change and stability in energy systems per mickwitz, research director finnish environment institute...

Change and Stability in Energy Systems

Per Mickwitz, Research Director

Finnish Environment Institute (SYKE)

Innovation Studies Seminar, 26.3.2013

2

Content of the presentation

● How I view the world○ Normative perspective○ Ontological perspective

● Politics○ Experience – making the

presentation more current○ Research

● Dynamics of energy systems (=change & stability)

○ Research (ours and others)

● Myself

● Finland

● The world

The call for environmental knowledge is increasing

1983

National Board of Waters

1995

SYKE

1986

National Board of Waters and the Environment

Ministry of the Environment

Increasing environmental

awareness

Decade of water protection

From water protection to environmental protection

Interdisciplinarity, internationalisation

Global challenges

Climate change mitigation • Green economy • Sustainable use of natural resources • Biodiversity •

Ecosystem services • Baltic Sea •

1970

Personnel 701

Number of person years 672

Total funding (M€) 59,9

Direct budgetary funding (M€) 32,8

External funding (M€) 27,1 (45%)

Personnel and funding 2013

Joensuu

Oulu

Helsinki

Jyväskylä

SYKE’s themes and research programmes

Theme Research programme

I. Support for climate policy i. Climate change

II. Consumption & production and sustainable use of natural resources

ii. Sustainable economic systems

III. Built environment and land use iii. Sustainable communities

IV. The Baltic Sea, inland waters and water resource management

iv. Water and marine protection in a resource-smart economy

V. Ecosystem services and biological diversity

v. Ecosystem services

VI. Environmental monitoring vi. Environmental data acquisition and use

● Socio-technical systems as constellations of technologies, material networks (the grid or roads), social networks, actors, organisations, and rules

Energy systems

● Systems & sub-systems: e.g. a bioenergy system can be divided into three interlinked sub-systems: fuel supply, conversion, and use

● The borders of a system & the interlinkage of systems

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” Missä me ollaan, ja oonko mäkin siellä?”

Matti Nykänen

”Where are we, and am I also there?”

8

● Climate change● Resource use● Biodiversity● Poverty …

We need:

1. a better understanding of the interdependencies between consumption, production and the environment

2. new policies that would support and enable transformations of key consumption and production systems

3. political importance

How I view the world 1:

The world is not sustainable

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1. Climate change

2. Energy security

3. Oil dependence

4. Resource use (e.g. biomass)

5. Energy shortage in developing countries

6. ...

Energy systems will change, but● Will they become more sustainable?● Will they change fast enough?

How I view the world 2: There is a desperate need for energy systems to change

● Realists hold the view that the world described by science is the real world, as it is, independent of what we might take it to be. Realists state that one can make reliable claims about unobservables.○ Is pollution a problem or climate change?

Ontology (what is the nature of reality?) Between realism and constructivism

● “Climate change in IPCC usage refers to a change in the state of the climate that can be identified (e.g. using statistical tests) by changes in the mean and/or the variability of its properties, and that persists for an extended period, typically decades or longer.” (IPCC 2007)

● Climate is long-term: “Climate is what you expect, weather is what you get” (Robert A. Heinlein/Mark Twain)

● Climate change cannot be directly experienced through our senses or directly measured by instruments (Hulme 2009)

○ “Estimating the average annual temperature of the hemisphere as a whole over a millennium is quite literally an act of reconstruction. …labor of hundreds, perhaps even thousands, of scientists … materials annually laid down in tree ring and ice cores, laminated lake and ocean sediments … careful measurements and complicated statistical techniques … into a spatially homogenized annual time series for the hemisphere as a whole” (Demeritt 2006)

Climate change and realism

● Realists hold the view that the world described by science is the real world, as it is, independent of what we might take it to be. Realists state that one can make reliable claims about unobservables.○ Is pollution a problem or climate change?

● Hard-core constructivist state that “there is no objective truth on which inquiries can converge” and thus “one cannot find out how things really are or how they really work” (Guba and Lincoln 1989). ○ “If global change is seen as primarily a social

construction rather than an objective (albeit imperfectly understood) condition, then it poses little threat to the future of our species.” (Dunlap and Catton 1994)

Between realism and constructivism

Constrained constructivism (Hayles 1995, s 51-53)

● We are positioned – embodied – in a specific context (historical, social and environmental)

® Constraints to constructions● Constraints do not reveal reality, but …

1. A construction ”is matched with our interpretations with the flux rather than with reality-in-itself”

2. “the claim of truth is replaced by the claim of consistency”

3. “the statement is capable of negation; that is, it is possible to say: “This is not consistent with our interactions with the flux”. Thus some claims can be eliminated as inconsistent”

“Essentially, all models are wrong, but some are useful.”

