TRANSITION TOWARDS SUSTAINABLE ENERGY SYSTEMS: THE ROLE OF DEVELOPMENT COOPERATION IN A MULTI-LEVEL ENVIRONMENT

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1 Proceedings of the 13 th International Conference on Environmental Science and Technology Athens, Greece, 5-7 September 2013 TRANSITION TOWARDS SUSTAINABLE ENERGY SYSTEMS: THE ROLE OF DEVELOPMENT COOPERATION IN A MULTI-LEVEL ENVIRONMENT JENS MARQUARDT 1 1 Environmental Policy Research Centre, Freie Universität Berlin Ihnestraße 22, Berlin, Germany jens.marquardt@fu-berlin.de EXTENDED ABSTRACT The transition of energy systems towards a sustainable and renewable energy supply is one of the biggest challenges of our time. It is vital for our climate and the reduction of greenhouse gas emissions. Today, most transition research focuses on transformation in industrialized countries, but it is the developing world that becomes more and more relevant with regard to climate change. The ASEAN energy outlook predicts that Southeast Asia s energy consumption will almost triple by 2030, when annual demand of the region is expected to be at more than one billion tons of oil equivalent leading to an enormous rise in greenhouse gas emissions. New technologies could change this emissions-intensive path of development, but their implementation and deployment faces severe economic, social and political barriers, as development projects have shown. This raises two fundamental questions: Firstly, can development cooperation after all promote renewable energies in a way to support the transition towards a sustainable energy system? Secondly, how can development activities have an impact not only on their local environment, but also on the national energy system? To answer these questions, this paper combines a theoretical approach that has not been used in the field of development cooperation so far with empirical experiences from Southeast Asia. It argues that transition management provides a useful theoretical framework and adapts it to the context of development cooperation. It will then be applied to three specific renewable energy projects in the Philippines, Indonesia and Vietnam. The aim of this paper is to demonstrate the parallels between transition management and development cooperation and therefore the applicability of the transition management approach in this field. Empirically, we can highlight a lack of awareness for local-national interactions that affect a renewable energy project s impact with the help of the transition management framework. However, we also need to be aware of the limitations of this work. This paper understands itself above all as a starting point of discussion both in development theory and among development assistance practitioners. Further research is needed especially with regard to case studies that broaden our understanding of multi interactions for transitions towards sustainability in developing countries. Keywords: renewable energies, transition management, development cooperation, energy transition, Southeast Asia 1. INTRODUCTION Since its emergence in the 1950s, modern development cooperation has been confronted with a key paradox: On the one hand, donors declare very ambitious targets for developing countries such as the millennium development goals. On the other hand,

2 the impact of most development activities remains restricted to the local. The question that arises from this micro-macro paradox (Mosley, 1987) should be the starting point of this paper, leading to the following question: How can local development projects change a system? Or more precisely: how can renewable energy (RE) projects contribute to a transition of a national energy system towards sustainability? Transition management provides some fruitful incentives to answer this question. However, it has been rarely used in the development cooperation context so far. We will therefore discuss the approach and apply it to the context of development assistance (section 2 of this paper). Section 2. Empirically, we will concentrate on energy transitions by investigating the role of three World Bank projects promoting RE in the Philippines, Indonesia and Vietnam (section 3). We assume that these development projects are not sufficient to promote energy transitions, but could enhance their impact if they focus not only on the local, but also take national framework conditions into account (section 4). 2. THEORY: TRANSITION MANAGEMENT AND DEVELOPMENT COOPERATION Although the micro-macro paradox expresses a conflict of goals between the national and the local, this issue of multi interaction has not been sufficiently captured by mainstream development theory. Transition management (TM) provides an alternative perspective especially with regard to RE and energy transitions. Global problems and societal challenges such as climate change require deep-structural changes in a variety of areas of human life. These Socio-technical transitions are complex challenges and long-term processes in which existing structures, institutions, culture and practices are broken down and new ones are established (Loorbach, 2007, p. 17). These transitions can occur when dominant societal structures are put under pressure by external changes or endogenous innovations (Loorbach, 2010). TM as a goal-oriented approach tries to answer the question, how we need to transform a society towards sustainability. It has a multi-disciplinary background based on earlier transition research from the innovation systems approach to transitions, multi- perspective approach, strategic niche management, complex systems analysis as well as evolutionary theories and models. Transition management can be defined as a structured process of learning, appropriate to the social and technological complexity, [ ] involving multi interaction (Van den Bergh & Bruinsma, 2008). Its focus is on systematic societal transformation based on new innovations and technologies. TM involves long-term planning based on searching, learning and experimenting, using innovative bottom-up developments in a strategic way by coordinating different s of governance to foster self-organization through new types of interaction, learning cycles and action for radical innovations for sustainability (Loorbach, 2007) with an emphasis on the political dimension (Meadowcroft, 2011). Let us briefly summarize its major elements that are relevant for this paper: Multi- perspective: Interactions in a multi- framework are used to study far-reaching change (Geels, 2002). On the macro-, long term societal framework conditions constitute the landscape (social values, political culture etc.). On the meso- a socio-technical regime is the key concept (Geels, 2011) as a coherent and highly interrelated structure (Markard & Truffer, 2008). On the micro-, concrete actions can be observed within niches, where new technologies and radical innovations can emerge - protected from prevailing selection pressure. TM combines button-up learning with a top-down vision (Kemp, Loorbach, & Rotmans, 2007). Multi-phase perspective: Transitions can be seen as long term processes covering at least two to three decades that go through different phases (Loorbach, 2007). The experimentation phase is characterized by relatively little visible change on the societal, but a lot of local experimentation. During the acceleration phase (structural change) the whole system begins to change (take-off). Finally, a phase of stabilization is reached with a new dynamic equilibrium.

