1.UNIVERSITEITMAASTRICHTBUSINESSSCHOOL(UMBS) INSTITUTD'ADMINISTRATIONDESENTREPRISESIAEAIXENPROVENCE AUDENCIANANTES.ECOLEDEMANAGEMENT ESCUELADEALTADIRECCINYADMINISTRACINEADA,BARCELONA LEONKOZMINSKYACADEMYOFENTREPRENEURSHIPANDMANAGEMENT(LKAEM)HHLLIEPZIGGRADUATESCHOOLOFMANAGEMENTAndassociatedpartner:OPENUNIVERSITEITNEDERLAND Master ThesisSubmitted in partial fulfillment of the requirements for theEuro*MBA Branding of non-profit organizations, a case study of collaborative innovation and commercialization in the U.S.A. renewable energy industry. Student: James Flock Version date: February 8th, 2010 Supervisor:Dr. Clemens Bechter DECLARATIONOFORIGINALITYOFWORK: Iaffirmthattheattachedworkisentirelymyownexceptwherethe wordsorideasofotherwritersarespecificallyacknowledgedthrough theuseofinvertedcommasandintextreferences.Thisthesishasnot beensubmittedforanyothersubjectatEuro*MBAoranyother institution.Ihaverevised,edited,andproofreadthispaper.

2. J.Flock - Branding Non Profits Euro*MBA List of Tables and Figures List of Tables Table 1: Best Global Brands 2009 (Interbrand) ....................................................................................... 17 Table 2: Total Variance Explained............................................................................................................. 49 Table 3: Rotated Component Matrix ......................................................................................................... 51 Table 4: Gender Differences ....................................................................................................................... 64 Table 5: Network Value Cycle (Estimate) ................................................................................................. 82 Table 6: Coefficients Regression................................................................................................................. 83 List of Figures Figure 1: Research Framework .................................................................................................................. 12 Figure 2: VENN-Diagram: Literature Review Classic Articles ......................................................... 13 Figure 3: Study 2 Mapping MBP and FBP (Grohmann, 2009) .............................................................. 16 Figure 4: Price and Product/image differentiation in commodity and branded markets (Pike, 2009)22 Figure 5: Taxonomy User Contribution Systems (Cook, 2008)............................................................... 25 Figure 6: Open Source Model of Wiki-Based Customer-Centricity (Wagner & Majchrzak, 2007).... 27 Figure 7: Open and Closed Innovation (Chesbrough & Appleyard, 2007) ............................................ 28 Figure 8: U.S. Energy Consumption by fuel (EIA, 2009) ......................................................................... 33 Figure 9: U.S. Energy Mix 2008 (EIA, 2009)............................................................................................. 34 Figure 10: Renewable / Nonrenewable Energy Centralized Grid Percentages taken from EIA (EIA, 2009) .............................................................................................................................................................. 37 Figure 11: Schematic of an example CM (Hatziagyriou et al, 2007)....................................................... 43 Figure 12: Energy Flow within a Microgrid (Hatziargyriou et al, 2007)................................................ 44 Figure 13: Climate Change Targets, US World Resource Institute (National Grid, 2008) .................. 45 Figure 14: Cluster country distribution..................................................................................................... 66 Figure 15: Cluster variable User_content................................................................................................. 67 Figure 16: Cluster Networkcost.................................................................................................................. 68 Figure 17: Cluster Brand ............................................................................................................................ 70 Figure 18: Cluster Renewables ................................................................................................................... 71 Figure 19: Cluster Residential .................................................................................................................... 72 Figure 20: Cluster Handson ........................................................................................................................ 73 Figure 21: Cluster Leave ............................................................................................................................. 75 Figure 22: Cluster Need_gov....................................................................................................................... 76 Figure 23: Cluster Designers....................................................................................................................... 78 Figure 24: Cluster All_ok ............................................................................................................................ 79 Figure 25: Network Value Cycle (Estimated)........................................................................................... 82 Figure 26: Regression .................................................................................................................................. 84 Figure 27: Renewable Energy Innovation community model ................................................................. 87List of Tables and Figures................................................................................................ 2 List of Tables ..................................................................................................................... 2 List of Figures.................................................................................................................... 2 Abstract.............................................................................................................................. 5 1.0 Introduction................................................................................................................. 7 2 3. J.Flock - Branding Non Profits Euro*MBA1.1 Rationale of study.................................................................................................................7 1.2 Research Objectives ...........................................................................................................10 1.3 Research Framework and Methodology ..........................................................................11 1.4 Limitations and Scope for Further Research ..................................................................14 2.0 Literature Review ..................................................................................................... 142.1 Branding..............................................................................................................................152.1.1 Brand Fundamentals.......................................................................................................152.1.2 The Non-Profit Brand .....................................................................................................182.1.3 The Commodity Brand ...................................................................................................212.1.4 Co-Branding.....................................................................................................................222.2 User Contribution Systems................................................................................................242.2.1 Innovation Community...................................................................................................242.3 Energy..................................................................................................................................322.3.1 Market Trends.................................................................................................................322.3.2 Conventional Energy Process.........................................................................................372.3.3 RPS - Renewable Portfolio Standard ............................................................................372.3.4 FIT Feed in Tariff.........................................................................................................382.3.5 Smart Grid .......................................................................................................................402.3.6 Micro-grid ........................................................................................................................412.3.7 Carbon Tax ......................................................................................................................452.3.8 Technology Trends ..........................................................................................................46 3.0 Dimensions of User Perceptions .............................................................................. 49 4.0 Interpretation of Dimensions ................................................................................... 514.1 Innovation Community - Product......................................................................................514.2 Illusion of choice - Placement.............................................................................................534.3 Signal Processing Placement ...........................................................................................544.4 The RenewShow - Placement .............................................................................................564.5 B^3 - Promotion...................................................................................................................574.6 Real Deal - Price ................................................................................................................584.7 The Man Incumbent power ..............................................................................................594.8 Value for you Price / Promotion......................................................................................61 5.0 Gender Differences ................................................................................................... 62 6.0 Geographical Grouping............................................................................................ 