Multi-perspective Framework for System Innovations in India; an Analysis of the Renewable Energy Development Gopal K Sarangi1 and Arabinda Mishra2 Paper ID: 106 System innovations through the interactions among multiple actors shape the dynamic structure of any system. System innovations occur through interplay of many actors that influence each other in varying scales. To grasp the dynamics of such complicated processes in a coherent analytical framework, the present paper applies multi-actor, multi-factor and multi-level aspects of transition propounded by Geels et al. (2004). The multi-level framework is widely applied due to its flexibility in accommodating the contribution of various actors. The dynamic multi-level models of transitions also have been used in the energy sector to track the directions of transitions occur in the sector (Sirkku, Kivisaari, 2004). The present paper uses this multi-perspective interaction framework to explain the transitions happened in the renewable energy system in India. It emphasizes the interactions occurring between the legal, socio-economic structure and technical change shaping the sectoral outcomes. Renewable energy has emerged as one of such niche areas to make such sustainable transitions a reality. The approach here is to gradually replace the traditional fossil fuel regime and move towards a more greener and eco-friendly regime. A set of new actors and institutions are introduced to facilitate this transition to drive the sector to achieve the overarching green goals of the society. Given the above context, the present paper attempts to investigate following set of research questions: a) analyze the dynamic interactions and interplay of various actors stimulating innovations in renewable energy sector in India, b) investigate how these interactions differ across states depending on differing socio-economic background, c) examine whether the transitions occurring in the sector moving in sustainable direction. 1 Research Scholar, Centre for Regulatory Policy and Research, TERI University, IHC, Lodhi Road, New Delhi: 110003. E-mail: gopalkrishna.sarangi@gmail.com, gopal@teriuniversity.ac.in 2 Dean, TERI University and Director, Climate Change Division, TERI 1 Keywords: Multi-level perspective framework, renewable energy, actors and networks I. Introduction The crave for sustainability and the emphasis on devising ways to achieve the desired level of sustainability grounded on the well established consensus that various characteristics of modern societies are not sustainable (Elzen et al.,2004). The need for radical change in area of energy, food, water and mobility calls for a transformation in the current pattern of consumption and production as well as change in the incentive structures and institutions and their interactions The momentum towards sustainability received increasing attention with the declaration of Bruntland Report in 1987. The 2002 World Summit on Sustainable Development in Johannesburg kick started the cross cutting programmes for transforming sustainable consumption and production systems and reiterated the promise made in 1987. The analytical focus of the current debate on sustainability is on the transformation from clean products to sustainable systems (Schot et al., 1994; Vellinga and Herb, 1999; Unruh,2000; Jacobbson and Johnson, 2000;Berkhout,2002). The irony of this transition is that it has not taken up as expected and appears to be ‘locked in’ in many dimensions. It is contended that this happens partially due to economic reasons, but there are also social, cultural, infrastructural and regulatory reasons (Geels et al., 2004). The paper is an attempt to understand the dynamics of transition to a greener regime in India through the lens of multi level perspective (MLP) transition framework propounded by several scholars (Rip and Kemp, 1998; Schot, 1998; and Geels, 2002;2004;). The paper argues that while the pressure stemming from the change in the landscape level acts as a major driver for influencing the internal dynamics of the socio-technical regime governing the renewable energy in India. This is reflected in the change in the actor networks and their interaction in shaping the growth and causing the diversity in the renewable energy development in India. The paper is organized as follows. The section II offers a theoretical framework highlighting the dynamics of transition and multi-level perspective framework analyzing the system innovations. The third section seeks to explain the transition towards a sustainable energy regime. Section IV elaborates the 2 evolution of energy transition to a green energy regime in India. Fifth section examines the dynamic interaction shaping the transition and last section concludes the paper. II. Transition Dynamics and MLP Framework for System Innovations: Theoretical Analytics Transitions are complex, uncertain, and involve multiple societal stakeholders (Rotmans and Loorbach, 2010). The varieties of policy paradigms and instruments complicate the issue of governing transitions and raise doubts about their practicality and efficacy in explaining it (Geels et al, 2004). Analytically transitions are characterized by strong nonlinear behavior. The theoretical arguments on transitions can be traced back to’ technological regime paradigm’ propounded by evolutionary economists like Nelson and Winter (1977). They put forward