George E. P. Box

How I view the world ...: “Finally the last slide on this topic”

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● Why are policies important?○ Direction – Sustainability○ Speed

● Policies are political

● Support, legitimacy, emphasis are crucial

● How could we conceptualise politics?○ (Box & Hayles)

Politics and public policy

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● Some examples of change and stability in Finnish energy systems

What’s next?

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Based on a framing analyses of 15 government programmes and 8 energy & climate strategies 1970-2010

● Security of supply, self-sufficiency and low-price have stayed as main goals of energy policy for 30 years

= Stability● Minor reframing when air emissions brought

to agenda● Major reframing in late 2000s when climate

goals lifted on top of the list of energy policy goals, influenced by EU policies

= Change

Finnish energy policy – What are the goals?

Kivimaa & Mickwitz (2011)

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Some theory: What is framing?

Framing can be defined as “the process of culling a few elements of perceived reality and assembling a narrative that highlights connections among them to promote a particular interpretation.” Entman (2010, 336)

Two aspects are crucial in framing:- selection - salience (Entman 1993, 52).

Bio-energy framing in Finland 1970- 2010

Fuel supply system

• Resource (e.g. forest, agricultural, waste)

• Domestic or imported

Use system• E.g. Heat, light or

transport

Conversion system

• Transformed into heat, electricity or transportable fuel




transport

Conversion system


For long


Bio-energy framing in Finland 1970- 2010

Fuel supply system




Fuel supply system




transport

Conversion system


More recently


Bio-energy framing in Finland 1970- 2010Based on a framing analyses of 15 government programmes and 8 energy & climate strategies 1970-2010

20002001200220032004200520062007200820092010201120120

200

400

600

800

1000

1200

1400

1600

Change in the total demand for energy in Finland

Energy consumption in Finland2000-2012: + 3 % (0,26 %/year)

Energy consumption in Finland1970-2000: + 184 % (6,1 %/year)

Updated based on an original slide by Raimo Lovio

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Change in the production: the big picture

Energy source Share 1970 Share 2012 Change in share

Nuclear 0 18 + 18

Natural gas 0 8 + 8

Peat 0 5 + 5

Import of electricity 0 5 + 5

Other 1 3 + 2

Coal 13 10 -3

Water and wind 5 4 - 1

Wood 24 23 - 1

Oil 57 24 - 33

Change

StabilityUpdated based on an original slide by Raimo Lovio

Oil and car dependencies in Finnish transport

1980 1985 1990 1995 2000 2005 20070

2

4

6

8

10

12

14

km

-16 %By 2020

1990 1995 2000 2005 20100.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Tg

CO

2-eq

.

19

22

19

51

19

58

19

65

19

72

19

79

19

86

19

93

20

00

20

070

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

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Nu

mb

er

of

pri

va

te c

ars

2006 2007 2008 2009 2010 2011 2012*

020406080

100120140160180200

Gas Diesel

g C

O2

/ km

Examining the change:Helsingin Sanomat (26 January 2011)

To which degree is the change due to the tax

reform?

EU goal 2015

The car taxation reform has increased the popularity of low-emission cars

2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140

160

180

200

Gas Dieselg

CO

2 /

km

Examining the change: Helsingin Sanomat (26 January 2011)


reform?

EU goal 2015

2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140

160

180

200

Gas Dieselg

CO

2 /

km

Many policies at many levels● EU:

○ voluntary agreements with the car industry

○ a requirement to provide information to consumers about CO2 emissions (1999/94/EC)

● Finland○ Increasing fuel taxes

● Helsinki & other municipalities○ Public transport○ Land use planning



reform?

EU goal 2015

2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140

160

180

200

Gas Dieselg

CO

2 /

km

Many other factors than policies● a financial crisis ● large SUVs – at least

temporarily – went out of fashion


2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140

160

180

200

Bensiini Dieselg

CO

2 /

km


reform?

EU goal 2015

”Of the realized reduction of approximately 33 g/km about 13 to 17 g/km seems attributable to the car purchase tax reform (in terms of car choice). Of the remainder at least 12 g/km is attributable to technological change (more efficient cars).”

Major changes in the Finnish energy governance

● New organisations○ Motiva (1993), a state owned company in 2000

• expert company promoting efficient & sustainable use of energy and materials

○ Finngrid (1997) created by merging the grids of imatran Voima Oy and Teollisuuden Voima Oy

○ The Nordic Power Exchange – Nord Pool ○ The Energy Market Authority (1995)

● New rules○ The Electricity Market Act (1995)○ The Emissions Trading Act (2004)

● Privatisation of previously public (municipality) owned energy producers

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● Some theoretical concepts

What’s next?