656.1 Gift Economy ......................................................................................................................676.2 Community Cost.................................................................................................................686.3 Brand ...................................................................................................................................706.4 Renewables..........................................................................................................................716.5 Residential...........................................................................................................................726.6 Learn by doing....................................................................................................................736.7 Support ................................................................................................................................756.8 Need for Government.........................................................................................................766.9 Designers .............................................................................................................................786.10 Conventional Wisdom ......................................................................................................79 7.0 Further Qualitative Findings ................................................................................... 807.1 Network Equation ..............................................................................................................81 8.0 Conclusion and Recommendations ......................................................................... 843 4. J.Flock - Branding Non ProfitsEuro*MBAAppendix.......................................................................................................................... 89 Section A Survey (Likert Scale) .............................................................................................89 Section B Group Comparisons (T-Test) .................................................................................91 Section C Network equation (variation) .................................................................................94 Section D....................................................................................................................................95 Bibliography .................................................................................................................... 95 4 5. J.Flock - Branding Non Profits Euro*MBA Abstract This research is focused on branding of a renewable energy non-profit. Which exists in the framework of network theory, open innovation, and methods for new technology dispersal. To attract or draw members, clients, and supply-chains to this network, a clearly defined value proposition must be embedded in the brand equity.To create engagement with a potential network member of a non-profit, multi- stakeholder perception, of renewable energy technologies, methods of brand communication need to be determined, so as to deliver the value proposition of the brand, thus influencing the dispersal of the network.Apriori, the starting points for renewable energy sources are different than that of non-renewable energy sources. The former are based along the thinking of Rachael Carson [1962] (Karvonen, 2008) summarized in her breakthrough work titled Silent Spring. Under this view, society is viewed from the socio-bio eco-system perspective, where the whole is viewed to be greater than the sum of the parts. Whereas the latter, energy production from non-renewable sources, is based in the context of a synergy of conventional machines, with defined rational for every part to serve the efficiency of those controlling the divided parts. The sum of the parts is greater than the whole. Adam Smith (1918) called this phenomena division of labor, in his influential book on economics titled, Wealth of Nations.In terms of usage as an energy source, non-renewables are considered an ideal production source based upon the reliance on a tightly controlled and defined supply chain from source to consumption. On the other hand, renewables are considered sensitive in terms of a volatile input imposing environmental constrains, thus affecting the output capacity, hampering the predictable energy quality and supply.Early adopters of the Carson view, in the context of energy, accepted the risks inherent with the output volatility and in turn created a local consumption environment that seems to, on average, balance consumption with production of electrical energy. Furthermore, the early adopters made this choice for many reasons, but one factor that all the early adopters faced as a ramification of their decision was the hurdle of high initial investment. This high initial investment coupled with other factors, beyond the scope of 5 6. J.Flock - Branding Non ProfitsEuro*MBAthis paper, is what many consumers consider to be the cause for the lack of real market penetration of renewables in the U.S.A. This paper will mainly focus on promoting alternatives in energy production as a means to increase market penetration of renewable energy and energy efficiency measures in the U.S.A. The market place has infinite segments and multiple stakeholders and thus the idea proposed in this analysis is to create a network where open communication can organically grow, but be monitored and directed. The goal of this analysis is to address the barriers of renewable energy and energy efficiency measures from a customer perspective of energy on a massive project scale. Therefore, the proposal of this paper is to consider a web-based application to develop an innovation community focused on addressing the issues of the deployment of renewable energy and energy efficiency concepts for the average consumer. The mixing of ideas in an open source forum to solve project-based issues should augment existing programs with a reduced cost and learning curve for the end user. To achieve this understanding on renewables and energy efficiency, a literature review will be conducted to identify the fundamentals of an innovation community. More importantly though, research into the branding process, specifically of a non-profit as a means to engage, influence, and direct the potential market will be conducted. This project as proposed, would be initiated in an effort to promote the mass penetration of renewables from a demand point-of-view, minimizing the need for state intervention in the sector of energy production and consumption.To discover if this concept can be achieved or not a user perception survey was distributed by the way of an online survey. The analysis of the results of the survey found major dimensions of stakeholder perception combined with gender and geographical differences. The results are further analyzing in the context of the extensive literature review to determine a conclusion and also recommendations for future research in this area. 6 7. J.Flock - Branding Non Profits Euro*MBA 1.0 Introduction1.1 Rationale of study In December 2008, a team formed that would create the business plan for a non- profit business idea known as the Global Sustainability Center (GSC). An entrepreneur, with little funding, led the project. Three MBA students two students from Case Weatherhead School of Management (Cleveland, OH) and one student from the Euro*MBA (European Consortium) were tasked with constructing the business plan that would assist them in gaining requirements towards their graduation. The author of this papers role was in the area of the marketing budget and plan. The business plan was to directly challenge the research findings from a report generated by the Greater Cleveland Partnership (Greater Cleveland Partnership, 2008), that stated the concept of GSC was, not a good fit for Cleveland, and would not attract membership beyond the local region, which limited the concepts effectiveness for the region. The GSC concept (Norman, 2009), as initially understood by the MBA students, was to be a network hub, or an innovation community, that was to target three specific market segments. This innovation communitys sole purpose was to be the market incubator for existing products in the renewable energy and energy efficiency sector related to building construction, and would have a physical space, in Cleveland, OH U.S.A. During the course of the project, the MBA students, as the previous planners (Greater Cleveland Partnership) before them discovered, that the business concept, as was presented to them, had many financial short falls in terms of generating sustainable revenue. The goal of what the business was to conceive was unable to be achieved on the planned revenue stream. Furthermore, the business GSC, as it was uncovered in the planning stages, had no real competitive advantage. Therefore, to attract potential network members, the community of GSC was to rely on the targeted segments desire, portion of their marketing budget, and good will to participate as a member of the community. The MBA team agreed that a key feature, namely the branding of the service, was missing from the original concept. Despite the not-for-profit status, it was determined in 7 8. J.Flock - Branding Non Profits Euro*MBAthe marketing plan that the main competitive advantage for this business concept was ultimately in the selected brand type. Branding of the business activity was a key factor in driving the increase in membership. Additionally, as the membership base grew, the value proposition of a well-connected supply chain could be realized, which would achieve the mission of the non-profit acting as the market incubator for renewable energy and energy efficiency technologies for all building types.However, to develop and promote the brand, it was crucial to maintain a substantial marketing budget. For the GSC marketing budget plan, as a benchmark, another non-profit brand, CLE+ / Simply Cleveland was referenced for justification of the financial figures (Norman, 2009) of the planned marketing budget. CLE+ was used based upon specific criteria, such as similar mission, region, and concept of creating a brand to attract businesses to a common hub, Northeast Ohio, or network, business in Northeast Ohio, with the intent to draw upon synergies that can exist once in the community. Nevertheless, in the business plan, the cash flow curve timeline was very long to achieve positive cash flow and demonstrated that an annual deficit was going to occur based upon the large marketing budget and limited number of revenue sources. After considerable debate, the budget for GSC, was created to move away from philanthropic institutions as sole funding sources and to operate with less dependency upon governmental assistance or grants. Therefore, it was then the realization occurred, supported by the financial figures, that the concept, GSC, as defined initially, was to fail, the intent to get funding not realized. One of the M.B.A. students considered an alternative scenario might improve the chances for sustainable income. That scenario first required feedback to demonstrate how multi-stakeholders would respond to a renewable energy brand campaign. Therefore, as the project for the GSC business plan drew to a close, this masters thesis began and was to focus on branding a non-profit, the concept of the network, an interactive web-based community, for connecting supply chains for the renewable energy and energy efficiency in buildings. At the time of this writing, the mass market has not adopted renewable energy and energy efficient technology for many reasons, of which will be the primary