that technological regimes refer to the cognitive routines shared by a community of engineers and guide their research and development (R & D) activities. This notion of technological regime can be related to the Dosi’s (1982) work on ‘technological trajectories’ and ‘technological paradigms’. The technology centered transition paradigm has been criticized for overemphasizing the supply side aspects of the innovations (Van de Ven and Garud, 1989;, Etzkowitz and Leydesdorff, 2000, Breschi and Malerba, 1997; Malerba, 2002; Lynn et al., 1996) and neglecting the user perspective to innovation. Scholars argue that these technology centered transition paradigm takes user preference as granted or at best it narrows it to ’the market’ (Geels et al., 2004). It is contended that users can not be taken as passive and they go beyond ‘the market’ framework of analyzing the innovation and can play a vital role in making the technology to adapt to the existing societal framework. Technological artifacts are effectively integrated into the user practices (Lie and Sorenson, 1996; Du Gay et al., 1997). The second set of research gap is based on the analysis of literature on ‘path dependence’ and ‘lock in’. The strand of literature based on the theoretical propositions of ‘path dependence’ and ‘lock in’ while able to explicate the stability aspects of the existing systems, does not possess the potential to address the issue of change and the transition from one system to another. It is put forward that while path dependency literature helps 3 us in understanding the complexity of lock in, it does not suggest us how to ‘lock out’ (Geels et al., 2004). Critically analyzing the earlier theories on transition dynamics, Geels et al. (2004) point out that though these theories contribute to the development and understanding of the system innovations, they are mostly in bits and pieces which are difficult to add up. The challenge therefore is to integrate these theoretical propositions in an effective manner. Multi-level perspective framework addresses these theoretical voids and integrates all the relevant factors in a coherent manner. Multi-level perspective is an approach has been widely advocated and propounded by several scholars (Rip and Kemp, 1998; Geels 2002; Geels; 2004; Geels and Schot, 2007). The novelty of multi-level perspective lies in its contribution to better understand the system innovation approach to transition by effectively integrating various theoretical strands such as STS, evolutionary economics and structuration theory (Rip and Kemp, 1998; Kemp et al., 1998; Schot, 1998; and Geels, 2002;2004). Grin et al, 2010).System innovations involve transformation in the socio-technical systems consisting of a network of actors and an array of factors such as technology, regulations, user practices and markets, cultural meanings, infrastructure, maintenance networks and supply networks (Elzen et al., 2004). It is further maintained that though technologies act as an important driver in fulfilling societal functions, its operations depend on its relationship with other factors. The mutual dependences and interrelatedness is termed as ‘socio-technical systems’. System innovations require an understanding about what constitutes a system. A ‘system’ is often defined as ‘a set of interrelated economic activities and actors and flows of goods and services’ (Vellinga, 2004). An effective transformation of the system requires an attention to be given to all facets of life like technology, institutions, economy and sociocultural sphere. As Geels et al. (2004) assert that system innovations not only involve technological know-how but also other aspects like new markets, new forms of user practices, regulations, infrastructures and cultural meanings. 4 Figure.1; Multi-level framework for analysis of socio-technical transitions Source: Adapted from Geels (2002) Analytic understanding of the processes of system innovations is premised on three levels i.e. socio-technical landscapes, socio-technical regimes and niches (presented in the Figure 1). The notion of socio-technical regimes is built upon Nelson and Winter’s (1982) technological regimes, but includes more actors and more number of rules. Widening of actors and rules imply more social groups are taken on board than engineering communities. It further suggests that technological pathways are not influenced by engineers, but also by users, policy makers, societal groups, suppliers, scientists, banks etc. The stability in the socio-technical regimes are of dynamic in nature. Multiple dimensions of a socio-technical system such as technology, scientific knowledge, markets, infrastructure, culture and symbolic meaning, industry networks and sectoral policies move in a trajectory quite interlinked and interconnected to each other. The stability and resilience is created in the system by aligning different trajectories. Often these trajectories diverge from each other and cause maladjustments and create tensions in the system. When activities of different social groups diverge from the pathways, this creates misalignment and instability in the system. 