ENERGY SYSTEMS AND THEIR TRANSITION Filip Černoch FSS MU ESS411 — Environmental aspects of energy Climate change results from the production and consumption patterns — meeting consumer's demands for goods and services through the carbon-based energy technologies and systems. Climate change mitigation is based on a switch to more efficient (low or zero-carbon) technologies and sources (RES). Economic argumentation suggests that the optimal technology is selected based on market forces and fully informed, optimizing agents. But this argumentation is incomplete. 1) There are some other factors affecting the people and company's choices (setting the system). 2) Once some choices are made they determine the future path (changing the system). mur Eli EVMP9U(m£ fer^V ■ LAJnZiAilLAvmwr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDELAYAlS'l ■ From 1405 until 1433, Zheng He's seven ocean expeditions (from China to Southeast Asia, India, Persian Gulf, Africa...). Hudreds of ships ( some of them 400 feet long, 160 feet wide), navy not comparable to anything in the world until WWI. Tens of thousands of sailors. Then the oceangoing ships was intentionally destroyed. Financial but also ideological and cultural (Confucianism — isolationism) reasons. mur Eli EVMP9U(m£ fer^V ■ LAJnZiAilLAvmwr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDElAvAnI ■ Technically best choices from technologies available? But different countries make different choices. = It is not market decision only, people (individuals, collectives) make choices. Market just coordinate. mur Eli EVMP9U(m£ fer^V ■ lAJnfiAilLAvmmr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDElAvAnI ■ History (culture) shapes choices — path dependence (where we are now is the result of our decisions in the past). Superior technological variant doesn't allways win out in dominant design frameworks. Inferior designs can become locked-in through a path-dependence process. + Some form of systematic barriers to the adoption of new energy systems (technologies). history matters. mur Eli EVMP9U(m£ fer^V ■ lAJnfiAilLAvmmr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDElAvAnI ■ □ Technological system (TS) — inter-related components connected in a network or infrastructure that includes physical, social and informational elements (for example, automobile transportation system). □ Changes in TSs are based on evolutionary framework with the dominant design models. ■nvention and inovation create several technologial variants, ^riod of uncertainty — variants compete for performance improvements nd market share. One of the variants captures a critical mass of the market and become de facto standard. Technologies than can exhibit increasing returns to scale (positive feedback) that accelerate improvements relative to competing 'H?^? 1 STIBSTvOillOLiTvl. "........ .t*""-' INVESllCE 00 R0IV0JE VZDELAvANl 13 Performance versus Cost Installed base or Market share □ Case of automobile industry Beginning of 20.century, competition among steam-, electrict-, gas-powered ICE vehicles to substitute horse and carriage, (noxious, noisy, complicated and dangerous vs cheap gasoline as a by-product from the production of kerosene). Than period of increasing returns to scale.. .locking ICE as the dominant design. Producers of other design are reduced — in 1890s, 1900 different firms producing over 3200 different variants of ICE vehicles in USA. In 1920s, a few dozens. By 1955 the Big Three (General Motors, Ford, Chrysler) held 90 % of domestic and 80 % of the global market. mur Eli EVMP9U(m£ fer^V ■ LAJnZiAilLAvmwr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDELAYAlS'l ■ □ Case of automobile industry Surviving oligopolistic firms shifted their focus from product to processes innovation, development of specialized knowledge = forming the basis of a company's competitive advantage. General Motors divided engine development into 22 subsystems (ignition, fuels systems, lubrication etc.). That had lasting impacts on specialised labor and knowledge development. — firms tend to focus on existing competencies and away from alternatives that could make their present products obsolete. = capital investment goes preferentially towards projects that reduce production costs and perfect existing product. JS wM>nFWr*i ("W^/1" WTUJnVr f^n^m, tfJMrn rttprflpr. tt>l* "vM^f 17"» INVESllCE 00 R0IV0JE VZDELAvANl 16 □ Network externalities arising from systemic relations among technologies, infrastructures, independent industries and users. ositive externalities — physical and informational networks can become more valuable to users as the grow in size (road network, telephone network). = the viability of the automobile depends on the development of multiple supporting technologies and industries to create a functional system. 17^ INVESllCE 00 R0IV0JE VZDELAvANl §1 17 ] The involvement of govt is important for two principal reasons. 1) ability of institutional policy to override market forces. In the evolution of a technological system, govt intervention can remove market uncertainty about the direction of technological development through policy (RES). 2) once the governmental institutions (formal, such as legal structures, or informal, such as culture, norms and values) are established they tend to persit in their initial form for extended period (agriculture subsidies, redundant offices). mur Eli EVMP9U(m£ fer^V ■ LAJnZiAilLiMaiwr ******......h....... ^ih>t* INYE5TICE DO RDZVOJE VZDElAvAnI ■ TSs and institutions are inter-linked. □ Techno-inistutional complexes (TICs) emerge through synergistic coevolution initiated by technological inreasing returns and perpetuated by the emergence of dominant technological, organizational and institutional design. INVESllCE 00 R0ZV0JE VZDElAvAnI ml Competencies Expand Grid Network Generation Investment Cost Plus Regulation Accu] luxation Use More Electricty Adaptive prderanjes Capture A simple illustration of the techno-institutional complex that fosters lock-in in electric power networks. See text for elaboration. A simple illustration of the techno-institutional complex that fosters lock-in in electric power networks. See text for elaboration. Fig. 3. A simple illustration of the techno-institutional complex that fosters lock-in in automobile-based transportation networks. See text for elaboration. investice do rozvoje vzdelávam Changes could be very disruptive — risk of unexpected results. Big changes in policy regimes rare (CAP of EU) Ideology matters mur Eli INYE5TICE DO ROZYOJE VZDElAvAnI ■ Could be (and has been) done Sometimes it takes research and development (sail to steam, coal to dies el locomotives) Sometimes it takes changes in policy — nuclear energy New systems face chicken-egg problem mur Eli EVMP9U(m£ fer^V ■ LAJnZlAllLAvmwr trwtmtm...... h....... ^ih>t* INYE5TICE DO ROZVOJE VZDElAvAnI ■ INVESTICE 00 ROZVOJE V Z 0 ELÁVÁNJ