Green electricity in the market place: the policy challenge

Energy Policy 30 (2002) 525–538

Green electricity in the market place: the policy challenge Doris A. Fuchsa,*, Maarten J. Arentsenb a

Ludwig-Maximilians-University, Faculty of International Relations, Oettingenstr. 67, 80538 Munich, Germany b University of Twente, P.O. Box 217, 7500 AE Enschede, The Netherlands

Abstract The paper explores the implications of the liberalization of electricity markets in Europe and North America for policy means and mechanisms to enhance the market penetration of renewables. Applying a (co-) evolutionary approach, the argument highlights the need for policy intervention to help producers and consumers move out of technological trajectories favoring non-renewable electricity. On the production side, energy generation is locked into the central power station system deriving from more than a hundred years of technological development along a specific system trajectory. On the consumption side, the locked-in effect results from a similarly long experience with electricity provision by monopoly suppliers and the associated lack of consumer choice and responsibility for product differentiation. As the analysis shows, policy strategies targeting both the production and consumption sides of the electricity market are needed for effective intervention. Furthermore, policy strategies should draw on a clear analysis of the inertia and dynamism underlying the production and consumption of electricity. In the light of such evolutionary dynamics, the analysis demonstrates the insufficiency of the policy approaches currently employed to foster the market share of renewables based electricity. Instead, the authors suggest a reflexive policy approach to initiate and support a reorientation towards green electricity, emphasizing the need for learning and communication between and among societal actors. r 2002 Published by Elsevier Science Ltd. Keywords: Renewable energy; Evolutionary theory; Liberalization

1. Introduction Over the last decade, two developments have dramatically changed the role of public policy with respect to energy. First, energy policy has been associated with a steadily growing focus on ‘‘sustainability’’. Secondly, liberalization, deregulation and privatization have transformed the organization and outlook of energy markets. Both developments are a function of political objectives. The focus on sustainability arose out of the concern with sustainable development in general, voiced most explicitly by the Brundtland commission and translated into national and international policy objectives in the course of the Rio Summit. Sustainability added a new dimension to the environmental concerns that had accompanied fossil and nuclear based energy systems for some decades already. The liberalization of energy markets, in turn, resulted from the desire to bring gas and electricity supply into the European Common Market. This objective led to two EU-directives, *Corresponding author. Tel.: +49-89-2178-3056; fax: +49-89-21783052. E-mail addresses: [email protected] (D.A. Fuchs), [email protected] (M.J. Arentsen). 0301-4215/02/$ - see front matter r 2002 Published by Elsevier Science Ltd. PII: S 0 3 0 1 - 4 2 1 5 ( 0 1 ) 0 0 1 2 0 - 3

committing member states to opening up national grids for third parties and removing restrictions on gas and electricity trading. In the current situation, then, sustainability as a political ambition has to be pursued in liberalized, commercially oriented energy markets. Our paper aims at exploring the implications of these new market conditions for policy means and mechanisms to enhance the market penetration of renewables.1 Applying a (co-)evolutionary approach, we highlight the need for policy intervention to help producers and consumers move out of technological trajectories favoring non-renewable electricity and to support the diffusion of renewable energy in the market.2 On the production side, energy generation is locked into the 1 The resources conceived as renewable include wind, solar, biomass, geothermal and (probably) small scale hydro. 2 On the consumption side, the analysis focuses on electricity choices by private households as a starting point. The factors determining electricity consumption choices by the commercial sector are quite different from the residential one, and require a separate analysis. Focusing on the consumption choices by private households first is appropriate for this analysis, because of the openness of many of these households to environmental arguments, and, more importantly, the likely impact of a fundamental change in electricity consumption choices by private households on similar choices by businesses.

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V a r i e t y

F i r m s ’ s e l e c t i o n

I n c r e a s i n g r e t u r n s t o a d o p t i o n

S e l e c t i o n e n v i r o n m e n t

Fig. 1. Summary of the core argument of the evolutionary mechanism.

central power station system deriving from more than a hundred years of technological development along a specific system trajectory. On the consumption side, the locked-in effect results from a similarly long experience with electricity provision by monopoly suppliers and the associated lack of consumer choice and responsibility for product differentiation. As our analysis shows, policy strategies targeting both the production and consumption sides of the electricity market are needed for effective intervention. Furthermore, to obtain the biggest policy effect, policy strategies should draw on a clear analysis of the inertia and dynamism underlying the production and consumption of electricity. In the light of such evolutionary dynamics, our analysis demonstrates the insufficiency of the policy approaches currently employed to foster the market share of renewables based electricity, in particular the sole reliance on market based instruments. Instead, we suggest a reflexive policy approach to initiate and support a reorientation towards green electricity, emphasizing the need for learning and communication between and among societal actors. Our paper is structured as follows. The next section establishes the theoretical foundation for the analysis by delineating the co-evolutionary approach and its perspective on technological innovation. In Section 3 of the paper, we explore obstacles to and strategies for fostering the market share of green electricity production. In Section 4, we turn to the consumption side and identify barriers to and opportunities for increasing the market share of green electricity in private household consumption. Our final section summarizes our analysis and findings.

2. Technological innovation from the perspective of a co-evolutionary approach The paper utilizes the (co-)evolutionary approach because of its strength in integrating producer and consumer perspectives and its focus on the epistemological dimension of technological innovation. The co-evolutionary approach emphasizes the idea of interactive learning as a pivotal force shaping technology and product development (Windrum and Birchenhall, 1998). It ‘‘views technological innovation as a coupled, second-

order learning system comprising a population of consumers and a population of firms’’ (Windrum and Birchenhall, 1998, p. 109). Thus, the (co-)evolutionary approach allows an externalist account of technological selection which includes the interests of different social groups in the analysis and provides a substantial improvement over solely producer based accounts. Simultaneously, the approach shifts the attention from the physical artifact dimension to the knowledge and learning dimension of technology. 2.1. The production side The co-evolutionary approach builds on evolutionary theory, which highlights the cumulative nature of technological change and innovation. Thereby, evolutionary concepts are able to explain why technological change is only gradual and why technological innovations tend to be rather incremental.3 Fig. 1 summarizes the core argument of this evolutionary mechanism. In the evolutionary tradition, firms in need of technology will tend to search in a rather routine way (Nelson, 1995, p. 68). These routines determine to a great extent the set of alternatives from which firms choose when solving problems or searching for new and better technologies. The routines are basically the result of learning processes the firm has internalized in problem solving and responding to its (changing) environment. Firms rely on routines because of the uncertainties incorporated in decision-making processes. In order to reduce these uncertainties and to avoid risk, firms tend to fall back on routines and favor those alternatives in decision making that have proved to be effective in the past. Firms develop their own knowledge base in a cumulative way meaning the ‘‘learning of newer pieces of knowledge requires a knowledge of the previous ones’’ (Saviotti, 1996, p. 171). Because of the risk avoiding nature of the search process, it becomes easier for a firm ‘‘yto acquire new external knowledge the more similar it is to the firm’s pre-existing internal knowledge’’ (Saviotti, 1996, p. 172). According to Saviotti, as long as the firm’s environment does not 3 See Hodgson (1994), Nelson (1995), or Saviotti (1996) for overviews on evolutionary thinking.

