System change in a regulatory state paradigm: the “smart” grid in the UK
By: Matthew Lockwood
Presented at: Innovation, technology and regulation – Exploring new modes of energy governance. At 7th ECPR General Conference, Sciences Po, Bordeaux, 4 – 7 September 2013
This paper examines one aspect of the political dynamics of the transition to a more sustainable energy system in the UK. The focus is on ‘smart grids’, which involve innovation in regulated monopoly electricity networks. The smart grids agenda is central to more sustainable electricity systems, as it will be essential for facilitating more flexible demand, needed for balancing variable renewable generation, as well as incorporating local small-scale technologies such as solar PV, and new technologies such as electric vehicles.
There has been increasing interest in recent years in smart grids from economics (Pollitt and Bialek 2008), innovation studies (e.g. Bolton and Foxon 2010) and energy policy studies (Woodman and Baker 2008, Shaw et al 2010) as well as think-tanks (Cary 2010). While these analyses all touch on aspects of changes in regulatory and policy frameworks that are political in nature, they are mainly concerned with policy analysis and recommendations, and do not take an overtly political perspective on the intended shift towards a smart electricity grid. By contrast, here my focus is explicitly on the interplay between the ideas, institutions and interests that surround the immediate debates on policy for smart grids. The underlying goals are first to understand how the governance of networks is affecting attempts to bring about low carbon innovation in networks, and second to determine what determines governance and governance change.2 In the conclusions I do draw out some implications for policy, especially the design of institutions, but these are preliminary in nature.
The studies mentioned above also all pre-dated important recent developments in electricity network regulation, notably a major review of the regulatory regime in 2009-10 (RPI-X@20) and the launch of a new regime subsequently (RIIO). The energy regulator in the UK linked both these developments to the need to move to a low-carbon energy system, with the implication that the old RPI-X regulatory framework was insufficient and that a major change would be needed. The background to regulatory change was a wave of concern about climate change in the UK in the 2000s, the passage of the Climate Change Act and considerable criticism that Ofgem was a barrier to decarbonisation. However, in this paper I argue that despite the considerable political pressure that Ofgem came under, RIIO represents ‘evolution rather than revolution’ in the regulation of electricity distribution networks, especially in terms of innovation. The key analytical question is then why major political pressure has led to only gradual rather than major change. Here I argue that the answers lie both in the nature of external pressure on Ofgem and in the institutional legacies of the original design of electricity regulation in the late 1980s.
The paper is structured as follows. In the next section, I clarify the questions addressed in the paper, and identify theoretical frameworks for first assessing and then explaining governance change. In section 3, the ‘smart grids’ concept is briefly explained, along with why it is important for a more sustainable electricity system. This section also briefly reviews arguments about the need for governance change for smart grids. Section 4 gives a summary account of what has happened in electricity network governance since privatisation, with particular focus on more recent events. In section 5, the significance of these changes is assessed, not only in terms of their likely impact, but also in relation to the pre-existing regulatory paradigm. Section 6 presents an attempt at explaining what changes have occurred, and why others have not. Finally, section 7 concludes with some observations on governance arrangements, drivers of change and Britain in comparative perspective.
Presentation: ML ECPR presentation-Sept13