discussion of 8 9. J.Flock - Branding Non ProfitsEuro*MBAthis paper. As one reads this analysis, consider that most if not all, technology follow an S-curve in their market share development, therefore, a key statement to make is why is the distribution of electrical energy different? Is the energy network commodity not ruled by market forces just as other commodities, products, and services? This paper will focus on looking to the gap that has formed between multi-stakeholder expectations, the market demand, and market supply related to renewable energy and energy efficiency current product and service offerings. Secondly, it will expand upon the evolving discussion around the innovation community concept, identifying the benefits in promoting networks and furthering the supply chain connectivity, specifically related to renewable energy and energy efficiency.A critical goal of this research is to begin a discussion to determine whether these open innovation communities truly channel latent innovation at the stakeholder level into realistic economic activities? Furthermore, it is extremely important to identify the specific stakeholder brand dimensions to create this engagement, attempting to close the gap between multi-stakeholder demand and market supply in this U.S.A energy sector. Throughout this discussion, will be looking to the activity of branding in the context of a renewable energy in a not-for-profit innovation community. The goal being, that to truly impact and make the most gains in terms of financial and social reward, the mainstream stakeholders must feel a connection to this renewable energy technology and begin to consider the commodity of energy similar to other consumer products where the illusion of choice is plentiful. This, in turn, would move society towards a more efficient path when considering the resources on the planet, striking a balance between the Carson and Smith points of view. Maybe an innovation community for renewable energy can consider a fresh method to communicate energy and energy efficiency ideas, for instance what makes the most efficient use of resources: a market or central planning? Possibly a brand is the tool that could assist in cultivating the demand embedded in the marketplace. The rationale for organizing as an innovation community and looking to the value of the user contribution model as a means to incubate technologies and connect unique value chains; without departing from the sense of urgency required to address the pressing needs for sustainable energy systems, it is imperative that the involvement of9 10. J.Flock - Branding Non Profits Euro*MBApeople at the grassroots level is harnessed and sound commercial and technical criteria are applied (Jefferson, 2008). As grass roots activities involve organizing various disciplines around a common-mission or goal, and relying on time and talent from volunteers contributing to the mission of the non-profit. In addition, this research seeks to understand the perception of the stakeholders on issues surrounding a renewable energy non-profit. This is based on the puzzling perception, surrounding the latest push of the green buzz, in the U.S.A. by the corporate and political elite. Despite this enormous push, there continues to exist a lack of proliferation of energy production as renewables, and mainstream efficiency implementation into buildings. The increased usage, by mainstream media, of the word green gives the perception that the stakeholders are interested in adapting the way in which energy is consumed and produced. However, status quo on both side of the value chain, for electrical energy, remains dominant in the U.S.A. marketplace. The confusion on this point is echoed by the McKinsey (2009) Group in their report titled Unlocking Energy Efficiency in the US Economy. The preface of the report introduces the topic as such: How is it that so many energy efficiency opportunities worth more than $130 billion annually to the U.S. economy can go unrealized, despite decades of public awareness campaigns, federal, and state programs and targeted action by individual companies, non-governmental organizations and private individuals (McKinsey, 2009). Therefore, the scope of the research will focus on the following hypotheses: Renewable energy products and solutions can gain market share in absence of governmental support if non-profit innovation communities develop strong brands. Furthermore, branding is the tool that can create engagement between the market and information (supply) to make environmentally balanced decisions related to energy consumption. See Section D in appendix for the historical motivation for this paper and the connection to Northeast Ohio, U.S.A.1.2 Research ObjectivesIt was seen from the GSC business plan that the concept of a market incubator will not function; sustain revenue, as a brick and mortar entity, at least in Cleveland, OH 10 11. J.Flock - Branding Non ProfitsEuro*MBAU.S.A. Either, attracting clients as a B2B hub or an end-user network center or even as means to connect suppliers with end-users; it seems the concept is not financially favorable. There is no incentive, as initially proposed in GSC business plan (Norman 2009), in the first instance to attract broad-based clients, the potential community members, to the center. Therefore, the objectives for this paper are to analyze the concepts: 1. Non-profit branding to create high level of stake-holder engagement 2. Innovation communities to drive innovation 3. Current U.S. energy market and its branding implications 4. Emerging trends in this area of open innovation and 5. Give recommendations for branding of non-profit organizations involved inrenewable energy.The research questions are: What are the stakeholders perceptions of a renewable energy (RE) innovationcommunity? What method of promotion of the RE innovation community will maximizenetwork growth? What is U.S.A. market forecast for energy alternatives? Do innovation communitys assist in promoting RE solutions to the market? 1.3 Research Framework and Methodology 11 12. J.Flock - Branding Non ProfitsEuro*MBA Figure 1: Research Framework The focus of the research will be to determine if the weak penetration of renewable energy and energy efficiency products, mainly in the U.S.A., despite high degree of product and service differentiation, can be corrected to meet the growing segment in this commodity sector, by branding a renewable energy innovation community. The following will be the process to achieve this goal. 1. Perform literature review in the relevant areas2. Create and distribute a stake-holder perception survey on the topic3. Analyze the results, quantitatively and qualitatively4. Draw conclusions from evidence considered in context of theory5. Make recommendations12 13. J.Flock - Branding Non Profits Euro*MBALiterature Review overview Figure 2: VENN-Diagram: Literature Review Classic ArticlesSurvey DetailsInsight into stakeholder perception on problem statement was to be addressed by distribution of a survey. The survey was conducted utilizing an online survey tool. The survey was opened on the 10th of March 2009. It was advertised and distributed on the authors personal Facebook and Linked-in pages and through personal emails to colleagues. Two personal responses were gained from participants working in the renewable industry; both were given the renewable energy portion of the survey. The survey was closed online, on the 23rd of March 2009 with 81 respondents initiating the survey.The survey was intended to determine the perceptions of the end users of electricity and renewable products. A non-attribute approach was used. The twenty-two13 14. J.Flock - Branding Non Profits Euro*MBAstatements made in the survey gauged the respondents opinions on a one (low) to seven (high) Likert scale ranging from least agreement (low) to most agreement (high) with a four rating as neutral on the statement.1.4 Limitations and Scope for Further ResearchThe primary strength of the research was the competence of respondents. Social networking tools were used to obtain a wide variety of respondents as the network used had a wide variety of opinions, cultures, and locations. In addition, various groups of respondents from different nationalities and industry backgrounds responded to the survey. Countries of the respondents were recorded for geographical clustering purposes. A weakness of the data collection is that a more targeted audience (stake-holders) in the form of a Quota sampling would potentially provide more specific details in the actual brand construction and brand dimension for a potential value proposition. Furthermore, the research was unable to get at the critical factors of a realistic brand launch program. To achieve this, the survey requires revision and a more costly distribution to target segments that would be potential members in the non-profit business concept. Finally, this activity if placed more specifically, in the context of brand perception, referencing other non-profit brands would possibly yield more specific details on brand dimensions required to accurately address the problems of creating the brand personality. With the introduction, rationale, and framework established, the analysis will now begin. The literature review will explore three primary areas, Branding, Innovation Community, and Energy in the U.S.A. The section 2.1, branding, is a composite of research based in theory throughout the 1990s to the present, at the time of this writing. 2.0 Literature Review 14 15. J.Flock - Branding Non ProfitsEuro*MBA2.1 BrandingSteve Case co-founder of America Online stated in a May 2005 Wall Street Journal article,that brand programs can contribute to significant social change. I can't agree more, but would add this: These programs (non profit-branding) will drive social change that will endure (Chiagouris, 2005).2.1.1 Brand FundamentalsBrand definitions include brands being a logo, legal instrument, image in the consumers mind, risk reducer, value system, adding value, personality, relationship, shorthand an evolving entity, a company and an identity system (Dickenson & Barker, 2007). Branding, endowing services and products with the power of a brand, is currently and has in the past been an effective way to communicate meaning. The meaning communicated often was important to the establishment of a shared set of values between the individuals that recognized and respected the brand. For example, to brand is literally to label, burn or mark. Even to place indelibly in the memory or stigmatize. Originating in pre-Roman livestock, pottery, and medieval trades, brands marked identifiable distinctions in property as proof of ownership or marks of infamy (Room, 1998) and established differentiated and recognizable identities for goods and trades in competition (Tregear, 2003). Brand names, signs and logos evolved to identify and articulate the character of goods and services (Riezebos, 2003) and reassure consumers of quality (Pike, 2009). Furthermore, successful brand managers recognize that people do not respond to objective reality but to their perception of reality (Boulding 1956; Stride and Lee, 2007). Therefore, if put into context of a brand campaign, a brand does not need to provide the appearance of being connected to the product or service offered. This statement is based upon the concept that, a brand is used as an expression of ones personality (Aaker, 1996).Branding, currently, can be a costly endeavor. For example, the cost of introducing a new brand in some consumer markets has been estimated to range from $10 million to more than $200 million (Kolter &Amstrong, 2004; Kwon, 2006). Branding is extremely costly when gender specific brands are utilized. Instead of double branding to 15 16. J.Flock - Branding Non ProfitsEuro*MBAmeet the gender preferences, a growing trend of companies is using the same brand name to target both sex segments (Kwon, 2006). Figure 3: Study 2 Mapping MBP and FBP (Grohmann, 2009) As the figure 3 above demonstrates, contemporary brands are located in what could be considered, in the range of slightly masculine to nearly neutral gender. The grouping cluster on the chart in Figure 3 is measured by the y axis of masculine brand personality [MBP] and x axis of feminine brand personality [FBP]. Research of the critical role of gender in a brand demonstrates a strong factor that men will almost reject feminine brands while women will most likely accept masculine brands (Kwon, 2006). To go further on this, men tend to exaggerate the differences in brands more markedly than women (Kwon, 2006). Essentially, men identify with a male oriented brand and will reject a female oriented brand. 