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provide for a radical change in knowledge, a ‘‘yfirm’s knowledge is likelyyto display increasing returns to adoption’’. This implies that firms wanting to enter a particular new technological area would face a knowledge barrier. Conversely, firms having accumulated knowledge in a technological area will tend to be locked into that area. Furthermore, if there are multiple options to the development of a technology, after a firm has opted for one of these, it becomes extremely difficult to switch to a different one. In other words, technological trajectories tend to display irreversibility and path dependence. These trajectories become harder to change, the longer the path of their development is. The concept of technological regime has been suggested to map the collective variant of the idea of cumulative knowledge and technology at the system’s level. According to Nelson (1995), this concept has been introduced: ‘‘yto refer to the set of understandings about a particular broad technology that are shared by experts in a field, including understandings about what a firm needs to be doing to operate effectively in that regime’’ (p. 79). A more sociologically oriented definition of a technological regime, taking also the ‘‘knowledge production side into account’’, is provided by Rip and Kemp (1998). They state that ‘‘a technological regime is the rule-set or grammar embedded in a complex of engineering practices, production process technologies, product characteristics, skills and procedures, ways of handling relevant artifacts and persons, ways of defining problems - all of them embedded in institutions and infrastructures’’ (p. 338). This sociological conception of a technological regime is very broad, but it nicely points to the ‘‘materialized’’ heritage of technological change and innovation. This heritage incorporates ideas, conceptions, artifacts, routines, habits, customs, skills, standards and institutions that together determine, shape, and condition search processes for better technologies. 2.2. The consumption side On the consumption side, the (co-)evolutionary approach emphasizes the role of consumers in the selection of technological trajectories (Windrum and Birchenhall, 1998). As empirical research has demonstrated, ‘‘consumer tastes evolve over the course of the life cycle, fundamentally influencing the type and forms of technology that eventually emerge’’ (Windrum and Birchenhall, 1998, p. 118). Windrum and Birchenhall, therefore, contend that ‘‘an explicit consideration of consumer learning and the way in which this learning process interacts with firms’ learning processes, [is] essential to any discussion of technological evolution’’ (Windrum and Birchenhall, 1998). Thus, the success of a technology depends on interactive learning between producers and consumers. Furthermore, technological

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success is not just a function of technological properties, but also of the socio-economic context of producers and consumers, to which the problem-solving characteristics of successful technologies have to fit. Consumers influence product design and performance characteristics through the formation of user preferences and the voicing of these preferences in the market place.4 The notion of a technology regime is of importance on the consumption side as well. Here, the socioeconomic context in which consumers voice their preference for technologies and products becomes a relevant characteristic of a given technology regime. The difference between consumption choices in a competitive market and a monopoly environment, for instance, is substantial. The co-evolutionary approach highlights that consumers are particularly important in the early stages of technology development. It is here that swift changes in demand can occur and fundamentally alter technology trajectories. This potential for dramatic change results from the flexibility of consumers in the early stages of product development, during which they still develop and formulate their preferences (Windrum and Birchenhall, 1998).5 Preference development and formulation, in turn, is a function of learning, which to a substantial extent takes place through emulation and social exchange. Once early adopters have moved into new technologies, therefore, a momentum of change can develop. As a consequence, it is extremely important to give renewable electricity consumption a boost at the beginning of the liberalized market.6 2.3. The co-evolutionary approach and green electricity The co-evolutionary approach, then, allows the analysis of similar, fundamental dynamics of technological innovation on both the production and consumption sides. Indeed, it forces such a two-sided analysis. Applying the co-evolutionary approach to the question of green electricity in the liberalized electricity market, we can analyze potentials for and obstacles to green electricity obtaining a substantial share in liberalized electricity markets. In this analysis, green electricity and its renewables based sources are treated as the technological and 4 With respect to electricity, the logic of consumer influence on technological trajectories appears to be problematic at a first glance. After all, electricity is a homogenous good (Truffer, 1998; W. ustenhagen, 1998). If we define performance characteristics of electricity in a broader sense, however, we can see how the consumer influence on technological trajectories applies. Suppliers of green electricity, after all, are attempting to foster product differentiation on the basis of its environmental impact. 5 As a consequence, advertising is also most influential at the early stage of technology development. 6 This was done through a rebate program in California, for instance Marquart (1998).

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product innovation in question. On the production side, the technologies needed to transform renewable resources into electricity are relatively young. Furthermore, compared to their fossil and nuclear based incumbents, they represent a completely new class of power generation technology as the analysis below will show. On the consumption side, it is only now, in the liberalized electricity market, that consumers can directly influence the spread of these technologies.7 This is the first time consumers can and need to consider different electricity ‘‘products.’’ Looking at green electricity as the innovation in electricity markets, we can then ask the main questions suggested by the co-evolutionary approach for both producers and consumers: To what extent are producers and consumers locked into technological trajectories favoring non-renewable energy sources? How can individual producers and consumers be convinced to adopt the innovation, i.e. how can we find ‘‘early adopters’’ of green electricity? How can we achieve the greatest possible extent of diffusion of this adoption of green electricity among producers and consumers? In the following, we will try to answer these questions, first from the production and then from the consumption side.

remuneration tariffs are regarded as effective policy strategies in this regard. The same holds for the suggested system of green certificates. These economically oriented instruments do have some impact, as the smooth increase of renewable based electricity everywhere in Europe shows. The assumption underlying these instruments is to make renewables more competitive with their fossil based incumbents by means of financial support, thus accommodating their learning curve and their adoption and endogenous diffusion in the electricity market. However, the cognitive maps underlying these linear innovation approaches are rather restricted in focus and tend to neglect the evolutionary logic underlying the development of electricity systems. They tend to underestimate the ‘‘technological inertia’’ (Patterson, 1999) incorporated in the electricity system, and the way this inertia conditions technological change of and innovation in the system. Electricity systems have developed as integrated systems thereby leading to the development of particular technologies and technology regimes. These technologies and technology regimes, one of whose central features are large-scale centralized power stations, can be traced back to Edison’s beginnings. As will be explained in more detail below, these technology regimes prove to entail major obstacles for transitions to new technology trajectories fitting renewables.