3 Co-evolution and social learning: Transitions are co-evolutionary processes interacting with societal subsystems, such as economic, cultural, technological and institutional (Safarzyńska, Frenken, and van den Bergh 2012, p. 7). Developments in subsystems can influence or even determine each other. Meaning of participation: TM involves public and private actors to support policies, and reframe problems and solutions. Although experts play a key role, steering a societal system from outside is not seen as effective (Loorbach, 2010). Figure 1. Summing up major transition management elements. Does this approach now fit together with development cooperation? Can it be applied to single RE projects? This paper argues: Yes, because TM leads to new ways of thinking in the field of development cooperation. Industrialized countries encounter massive problems of social and environmental unsustainability and fail to cope with this situation which is closely related to our modern way of life. Today, developing countries are heading into the same direction, following a development paradigm based on economic growth, leading to the same questions of unsustainability. As we have seen before, transitions heavily depend on local initiatives functioning as models for further sustainable development. This ratio is inherent to development cooperation even among post development theorists (Rahnema & Bawtree, 1997). With the help of the following implications we will adjust TM to the context of development cooperation: (1) Technologies like RE need fundamental social, economic and political changes on the national and on the local no matter if in the Netherlands or in the Philippines. (2) TM captures all dimensions of sustainable development (SD), a key development cooperation paradigm. SD and TM are both goal-oriented and normative approaches. (3) Innovation, multi-, and complex systems research are at the heart of TM as well as development projects that tend to be innovative local experiments with an ambition to scale up. Ideally they support the growth of new socio-technical configurations. (4) To support new and alternative regimes, protected area (niches) need to be created. Agents such as development cooperation organizations - can effectively create a new regime in a protected environment to permit investment of sufficient time, energy, and resources (Loorbach, 2010, p. 168).

4 Development projects aim to stimulate niche development on the micro while finding new attractors at the macro by developing a sustainability vision. Often, they are set up to be experiments with a chance for scaling up a process that is crucial for TM. The following figure summarizes the role of development cooperation according to TM: National Local Global science markets industry policy culture technology Project impact according to TM made to diffusion and learning.vision development (landscape) SD as a top-down paradigm influences the landscape Regime shift support Support of a regime shift towards SD through technology transfer etc. Niche experimentation Local projects demonstrate feasibility of RE technologies Diffusion and learning Local activities and global vision of SD influence regime constellation niche experiments regime configuration development cooperation impact Figure 2. TM applied to the development cooperation context. 3. EMPIRICS: RENEWABLE ENERGY PROJECTS IN SOUTHEAST ASIA Let us now confront our theoretical reflections with experiences from Southeast Asia. Due to increasing energy demand, its high potential for renewables, strong economic performance and an active development cooperation scene in the field of RE, Southeast Asia seems predestinated for this research. Exemplarily, we will discuss three World Bank projects in Indonesia (3.1), the Philippines (3.2) and Vietnam (3.3). Being aware of the limitations of a short paper like this, the aim of this chapter is above all to discuss TM as an assessment framework for development projects. In practice, a much more detailed analysis of the framework conditions, barriers and potentials would be necessary. For every project, we will concentrate on the following three key questions: Multi Framework Conditions What multi interactions exist in the energy sector? Development Project Promoting RE What is the approach of the project; what is its impact? Assessment with the help of Transition Management How can it be assessed with the transition management framework? Figure 3. Methodology for the empirical chapters below. 3.1 Case 1: Promoting Renewable Energy in Indonesia Multi Framework Conditions: Indonesia is Southeast Asia s most populous nation and managed its transition to democracy, but with territorial integrity as a major domestic challenge. Economically, a process of liberalization and market openness went hand in hand with a system of crony capitalism and the over-exploitation of natural resources (Wingqvist & Dahlberg, 2008). Indonesia has a comparatively low rate of electrification with 75 million people having no access to electricity at a per capita electricity consumption of 609 kwh (IEA, 2013a). Energy supply in Indonesia mainly depends on fossil fuels, although oil reserves are expected to be exhausted by Indonesia has the world s largest geothermal power development potential (27,000 MW), but only 970 MW installed so far. Oil price subsidies are a major barrier for energy diversification (USAid, 2008). Energy demand is expected to increase by 7-9% annually. Indonesia s