16 17. J.Flock - Branding Non ProfitsEuro*MBA Brand ranking from 2009 demonstrates the value of equity in a brand. The data in Table 1 can be interpreted in a variety of ways, but what should be noted, relevant to this study; brand equity is extremely important for products that exist in markets where threat of substitution are high and for products that are attempting to pull the market up based on the price point, which are dependent on the targeted segments image of social class. Table 1: Best Global Brands 2009 (Interbrand) Rank Company Country ofBrand Value ($m)ownership1Coca-Cola USA 68734 2IBM USA 60211 3Microsoft USA 56647 4GEUSA 47777 5Nokia Finland 34864 6McDonalds USA 32275 7GoogleUSA 31980 8ToyotaJapan 31330 9Intel USA 30636 10 DisneyUSA 28447 11 HPUSA 24096 12 Mercedes-Benz Germany 23867 13 GilletteUSA 22841 14 Cisco USA 22030 15 BMW Germany 21671 16 Louie VuttonFrance21120 17 MarlboroUSA 19010 18 Honda Japan 17803 19 Samsung Republic of Korea 17518 20 Apple USA 15433 Over time, branded objects and branding processes accumulate histories that are social and spatial and matter to their evolution. (Pike, 2009) Brands are essential for communication in a society where value is exchanged. These brands are costly to cultivate and thus typically drive to engage across gender lines. Similar to cultural or country stereotypes, gender stereotypes should influence the perception and judgment of any object, including consumer products and brands (Alreck, Settle and Belch, 1982). Keller (1998) also argues that some brands in the marketplace possess certain gender-specific associations so that consumers associate the individual brands user as specifically from either sex. Nevertheless, the concept of the brand and the relevance to the target segment is of extreme relevance. The brand is imbued with its own unique qualities and 17 18. J.Flock - Branding Non Profits Euro*MBAcharacteristics, a brand can provide emotional and self-expressive benefits to the consumer (Stride and Lee, 2007). To engage the target, the brand must drive to the core instinct, connecting with the inner self. An understanding of the complex value dimensions operating within the brand relationship provides the consumer with an opportunity to express symbolically an actual self (Belk, 1988), or an ideal self (Malhotra, 1988). Brand image, or how the consumer perceives the brand, plays a central role in the Customer Based Brand Equity model (Keller, 1998) where it is claimed that the power of a brand lies in what resides in the minds of customers (Stride and Lee, 2007). Moreover, valued brands achieve this inner brain, emotional, connection with the consumer. Branding is primarily conducted to grab and maintain the attention of the consumer. This activity, the grabbing attention, is an effect of the market that the product or service resides within. Typically in markets where multiple products are competing for attention, differentiation or the appearance of being different is natural. Being different and expressing this difference, individuality, is the forward movement in the social human experience. In the arena of product and service competition, the brandscape, brands exhibit very similar characteristics. These characteristics beam to the consumer the attempt to convey a difference, an attempt to stand-alone from the others. However, whilst differentiation remains the key objective of branding (Kapferer, 1992), the focus of branding has shifted from the tangible aspects such as name and logo to intangible elements such as brand personality and emotional benefits (Aaker, 1996; Keller, 1998). With advances in technology that made it possible for companies to replicate high quality products of their competitors it was no longer sufficient just to promote a product, it had to be enhanced in some way (Kotler, 1997). Brands therefore acquired an emotional dimension that reflected buyers' moods, personalities, and the messages they wish to convey to others (de Chernatony and Dall'Olmo Riley, 1998; Stride and Lee, 2007).2.1.2 The Non-Profit BrandBrands are the natural response of a desire for engagement in a competitive environment. Competition for awareness or attention has been a constant for most brands 18 19. J.Flock - Branding Non Profits Euro*MBAobserved in the for-profit sector. Increasingly, as the climate of human consciousness shifts to an increase in social concerns, many for profit companies are not prepared to meet the new social requirements from an overly informed and aware market. Recently, as of this writing, more and more non-governmental organizations have been increasing their presence, attempting to meet a demand not being filled by the for profit companies. With the rise in non-profit organizations, many of these organizations have overlapping missions. While resources and capital are typically derived from the same sources, the burden to standout, to attract the resources and capital, falls on the non- profit organization. This requirement of needing resources and capital puts downward pressure on the organization to meet its mission. One of the ways in which non-profits are responding to this increase in competition is by adopting branding techniques developed in the corporate context (Stride and Lee, 2007). This shift in thinking, branding a non-profit, moves the organization away from the typical cycle of dependence upon philanthropic donations and governmental funding. Again, the branding activity seems to be a natural posture when value differences exists and resources are limited. However, while branding a non-profit may seem natural in a competitive world, it is argued by some, that brand orientation helps voluntary organizations develop trust across key stakeholder communities (Tapp, 1996; Ritchie, Swami et al., 1998), strengthen awareness amongst target audiences (Hankinson, 2000) and build charity loyalty within donor and supporter groups (Ritchie, Swami et al., 1998), other academics and practitioners have expressed concern that the unquestioned adoption of techniques developed in the for-profit context has contributed to the charity sector becoming over-commercialized (Sternberg 1998; Salamon 1999; Stride and Lee, 2007). Despite the grumbling from the academics and pure practitioners, branding a non- profit is extremely practical in terms of budget efficiency, if people are going to donate time or money or become members, they want to know what the brand is all about; they want to know the mission statement (Chiagouris, 2005). More importantly, a compelling brand image is more important to non-profits than commercial sector companies for one fundamental reason: Nonprofits do not have the resources to send their messages to large numbers of people through the media. They cannot solve awareness19 20. J.Flock - Branding Non ProfitsEuro*MBAchallenges with more advertising weight, but must define and execute their branding objectives right out of the gate (Chiagouris, 2005). Perhaps the academics and practitioners are concerned about the subtle differences in branding between the for-profit and non-profit sector. The initial reaction from the academic is first and foremost, skepticism. This skepticism is not unwarranted, as the nuances between the profit and non-profit sector must be managed. Effective brand management in the non-profit context is more complex than simply satisfying donor needs. To be truly effective, non-profit brands need to address a number of additional organizational objectives. The most widely cited include lobbying (Hankinson, 2000), education and the communication of the cause itself (Tapp, 1996) and image and reputation management (Polonsky and Macdonald, 2000; Stride and Lee, 2007). The non-profit is thought to be meeting needs that focus on the common good, where return on risk (financial) is not possible to be recovered. The common good is structured or rather rests upon a foundation of a clearly defined value system. This value system is what the non-profit typically promotes through its operations, working to fulfill its mission. For an organization to work towards a specific charitable purpose that is of benefit to society, it must have a value system that both underpins and indeed drives the charity's operations. This implies that the values are not optional or negotiable but are integral to the organization itself (Stride and Lee, 2003). This contrasts with the more flexible nature of values in the commercial context, the objective of which is to ensure survival in an external environment (Schein 1985; Stride and Lee, 2007). Promotion of nonprofits typically come in the form of some benefit or activity that generates interest based on personal gratification or social event but also has the additional benefit that the money generated from the registration is destined for the mission of the nonprofit. Athletic events typically bring the participants together and thus their participation promotes the brand of the nonprofit furthering the mission. The Unique Selling Proposition (USP). The USP is central to the brand message. Some call it the brand promise; others refer to it as the net impression. Whatever the label, it is the 20 21. J.Flock - Branding Non ProfitsEuro*MBAprimary thought the target audience should take from encounters with the brand, a composite of brand attributes and benefits (Chiagouris, 2009). In this instance the non-profit with limited financial resources can now reach and engage a customer base that will associate the mission favorably based on the already existing equity in the