3. The production side 3.1. Technological inertia of the electricity system Applying the co-evolutionary approach to the production side, we find that the development of the production side of the electricity system is locked into technological trajectories favoring non-renewable electricity sources. Moreover, we demonstrate that economically oriented approaches favored because of their compatibility with the European Common Market are not sufficient for supporting the diffusion of renewables in the electricity system in the longer run. We, therefore, suggest a two-track policy intervention strategy that will eventually allow producers to overcome technological inertia and adopt new technological trajectories. This policy strategy would foster the optimization of incumbent technologies in the short term, and initiate and support transitional change towards renewable based technologies in the long term. Currently, EU and national policy strategies attempt to foster the improvement of the technical and economic performances of renewable based technologies in order to support and facilitate their further diffusion and integration in the electricity system through the use of economic instruments.8 R&D funding and attractive 7

Except for green pricing programs which in some instances started under regulated monopolies. 8 See for instance the Directive of the European Parliament and of the Council on the promotion of electricity form renewable energy sources in the internal electricity market.

The invention of electricity is perceived as one of the big achievements of mankind. Thomas Edison is generally recognized as the founding father of the modern electricity system with his path breaking system’s approach of electricity. He perfectly understood that ‘‘If what you are selling is illumination and you want to make it as economical as possible, you have to optimize the entire systemFthe generator, the network and the light bulbsFas a system, because it all works together, moment by moment’’ (Patterson, 1999, p. 142). The secrets untangled by Thomas Edison and his successors enabled the construction of the centralstation electricity system as we know it today: a rather homogenous technology consisting of large power plants interconnected by a system of high and low voltage wires transmitting the (transformed) electricity directly to consumers. Electricity production, transmission, and consumption are well integrated into a system consisting of a large set of interconnected technological components (Hughes, 1998). System optimizations at an ever-increasing scale (from the local, the regional, the national to the international level), maintenance of reliability, and reduction of operation costs have been the ultimate drivers in the technological development of the

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electricity system. The basic technological principles guiding this process were formulated in the 1920s and have not changed since then. They include obtaining economies of scale with large generation units, siting generation plants near load centers, energy resources and cooling water reservoirs, interconnecting power plants to optimize their different characteristics, high voltage grids extending the range of transmission, low and differentiated charging of consumption, allowing supply to create demand, interconnecting loads to take advantage of diversity and thereby raising load and demand factors, centralizing systems controlled by coordinating centers, forecasting load requirements to achieve optimal operation within the integrated system and lowering installed and reserve capacity through the exploitation of power plants interconnections.9 The electricity system, built on these technological principles, is rather homogenous throughout the industrial world and the technical configurations only differ in the mix of energy resources (fossils, hydro, nuclear) used for power generation. From a technological point of view, the system is mature and rather sophisticated, able to meet high reliability standards in general. Systems fall out is relatively rare and most often caused by exogenous circumstances such as (bad) weather conditions. The system is highly controllable and manageable, both technically and economically and the further improvement of its reliability and controllability has been one of the major drivers in technological innovation of generation and transmission. More than a century of engineering practices, learning capacities, skills, science and engineering has been devoted to and invested in the central station electricity system as we know it today. New generations of engineers and practitioners have been trained to operate the system and to improve its technical and economical performance. In this way, electricity could become the important, convenient and indispensable power source, which penetrated and was integrated in every facet of modern industrialist society. As Thomas Hughes puts it at the beginning of his history of Western electrification: ‘‘Of the great construction projects of the last century, none has been more impressive in its technical, economic and scientific aspects, none has been more influential in its social effects, and none has engaged more thoroughly our constructive instincts and capabilities than the electric power system’’ (Hughes, 1998, p. 1). The maturity and long tradition of the technology and accompanying technology regime of the electricity system with its reliance on central, large scale power stations are creating obstacles for the market penetration of renewables today. These obstacles not only relate 9 The list is taken from Hughes (1998, p. 370) who took it from engineering journals in the 1920s.

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to the immature technical and economic performance of renewables as current policies assumes. These policies, in fact, tend to neglect the system environment in which renewables have to operate. Renewables are predominantly pushed and supported as alternative for one system component: the generation technology. In all other respects, however, renewables as a component in the mature electricity system are still subordinated to their fossil, hydro and nuclear based competitors. This is the case not only because their technical and economic performance is still limited, but also because restrictions regarding their controllability and manageability in the system exist. Quite often expensive additional technology is needed to bring the manageability of renewables to the same level as their incumbents when they are operating as grid connected components. Without these additional technologies, renewables might endanger the reliable and controllable operation of the system. To push renewables as alternatives for current matured generation capacity furthermore tends to neglect the problem of scale. It is far from clear yet whether renewables will ever be able to reach the scale needed to become a serious alternative generation component in large-scale electricity systems. For most renewable based alternatives, the distance between the scale of demand on the electricity system and the scale of operation of the technology is far too large. It can be questioned whether the gap between the scale the electricity system demands and the scale of renewable based technology can ever be bridged. Recent innovation developments in the electricity system seem to suggest too strong an optimism in this regard. In thermal based electricity systems, such as in the Netherlands, only biomass seems to be able to meet the scale demands of the system. This renewable based energy resource could quite easily develop as alternative for fossil based energy resources. Biomass, furthermore, shows that the electricity system is only willing to integrate innovations if they do not deviate too strongly from dominant technological trajectories. This is the case with waste incineration and all other types of biomass products. Biomass could achieve feasibility as an energy resource by only incrementally innovating incumbent thermal based generation technology. In terms of technology dynamics, it continues the dominant technological trajectory of the existing technological regime, e.g., the reliable and easily manageable large-scale power plant. For the same reason, combined heat and power generation could develop. Wind and solar based technologies, however, refer to a completely new class of technology, based on different technological principles, which deviate from the dominant technological paths of the electricity system. These technologies deviate both in terms of scale and manageability because their electricity production depends on fluctuating

