Nicolai Herrmann Regional Energy 2050: A sustainability-oriented strategic backcasting methodology for local utilities Rainer Hampp Verlag Miinchen, Mering 2011
Overview 1 Introduction and definitions 20 1.1 Problem statement and motivation 20 1.2 Derivation of research questions 26 1.3 Initial assumptions and definitions 28 1.4 Sustainability - definition and adaptation for the energy sector 40 1.5 Summary and conclusion for chapter one ' 60 2 Sustainability and business strategy 61 2.1 Perspectives on corporate economic and environmental performance 61 2.2 Definition of a strategic development corridor for corporations 69 2.3 Strategic necessity of corporate sustainability-orientation 78 2.4 Summary and conclusion for chapter two :..r...'. 89 3 Future studies and business strategy 91 3.1 Introduction to future studies 91 3.2 History and state of the art of backcasting 105 3.3 Strategic backcasting and other strategy schools 112 3.4 Arguments for a novel backcasting methodology for local utilities 123 3.5 Summary and conclusion for chapter three 125 4 A novel strategic backcasting methodology for local utilities 127 4.1 Definition of criteria and targets for a sustainable future energy system 130 4.2 Description of a regional target scenario 137 4.3 Analysis of status quo 145 4.4 Derivation of external crossroads and internal milestones 153 4.5 Identification of a strategic development pathway 192 4.6 Summary and conclusion for the methodological section 204 5 Case study - sample application of strategic backcasting 206 5.1 Step 1: Definition of criteria and targets for the future energy system 208 5.2 Step 2: Description of a regional target scenario 228 5.3 Step 3: Description of the status quo 239 5.4 Step 4: External crossroads and internal milestones 261 5.5 Step 5: Identification of a strategic development pathway 282 5.6 Summary and conclusion for the case study 290 6 Critical assessment and conclusions 292 6.1 Lessons learned from the case study 292 6.2 Critical reflection of the strategic backcasting methodology 300 6.3 Further research needs 303 6.4 Summary and conclusion for chapter six 306
Table of contents Abstract 13 Summary 14 1 Introduction and definitions 20 1.1 Problem statement and motivation 20 1.2 Derivation of research questions 26 1.3 Initial assumptions and definitions 28 1.3.1 Initial assumptions 28 1.3.2 Definition of energy 28 1.3.3 The energy sector as a subject 29 1.3.3.1 Local utilities in the German energy sector 32 1.3.4 Conclusion and working hypothesis for this paper 38 1.4 Sustainability - definition and adaptation for the energy sector 40 1.4.1 The basic concept of sustainability 40 1.4.1.1 Different capital stocks and schools of sustainability 43 1.4.2 An applicable understanding of sustainability for local utilities 48 1.4.2.1 Hierarchy of sustainability dimensions for the energy sector 51 1.4.2.2 Focus on ecological sustainability 53 1.4.3 Definition of sustainability targets for the energy sector 54 1.4.3.1 Mitigation of climate change as a superior sustainability requirement 56 1.5 Summary and conclusion for chapter one 60 2 Sustainability and business strategy 61 2.1 Perspectives on corporate economic and environmental performance 61 2.1.1 Win-lose perspective 62 2.1.2 Win-win perspective 63 2.1.3' Rational system perspective 65 2.1.4 Argument for a rational system perspective 67 2.2 Definition of a strategic development corridor for corporations 69 2.2.1 Natural resource limitations as a fundamental driver for business strategy 69 2.2.2 Societal limitations as a fundamental driver for business strategy 70 2.2.3 A long-term-oriented strategic development corridor for corporations 71 2.23.1 Natural system limitations 72 2.2.3.2 Societal system boundaries 73 2.2.3.3 Nature of change in the strategic development corridor 76
2.3 Strategic necessity of corporate sustainability-orientation 78 2.3.1 Different strategy approaches within the strategic development corridor 79 2.3.1.1 The reactive strategy approach 79 2.3.1.2 The proactive strategy approach 80 2.3.1.3 Description of proactive and reactive strategy pathways 81 2.3.2 Proactive strategies and the emergence of competitive advantage 84 2.3.2.1 The resource-based view of the firm 84 2.3.2.2 The natural resource-based view of the firm 85 2.4 Summary and conclusion for chapter two 89 3 Future studies and business strategy 91 3.1 Introduction to future studies 91 3.1.1 Scenarios as a prospective method in future studies 92 3.1.2 Two different scenario design philosophies 94 3.1.2.1 Introduction and critique of forward scenarios 95 3.1.2.2 Introduction and critique of backward scenarios 100 3.1.3 Methodological applicability of backcasting 102 3.1.4 Strategic backcasting for organisations 104 3.2 History and state of the art of backcasting 105 3.2.1 Practical applications of backcasting 110, 3.2.2 Similar methodological approaches in future studies 110 3.3 Strategic backcasting and other strategy schools 112 3.3.1 Two basic understandings of strategy 112 3.3.2 Existing strategy schools 113 3.3.2.1 Classical strategy approach 113 3.3.2.2 Evolutionary strategy approach 114 3.3.2.3 Processual strategy approach 114 3.3.2.4 Systemic strategy approach 114 3.3.3 Classification of existing strategy schools 115 3.3.4 Critique of classical strategies and location of strategic backcasting 116 3.3.5 Strategic backcasting and risk reduction 117 3.3.6 Challenges for strategic backcasting as a method of strategic management 119 3.4 Arguments for a novel backcasting methodology for local utilities 123 3.5 Summary and conclusion for chapter three 125