commercial brand. These brands or products can be represented physically (e.g. bundled package of two or more brands) or symbolically (e.g. advertisement) by association of brand names, logos or other proprietary assets of the brand. Various terminologies have been used to describe these alliances including cause branding strategies (Cone et al., 2003) cause-marketing alliances (Till & Nowak, 2000), co-branding (Dickinson & Ramaseshan, 2004a, 2004b), cross promotion, joint branding and symbiotic marketing (Adler, 1966). Brand alliances generate a relationship that is not necessarily cause' specific (as in cause-related marketing) and as such, are an overall collaboration between two partner brands without necessarily referring to a specific charity drive event (Dickinson & Barker, 2007). Lastly, whilst concentration upon mission and vision achievement and core values is crucial to successful branding, so to remains the ability to differentiate through image in a competitive and increasingly cluttered marketplace. The majority of non-profit branding commentators would agree, is first achieved through effective logo, tagline and identity design (Ind and Bell 1999, Naddaf 2004; Stride and Lee, 2007).2.1.3 The Commodity BrandCommodity branding is the alternative approach to marketing that could potentially have value for the RE, renewable energy, innovation community. Observations in other sectors demonstrate the success of this particular type of branding. For example the, got, milk? branding campaign was a tremendous success, in that it influenced demand to meet the over production on the supply of milk in the US dairy farmer market. Awareness of the got milk? branding campaign rated of 90% nationally (US), making it a highly successful brand (Christensen, 2008). A commodity is a good with very little differentiation. Beef, milk, cell phones, and PV, photovoltaic, are all examples of commodities. When it comes to marketing a commodity an individual companys marketing expenditures tend to have a poor return. (Renewable Energy 21 22. J.Flock - Branding Non ProfitsEuro*MBAWorld, 2008). Furthermore, Instead of putting so much emphasis into nickel and diming the cost effectiveness of solar, perhaps the solar industry would be best served by utilizing a collective branding effort in order to bring solar to the mainstream (Renewable Energy World, 2008). Note the chart below to gauge the stark difference between commodity and branded markets. Figure 4: Price and Product/image differentiation in commodity and branded markets (Pike, 2009)2.1.4 Co-Branding Brand alliances build brand equity by transferring new associations between partner brands and increasing familiarity across established as well as new markets. From a commercial entity perspective, developing brand capital is a financial burden making branding alliances appealing as they result in image enhancement because nonprofit brand knowledge structures usually have higher levels of trust and confidence that can be transferred to the commercial entity (Austin, 2000; Dickenson & Barker, 2007).22 23. J.Flock - Branding Non Profits Euro*MBAAlternatively, The twenty-first century will be the age of alliances. In this age, collaboration between non-profit organizations and corporations will grow in frequency and strategic importance (Dickenson & Barker, 2007).Possibly the largest hurdle for the branding of a non-profit is financing the brand program. To meet this challenge, a particular technique, co-branding, is introduced to further the brand of the non-profit to the market. Brand extension theory provides a strong basis to understand evaluations in the context of co-branding. The key assumptions of this theory are that if respondents view a match' or 'fit' between the original brand and the extended brand (or in this case two individual partner brands) then the positive associations that the respondent holds towards the original brand (each individual partner brand) may be transferred to the new extension the brand alliance (Aaker and Keller, 1990) and there may be resulting spillover effects on original brand attitudes (Simonin & Ruth, 1998; Dickinson & Barker, 2007). Partnering with a commercial brand can introduce the less known non-profit image to an already existing, ready and waiting audience. Non profit entities can acquire financial resources from the commercial partner through long term alliance sponsorships, together with cause-related donations that the commercial brand may choose to support as well as benefits of more favorable brand attitudes due to positive associations derived from the commercial partner brand. Similarly, commercial entities want to gain more from their brands and one way to do this is to form branding alliances with non-profit organizations where response to their brand is attenuated as a result of the alliance associations (Porter and Kramer, 2002). Ultimately, by having a brand alliance, organizations are able to transfer original brand attitudes from a partner brand to their own brand, which is a more economical way of managing brand knowledge (Dickinson & Barker, 2007). Given that a key motivation of commercial entities is to transfer positive affect between a non-profit brand and their commercial brand, the measure of how great an impact the brand alliance has had is ultimately the spillover effects. These spillover effects relate to changes in brand attitudes, brand image and brand equity (Javalgi et al., 1994; Dickinson & Barker, 2007). The brand must be promoted in networks beyond the do-it-yourselfers, the early23 24. J.Flock - Branding Non ProfitsEuro*MBAadopters of RE technology. Various terminologies have been used to describe these alliances including cause branding strategies (Cone et al., 2003) cause-marketing alliances (Till and Nowak, 2000), co-branding (Dickinson and Ramaseshan, 2004a, 2004b), cross promotion, joint branding and symbiotic marketing (Adler, 1966). Brand alliances generate a relationship that is not necessarily cause' specific (as in cause-related marketing) (Dickenson & Barker, 2007).Perceived fit between two brand partners in an alliance has been seen to be important for positive brand alliance evaluations (Keller and Aaker, 1992; Simonin and Ruth, 1998). Indeed, the majority of the literature reviewed suggests that the most important condition for brand enhancement is the fit between the core brand: and the extension. Past research has shown that consumer perceptions of how well the products together influenced attitudes toward the joint offering of the partners (Yadav, 1993; Simonin and Ruth, 1995 Park et al, 1996; Simonin and Ruth, 1998; Dickinson & Barker, 2007). With an increasing interest in non-profit and commercial alliances such as recent high profile alliances between McDonald's and Diabetes Australia as well as Toyota and Planet Ark, an understanding of how consumers receive these alliances is important. Brand alliances rely on 'transfer affect (Dickenson & Barker, 2007). The synthesis of the two forces is the brand and thus the promotional atmosphere must incorporate participants from both of these factions in a non-compromising or non-threatening way. The fundamentals of branding, in both a profit and non-profit framework are important to the analysis underway in this document. Branding is the tool to connect to the market. In this next section, will discuss the what is suggested to connect to the market. Therefore, the discussion will now turn to the innovation community or the network and open innovation.2.2 User Contribution Systems2.2.1 Innovation CommunityThe concept of user contribution isnt new. However, both the Internet highfliers (E-Bay, Amazon, etc.) and the old-economy behemoths (General Motors, General 24 25. J.Flock - Branding Non Profits Euro*MBAElectric, I.B.M. etc.) have actively created something called a user contribution system. That is, theyve created methods, usually internet-based, for aggregating and leveraging peoples contributions or behaviors in ways that are useful to other people (Cook, 2008).In an innovation community, user content is the commodity or the currency that is in circulation. The value of the community is made by the volume of subscriber content, user contribution, in circulation in the respective network. The discussion of user contribution systems, a.k.a. innovation communities, involves two types: active and passive systems (Cook, 2008). Figure 5: Taxonomy User Contribution Systems (Cook, 2008) Active systems, such as these, focus the image of the network on specifically attracting subscribers to contribute content. Conversely, passive systems tend to rely on a25 26. J.Flock - Branding Non ProfitsEuro*MBAtechnology or infrastructure that is designed to collect and log data and determine trends in consumer behaviors. User contribution systems turn to the consumers for the concepts that will generate value. These systems pose a challenge to the long unquestioned beliefs about management and the role of management (in an organization), the value of experts and the need for control of the customer experience and the importance of quality assurance (Cook, 2008). User contribution systems inverses the traditional organization information flow in that it, creates value for a business as a consequence of the value it delivers to users (Cook, 2008). The innovation community leverages a synergy that can naturally occur in a community, the sharing and knowledge transfer between non-official partnerships, facilitating the organic growth of a network. Once members, of the community, exist utilizing and adding content to the network, the value of the network increases at a rate greater than one for every new member (Wagner & Majchrzak, 2007). This rate of increase of membership is driven by a low entry barrier to join the network. A low, financial, barrier to enter the community often drives the high subscription rates in these communities because, for a user contribution system, payment can destroy participation by undermining a sense of collaboration and trust. Rather, these systems rely on motivations intrinsic to humanity (Cook, 2008). The concept of the innovation community challenges the conventional thinking in respect to the core drivers of value creation and human economic activity. The challenge is that, we are not only acquisitive economic beings but also inquisitive social beings with a desire for other forms of interaction, oriented around shared identities, values and community spirit, which enable us, in varying degrees, to shape our lived experience outside the realm of commodities and prices (Currah, 2007). An open innovation platform is a framework that channels the user contribution to value creation. In active systems, motivation by the participants is extremely critical to developing the community. To attract members who would like to contribute, a certain level of organization structure needs to be in place to allow the contribution to be 26 27. J.Flock - Branding Non Profits Euro*MBAchanneled effectively. The five factors that are important for facilitating participation in an open source community are (Wagner & Majchrzak, 