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physical conditions. Therefore, it might even be questioned whether wind and solar based technologies should be treated as an alternative generation component in the central station electricity system or whether they should be treated as incubates of new concepts of electricity and energy provision, next to the central station model. Current innovation policies hardly account for these broader obstacles resulting from system inertia. They basically focus on the integration of all renewable based technologies by conceiving them as potential alternatives for incumbent fossil based generation capacity. However, not all renewable based technologies are compatible system components able to meet the high technological performance standards of the centralstation model. It might even be questioned whether all renewable based alternatives could be perceived in this way not only in the short term but also in the long term. The dominant technological trajectory of Edison’s central-station system is likely to build on the further optimization of incumbent large-scale technology (gas, combined heat and power generation and, in the longer term, hydrogen), instead of adopting to renewable based alternatives. Therefore, liberalization is likely to support the further development of currently operating generation technologies, especially, as the economic logic of the liberalized market will increasingly force power generators to rely on the dominant technological trajectories to innovate power generation technology. At best, the dominant trajectories will allow short- and medium-term integration of hybrid technological alternatives, which combine a renewable base with high quality demands of the central station electricity system. 3.2. Consequences for innovation policy Due to the obstacles raised by existing technological trajectories, it is questionable whether the kind of policy strategies currently pursued will be able to initiate the changes needed for sustainable electricity production. Successful policy strategies to initiate sustainability oriented change processes in electricity supply have to account for the evolutionary logic underlying technological change and innovation. Drawing on this evolutionary logic, the sustainability challenge is to redirect the innovative search process of actors in ‘‘desired’’ technological directions and to facilitate the adoption of these new technologies. In general, evolutionary thinking provides for a two-track approach in innovation policy: changing the selection environment to discourage the selection of the dominant technology and increasing the rise and development of variety (new technologies). In innovation policies, the first track would translate in policies oriented towards the further optimization of the dominant technology of electricity systems, whereas the second track would translate in

policies oriented towards a (longer-term) transition towards new systems of sustainable energy provision. The latter track would include the initiation, facilitation and support of innovations able to develop into new sustainability based technological trajectories. Both tracks will be illustrated below. 3.2.1. Optimizing incumbent technology Public support for renewables has been predominantly financially and economically orientated in recent years. Due to this support, a new class of renewable based technologies could enter the electricity system. Under liberalization, reliance on market based policy instruments is likely to be even stronger, because of their compatibility with the competition-rules of the internal market. The system of tradeable green certificates is considered most promising in this regard and can be adapted to support the environmental optimization of incumbent technology.10 The system of green certificates obliges energy companies to gradually increase the share of renewable based electricity in their annual electricity supply portfolio. Working out the technical details of national or EU-wide operational systems seems to be a minor problem in comparison to other problems. The system assumes longer-term political reliability, extending the time horizon of political elections, in order to convince corporations to invest in renewable based generation capacity.11 Next to political credibility, a green certificate system has to include devices to account for initial differences in technological and economic performance among renewable based technologies. Neglecting these differences could harm the further development of promising alternatives that are still in an infant stage of development. A kind of quota system (earmarked bands of technologies) could be considered as part of the green certificate system, in order to provide fair chances to the whole range of technological variety in the initial stage (Smeloff and Asmus, 1997, p. 197). However, this would increase the bureaucracy of the system and would enlarge its administrative burden. Drawing on evolutionary logic, it appears likely that a system of green certificates will push the further 10 Despite its attractiveness and fit with EU rules on competition in the internal market, a policy strategy relying on green certificates would face some problems too: ‘‘Its successful implementation will require that investors in renewable power plants have confidence that the policy will remain in place long enough to allow them to recoup their investments. At the political level, it will also have to account for initial differences in the competitiveness of renewable technologies. Finally, details for certifying the credits and monitoring their purchase need to be worked out, as do compliance mechanism and penalties for non-compliance’’ (Smeloff and Asmus, 1997, p. 103). 11 The EU-debate on hydro is not that trust-creating in this respect. What if larger scale hydro will be treated as a renewable energy source in a couple of years, if it turns out that this is the only way for the EU to bring the market share on the desired 5% in 2005?

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development of predominantly hybrid generation technology in the shorter term, such as biomass coincineration, (gas turbine based), combined heat and power production and electricity or gas driven heat pumps (geothermal) at least in the thermal based European electricity systems. Hybrid technologies are less risky than fully renewable based technologies and, more importantly, they fit in the well established and widely spread technological trajectories developed out of the past and they don’t endanger the high technological quality standards of the system. Such policy strategies probably will be effective for pushing efficiency improvements in the central station electricity system, to stimulate the reduction of the environmental hazards of thermal based electricity systems and they probably can stimulate the penetration of some renewable based technological alternatives, such as biomass and large scale wind turbines. However, the technological inertia of the electricity system highlights the need for additional innovation policies able to initiate and to accommodate new, renewable based, technological trajectories needed for a sustainable energy supply in the long term. 3.2.2. Fostering transitional change in electricity provision If we really want to attain higher levels of market penetration for renewables, then, strategies to foster transitional change, i.e. change from one technological trajectory to another, are necessary. In particular, these strategies should promote change toward a new trajectory supporting sustainable development. To initiate these kinds of transitional changes, state authorities could focus on two strategies in the context of liberalizing electricity markets: 1. Initiating societal discourse to explore sustainable development perspectives in electricity/energy supply. 2. Initiating and accommodating socio-technical experimentation with new, renewable based technological concepts. As pointed out in previous sections, the current central station electricity system is an inert system, which is historically grounded in and accommodated by a long science and engineering tradition. The inert technological (and since liberalization, also economical) forces in the system are supposed to be strong, and one of the options to attack these forces is to initiate a debate on alternative paths of development. One of the major functions of societal discourse, therefore, is to open up the closed minds for new developments, alternative energy concepts and new, sustainable technological trajectories. Liberalization offers state authorities a good moment to initiate, organize and manage these kind of discourses among all stakeholders involved. Liberalization offers opportunities to bring new stake-

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holders, in particular energy consumers, both industrial and households, into the debate. The discourse offers a platform for exchanging (diverse) views and to discussing possible routes in sustainable development. Such discourses should be open to allow all stakeholders to bring in ideas, values, preferences, capacities, etc. The essence of the discourse is to optimize the conditions to learn about the options for longer-term transformation of the fossil based electricity supply system into a renewable based system. This kind of discourse, therefore, goes beyond the question how to increase the share of renewables in the current electricity system. State authorities are in a position to organize this kind of discourse on sustainable development, and to provide supportive facilities for knowledge and information. Socio-technical scenarios have been suggested as a supportive instrument in this regard (Geels, 1999). Scenarios are helpful to systematize diffuse ideas about future developments by explicating possible paths of development. Scenarios force participants in the discourse to take a position in the debate and to explicate their assumptions about future expectations. The suggested discourse approach is not new and already used in practice. One example, running both national and at the EU-level, is the dialogue on climate options for the long term ( cool). The program aims to discuss options and developmental paths for the reduction of green house gases. In the Netherlands, the national dialogue is facilitated by two future scenarios of 80% CO2 reduction in 2050 (Faaij et al., 1999). With the help of this information, state representatives, scientists, environmental groups and representatives of industry discuss the impact of the reduction in terms of options and possible developmental routes. A second example, also from the Netherlands, is the suggested ‘‘Deltaplan’’12 for a sustainable energy provision. Here too, the state acts as initiator of the process. The program aims to bring all stakeholders involved to the debate, and the Social Economic Council (2000),13 who suggested the program, proposes to develop a common implementation program, comprising four aspects: the identification of priorities, the identification of barriers, determination of responsibilities and finally, the identification of supportive policy strategies (SER, 12 The name of the program ‘‘Deltaplan’’ refers to the national Dutch program of water dam construction after the severe flooding of the province of Zeeland in 1953. Choosing this name for the sustainable energy program stresses the priority the National Socioeconomic Council, the initiator of the program, gives to a sustainable national energy provision. 13 It should be noted that the Dutch Social Economic Council is a national advisory board consisting of industry, trade unions and several independent members, predominantly with an academic background.