● Joseph Schumpeter’s notion of “creative destruction”

1. technological and organizational changes are central and necessary to capitalism.

2. change occur as a battle between the old and the new, (path dependence and the creation of new paths).

3. temporal variations in the process of change: • change is sometimes slow • while at times it is violent.

• The more violent phases start when the development of the old path stagnates and is ossified.

The concept of system transformations

● A lively new research field○ Journal of Environmental Innovation & Societal

Transitions○ Special issues

• Research Policy• Energy Policy• Sustainability Science

○ The Sustainability Transitions Research Network • Annual conferences (latest in Utrecht 2014)

● In this field “sustainable development is increasingly understood in terms of ‘transitions’ to more sustainable socio-technical systems” (Smith et al. 2010, p. 439). ○ Not as balancing the economic, environmental and

social impacts of the present system.

A need for faster and better directed system transformation

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Conceptualising transitions

Can “path dependence” be an explanation of stability?

Can “path creation” be an explanation of change?

Could “path dependence” be an explanation?

● Pierson (2004, 20) uses the definition “path dependence refers to dynamic processes involving positive feedback, which generate multiple possible outcomes depending on the particular sequence in which events unfold.”

● While North (2005, 52) state that path dependence “is the constraints on the choice set in present that are derived from historical experiences of the past.”

● David (2007b) provides the definition that “A path dependent stochastic process is one whose asymptotic distribution evolves as a consequence (function of) the process’s own history.”

Path dependence: small initial difference resulting in huge long term effects

A crucial aspect of path dependence is positive feedback or self-reinforcement

1. Large set-up or fixed costs○ which are barriers to entry, but also imply that average

costs decrease when volumes increase;

2. Learning effects○ knowledge from experiences with a technology results in

increased returns from continuing using it;

3. Coordination effects ○ imply that the benefits for one user increases when others

uses the same technology, in other words there are positive network externalities;

4. Adaptive expectations ○ self-fulfilling expectations that widespread technologies will

generate coordination effects.

(Arthur 1994)

Fig. 9 Experience curve for Sweden and Finland combined, using the Swedish primary forest fuel (PFF) prices and the combined cumulative PFF production of Finland and Sweden between 1975 and 2003. Compared to the “average production” experience curve of Sweden alone, t...

M. Junginger , A. Faaij , R. Björheden , W.C. Turkenburg 2005. Technological learning and cost reductions in wood fuel supply chains in Sweden Biomass and Bioenergy Volume 29, Issue 6 2005 399 - 418

Learning/Experience curves

● Even neoclassical economics can explain why some old energy systems persist○ Coal is cheap○ The prise of allowances at the European

emissions trading system is low (2.11.2012 8.07 €/t CO2)

Do we over explain with path dependence?

● Even neoclassical economics can explain why some old energy systems persist○ Coal is cheap○ The prise of allowances at the European

emissions trading system is low (2.11.2012 8.07 €/t CO2)

● The path dependence concept is not needed to explain persistence of certain framings in politics (vested interest are important)

Do we over explain with path dependence?

Can path creation help us understand change?

● If small events during the early phase of a technology can have a disproportionate impact on its subsequent development (path dependence as a progressive amplification of an early differential advantage), then surely entrepreneurs can actively work to bring about such events? (Lampel 2001)

● The notion suggests a reflexive role for entrepreneurs: entrepreneurs can recognise the factors creating dependency on the currently dominant path, and take action to “mindfully deviate” from existing structures (Garud and Karnoe 2001).

Perspectives on the dynamics

Path dependence● as an explanation of why

(inefficient, e.g. CO2) systems persist.

● as the conditions through which new alternatives may spread and become dominant

● as structures and evolutionary-emergent processes (predominantly unintentionally produced) (or "outsider's ontology“)

Path creation● as the first stage of path

dependence● as the process through

which more efficient systems may develop

○ conditions for path creation○ competition between new

alternatives○ destabilization of old path

dependences

● as deliberate actions by actors (predominantly mindfully produced) (or "insider's ontology“)

Today’s innovation mechanisms of path creation and creative destruction

Lovio, Mickwitz & Heiskanen 2011, 284

Creating new transport energy paths- examples

Schumpeter Mark 1: St1: -2009 a new domestic biofuel, a high-concentration bioethanol produced from biowaste, - acquired 150 leases for wind power sites,- consultancy and renewable energy solutions

Civic activity: - a citizen-consumer action project called Electric Cars – Now!