5 Technological trajectories are placed in a socio-technical landscapes consisting of deep structural trends. The metaphor landscape connotes the broader ‘conditions’, ‘environment’, and ‘pressures’ for transitions. Landscapes form a broad external environment which is beyond the direct influence of regime and niche (Grin et al., 2010). The landscape is at the macro level and highlights the issues like political cultures, economic growth, macro-economic trends, land use, utility infrastructures and so on (Geels, 2002) and landscapes put pressures on existing socio-technical regimes and open up opportunities for critical responses (Geels and Schot, 2007). The material context of the society determines the landscape e.g. material and spatial arrangement of cities, factories and electricity infrastructures etc. The socio-technical landscapes consist of a bunch of heterogeneous, slow changing factors such as cultural and normative values, broad political coalitions, long term economic developments, environmental problems growth, emigration etc. The socio-technical landscapes are often shaped by shocks and surprises like war, sudden rise in oil prices, climatic eruptions etc. So primarily the landscape is the external context for actors in niches and regimes. While regime can be changed up to an extent, it becomes difficult to change landscape. Geels and Schot (2007) define landscape as follows; “The sociotechnical landscape is a broad context that sustains action and makes more actions easier than others. These external landscape developments do not mechanically impact niches and regimes, but need to be perceived and translated by actors to exert influence”). While regimes create incremental innovations, radical innovations are generated in niches. Niches are protected from normal market selection, and provide scopes for radical novelties (Schot, 1998). Novelties often stay at the niche level for quite a long time period because of several reasons (Grin et al., 2010). This might be due to long period of technological development and troubleshooting within the niche or due to the existing incompatibility in the novelties and regimes. Niches also offer space to develop the social networks which support innovations. The initiation of regime change originates in the niche, when practices and norms developed in niche get momentum leading to wider technological regime becomes completely transformed by the configurations originally nurtured in the niche. Often breakthroughs in the niche-innovations stem from landscapes 6 which create pressure on the existing regimes and offer windows of opportunity for innovations. The interconnectedness of these three concepts can be best understood in the framework called ‘nested hierarchy’. The nested character of these levels implies that regimes are embedded within landscapes, and niches within regimes. The novelties in the niches are primarily designed to address the problems in the regimes. Actors in the social network which support niche believe that the novelties created in the niche will be used eventually in the regime or even replace it. The entrenchment of elements in regimes is strong enough to not allow the novelties to replace the current regime. Nevertheless, niches play an important role in innovations and act as the source of change. Often radical novelties stand themselves incompatible with the current regimes. Innovations occurring at the niche can break through and enter into the regime if external environment is conducive that is the existing process at the levels of regime and landscape create a window of opportunities. When innovations enter into competitions in the regime, it replaces the current regime; it is accompanied by the change in the wider dimensions of the sociotechnical regimes. This indicates that system innovations not only include change in the technology and market shares, but also changes in the regulation, infrastructure, symbolic meaning and industrial network. The new regime ultimately influences the landscape development. Geels et al. (2004) argue that multiple perspective framework combines the two way explanation of the systems innovations i.e. external circumstances and b) internal drivers. Often change in the external circumstances offer windows of opportunities for novelties. This happens when change in the external environment create tensions between elements in the socio-technical regimes and results in misaligning of activities in the regime. For example, climate change putting pressure on energy and transport. Pressure might come from the change in the cultural values, ideologies and political co-coalitions. Internal technical problems in the existing regime can also contribute in creating opportunities for novelties. Often negative externalities also create pressure on the regime. Changing user preferences often results in tensions when established technologies have difficulties in meeting them. 7 System innovations are co-evolutionary processes involving both supply side (technology, knowledge and industry structure) and demand side (user practices, cultural status and infrastructure) interactions. System innovations are architectural innovations involving large changes instead of incremental or change in one component, these are multi-actor processes and they appear in a long time scale (Geels et al, 2004). There is also scale consideration to the systems innovation processes. There are national systems of innovations, regional systems of innovation and sectoral innovation systems. The three scale levels are functional scale levels rather than spatial or geographical ones. They represent functional relationships