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2000). This kind of reflexive policy approach builds on the strong Dutch corporatist tradition and should be considered as a supportive device for the search of and a change toward more sustainable routes in technological development. While the discourse approach pursues a change of mind of stakeholders, a second policy approach to initiate and to facilitate transitional change goes a step further. This approach, called strategic niche management (Kemp et al., 1998), is not only about ‘‘learning by talking’’, but also about ‘‘learning by doing’’. Strategic niche management is defined as: ‘‘... the creation, development and controlled phase-out of protected spaces for the development and use of promising technologies by means of experimentation, with the aim of (1) learning about the desirability of the new technology and (2) enhancing the further development and the rate of application of the new technology’’ (Kemp et al., 1998, p 186). Strategic niche management not only allows for real life experiencing of new technologies, but also the further exploration of nontechnical conditions and the social and institutional changes necessary for their effective adoption. New products or technology are normally integrated into the market after a certain incubation time in niches. Niche management, is therefore quite common for industry as well as for innovation policies. Strategic niche management builds on evolutionary logic underlying technological change and innovation and has been suggested as policy tool in particular to initiate and facilitate transitional changes. In a liberalized context, state authorities in particular could initiate projects of strategic niche management, by mobilizing and organizing stakeholders. Urban planning processes offer good laboratories for these kinds of projects. In the Netherlands, for instance, municipal authorities now have legal power to determine the type of energy infrastructures in new residential and industrial areas. This power could be used to initiate new electricity/energy concepts at the local level. While the Dutch initiatives are running on a very limited scale, this kind of ‘‘socio-technical experimentation’’ could be extended and strategic niche management offers a context for that. Almost all-renewable based technological options currently available, have proven operational on more restricted scale than the dominant technology regime requires. This ‘‘weakness,’’ however, allows for their further development by means of interactive learning by both producers and users of the technology, i.e. the electricity consumers, in the context of strategic niche management. These renewable based technologies would re-integrate, what evolutionary thinking labels as the ‘‘form and function of technology’’ (Rip and Kemp, 1998), of renewable based electricity and heat production at the level of (groups of) consumers.

Thereby, such initiatives could open the minds for completely new energy provision concepts.14 Both suggestions to initiate transitional change in electricity production are necessary supplemental strategies and not meant as alternatives for economic oriented policy instruments like green certificate trading, R&D support, quota obligations and the like. As explained above, these latter instruments probably only will support those renewable based alternative generation technologies able to meet the high quality standards of the dominant central station electricity system. They will increase the share of renewables in the short term, but it might be questioned if this kind of policy support will be able to induce a longer-term transition towards a sustainable electricity system because of technological inertia of the dominant technological regime. For that reason, we argue that current policy instruments need to be combined with discourse, learning and experimentation, to explore, to understand and to experiment with future requirements of a sustainable electricity provision. These kinds of reflexive approaches allow open debate about sustainable alternatives for current generation technologies, but perhaps also for the central station electricity system itself. In this way, a better understanding of sustainable future electricity options can be developed. Next to initiating and accelerating discourse, policies should support experimentation with promising new technological concepts and designs inside and in parallel with the central station electricity system. The new liberalized electricity market allows for this kind of diversification and flexibility in generation technology, although strong governmental financial support will be needed because of the risks involved. Governments do have a special responsibility in initiating a transition towards a sustainable electricity provision in the long term. The transition will take decades, but can and should be initiated now.

4. The consumption side We now turn to answering the policy challenge of how to enhance the share of renewables in a liberalized electricity market on the consumption side. Using the co-evolutionary approach, we discuss the extent to which consumers can get locked into a certain electricity 14 The stand alone wind turbine as well as the photovoltaic screen are clear examples of electricity systems integrating form and function of the technology at the scale of individual consumers. The industrially or residentially operating combined heat and power units are other examples of such small scale de-centralized energy concepts. Combinations of several renewable based technological options, for instance, heat pumps in combination with wind based electricity generation, could be experimented on small real life scale, by means of strategic niche management.

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purchasing behavior and identify the implications of the existence of different consumption styles for the adoption and diffusion of green electricity consumption choices. In particular, we demonstrate the importance of targeting specific and relevant consumption styles and of persuading consumers in these different target groups to switch to green electricity. Based on this analysis, finally, we delineate general and target group specific policy intervention strategies to enhance the market penetration of renewables from the consumption side. Fundamentally, we can deduce from co-evolutionary logic that consumer choice is particularly important in the beginning of liberalization given the potential of developing a momentum of change at that stage. Rather than accept that green electricity may continue to serve only a niche market or wait for its slow, gradual growth into a larger market share, we have to ask how we can achieve a substantial momentum of change towards renewable energies now. In other words, we have to determine what would make ‘‘early adopters’’ purchase green electricity and what would lead to the greatest extent of societal diffusion of this consumption choice. For both questions, we first need to look at some of the obstacles to the ‘‘adoption’’ of electricity from renewable sources by consumers. These obstacles result from the latter’s being ‘‘lockedinto’’ the previous technology and consumption patterns and reveal the hurdles green electricity needs to overcome for a successful penetration of the electricity market.

4.1. Locked-in In the case of green electricity, consumers are locked into the socio-economic context and practice associated with the previous technology regime. Consumers are used to receiving their electricity from a monopoly provider with no room and need for making choices (Truffer et al., 2001). This has several consequences. First, consumers have no experience with purchasing electricity in a market environment. Where does one purchase electricity and from whom? Where does one get the necessary information, and what is the important information? Given such ‘‘ignorance’’ and uncertainty, many consumers find consumer choice overwhelming (Wiser et al., 1999), and choose to stay with their previous monopoly suppliers who are still benefiting from the aura and history of secure electricity supply.15 15

Their hesitancy is further enhanced by the existence of a ‘‘boundary of imprecision in human decision making’’ due to which ‘‘consumers can remain locked into a technology which, within some tolerance is less than optimal’’ (Windrum and Birchenhall, 1998, p. 129).