2007): Value Proposition Community Expertise Governance of the community Processes for co-creation Technology Figure 6: Open Source Model of Wiki-Based Customer-Centricity (Wagner & Majchrzak, 2007) These factors are considered the critical reference for the open source or wiki- community to grow and cultivate value from the community. With these factors in place, can then characterize the types of open and closed innovation platforms. Defined, passive systems tend to be more in-house; where active systems lean towards a 27 28. J.Flock - Branding Non Profits Euro*MBAcommunity-driven approach.If we are to make strategic sense of innovation communities, ecosystems, networks, and their implications for competitive advantage, we need a new approach to strategywhat we call open strategy (Chesbrough & Appleyard, 2007). Figure 7: Open and Closed Innovation (Chesbrough & Appleyard, 2007) An open innovation system creates value when community-driven. However, the open innovation presents a challenge to the conventional method of conducting business because shifting the focus from ownership to the concept of openness requires a re- consideration of the processes that underlies value creation and value capture. Our notion of openness is defined as the pooling of knowledge for innovative purposes where the contributors have access to the inputs of others and cannot exert exclusive rights over the resultant innovation. In its purest form, the value created through an open process would 28 29. J.Flock - Branding Non Profits Euro*MBAapproach that of a public good. It would be non-rival in that when someone consumed it, it would not degrade the experience of a subsequent user. It also would be non- excludable so all comers could gain access... (Chesbrough & Appleyard, 2007). Open innovation takes confidence and self-assurance on the part of the management to allow value creation processes to become non-linear and incorporate the intangibles of social interaction. However, the open innovation user contribution system still must possess some structured role to utilize the value created in the community, as noted in the model. Management of the company retains control of the system and may choose to modify its design, the system, converting inputs into useful outputs in real time with little or no intervention by the company (Cook, 2008). The company and management processes become the conduit to channel innovation rather than being the driver of innovation. All of the traditional views are based upon ownership and control as the key levers in achieving strategic success. All focus largely within the firm, or within the value chain in which the firm is embedded. None take much notice of the potential value of external resources that are not owned by the firm in question, but may nonetheless create value for the firm. These external resources, such as volunteer contributors, innovation communities and ecosystems, and surrounding networks represent growing sources of value creation (Chesbrough & Appleyard, 2007). An effective open strategy will balance value capture and value creation instead of losing sight of value capture during the pursuit of innovation (Chesbrough & Appleyard, 2007). The members of the community are thus bound by sharing the value that unfolds from their contributions. The circulation of gifts leaves a series of interconnected relationships in its wake which imbues the community with a form of decentralized cohesiveness (Hyde 2006: Currah, 2007). This cohesiveness begins to form a commons not only of resources but also of shared values (Hess & Ostrom 2007; Currah, 2007). Gifted information from a community member has higher content value based upon the social value exceeding the commercial value (Currah, 2007). Which supports the statement, today we see communities with evolving patterns of participation, value derived from co-created knowledge rather than software artifacts, knowledge that evolves as it is used rather than treated as an object that is periodically29 30. J.Flock - Branding Non ProfitsEuro*MBAreleased, and technologies specifically suited for co-creation rather than adopted for discussions and version control... (Wagner & Majchrzak, 2007). Open innovation is a balance, a balance between the two extreme poles of extreme commercial interests and those of extreme social connectivity. For example, an excessive degree of commodification and control (through property rights) risks the enclosure and under-utilization of creative works ; while an excessive degree of sharing and freedom (through gift exchange) risks the implosion and underproduction of creative works (Currah, 2007). Determining this balance is where the role of management is to be asserted in this emerging innovative environment. Similar to current transactions, the emergence of the digital networked environment has sparked a battle between, on the one hand, the corporations and, on the other hand, advocates of digital freedom, free culture, and cyber liberty (Currah, 2007). As a result of the user contribution system a new economy is burgeoned to form. This environment where users transfer ideas self-generated or a derivative of a copy righted are collectively known as the realm of the gift economy. These gift economies operate within virtual spaces of social interaction that have been opened up by Internet- based communications protocol as a result the Internet actually comprises a network of myriad gift economies, which continue to undergo expansion and diversification, both in parallel and at the intersection of different communication protocols (Currah, 2007).The gifts created by the users in a sense are advertisements. The contributions lead to the formation of the contributors brand. Each contribution that is created for the network or shared with the network has in a sense the elements of a personal advertisement. Three dimensions motivate consumers to create advertisements: Intrinsic enjoyment, Self Promotion and Change Perception (Berthon et al, 2008). These gifts allow for cross-pollination between the centrally controlled market structures. This mixing of markets based now on the preference of the actors within the networked communities drives consumer preference at the source. The innovation community can be the market place for most distant of market actors. This activity has been defined by OReilly (2005) as web 2.0 or e-commerce. 30 31. J.Flock - Branding Non Profits Euro*MBA The innovation community, which has been facilitated by improvements in technology, from the centralized corporations, is the driver that has formed what is called the web 2.0 commerce. The core competencies (of a web 2.0 business) OReilly listed are: The company provides services, not packagedsoftware, and they can be cost-effectively scaled They have control over the content in their database,which gets richer the more people use it They trust users as co-designers They harness collective intelligence They leverage "the long tail" of the Web throughcustomer self-service, Their software is not platform specific, Their user interfaces, development models and business models arelightweight and can be "snapped together" and mashed up, (OReilly, Christopher, 2007) The Web 2.0 based market tells the story of the natural or organic capacity of human interaction, and that is witnessed through the myriads of web-based commercial and social transactions daily. O'Reilly calls hyper-linking the foundation of the Web because users add new content and new sites and as other users discover them, they create hyper-links that bind them together into the network. The web of connections grows organically (OReilly, Christopher, 2007).Simply put, commodities and gifts are both vital to the expression of creativity in its myriad forms (Currah, 2007).From this point in the literature review, the theory is in place for the business concept of the scope of this document. However, it is also of extreme importance to place these concepts in a practical setting where it will serve the market. Therefore, the next chapter will briefly address regulatory and market mechanisms from a historical reference to what is currently attempting to meet the markets demand for alternatives in energy market in the U.S.A. 31 32. J.Flock - Branding Non Profits Euro*MBA2.3 EnergyExternalities are defined as benefits or costs generated as an unintended by- product of an economic activity that do not accrue to the parties involved in the activity. Environmental externalities are benefits or costs that manifest themselves through changes in the physical biological environment (Owen, 2006). 2.3.1 Market TrendsWe are currently witnessing one of those rare events in history when there arises a head-on conflict between a line of development in a society and a new social attitude. Consider these alternatives: On the one side, we have a vigorous growth in energy consumption, closelyrelated to a rising standard of living. On the other side, we have a widespread public concern with preservation of theenvironment, which has been translated into restrictive standards and regulations(Netschert, 1973).The above was written in the early 1970s. Below is the current prediction of fuel consumption. 32 33. J.Flock - Branding Non Profits Euro*MBAFigure 8: U.S. Energy Consumption by fuel (EIA, 2009)The irony is that after a generation of awareness, the topic of energy production and consumption remains under debate with no equitable solution for both sides of the equation concretely developed. The social-bio concerns echoed by the Carson philosophic view are being addressed by an attempt at a race to the top global legislation, yet the commercial burden of this will be passed onto the consumer in the form of taxation. While the commerce business first, Laissez-faire market advocates remain challenged and insecure as the transaction costs, the social costs to the commons, of energy production remain debated. However, this area is currently under much debate and the outcomes at the time of the writing have not been completely defined.The energy market in the U.S.A. has been a tightly state regulated sector. However, despite the strong controls imposed by state regulation related to the production and transmission and distribution of electrical energy, only a handful of private firms or holding companies manage the operations of these capital-intensive activities. This oligopic control of the energy commodity, which in general allows growth and progress, has brought unification to the U.S.A. market place, but has also been slow to adapt to the changing social demands, related to conservation and efficiency. Consider first the matter of energy growth. The aggregate consumption of energy in the United States has increased in almost every year of this century except during the depression years in the 1930's. One of the causes of the growth in energy consumption is, of course, population increase (Netschert, 1973). Also it was recognized then that the energy growth rate has been faster than that of population, indicating that per capita consumption is also increasing. This is due in large part to the increasing electrification of energy use. The growth in electricity consumption has consistently exceeded that of aggregate energy consumption: the compound growth rate during the 1960's was 7.57%; per-capita use increased at an annual rate of 6.2% (Netschert, 1973). In large measure, this reflects general affluence, in which householders continue to acquire high-load appliances and equipment such as electric dryers, quick-recovery water heaters, self- cleaning ovens, frost-free refrigerators, color TV sets, air-conditioning, and electric space heating (Netschert, 1973). 