between actors, regime and niche actors. MLP framework to system innovations also has been criticized by several scholars. Smith and others (Smith et al., 2005; Berkes et al., 2003) argue against the theoretical proposition extended by systems innovations that regime change is initiated in niches and runs upwards. They rather argue that this theoretical proposition undermines the importance of relationship between landscape and regimes. This explanation is posited in the framework of governance of regime transformation. They argue that the framework should pay adequate to the agency and the role of power in the socio-technical regime shifts. They assert that it is not only about selection pressures but also about adaptive capacity, or the relationships, resources and their levels of co-ordination that constitute a response to these pressures. It is also argued that the contending notions of socio-technical regime can be based on the empirical validation. What looks like a regime shift at one level may be actually be an incremental change from a wider regime’s perspective. In many transition cases with regard to sustainability problems, multiple niche innovations are involved. There may be the case that multiple niches interact with regimes, Often niches interact with each other and stimulate and frustrate each other’s development (Grin et al, 2010). There are also interactions between multiple regimes as a future research topic. III. Transitions to a Sustainable Energy Regime: Global Perspectives The arguments on sustainable transitions predate to the neoclassical propositions of rational resource allocations under the conditions of resource scarcity. Neoclassical 8 economists perceive transitions as the movements from one economic structure to another. They postulate that environmental problems are caused by market failures and not reflected in the pricing structure of the products or services. The arguments posit that environmental considerations are poorly dealt by the existing markets. This occurs as costs and prices fail to internalize environmental externalities resulting poor response to produce cleaner innovations (Pearce et al., 1989). In order to drive the change in the direction of sustainable development requires change in the conditions under which markets operate (Butter and Hofkes, 2006). Market failures can be addressed by using several policy instruments like environmental taxes, subsidies and tradable permits. In the nutshell neoclassical arguments on sustainable transitions can be viewed as change in the technological structure to reflect the changing structure of prices (Geels, 2010). The technological discontinuity approach to transition propounded by Schumpeter (1939) poses transition as the development of ‘green’ technologies (Geels et al., 2010). This was further elaborated by Freeman in his concept of ‘green’ techno-economic paradigm (Freeman, 1992). Freeman argues that the green techno-economic paradigm emphasizes on the energy and material savings in the existing product and production processes. He further contends that this green techno-economic paradigm does not offer a solution for transitions of the sector. Rather it emphasizes on the bits and pieces of transition dynamics. He observes silence about the green system innovations. The next theoretical development was structural-functionalism approach to transition. They argue that transitions are shaped by setting overarching goals like Kyoto protocols and Millennium Development Goals (MDGs). Recognizing non-linear dynamics and uncertainties in complex systems, these scholars argue that adaptive management of socio-environmental systems based on diversity, learning, flexibility and stakeholder involvement (Berkes et al., 2003). The importance of transitioning to a sustainable regime viewed in the context of emerging global environmental problems such as climate change, biodiversity and fast depleting natural resources. The modern day transition problems being different from the problems encountered in 1970s and 1980s require different approaches to address them (Elzen et al., 2004; and Van den Bergh and Bruinsma, 2008). These transitions can be called ‘socio-technical’ owing to the fact that they are not only technological 9 transformations but also changes in the markets, user practices, policy and cultural meanings (Geels, 2004). IEA (2008) argues there is a need for massive transition required to move from the current energy regime primarily based on the conventional source of energy towards a regime which is more sustainable and environmentally friendly. The following figure depicts the movement towards greening the economies in several countries of the world by offering several green stimulus packages as part of their development initiatives. It can be elicited from the picture below that China and South Korea have the greatest green stimulus packages among the countries compared. Though transition to a greener energy regime have gained adequate attention in many countries of the world, the share of renewable energy production is almost constant (13 %) since 1974, even though total energy production has doubled (IEA, 2009) Figure.2: Green Investment Packages Across Countries Source: Von Weizsäcke, (2009). The smooth transitions to sustainability do not come about easily as these sectors (energy, transport, housing and agri-food) are characterized by