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Besides a lack of knowledge about the supply side, consumers are starting with a lack of knowledge about their own needs and preferences. Thus, consumers are frequently rather uninformed about their own electricity consumption, as well as its costs and environmental impact (Truffer, 1998; Wiser et al., 1999). This is quite understandable since such information was of little relevance as long as little choice and room for change existed. Furthermore, early adopters of green electricity face network externalities. After all, the individual choice has little impact on the overall environmental impact of electricity generation (Truffer et al., 2001). Some suppliers even will only build renewable sources if a given number of consumers subscribe. Finally, consumers are used to regarding decisions about the environmental impact of electricity generation and its future trajectory as the responsibility of the regulator and the utilities. While the liberalized market does indeed provide a ‘‘new opportunity for public involvement in the electricity sector’’ (Miller and Serchuk, 1996), this opportunity is frequently not being perceived as such (i.e. in a positive manner) by consumers. This opposition to becoming active and taking on responsibility appears to be particularly strong in Europe compared to the US, maybe because the liberalization of the electricity market came as an ‘‘order from above. ’’ Liberalization was decided by the EU Commission without much of public demand for it or even public discussion. In contrast, liberalization was a topic of public debate in the US, and partly demanded by customers (mainly commercial but also residential) because the costs of electricity were visibly high in some states relative to others. In sum, finding early adopters of green electricity by itself is difficult. Consumers are locked into the provision of electricity by monopoly suppliers. They exhibit very limited understanding of the liberalized electricity market and willingness to assess their own potential role and responsibility in it. Consumers frequently feel overwhelmed by the new situation and show hesitancy and inertia. In a first step, therefore, policy strategies to enhance the share of renewables in a liberalized electricity market have to help consumers overcome this effect of being locked-in by introducing the market to consumers. If we also consider the need for the diffusion of consumption decisions by these early adopters highlighted by evolutionary logic we notice additional problems. Achieving a sufficient momentum of change through the diffusion of consumption choices of green electricity by early adopters would require the general communicability and applicability of these choices. With respect to environmental consumption criteria, however, different consumption styles exist, and the emulation and diffusion of consumption choices across these styles

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is limited (see the appendix).16 Within consumption styles, the arguments for a particular consumption choice are likely to be similar, and therefore more likely understood and perceived as persuasive. If, however, fundamental subjective and societal differences in the evaluation of a product and its performance characteristics and the needs satisfaction drawn from its purchase exist, the reasoning and cost-benefit calculations are likely to be very different, and perceived as very different.17 In the case of green electricity, early adopters are likely to be members of the eco-niche. The benefits of switching to green electricity for this group are likely to be the highest, as they perceive environmental action to be necessary, environmental consciousness is part of their identity, and environmental action may satisfy their need for participation. Given the relatively high value this group receives from choosing green electricity, the benefits of this choice will outweigh the costs at a relatively higher cost level.18 Spill-over from the econiche to other consumers, however, is likely to be limited, since the latter have different satisfiers for their needs and perceive the costs of green electricity differently as well (Truffer et al., 2001). Explanations members of the eco-niche give for their consumption decisions are not likely to convince ‘‘inconspicuous families’’, for instance, whose preferences are for inexpensive, inconspicuous, mainstream goods (Schultz, 2000a, b). The existence of different consumption styles thus means that a powerful policy strategy would attempt to garner ‘‘early adopters’’ simultaneously in several consumption styles to establish the best basis for the diffusion of this consumption decision. Only such a targeting of the most relevant consumption styles will provide a basis for the desired diffusion of green

16 Empirical studies on sustainable consumption have identified a range of consumption styles, which are characterized by different consumer preferences and abilities resulting from the combination of subjective and societal determinants of consumption (Schultz, 2000a, b; Prose, 2000; Pedersen and Broegaard, 1997). Interestingly, research has identified different groups as being most predisposed towards purchasing green electricity in different countries (Truffer, 1998; Oikos, 1999). 17 This argument is not meant to deny that emulation across consumption styles exists, such as the phenomenon of ‘‘upward emulation.’’ Elite consumption patterns, especially as communicated by the media, are being imitated and replicated by other groups as well. Beyond status driven consumption decisions, however, such emulation across consumption styles is not that frequent, and does not negate the importance of diffusion within consumption styles. Rather, the imitation of elite consumption patterns suggests that the targeting of elite consumption styles is likely to have an additional benefit beyond the manipulation of the consumption decisions of that group, which policy strategies need to take into account. 18 Furthermore, members of this group tend to be financially better off, so that a given financial cost is relatively smaller for them anyway.

electricity consumption choices to a large number of households. 4.2. Policy intervention Based on the above discussion, we know that consumption oriented policy strategies to enhance the share of green electricity in a liberalized market have to involve the following components: (1) an introduction of the market to consumers in general; and (2) strategies for the targeting of specific consumer groups and the diffusion of green electricity consumption choices among them. 1. Introducing the market to consumers in general.The hesitancy even strong environmentalists exhibit to date to choose electricity from renewable sources indicates the importance of a general education about the liberalized market and the simplification of transactions in that market. Most importantly, such facilitation strategies have to reduce transaction costs, i.e. information and contracting costs (Truffer et al., 2001). Research has shown that regulatory rules assuring the functioning of institutions and keeping transaction costs at a minimum are very important for the operation of emerging markets in general and liberalized electricity market in particular (Williamson, 1996; Wiser, 1999; Wiser et al., 1999). The state can reduce transaction costs by creating transparency and providing easily accessible, reliable information on ‘‘products’’ and their performance characteristics.19 Publicly funded consumer education on retail choice thus would provide an important step to offset inertia and confusion (Wiser et al., 1999). Given that consumers are new to a choice in the ‘‘product’’ electricity and the ‘‘performance characteristics’’ of competing products in this market, such information should highlight the different dimensions along which consumers can compare offers. Here, environmental characteristics are particularly relevant, and should include disclosure requirements on the sources of electricity sold and its environmental impacts. After all, consumers thus far have had little opportunity to gather information on the environmental impact of different electricity sources and thus exhibit only a very limited awareness of potential differences (Truffer, 1998; Wiser et al., 1999). Government involvement in the provision of information is particularly important, as many of the new, small suppliers of electricity, particularly the providers of green electricity, do not have the same marketing budgets as the established large utilities. Thus, the provision of information could to some extent level the playing field. 19 The state is, of course, not the only actor able to play a role in the provision of information and transparency. See Truffer et al. (2001) for an excellent discussion of third party labeling and the complexities associated with it.