33 34. J.Flock - Branding Non Profits Euro*MBAWhile holding the historical mirror to face of the U.S.A. policy makers and to the politicians engaged in the control of energy in the U.S.A. (is somewhat enjoyable), the scoff of pious disdain shouldnt be left un-challenged. To be fair, there has been some movement in the energy marketplace to address the concerns of Netscherts (1973) article addressing the Carson point-of-view concerns. The increasing presence of renewable energy production demonstrates the means to produce energy can be achieved in balance with environmental concerns. Figure 9 below provides a breakdown of the energy sources in terms of BTU (British Thermal Units) for the U.S.A. in 2008.Thus, the promotion of renewable alternatives to fossil fuels involves a complex process of interaction among a variety of actors (Ogihara et al, 2007). Figure 9: U.S. Energy Mix 2008 (EIA, 2009) 34 35. J.Flock - Branding Non ProfitsEuro*MBA The planned centralized grid for 2020 provides a mix of energy production sources of which renewables are expected to become 10% (EIA, 2009) of that production mix. To achieve this increase there are to be regulatory instruments to assist this energy production mix target. Feed in tariff, Renewable Portfolio Standards, Smart Grid, and a possible Carbon Tax are regulatory techniques that are devised to proliferate market penetration of energy from renewable sources along with improving the management of individual building energy usage. The method least discussed to achieve higher renewable energy production sources is a technique called decentralized energy, a.k.a. Micro-grid. Much of the literature on this topic states that the penetration of renewable energy and energy efficiency lags far behind the stakeholder perspective in the first instance, and in the second, in terms of financial gains made in energy savings. For example, surveys consistently reveal customer preference for green power. (P&GJ, 2002) However, despite the technologies for energy efficiency and production being readily available the consumer adoption has been slow (Caird & Roy, 2008). In addition, according to the McKinsey (2009) report, the energy efficiency sector, if executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion. For example, just taking one portion of the renewable technologies production portfolio, photovoltaic (PV) at $2 to $2.50 per installed watt, the annual market potential for grid-connected residential and commercial building PV applications is estimated at 2,900 MW, representing an annual market of about $6.6 billion, including equipment and installations (Renewable Energy World, 2005). Nevertheless, the bottom line for renewable energy systems, the starting points (for renewable energy systems) are very low. Even 30% per annum increases in rated capacity (it) takes many years to make a big impact at the global level (Jefferson, 2008). From a financial rational perspective, slow adoption of renewable or green technologies is slow, simply stated, because the risk premium of investment in these technologies on conventional scaled implementation is too high. Energy as a commodity has remained largely produced by non-renewable sources for the reason that non- renewable commodities are non-stochastic, whereas renewable sources contain uncertainty in supply, which increases the risk premium during investment planning. 35 36. J.Flock - Branding Non ProfitsEuro*MBA This uncertainty, of renewable resources, reduces rent and increases the rate of extraction of the resource but has implications for the degree of regulation when property rights cannot be assigned and maintained (Pindyck, 1984). However, if demand for the nonrenewable resource is elastic so that the extraction rate falls when the stock is low, then less regulation may be needed (Pindyck, 1984). From the stakeholder perspective, the basic human need to feel secure dominates the discussion on energy and less about determining the risk premium on a stochastic resource. Nevertheless, the conventional wisdom has been that ecological uncertainty increases the need for regulation (Pindyck, 1984). In the USA energy market the beginning of regulatory and policy level techniques are being introduced as a method to meet the socio-ecologic concern from the market. The following are a few of the predominant policy level techniques that promise to bring higher penetration of renewables and energy efficiency to the market. However, it remains difficult to predict that any of these techniques are reacting to the market demand appropriately. This is based upon the fundamentals that, the speed of the development of alternative energy is limited by the laws of physics and economics. Regardless of their good intentions, legislators cannot circumvent these engineering and market realities by simply ordering the purchase of specified percentages of RPS (renewable portfolio standards) qualifying energy on a politically developed schedule (Greenwald, 2007). 36 37. J.Flock - Branding Non ProfitsEuro*MBA2.3.2 Conventional Energy Process Figure 10: Renewable / Nonrenewable Energy Centralized Grid Percentages taken from EIA (EIA, 2009) FIT = FEED IN TARIFF (FIT Coalition, 2009); RPS = Renewable Portfolio Standard (FIT Coalition, 2009) 2.3.3 RPS - Renewable Portfolio StandardAfter reviewing the research on this subject the following definition provides the most straightforward definition. A Renewable Portfolio Standard (RPS) requires utilities to generate an increasing percentage of their electricity from renewable resources (Goldstein, 2007). These standards are typically introduced, in the U.S.A., at the state legislation level. Politicians and policy makers drafted the RPS targets and their associated time frames to compliance. 37 38. J.Flock - Branding Non Profits Euro*MBA From the research there demonstrates much lack of faith or credibility in the ability of the RPS to meet social and economic demands. For example, these initial RPS initiatives have served their purpose: jump-starting the desired rejuvenation, and promoting the accelerated development, of alternative energy projects. However, imposition of RPS standards by themselves will not achieve the desired transition away from our fossil fuel dominated generation facilities. In fact, exclusive resort to increasingly more exacting RPS standards, along with a series of other regulatory and utility practices, could actually inhibit the development of renewable resources, deprive consumers of their benefits and, ironically, preserve thermal dominance (Greenwald, 2007). The research continues to uncover that, one predominant theme in American energy and electricity policy is the idea of a portfolio approach or that society must embrace an assortment of different energy technologies simultaneously. This strategy, in practice, is (a) biased, since fossil fuel and nuclear technologies have been heavily favored; (b) opaque, obscuring the different full social costs of energy systems; (c) inequitable, promoting technologies that contribute to climate change; and (d) unsophisticated, ignoring important qualitative differences among technologies (Sovacool, 2008). If indeed RPS is driving for a variety of sources for energy production, possibly the proliferation of energy from a multiple sources would be greater. However, the fact that most hydroelectric resources are excluded from RPS-eligible status reveals an unfortunate political reality: RPS status often reflects local political and competitive situations, rather than objective scientific criteria. The California statute that generically denies RPS eligibility to all combustion municipal solid waste generators, but for one located in Stanislaus County and... operation prior to September 26. 1996, epitomizes the partisan influences permeating RPS programs... (Greenwald, 2007). At the time of this writing there is no federal level RPS for the U.S.A.2.3.4 FIT Feed in TariffRecognizing the slow progress of RPS programs, an alternative known as a feed- in-tariff (FIT) is promoted as the most effective and practical method for integrating 38 39. J.Flock - Branding Non ProfitsEuro*MBArenewables onto the energy grid. A much simpler and comprehensive policy structure known as the Feed-in-tariff (FIT) is able to achieve greater developments in renewable energy, but at a far lower cost and with greater economic and social benefits to the local environment. The FIT does this by establishing a pre-determined price for renewable energy high enough to attract investment without being so exorbitantly high that it allows for windfall profits. Instead of mandating a specific quantity of renewable electricity based on the overall electricity consumption and leaving the market to determine the price with a plethora of financial mechanisms and incentives, FITs mandate a specific price (tariff) for renewable electricity sufficient to attract investors and leaves the market to determine quantity (FIT, 2009). The FIT is the technique utilized in Germany and Denmark, which allows for more rapid penetration of renewable energy sources. European nations additionally require utilities to take responsibility for interconnecting renewable energy projects on demand to higher voltage transmission lines and require them to offer uniform contracts that include these interconnection requirements so that projects are guaranteed a grid connection. A FIT thus provides a long term contract at a fixed price sufficient for a reasonable return on investment (ROI) (FIT, 2009). FIT is promoted as the regulatory technique that cuts through the beauracracy meeting the needs of the market. Because of the stability, straightforwardness and transparency of the FIT, the net costs and benefits of transitioning to renewable energy generation are shared more uniformly between all rate payers and involved parties. Prioritizing renewables and ensuring their rapid deployment with the FIT will bring the net costs down quickly and in doing so will mitigate the need for peaking plants and help ensure that the benefits of renewable energy will be substantial and far-reaching (FIT, 2009). It is found that investor risks are much lower in a FIT system, and that innovation incentives are larger (Fouquet & Johansson, 2008). Renewable power feed in laws which give renewable power producers access to the grid with a guaranteed price for the power specify a minimum amount of renewable energy that must be included in the portfolio of energy resources of licensed electricity suppliers serving a state or country... (Ogihara et al, 2007). 