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When solar panels hit brick walls: What innovation theory can tell us about community energy
24th September 2013
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I don’t envy politicians trying to talk to constituents about climate change. It’s undoubtedly one of the most crucial challenges for modern politics. But, when you’re trying to earn a living and get the kids to school, climate change can seem a remote, theoretical thing.

So this summer, when Green Alliance arranged sessions for three MPs to talk community energy with their constituents, it was great to see such enthusiasm and engagement. We talked about how communities could set up renewables projects, how local street-by-street schemes can help overcome fuel poverty, and how all this helps people to understand climate change and carbon reduction in a practical, tangible sense.

No surprise, then, that there’s strong support for community energy, from politicians of all colours, including climate change minister Greg Barker.

Yet I worry that all this enthusiasm will bump up against a very serious brick wall: the brick wall of our current energy system.

The system doesn’t work for innovators who want to do things differently
To get theoretical for a moment, a read of the academic literature on innovation reveals a very real problem for community energy. It’s this: markets, institutions, laws and physical infrastructure develop, over time, to form a whole system that supports established industries: the incumbents. Innovators who find whole new ways of doing things, called ‘disruptive’ innovators, often find that the system doesn’t work for them. This is hardly surprising, as it wasn’t designed for them in the first place.

We see this in the case of energy: market arrangements, infrastructure and policy work best for the large commercial players, generating power centrally and pushing it down the wires to consumers as cheaply as possible. No wonder it’s a struggle for community energy, which does things very differently. It’s decentralised. It’s large numbers of small projects. It’s about both supply and demand. All things our current energy system doesn’t deal with very well.

Government support is the key
To compound the problem, government calculations of future costs (which, understandably, guide policy decisions) are based on an extrapolation from current costs. In other words, they assume that the system will stay as it is, dominated by the incumbents. Disruptive innovation is hard to model.

All this adds up to a high degree of inertia. It’s hard to see how disruptive innovations like community energy can break through unless there’s significant change to the way that the energy system works. And government is central to bringing about that change.

The role of government in promoting innovation is well understood. The Netherlands has pioneered the idea of ‘transition management’. Under this approach, government provides policy support, and clear long term signals, to allow disruptive innovation to develop and strengthen, to a point where it can challenge the incumbent system.

The economist (and Green Alliance trustee) Mariana Mazzucato makes a similar argument by calling the state a ‘market maker’. She points out that commercial giants like Google and Glaxo SmithKline wouldn’t exist without serious support from the state. A major research project at Sussex University has analysed community energy as a disruptive innovation and charts how it could, over time, challenge the mainstream incumbent industry.

But where does this leave community energy, our enthusiastic MPs and their constituents?

The rules need to change to support new entrants
The main lesson, for me, is that we can’t support community energy just by congratulating plucky communities on their achievements and wishing them well. Neither will short term grants, better advice or a good website do the trick. We need to change the rules.

The Department of Energy and Climate Change has a chance to do this. Its first ever community energy strategy will be published this autumn. It could offer a bit of advice and money for communities wanting to give it a go. Or it could acknowledge the role of community energy as a disruptive innovation which could help us to meet our future energy and carbon goals, and set up serious, long term reforms to support the new entrants, not just the incumbents.

This post is reproduced from the Green Alliance blog, www.green-alliance.org.uk

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Rebecca Willis

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