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Introducing the market to consumers means to a large extent also the reduction of uncertainty and perceived risk. Thus, consumers need to be assured of consumer protection, especially with respect to contract reliability and consequences of supplier failure. Likewise, consumers need to know to what extent they can trust information on producer ‘‘performance characteristics’’ such as the environmental impact of the generation of that electricity. Here, environmental labels and disclosure requirements can provide an important tool (Truffer, 1998; Truffer et al., 2001; Wiser et al., 1999).20 2. Targeting specific consumption styles.The simultaneous targeting of a variety of consumption styles involves three steps: (1) the selection of the most relevant groups, (2) the selection of policy measures and instruments to garner early adopters of green electricity in those target groups, and (3) the selection of policy measures and instruments to enhance the diffusion of the consumption choice made by these early adopters within the target groups. The selection of the most relevant target groups should be based on the potential impact of feasible change. This potential impact is a function of group size, the accessibility of this group and the expected marginal benefit of change. It might be more valuable to pursue a small but fundamental change in a target group which shows little convergence towards a desired policy goal, for instance, than spending a lot of resources on a target group which is already 90% in compliance with the goal. Finally, other potential benefits associated with a change in consumption behavior by members of a particular group have to be taken into account, such as the likely effect on other groups. In order to select the most relevant target groups, consumption styles in the market need to be studied. In general, one can distinguish an environmentally oriented consumption style, the status oriented elite, a consumption style that is not responsive to environmental or social messages, and a large remaining group of consumers, who will include environmental criteria in their consumption choices under certain conditions. Schultz (2000a, b), for example distinguishes between four such target groups for policy intervention with respect to the sustainability characteristics of household consumption choices (for a description of the four groups according to Schultz’ empirical results see the appendix). In the case of green electricity, the selection criteria mentioned above suggest that policy should not focus primarily on the environmentally oriented consumers or those unresponsive to any environmental messages. The 20 Environmental labels can, however, also fail in facilitating consumer choice. Whether the three (almost four) competing environmental labels in Germany, for instance, reduce or increase confusion has yet to be seen.

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former is a relatively small group and likely to already purchase green electricity to a relatively high extent if the general policy strategies suggested above are implemented. Targeting the latter does not promise an efficient investment of policy resources due to the limited probability of success. The large group of not explicitly environmentally oriented consumers, ‘‘the traditionals’’ in Schultz’ categorization, however, would be a valuable target, since its members currently have entered the green electricity market only to a very limited extent. In consequence, even a small change towards green electricity would probably have a substantial environmental impact. Furthermore, achieving such a change is feasible, since this group is likely to respond to indicators of health, regional context, and specific environmental benefit (Schultz, 2000a, b), which all can be linked to renewables. On the health side, disclosure requirements indicating resource mix and associated emissions and hazards of a given electricity ‘‘product’’ in a simple and clear manner, for instance, would foster the understanding of the environmental impact of one’s electricity consumption, especially if accompanied by information campaigns linking environmental impact to health consequences. The regional context could be emphasized through the development of renewable energy sources in the region, such as local solar power stations. Such regional stations would allow consumers of green electricity to ‘‘experience’’ some of the benefit of choosing green electricity more directly and serve to make the differentiated product electricity more real (Oikos, 1999). Finally, this group is receptive to a sophisticated communication of environmental benefits, if the latter are specific rather than are based on broad moral appeal (Schultz, 2000a, b). Therefore, information needs to be credible and informative, for instance through ecolabels, disclosure requirements, or credible endorsement by environmental actors (Mayer et al., 1999; Oikos, 1999; Wiser et al., 1999; Wiser, 1999).21 Likewise, a spirit of community goodwill, volunteerism, and local participation matters for this group, which again can be addressed in green electricity campaigns (Mayer et al., 1999). Possible information strategies include campaigns on TV or in newspaper brochures, community centers and events, grassroots involvement and business-NGO partnerships, and community power pooling and local agenda 21 initiatives (Mayer et al., 1999; Truffer, 1998; Schultz, 2000a, b, for the importance of intermediary actors in general see Oikos, 1999). Since this group tends to be very cost sensitive, the price of green electricity (including transmission charges) would need to be as competitive as possible 21 Note, however, the complex relationship between credibility and accessibility of information.

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of course. Thus, information campaigns and discoursive strategies could be combined with economic instruments such as eco-taxes or rebates. The price factor could be weakened, however, by raising awareness about the small impact electricity consumption has on the budgets of most households (Truffer, 1998). Furthermore, ‘‘the traditionals’’ would also perceive a reduction in security of supply as a significant cost. Moreover, for some members of this group, the perceived costs of green electricity would be lower if its purchase was seen as mainstream behavior. Therefore, it is extremely important for policy strategies to assure this group of reliable and easily accessible electricity consumption choices and to continuously communicate positive developments in the market share of green electricity to the group. The second valuable target group is the economic and social elite, ‘‘the privileged’’ as Schultz (2000a, b) calls them. This group is particularly relevant as a target for policy strategies to enhance the market share for renewables due to (a) the amount of its electricity consumption and (b) the potential effect its consumption choices have on other target groups. Thus, even though this group is rather small, a substantial environmental impact could be achieved through a change towards green electricity. Compared to ‘‘the traditionals,’’ ‘‘the privileged’’ are fewer and probably easier to target. Possible avenues are presentations at social gathering of this group in Rotary or Lions Clubs, for instance. According to Schultz (2000a, b), members of this group can potentially be convinced to switch to green electricity, if they perceive the latter as valuable in providing such status.22 As a consequence, solar power might carry considerable potential because of its perceived high tech quality and expensiveness. The potential of renewables to gain a significant market share in this target group thus depends to a significant extent on the ability to communicate its purchase.23 Furthermore, members of this group might also be persuaded to switch to green electricity by appealing to their sense of societal responsibility due to the conservative values that dominate in this group (Schultz, 2001a, b). Finally, diffusion of a consumption choice for green electricity by early adopters within the two target groups can be fostered by inducing communication about the respective subject within the groups. Such communication can take place at social gatherings and local events, as well as via newsletters by social/interest groups. Discourse can be fostered at churches, schools, work places, and/or sports clubs, as well as social clubs and See also Wustenhagen . (1998) for the role of demonstrative consumption of ‘‘green’’ products. 23 B.A.U.M.’s campaign for solar power which is accompanied by the sale of a whole range of advertizing toys appears to be on the right track in this regard. 22

society events. The visible and positive presentation of choices for green electricity by members of the two groups would be extremely important. In turn, the most visible members of these groups are valuable targets. As a long-term strategy to increase the potential for diffusion, social networking as such could be fostered as well. This is difficult to accomplish from the outside, of course. And yet, it could be a valuable endeavor not just for the market share of green electricity but also because of the general importance of social networks for social (and individual) health. As the literature on social capital (Bourdieu, 1992; Putnam et al., 1999) argues, the loss of social networks is also associated with other social, economic, and political consequences, in particular the willingness to contribute to the provision of public goods such as environmental quality.