5 energy policies are guided by the goals of energy diversification (increase RE share to 25% by 2025), conservation, sector reform (transparency) and rural electrification (increase electrification to 90% by 2020), although RE policies are relatively weak. The Ministry for Energy and Mineral Resources is the key authority for national energy politics. The Directorate General for Electricity and Energy Utilisation is responsible for rural electrification, which is important for the world s largest archipelago. Decentralization has been pushed under Reformasi to empower local authorities, which show a lack of capacities for effective law enforcement. The decentralised government system also impedes national coordination for RE (Ardiansyah, 2011). RE Development Project: The Geothermal Power Generation Development Project (World Bank, 2013a) aims to reduce CO2 emissions in the power sector and promote the expansion of geothermal power in Indonesia. It supports the Indonesian government to enforce a policy framework for scaling up the development of geothermal power; and mobilize investments. It was approved by the World Bank in May 2008 with a total project cost of 9 million USD. Since the Geothermal Law 2003, the government shows various regulatory efforts to scale up geothermal power development. The World Bank identifies barriers especially with regard to the policy framework for geothermal, government planning and management capabilities and domestic technical capabilities to support long-term growth. Consequently, the efforts are focused on policy measures promoting the economic feasibility of geothermal and implementing the Geothermal Law as well as tendering unexplored fields, training to facilitate transactions, and awareness rising. Assessment with TM: Let us assess the RE project with the help of the framework we have developed in chapter 2. Although geothermal is not new to Indonesia, the project provides incentives especially on the local. The Indonesian government s regime shift is supported by implementing the Geothermal Law. A new landscape vision is not being provided. The following figure illustrates these effects: National niches Global regime landscape markets science industry culture policy technology Local Project Impact According to TM Vision development (landscape) No direct incentives for a vision towards sustainable energy (despite positive climate effects) Regime shift support Focus on financial incentives, policy implementation and training Niche experimentation Tender unexplored fields, but geothermal not a new technology Diffusion and learning Support for diffusion and scaling up remains unclear Figure 4. RE project impact in Indonesia from a TM perspective. 3.2 Case 2: Promoting Renewable Energy in the Philippines Multi Framework Conditions: Despite regular elections, the political system of the presidential Republic of the Philippines is dominated by a few influential families (Kreuzer, 2009), widespread corruption, and powerful local leaders. Sufficiently qualified personal, access to information and exchange of experience is needed to promote RE across Local Government Units (LGUs). In the Philippines, 16.2 million people live without electricity supply (UNDP, 2007), per capita electricity consumption is relatively low with 592 kwh. Theoretically, the Philippines as a widespread archipelago should be predestined for a decentralized and community based energy supply with RE. In practice, the Philippines energy mix shows a high dependency on fossil fuels (IEA, 2013b). In the power sector, only geothermal (16.7%) and hydro (15.8%) have a relatively large share.