39 40. J.Flock - Branding Non ProfitsEuro*MBA The predictions currently are that energy demand is expected to increase by 20% by 2020 (EIA, 2009) Therefore, maintaining the current non-renewable energy production capacity will continue to suffice for day-to-day operations of the grid. The renewables then as they come on line and connect to the grid can then be controlled to meet this predicted 20% increase in demand. In conjunction with the planned increase in demand and the increased penetration from renewable sources the smart grid technology will curb the demand side, allowing the peaks or energy demand spikes to be flattened or moderated in a controlled manner, reducing the demand side. The analysis is based on recent development in EU with different models for support of installations based on renewable energy. These include feed-in models with guaranteed minimum tariffs, tender models for different bands of technologies, and green certificates trading models with obligatory consumer quota. This describes the market situation in selected European countries, including Germany, the UK, Holland and Denmark (Meyer, 2003).2.3.5 Smart GridOn the consumption and distribution section of the value chain, a tool or process called Smart Grid is to be deployed to bring about improvements on the efficiency of the energy consumption devices. Smart Grid will allow homeowners or businesses to use electricity as economically as possible (Caskey, 2008). The term Smart Grid refers toa modernization of the electricity delivery system so it monitors, protects and automatically optimizes the operation of its interconnected elementsfrom the central and distributed generator through the high-voltage network and distribution system, to industrial users and building automation systems, to energy storage installations and to end-use consumers and their thermostats, electric vehicles, appliances and other household devices (Tuite, 2009). The Smart Grid will be characterized by a two-way flow of electricity and information to create an automated, widely distributed energy delivery network. It incorporates into the grid the benefits of distributed computing and communications to deliver real-time information and enable the near-instantaneous balance of supply and demand at the device level (Tuite, 2009). The RPS and FIT techniques are the regulators attempt to promote wider renewable penetration onto the grid (FIT Coalition, 2009). They, RPS and FIT, are a 40 41. J.Flock - Branding Non ProfitsEuro*MBAprocess or sequence of taxation or output quality standards that control the proliferation of renewable energy onto the grid. These smart grid proposals would create a flexible, interactive relationship between energy producers and consumers. "The grid needs to evolve from one-way wires and cables to something where each power line would send power in either direction to or from homes, businesses, or industry. We need the marriage of energy technology and information technology... (Grant, 2010). The Smart Grid will be mainly promoted by what is currently the service providers portion of the value chain. The goal is to streamline consumption devices usage through an elaborate communication network. The entire system is to set up to ensure the base load, production from non-renewables are maintained. Smart grid is seen as a more realistic alternative to building new power plants and transmission lines, which are expensive in themselves and even more expensive if not impossible to build, considering the difficulties in obtaining licenses (Tuite, 2009). Therefore a base-load of non-renewables must be maintained until the market produces technologies that can produce higher efficiency and less variable energy production. This base load is to ensure predicted daily demand on the grid is factored to have ample supply to accommodate for non-routine demand spikes. The Smart Grid would allow a sort of auction in which rates would change minute by minute based on present capacity and the cost of operations. Those rates would be regularly fed over the grid to all users, whose electrical equipment would use complex algorithms to decide whether or not to turn on (Tuite, 2009).2.3.6 Micro-gridA micro-grid is a collection of energy sources that provide the location utilizing them, to produce and consume energy more efficiently, as a distributed energy resource rather than solely downstream from the central electricity energy grid. Micro-grids are a future power system configuration providing clear economic and environmental benefits compared to expansion of legacy modern power systems. It is clear that development of micro-grid concepts and technologies requires considerable effort to resolve numerous economic, commercial, and technical challenges. Extensive RD&D efforts are therefore 41 42. J.Flock - Branding Non ProfitsEuro*MBAin progress, especially in Europe, the United States, Japan, and Canada, to provide efficient solutions and to demonstrate micro-grid operating concepts in laboratories and in pilot installations (Hatziagyriou et al, 2007). As an alternative to central grid planning, advocates of a decentralized electrical energy system argue that micro-grids are more suited to hosting renewable energy and as such could make a significant contribution to the overall reduction of carbon emissions (Wilcox, 2009). One of the key advantages experienced in decentralized energy is in the improved efficiency of the process during the transition from production to transmission. For typical grid tied production sources, the power rating capacity of the production source drops, as a large portion of the energy generated is lost as heat, sometimes referred to as carbon. In addition, the presence of generation close to demand can increase the power quality and reliability (PQR) of electricity delivered to sensitive end uses. Indeed, DERs (distributed energy resources) can be used to actively enhance PQR. In general, these three perceived benefits, increased energy efficiency through combined heat and power (CHP), reduced carbon emissions, and improved PQR, are the key drivers for DER deployment, although many other benefits, such as reduced line losses and grid expansion deferral, are also often discussed (Hatziagyriou et al, 2007). Micro-grid as a technology incorporates the already marketed energy production sources like photo voltaic (PV) and wind while the connection to the grid remains the area under development. A method of transient suppression is required during the switching in and out of the centralized grid, and it is in this area that much of the research projects continue. One of the events producing major transient interaction between a WTG (wind generation) and a local grid is the grid connection itself (Quinonez-Varela, 2008). Despite this area of on-going development, there has been significant progress toward developing small (kW-scale) CHP applications. These systems, together with solar photovoltaic (PV) modules, small wind turbines (WTs), other small renewables (such as biogas digesters), heat and electricity storage, and controllable loads are 42 43. J.Flock - Branding Non ProfitsEuro*MBAexpected to play a significant role in future electricity supply. These technologies are herein collectively called distributed energy resources (DERs) (Hatziagyriou et al, 2007). Figure 11: Schematic of an example CM (Hatziagyriou et al, 2007) Above, in Figure 11, is a model that represents a decentralized energy source system with central grid connection, know as CERTS Microgrid [CM]. CERTS stands for Consortium for Electric Reliability Technology Solutions and was formed in 1999 primarily to focus on energy alternatives in the area of improving the energy reliability for the U.S.A. (Nikkhajoel & Lasseter, 2009). Micro-grid a.k.a island networks, stand as the alternative for greater penetration of renewable, alternative energy. The development of the ability to switch in the variable renewable source to the grid will gain the ability for a truly independent market-demand-based and a resource optimized power generation system. See Figure 12 for the energy efficient energy flow within a Microgrid. While the application of DERs can potentially reduce the need for traditional (power generation) system expansion, controlling a potentially huge number of DERs creates a daunting new 43 44. J.Flock - Branding Non Profits Euro*MBAchallenge for operating and controlling the network safely and efficiently... (Hatziargyriou et al, 2007). Figure 12: Energy Flow within a Microgrid (Hatziargyriou et al, 2007)Micro-grids are being deployed in developing nations and the impact of continuous and reliable power is tremendous on the society. For example a micro-grid in rural Kenya, demonstrated that access to electricity enables the use of electric equipment and tools by small and micro enterprises, resulting in significant improvement in productivity per worker (100200% depending on the task at hand) and in a corresponding growth in income levels in the order of 2070%, depending on the product made (Kirubi et al, 2009). In another example, Stiren Hermansen, director of the Energy Academy on the island of Samso, says, Denmark decided to focus on many different sources of decentralized energy production (Nielsen, 2009). Today Denmark is perceived to be a leader in renewable energy production partly based on the governance and the leaderships ability to leverage the power of distributed energy 44 45. J.Flock - Branding Non Profits Euro*MBAresources. The amount of decentralized electricity generation (DG) connected to distribution networks increases across EU member states. This increasing penetration of DG units poses potential costs and benefits for distribution system operators (DSOs). These DSOs are regulated since the business of electricity distribution is considered to be a natural monopoly (De Joode et al, 2009).2.3.7 Carbon Tax Carbon trading has been occurring in the European Union since 2005 (Jaehen & Latmathe, 2010). The carbon is traded at a per ton price. Since the inception the price per ton has traded between one and 30 Euro, which was an unpredicted volatility (Jaehen & Latmathe, 2010). The trading scheme was billed to act as market solution to curb dirty contributors in the energy business, specifically non-renewable sources of energy production. The historical volatility in this market has given rise to speculation surrounding market power, specifically on the influence of price. Besides market power, the combination of information asymmetry and price interdependencies (between prices of primary goods, especially electricity, and allowances) plays an important role in explaining the emission trading paradox (Jaehen & Latmathe, 2010). Figure 13: Climate Change Targets, US World Resource Institute (National Grid, 2008) 45 46. J.Flock - Branding Non ProfitsEuro*MBA In addition to the regional GHG (green house gas) related activity, there is a growing consensus at the national level] that the United States should reduce its GHG emissions by 60 to 80 percent by 2050 to support the global efforts to reduce GHG emissions. The leading proposals currently before US