5. Implications In this paper, we developed policy intervention strategies to enhance the market penetration of renewable based electricity in a liberalized market. Using a (co-) evolutionary approach, we analyzed the powerful obstacles to increasing market shares for renewables on both the production and consumption sides. Thus, we demonstrated the need for policy intervention to help producers and consumers move out of technological trajectories favoring non-renewable electricity into which they are currently ‘‘locked’’ and to support the diffusion of renewable energy in the market. On the production side, we highlighted the extent to which producers are locked into technological trajectories favoring incumbent fossil, nuclear, and large-scale hydro based electricity generation. On the consumption side, we delineated the extent to which consumers are locked into a socio-economic context favoring traditional large utilities and leading to an aversion towards consumer choice and responsibility. Based on these analyses, our paper derived policy intervention strategies. On the production side, we suggested a two-track policy approach: an optimization track and a transformation track. The first track is oriented towards the further optimization of the dominant technology of electricity systems, whereas the second track is oriented towards a (longer-term) transition towards new systems of sustainable energy provision. To induce the necessary kinds of transitional changes, we suggested that state authorities focus on initiating societal discourse to explore sustainable development perspectives in electricity/energy supply, and on initiating and accommodating socio-technical experimentation with new, renewable based technological concepts, for instance through strategic niche management. On the consumption side, we also proposed two levels of policy intervention. First, we argued that policy needs

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to introduce the liberalized market in general to consumers, and to enhance their understanding of their role and responsibility in it. Secondly, we made a case for target group specific policy strategies, allowing the development of ‘‘early adopters’’ of green electricity in the most relevant target groups and supporting the diffusion of that consumption choice within those target groups. Again, we demonstrated that policy strategies initiating societal discourse have great potential. Communicating information (environmental and other) which can be identified as particularly relevant for a given target group, and enhancing communication about the topic as well as consumption choices made within (and to some extent across) target groups can provide the fertile soil for the development of a momentum of change towards green electricity on the consumption side. The fundamental insight provided by these separate production and consumption side focused analyses is the importance of strategies fostering societal discourse. Our analyses highlight the insufficiency of policy approaches currently employed to foster the market

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share of renewables based electricity, in particular the sole reliance on market based instruments. Instead, both analyses suggest a reflexive policy approach to relieve the current inertia in electricity production and consumption and to initiate and support a reorientation towards green electricity. They emphasize the need for learning and communication between and among actors, including especially societal actors. Unfortunately, initiating, fostering, and focusing such discourse is not an easy task. Further research will have to develop more specific policy strategies for this endeavor. To a large extent, our argument has been based on the path dependency of technological development. While such path dependency is often acknowledged in literature and practice, paths do sometimes change. The interesting question, then, is: when do such changes occur? When does a situation of openness for change exist? Some might argue that due to the current liberalization of electricity markets such a situation of openness exists due to the fundamental change of the institutional environment. Our above analysis, however, shows that that is

Table 1 Target groups TG1: The environmentally oriented The organized eco-families: families with one or more children, often both parents are employed, therefore, time scarcity is a frequent issue in everyday life, and, in consequence, an orientation towards convenience products exists. Because of time and organizational issues, a car is seen as necessary, for instance, in order to take the children to sports activities, however, car-sharing is evaluated positively. High educational levels, a good financial background, positively oriented towards change, an egalitarian family model, and a clear orientation toward the environment, with a strong health component, especially the health of the children dominate the consumption behavior of this type. The creatives: young to middle-aged, low income, which is compensated by sufficient free time, predominantly women and men from social or artistic jobs, from the bourgois, alternative, or sub-cultural milieu, with a well-developed liking toward the self-determination of consumption and a clear environmental orientation, partly also guided through compassion with animals and orientation towards ethical consumption. TG2: The overwhelmed The young disinterested: young and living by themselves, low income, often in educational stage, frequently first own household, with a welldeveloped orientation towards action and excitement, an orientation towards short-term consumption and convenience. The consumption-unnerved: individuals in the middle phase of life, more often men, good financial background, but in situations of pressure, many self-employed, threat of job loss/decline, with a strong orientation towards convenience and car, a aversion towards environmental directions, but also against other demands of consumption design, partly with a clear dissatisfaction with life. The badly positioned overwhelmed: low income, many unemployed, with low educational level, scarcity in social resources and everyday competency; the consumption orientation is dominated by the need to save money, purchases based on the pattern of ‘‘cheap and lots/big’’ determine consumption behavior, aversion towards or disinterest in environmental theme, the situation of women in this group is determined by strong work over-load and time scarcity. TG 3: The traditionals The rural traditionals: families with older or grown-up children, in own houses, living in rural areas or suburbia, with medium education levels, often self-employed artisans and traditional housewives, with a strong orientation towards ownership, security, and quality, and a strong regional orientation. The inconspicuous families: families in all age groups in petite bourgeois milieu, sufficient to medium income levels, strongly involved in family networks, strong orientation towards price, traditional family oriented consumption, and cars. The active elderly: seniors with middle to high education and income levels, the children have left home, with lots of free time, which they like to use for travel, with openness towards change, a well-developed regional orientation and orientation towards quality, and partly an age-determined health consciousness. TG 4: The privileged The childless job-oriented: successful singles or couples with no children from privileged or upcomer milieus, with high income, household help, successful in the job with a strong orientation toward the job, with orientation towards status and convenience, partly exclusive hobbies, a strong . orientation towards long distance travel and partly an aversion towards the environmental theme and a setting of boundaries towards ‘‘Okos’’. The status-oriented privileged: individuals in extremely good financial situations with high consumption levels, and an orientation towards status, ownership and family, a strong integration into milieu-specific social circles, partly open to ethical consumption.

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not the case. On the production side, previous (sunk) investments, hegemonic technological systems, preformed human skills, and huge overcapacity in European electricity generation prevent the utilization of this open situation. On the consumption side, a lack of information and practice lead to a similar result. Therefore, targeted policy intervention is necessary to create a window of opportunity for transitional change. Finally, one might wonder what the time scales involved for the necessary changes would look like. Complete technological transitions tend to take a long time, some 20–25 years. The initial changes on both the production and consumption sides need to be achieved in a much shorter time frame, of course, to allow the overall transition. Especially, on the consumption side, governments need to actively intervene now at the beginning of the liberalization process and the availability of consumer choice with respect to green electricity. It is here that a significant momentum of change can be achieved in the short term. On the production side, the suggested steps in terms of both the optimization of incumbent technology, but also the initiation of societal discourse and strategic niche management also has to start now. They are likely to foster medium-term changes rather than short-term changes, however.

Acknowledgements The authors would like to thank Anne Louise Koefoed, Jyrki Luukkanen, Lutz Metz, Niels Meyer, Atle Midttun, and Steve Thomas, as well as an anonymous reviewer for their valuable comments. The responsibility for the remaining errors is with the authors.

Appendix A Target groups (adapted and translated from Schultz 2000a, b is shown in Table 1).

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