lock-in mechanisms due to the inherent nature of the sector such as sunk investments, behavioural patterns, vested interests, infrastructure, favorable subsidies and regulations (Unruh, 2000). IV. Movement Towards Green Energy Regime in India India being one of the fastest growing economies of the world has been confronting several challenges in the energy front. India is having fifth largest generating capacity in the world with an estimated capacity of 152 GW which is about 4 percent of world’s generation capacity. The average per capita consumption is about 704 KWh during 200810 09. As depicted in the following figure, India has experienced a negative energy balance through out the years and still facing the same challenge. Fig.3: India’s Energy Balance The transition to a greener energy regime in India is driven by both ‘external’ or ‘landscape’ factors, like energy prices, market developments, political culture and the emphasis on climate change as well as internal factors like the goal to achieve long term energy security and the need for enhancing access to energy. The case for a shift to a green energy regime in India is based on several key arguments such as i.e. India possess adequate renewable energy potential, renewable energy can address the environmental concerns effectively, renewable energy also have the potential to meet the rural energy needs, it can also address the energy security concerns of India and renewable energy sources are becoming more and more competitive with traditional sources of energy (McKinsey, 2008). The structural change is reflected in the shift in the role of the state and the private firms in the energy sector. Ministry of New and Renewable Energy (MNRE) sketch the development of renewable energy in India into various phases. 1970s as research phase, 1980s as demonstration phase and 1990s onwards as commercialization phase.The renewable energy development in India though still constitute a small portion of the entire production (4 -5 % power production and 10 % installed capacity), the pro-active 11 initiatives taken recently has accelerated the speed of the renewable energy’s contribution to the energy basket in India. Realizing the future importance of the renewable energy in the country’s energy basket, Government of India envisages that by 2012 the renewable source would contribute around 10,000 MW, which will be around 10 percent of the entire capacity additions (Ministry of Power). The major recent intiative in this direction is the jawaharlal nehru Natioonal Solar Mission (JNNSM) which aims to produce 20,000 MW by 2022 in three different phases. The development of wind energy in India contributes substantially to the overall renewable energy development in India. Overtime the wind energy development has grown from a subsidy driven source of energy more towards a market driven energy market (Goyal, 2010). The restructuring of the energy market and the enactment of Electricity Act 2003 has changed the structure of the renewable energy development in India. The tariff for renewable energy is no more determined by the state/central governments; rather it is determined by the state/central electricity boards. There has been market mechanisms introduced to trade renewable energy among states in India. The network of actors governing the renewable energy development has changed over time. New actors like regulatory commissions, energy exchanges have been playing critical roles in the development of renewable energy in India. An analysis carried out shows that the compound annual growth rate of wind energy development is around 27 % from 2002 to 2007. The Indian Wind Energy Outlook Report 2009 suggests that there is a possibility of wind power contributing 25 % of total energy requirement by 2030. 12 Fig .4: Trend showing wind energy development in India The above diagram (Figure.4) gives a synpotic view of the wind power development in india. Two important interventions need to be mentioned. One is during 1994 where Ministry of New and Renewable Energy anounced key financial support for boosting the power generation from such source. The other is during the legalisation of reform with the enactment of Electricity Act in 2003. Though the development of wind energy experienced a decline during 2007-08, it has again taken up and being considered vital to support the energy basket in India. V. Dynamic Interactions of Entities and Actors Stimulating the Renewable Energy Development in India The structural change in the India’s energy system can be explained by drawing insights from the systems innovation theoretical approaches with multi-level and multi-perspective framework. The present section elaborates the interaction among various entities promoting renewable energy in India. The interaction among actors are fast changing and shaping the growth of renewable energy in India. In a conventional set up, the renewable energy development at the sub-national level in India were mostly undertaken by the state energy departments/ministries and/or state energy development authorities (SEDAs). Of late, the restructuring exercise created a new set of actors like state electricity regulatory commissions (SERCs) with new set of instruments and measures to take up the electricity sector on a sustainable path. The recent thrust on climate change and the urgency to address it through sectoral approaches have