Schumpeter Mark 2: -Neste oil is constructing four biofuel refineries in Finland, Singapore and Rotterdam, -Stora Enso and UPM wood-based biofuels, - Fortum electric cars

State interventions: - new act on motor vehicle taxation based on CO2, - a minimum share of biofuels

Markets

High co-ordination

Policy

Lowco-ordination

Lovio, Mickwitz & Heiskanen 2011

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Example of change: Heat pumps

Figure by the Finnish Heat Pump Association SULPU ry

+72%

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● A fairly successful set of efforts to introduce heat pump technologies in detached homes resulting in a breakthrough in 2008○ Co-operating with users is central, but may

require resources that are beyond the means of individual small companies

○ Attempts to influence policy and public opinion also entail significant costs and risks for small entrepreneurs

(Heiskanen et al. 2011)

Examples of path creation

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● It’s all about the economy○ The euro crises○ The Nokia crisis (Salo, Oulu and Finland)○ Restructuring of the pulp and paper industry

● Climate change or sustainable development are not top priorities – Growth & development are

● But what kind of development will Finland promote?○ National politics and policies○ Local politics and policies

Let’s return to the start, i.e. my normative position: the context

Possibilities for new energy paths

Schumpeter Mark 1: - Energy start-ups by “Nokia

engineers”e.g. There Corporation

Civic activity: - Small scale energy production (solar, heat pumps)- Increased interest in energy efficiency

Schumpeter Mark 2: - Utilities adopting new strategies and business models for decreasing energy demand- Pulp and paper industries extending their role as energy producers

Policy interventions: - New energy efficiency regulation (EU)- Financial support (national, regional)-Detailed rules (e.g. feed-in tariffs- Proactive cities and municipalities

Markets

High co-ordination

Policy

Lowco-ordination

Lovio, Mickwitz & Heiskanen 2011

?

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● Energy framing based on only centralised large-scale production (and partly use)○ Possibilities to sell to the grid○ Requirements for feed-in tariffs○ Financing

● Climate change mitigation & Green Growth as international or national issues

● From climate policy to systems transformation

● Consumer – producer dichotomy

Let’s return to the start, i.e. my normative position: a need for reframing

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● Avoid supporting unsustainable systems○ Car dependent land use planning○ Peat based energy production

● Support experiments and learning○ Hinku municipalities○ Skaftskär – energy efficient land use planning

+ living lab

● Enabling action by small scale actors● Support sustainable selection

○ Public procurement, e.g. a French tender in Porvoo

Let’s return to the start, i.e. my normative position: things to do

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“Social life is not only a trial of strength between opposing groups: it is action within a more or less resilient or brittle framework of institutions and traditions, and it creates - apart from any conscious counter-action - many unforeseen reactions in this framework, some of them perhaps even unforeseeable. … the main task of the social sciences … is the task of analysing the unintended social repercussions of intentional human actions.”

Karl Popper 2003: The Open Society and Its Enemies, Volume Two: Hegel and Marx, page 105

The limits of political design 1

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The story of small bioenergy heating in Finland as told by Maria Åkerman, Aino Kilpiö and Taru Peltola

Maria Åkerman, Aino Kilpiö and Taru Peltola 2010. Institutional change from the margins of natural resource use: The emergence of small-scale bioenergy production within industrial forestry in Finland Forest Policy and Economics Volume 12, Issue 3 2010 181 - 188

● The emergence of a new forest management category of “young forest”○ Statistics revealed an increasing amount of young

forests○ “young forests were identified as a nation-wide

problem, neither owners nor forest industry were interested in thinning

○ Subsidies were introduced

● Categorization and monitoring as tools of government, but also making unexpected change possible

The crucial element that made small scale bio-energy heating possible

Åkerman, et al. 2010.Peltola & Åkerman 2011

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● Mickwitz, P., (2012). The Road to Rio+20: An Opportunity Missed(?), Forum for Development Studies, 39:1, 75-81

● Mickwitz, P., M. Hildén, J. Seppälä and M. Melanen, (2011). ‘Sustainability through system transformation: Lessons from Finnish efforts’, Journal of Cleaner Production, 19 (16) 1779–1787.

● Kivimaa P., Mickwitz P (2011). Public policy as a part of transforming energy systems: framing bioenergy in Finnish energy policy, Journal of Cleaner Production 19(6): 1812-1821.

● Lovio R., P. Mickwitz and E. Heiskanen (2011). ”Path dependence, path creation and creative destruction in the evolution of energy systems”. in Wüstenhagen R. and R. Wuebker (eds.) Handbook of Research on Energy Entrepreneurship, Cheltenham: Edward Elgar Publishing, 274-301.

www.environment.fi/SYKE/enpath

Some further reading

http://www.environment.fi/SYKE/enpath

Thank you!

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change and stability in energy systems per mickwitz, research director finnish environment institute...

Documents

world slide

sustainable slide

production systems

interlinkage of systems

sustainable economic

change stability research

constructivism slide

interlinked subsystems