4 A novel strategic backcasting methodology for local utilities 127 4.1 Definition of criteria and targets for a sustainable future energy system 130 4.1.1 Problem statement and analysis of problem nature 130 4.1.1.1 Problem complexity and occurrence of externalities 131 4.1.1.2 Temporal problem dimension and persistency 131 4.1.1.3 Spatial problem dimension and pervasiveness 131 4.1.1.4 Problem urgency 132 4.1.1.5 Nature of fundamental problem drivers 132 4.1.1.6 Dimension of necessary solutions 132 4.1.2 Definition of study scope and general target framework 134 4.1.3 Applicable definition of sustainability and sustainable development 135 4.1.3.1 Determination of specific sustainability targets 135 4.1.4 Methodological discussion of criteria and target definition 136 4.1.4.1 Quality criteria for the definition of sustainability targets 136 4.2 Description of a regional target scenario 137 4.2.1 Definition of scenario scope 138 4.2.2 Analysis of existent long-term energy scenarios 138 4.2.3 Synthesis of a regional target scenario 139 4.2.4 Methodological discussion of target scenario design 139 4.2.4.1 Necessary nature of a target scenario for strategic backcasting 139 4.2.4.2 Classification of long-term energy scenarios 141 4.3 Analysis of status quo 145 4.3.1 Methodological discussion of status quo analysis 146 4.3.1.1 Instruments for the analysis of regional energy systems 147 4.3.1.2 Comparison to the national situation and discussion of applicability 147 4.3.1.3 Assessment of existing potentials for target-oriented development 148 4.4 Derivation of external crossroads and internal milestones 153 4.4.1 Identification of external crossroads 153 4.4.1.1 Methodological discussion of external crossroad analysis 156 4.4.1.2 Relevance for strategic backcasting in local utilities 175 4.4.1.3 Conclusion and historic evidence for external crossroad analysis 176 4.4.2 Identification of internal milestones 183 4.4.2.1 Approach for identification and ranking of internal milestones 184 4.4.2.2 Methodological discussion of internal milestone selection 185 4.4.2.3 Role of innovation for strategic backcasting 190 10
4.5 Identification of a strategic development pathway 192 4.5.1 Methodological discussion of strategic development pathways 193 4.5.1.1 Investment rationales for the strategic development pathway 194 4.5.1.2 Linking external crossroads to internal milestones 200 4.6 Summary and conclusion for the methodological section 204 5 Case study - sample application of strategic backcasting 206 5.1 Step 1: Definition of criteria and targets for the future energy system 208 5.1.1 Problem statement and analysis 208 5.1.1.1 Problem statement 208 5.1.1.2 Problem analysis 210 5.1.2 General framework definition :.."..! 214 5.1.2.1 Corporate scope - the local utility MVV Energie AG in Mannheim 214 5.1.2.2 Regional scope - the Metropolitan Region Rhine-Neckar 216 5.1.3 Definition of sustainability 218 5.1.4 General sustainability targets and company-specific target setting 219 5.1.4.1 Lead target of sustainable emission reductions 219 5.1.4.2 A long-term CO2 reduction target for industrialised countries 220 5.1.4.3 Emission reduction targets on the micro-economic level 224 5.1.4.4 Discussion of additional sustainability targets for the case study 225, 5.1.5 Conclusion for the case study scope and target system 226 5.2 Step 2: Description of a regional target scenario 228 5.2.1 Scope for the target scenario 228 5.2.2 Analysis of existing long-term energy scenarios 228 5.2.3 Scenario synthesis 230 5.2.3.1 Future energy demand 230 5.2.3.2 Population development in the regional target scenario 236 5.2.3.3 Energy-related carbon emissions in the regional target scenario 236 5.2.4 Conclusion for the case study target scenario 237 5.3 Step 3: Description of the status quo 239 5.3.1 Sample status quo analysis for energy supply and demand in MRN 239 5.3.1.1 Present and future role of nuclear energy in MRN 241 5.3.1.2 Status quo of renewable energy utilisation in MRN 242 5.3.2 Energy-related emissions in MRN 243 5.3.3 Comparison to German average 244 5.3.4 Sample analysis of corporate status quo 246 5.3.4.1 Generation portfolio MVV Energie 246 11
5.3.4.2 Analysis for a power plant in MRN 247 5.3.5 Assessment of regional potentials to realise sustainable development 251 5.3.5.1 Technical potential of renewable energies in MRN 252 5.3.5.2 Critical reflection on technical potentials in MRN 255 5.3.5.3 Conclusion for the case study status quo analysis 260 5.4 Step 4: External crossroads and internal milestones 261 5.4.1 Analysis of external crossroads for a local utility 261 5.4.1.1 External crossroads until 2020 the post-kyoto period 262 5.4.1.2 External crossroads in the long-term - 2020 to 2050 270 5.4.2 Internal milestone selection 272 5.4.2.1 Setup of a corporate expert group for internal milestone selection 273 5.4.2.2 Selection of internal milestones 274 5.4.2.3 Conclusion for external crossroad analysis and internal milestone selection..281 5.5 Step 5: Identification of a strategic development pathway 282 5.5.1 Sample strategic ranking of regional renewable resources in MRN 282 5.5.2 A regional strategy for long-term sustainability in MRN 286 5.6 Summary and conclusion for the case study 290 6 Critical assessment and conclusions 292 6.1 Lessons learned from the case study 292 6.1.1 Problem statement and analysis 292 6.1.2 Definition of sustainability and sustainability targets 293 6.1.3 Definition of a regional target scenario 293 6.1.4 Status quo description 295 6.1.5 External crossroad identification 296 6.1.6 Internal milestone selection 297 6.1.7 Definition of a strategy pathway 299 6.2 Critical reflection of the strategic backcasting methodology 300 6.2.1 ' Further applicability of the strategic backcasting method 301 6.3 Further research needs 303 6.4 Summary and conclusion for chapter six 306 i List of figures 308 List of tables 311 Reference list 313 12