expanded the scale of activities carried out by electricity regulators and added extra regulatory burden on them. Regulators serve as key in introducing various policy instruments and initiating promotional measures for making the desired environmental goals a reality. They can have strong impacts on the development of renewable energy. Table-1, demonstrates a comparative framework of the creation of state energy development authorities (SEDAs) and state electricity regulatory commissions (SERCs). It could be discerned from the table that except Rajasthan, all SERCs are newly created institutions in contrast to the SEDAs. The noteworthy point is that 13 before the creation of SERCs, SEDAs were the prime decision making authorities on behalf of the respective state governments to incentivise and promote renewable energy in the state, but with the appearance of the SERCs, the responsibility to promote renewable energy is shared in disproportionate manner between SEDAs and SERCs across states. While states like Maharashtra experienced a very intensive and continuous deliberation between the Maharashtra Energy Development Authority (MEDA) and Maharashtra Electricity Regulatory Commission (MERC), other states like Orissa does not reveal such kind of intensive interaction, rather, taking into account the apathetic attitude of State Government of Orissa and its designated authority i.e. Orissa Renewable Energy Authority (OREDA) in promoting renewable energy in the state, Orissa Electricity Regulatory Commission has recently, suo-moto , has directed OREDA to expedite the process of renewable energy development in the state. 14 Table.1; Creation of SEDA and SERC in Select States in India State Energy Development Year of Year of Authority establishment Establishment State (SEDA) of SEDA of SERC Orissa OREDA 1984 1996 Purpose of SEDA To promote research, development and popularization of nonconventional and renewable sources of energy To promote renewable energy technologies and create an environment West Bengal WBREDA 1993 2000 conducive to their commercialisation through innovative projects To promote the use of new and renewable source of energy, to promote energy conservation activities, to encourage R & D in renewable Tamil Nadu TEDA 1985 1999 energy To promote and popularise renewable energy and energy conservation Gujarat GEDA 1979 1998 in the state of Gujarat To promote and develop non-conventional energy sources in the state and as a state designated agency (SDA) for enforcement of provisions Rajasthan RRECL 2002 1999 of Energy Conservation Act 2001 in the State to promote and develop non-conventional and renewable energy Punjab PEDA 1991 1999 programs or projects in the State 15 Madhya Pradesh To implement various programs and policies of the Government of MPUVNL 1982 1999 India as well as the State Government for the renewable energy sector. To undertake the development of renewable energy and facilitate Maharashtra MEDA 1985 1999 energy conservation in the State of Maharashtra To gather and disseminate useful knowledge in various fields of Nonconventional Energy, Energy Conservation and Rural Technology; conduct studies, demonstrate, implement and support implementation Kerala ANERT 1986 2002 of schemes and projects. Karnataka KREDL 1996 1999 To promote non-conventional energy sources in Karnataka Andhra Pradesh To implement non-conventional energy programmes sponsored by NEDCAP 1986 1999 both the State and Central Governments 16 VI. Conclusion It is argued that there is no overall rationality to guide transitions rather actors direct the transition through probing and learning. Multi-level perspective has the advantage of encompassing sociological, economic and socio-technical theories (Elzen et al., 2004). Importantly, user preferences has enormous important in the transition processes. Change in the users behavior and preferences is central for a transition. Users may act as a barrier to transition as they usually do not easily change their ways and adopt new patterns of behavior. Users can either make or break the transition (Elzen et al., 2004). Transition is often argued as the process to ‘modulate the ongoing dynamics’. The present paper argues how the changing networks and actors are driving the renewable energy development in India. There has been a significant change in the actor networks after the restructuring of electricity industry in India around 2003. This has definite implications for the renewable energy development in India. In absolute terms though there are still challenges ahead to develop renewable energy as the key source of energy supply, but the current focus on various policies and programmes and the effort to integrate green source of energy in the mainstream of energy supply reveals that it is not only technological development alone which is driving the sector, rather an array of socio-economic drivers also causing this transition in the required dimension. The growing awareness about green energy’s role in the clean environment is increasingly changing the user’s preferences for green energy. This is visible in the development of renewable energy based off-grid energy systems being vigorously pursued in many parts of the country. Introduction of market for renewable energy also acts as an important driver for pushing ahead the renewable energy production. 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