis? What makes narratives politically powerful? Do they differ from powerful expectations for experimentation?

3. Interests and experimentation. Interests are deemed important in the politics of niche protective spaces, but are not central in understanding the role of experimentation in conventional niche analysis. What is added by a focus on interests? How do present-day interests colour future oriented expectations? How does social learning reinforce or reconfigure the realisation of actor interests?

4. Social learning and changes in protective spaces. One can expect feedback relationships between outcome of experimentation and dynamics in niche protection. How do outcomes relate to collapsing or expanding of the niche protected space? How important are learning outcomes of experimentation in relation to other factors, e.g. wider dynamics in prevailing regimes or major political changes?

5. Interests, narratives and social learning. Social learning in current niche theories is currently conceptualised as a straightforward singular process. How are outcomes of social learning processes strategically constructed? Are they contested, if so how, by whom, and for what political purpose and with what interests?

11

Our answers and theory will be tested throughout through engagement with practitioner insights, especially at two dedicated policy workshops in London and the Hague; discussions with leading academics at a specially convened two-day seminar; as well as presenting to other workshops and conferences (see dissemination).

Research management and team Dr Adrian Smith is the Principal Investigator in the UK and will undertake all the fieldwork and analysis under a 100 per cent FTE commitment to the project. In the Netherlands, Dr Rob Raven will be the Principal Investigator and will recruit a post-doc full-time to undertake the fieldwork and help with the analysis. As PIs, Adrian and Rob will take responsibility for their respective budgets and ensuring progress against the schedule (see Gantt chart in the Annex). Research management is organised across a series of Work Packages (WP) and is summarised in Table 3 and in the Gantt chart. Team meetings at the beginning of the project, the start of each case study, and at the beginning of the synthesis phase will alternate between Eindhoven and SPRU. Face-to-face meetings will be complemented with regular ‘phone conference calls every month to review progress and ensure the milestones are achieved. More frequent email contact will be kept on a day-to-day or weekly basis as necessary. Raven (Dutch PI) will spend one week at Sussex working on the research design and planning as part of the first visit. The Dutch post-doc will spend four weeks at Sussex at the comparative analysis stage (months 30 and 31) in order to facilitate high qualitity synthesis of findings. On the occasion of each team meeting, the overseas researcher(s) will also visit and give a seminar to another UK or Dutch research institute, in order to build Dutch-UK networks and disseminate the project.

12

Table 3: Organisation of the work packages and research outputs

Dissemination and expected outcomes We anticipate presenting our research at a variety of international conferences and workshops. In order to make efficient and effective use of resources, we will agree in advance which of the research partners will attend each conference. In instances where joint attendance is deemed sufficiently beneficial, then we will also include time for project meetings around that event. We will feedback any lessons and responses through our regular project management communication channels. Academic dissemination (see Academic Beneficiaries section for full details) will culminate in a two-day academic seminar with participants presenting related work from the US, Europe and UK. It will test and consolidate our research outputs, and with the aim of producing a special issue journal from the best papers. The seminar will be held at

13

the University of Sussex. In addition, we anticipate five peer reviewed articles (see table 3). As their CVs demonstrate, both Rob and Adrian are leading experts in niche theory and empirical analysis. They have a strong track record in disseminating and publishing their findings, and are involved in international research networks in sustainability transitions. Moreover, both applicants regularly engage with policy actors in their respective countries. The Impact Plan indicates how they will maintain an engaged approach throughout this research project. As well as exploiting opportunities afforded by ongoing policy processes, the partners will convene policy workshops in London and the Hague and produce a widely disseminated Policy Briefing. Finally, project web-pages will provide up-to-date information, working papers, etc and will be hosted on the Sussex Energy Group website. This will be mirrored on the website of the Eindhoven Centre for Innovation Studies and both will link to the program website of the Dutch Transition Studies group. [WORD COUNT: 4812]