6 According to the Philippine Energy Plan (DOE, 2009) conventional fuels should be further developed, but also RE should be doubled by The Department of Energy regulates the energy sector and is the most important actor in this field. However, unclear responsibilities, a high number of sometimes competing institutions as well as a lack of law enforcement in the energy sector can be observed. The energy sector has been privatized gradually since the 2001 Electric Power Industry Reform Act (Abrenica, 2003). RE Development Project: The Philippines Renewable Energy Development Project (World Bank, 2013b) is a 450 million USD project that is estimated to be approved by the end of March It aims to assist in meeting electricity demand in a sustainable manner mainly by providing financial mechanisms and bolster private sector lending. RE generation should be increased all over the Philippines and especially in off-grid areas without any regional focus as another rural power project before. The development of the RE sector should be accelerated through an on-lending window for marginal projects that qualify for feed in tariffs as well as others in off-grid areas. Assessment with TM: Finally, let us assess the project promoting renewable energies within the Philippines context with the help of the framework we have developed in chapter 2. From a transition management perspective, we can hardly find any impact on the landscape ; a regime shift support is restricted to the market and industry component. On the niche, protected areas for RE projects are created, although these technologies are mature in the Philippines already. Therefore, learning effects for the national remain unclear. The following figure summarizes the effects: National niches Local Global regime landscape science markets industry culture policy technology Project Impact According to TM Vision development (landscape) No active promotion of sustainable energy supply Regime shift support Restricted to the creation of markets and industry support Niche experimentation Local (small scale) RE projects should be supported all over the Philippines (especially off-grid). Diffusion and learning no explicit reference to processes of learning, diffusion or scaling up Figure 5. RE project impact in the Philippines from a TM perspective. 3.3 Case 3: Promoting Renewable Energy in Vietnam Multi Framework Conditions: The Social Republic of Vietnam is Southeast Asia s third largest country with an annual economic growth of more than 7% over the past years that led to increased energy demand and put the electricity sector under pressure. Energy consumption is growing even faster than Vietnam s economic development. Household access to energy increased from 50% to 92% (strong central planning authorities, no need for profitability and major local inputs); annual per capital consumption increased from 156 kwh to 650 kwh. As the region s first communist state, Vietnam represents a unitary single-party state ruled by the Communist Party of Vietnam from the local party cells over district committees and provincial organizations up to the Central Committee. Since 1986 doi moi (economic modernization and reformation) has strengthened social and economic freedoms, although corruption and intransparent decision making still remain serious problems. The national government passed a market-oriented Electricity Law in 2004, followed by the preparation of a roadmap for reform which envisages the unbundling of the sector. Yet, Electricity of Vietnam (EVN) rules the power sector. Energy policy in Vietnam is based on long-term macroeconomic

7 considerations. With its rich energy resources (coal, oil, natural gas, hydropower, RE) Vietnam is able to maintain energy self-sufficiency it is even a net oil exporting country. In recent years, the Vietnamese government recognized the role of RE for sustainable energy supply especially for rural off-grid areas. The government (Vietnam Prime Minister, 2007) aims to increase RE s share from 3% (2010) to 11% (2050). Hydropower is by far the most important RE source in Vietnam, but small scale RE systems are rare. RE Development Project: The Renewable Energy Development Project for Vietnam (World Bank, 2013c) should increase electricity supply from renewables to the national grid. Problems exist in terms of power shortages, high investment needs, weak regulatory institutions, and government-controlled power tariffs. The project challenges almost exclusively financial barriers for further RE development with the following three major components: enhancing investments (credits and technical assistance), regulatory development (for capacities of national energy authorities), and building a pipeline of RE projects (for large-scale development). The project has been approved in 2009 with a total cost of 318 million USD. It is implemented by the Ministry of Industry and Trade. Preliminary results show that only 27% of the funds have been committed so far. Implementation has started on 8 sites, but the project pipeline is weaker than expected. Assessment with TM: Let us finally assess the project promoting RE in Vietnam. Focused mainly on financial incentives, the project lacks a clear vision and incentives on the landscape, a regime shift support on the national includes regulatory and economic instruments. Local project sites on the local create niches for experimentation. The following figure summarizes these effects: National nichesniches Local Global landscape landscape regimeregime markets science industry culture policy technology Project Impact According to TM Vision development (landscape) No vision of SD going beyond RE projects. Regime shift support Financial and regulatory instruments are highlighted to promote RE. Niche experimentation A pipeline of RE projects should promote local activities. Diffusion and learning There is no reference 4. CONCLUSIONS Figure 6. RE project impact in Vietnam from a TM perspective. At the beginning of this paper we asked ourself, how RE development projects can contribute to the transition of a national energy system and assumed that transition management (TM) would provide some fruitful incentives to answer this question. After having discussed the approach theoretically and applied it to three concrete projects, we can draw the following conclusions: TM and development cooperation have so much in common, that the approach is useful to assess projects in a multi environment (vision development, regime shift support, niche experimentation, learning and diffusion) in order to provide suggestions of how to overcome the micro-macro-paradox. Empirically, we found evidence for a lack of awareness for local-national interactions that effect a project s impact. Having said this, we need to be aware of the limitations. This paper understands itself as a basis for discussion for development theory, but also for practitioners. Further research is needed with regard to case studies that broaden our understanding of multi interactions that are important for energy transitions.

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