New Thinking: Overcoming inertia is the key to unlocking a sustainable energy future

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on Jan 12, 15 • posted by

New Thinking: Overcoming inertia is the key to unlocking a sustainable energy future

Forget the ‘trilemma’ – tackling the fourth challenge of inertia is the key to unlocking a sustainable energy future

Since the 2007 Energy White Paper, energy policy in the UK has sought to address three main challenges: it must be clean, it must be secure, and it must be affordable. The energy trilemma, as it has come to be known encapsulates the problem inherent in having three, sometimes conflicting, priorities. For some (notably politicians who are keen to satisfy everyone), the trilemma is ultimately solvable. It is a challenge that can be addressed, with trade-offs kept to a minimum. For the more pragmatic among us the term is best understood as a kind of super-dilemma. It implies a clear privileging of one objective over the other two: affordability if you’re a customer, decarbonisation if you’re a renewables developer and so on.

Regardless of how the term is used, it has perhaps been most useful in policy as shorthand for expressing acknowledgement that a range of challenges (and stakeholders) exists. Rather than enabling a holistic oversight of the issues however, having three objectives may simply be enabling decision makers to pick the most fashionable concern of their time in office, framing energy security, or affordability, for example, as the most pressing concern of the day, and pushing through individual policies to those ends.

Unfortunately however, conceptualising the energy system challenge as a trilemma takes attention away from a fourth, and arguably more important challenge: that of overcoming inertia. As I will explore here, the overriding challenge facing decision-makers (and society) is less in formulating a new energy system, but in moving away from the established, embedded and highly connected system already in place. The difficulty lies, as Keynes said, “not in the new ideas, but in escaping from the old ones”.

The causes and implications of inertia within the energy system have been explored in depth. Gregory Unruh’s work on carbon lock-in, for example, is a fitting analysis of the combination of forces that conspire to perpetuate fossil fuel-based infrastructures despite the presence of alternatives. Path dependency (the ‘selection’ of particular circumstances through chance and timing, rather than superiority) and scale economies, among other factors, creates competitive advantages and can lead to eventual market domination. These processes are further reinforced by network effects, which both solidify the dominance of particular designs and resist the introduction of alternatives. Taking the broadest example of UK electricity generation, large and centralised plant requires specific transmission and distribution networks, specific forms of ownership, and specific market arrangements through which to electricity is traded. All of this is of course shapes, and has been shaped by, a specific set of worldviews and competencies held by those within energy policy-making.

It is naïve to suggest that it is just technologies and institutions that exhibit inertia. Consumers (or people, as they are known elsewhere) have surely been complicit to a degree in shaping the current energy system, not least through the apparent disengagement from the market. The prevalence of ‘sticky consumers’ (those who rarely, or have never switched electricity supplier) in turn discourages competition and innovation. Inertia, it seems, is truly system-wide.

Looking at the drivers behind energy policy is of some use. The trilemma objectives are driven by both legal and moral imperatives; while EU policy might be the legal driver behind clean (renewables and emissions reduction) energy policy, they are also, one would like to think, encouraged by the moral imperative to better manage our energy resources towards something more sustainable. While security and affordability objectives are of course bound up with clean energy objectives, they are demonstrably more influenced by economic/political drivers, the first reflected by “keeping the lights on” rhetoric, the latter by any number of debates around “green crap”, vertical integration, and the suitability of the retail market more profoundly.

On the one hand, overcoming inertia is similarly influenced by economic drivers: the current system has demonstrated an inability to stimulate either competition or infrastructure investment, a situation which meant that market reform has for some time inhabited a comfortable place on the political agenda. Furthermore, the economic drive to overcome inertia becomes more pressing over time, as fossil fuel assets are sweated over developing lower marginal cost renewables.

On the other hand, there is simply no political drive to overcome inertia. Instead, institutional lock-in actively reinforces inertia by maintaining the same old ‘rules of the game’ in terms of market and regulatory rules and particular schools of economic thought, and is overseen by an incumbent old guard of economists and technologists. As Upton Sinclair famously stated, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it”. Despite the centrality of people and institutions in addressing the energy challenges, economists and engineers overwhelmingly outnumber social scientists in DECC, a hangover from past emphases on fixing technological problems, supply-side solutions, and managing energy as a commodity rather than a public good.

Decision-making by those at the top is not only guided by these institutional constraints, but is further influenced by loss aversion: the (personal and political) costs of making a bold, but bad decision are far greater to the average politician than the benefits of making a bold decision that turns out to be good. The fact that the economic costs of a more flexible, inclusive energy system are also more immediately felt than the benefits means that making those bold, but good decisions all the more daunting.

What of the moral obligation to seek meaningful change? Fundamentally, it seems misguided at best, and deceptive at worst, to admit that the energy system isn’t working without accepting some responsibility for it. It is harder to complain about energy bills if you have never switched providers. Equally, policymakers or regulators should not, and cannot be constrained by the rules of the game that they themselves have created. There is, and has been for some time, acknowledgement that the energy market has failed to deliver against policy, let alone societal goals. However, there is no acknowledgement that current governance arrangements that maintain such a market are in any way flawed. The recent electricity market reform was thus doomed from the outset: an assumption was made that no change was necessary in the principles underlying the market.

Inertia is by definition difficult to overcome. In order to make headway, we must first acknowledge it as a problem, and second, do something about it.

Although inertia is a property of politics, overcoming it can also be used as a political opportunity. Acknowledging mea culpa, runs counter to the status quo of laying the blame only at the door of past governments. It will require a form of leadership of the kind absent from UK politics, and will be the defining characteristic of a truly progressive government.

While acknowledging inertia is a vital first step, it is clearly worthless if not followed by doing something about it. That something might be establishing a visionary at DECC’s helm, or meaningfully reforming Ofgem’s remit and powers. Whatever it is, it will need understanding and support from the media, and in turn, the electorate. Since both acknowledgement and action are also our collective responsibilities, Government simply must engage more meaningfully and coherently with society.

The forthcoming election could mean any number of things for those engaged with the energy system, which is to say, everyone. The most damaging outcome, however, would be for the incoming Government to carry on focusing solely on addressing the trilemma, rather than acknowledging the existence of the fourth, and most important challenge of inertia. Without acknowledging and addressing inertia, meaningful change to the energy system, and the institutions that perpetuate it, will sadly remain elusive.

This guest IGov blog is from EPG’s Iain Soutar: 


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