Governing Infrastructure Interdependencies, Jim Watson, UKERC

Sussex Energy Group, SPRU

Governing infrastructure interdependencies

Jim WatsonResearch Director

UK Energy Research Centre

International symposium for next generation infrastructureIIASA, Vienna Austria, 30th Sep – 1st Oct 2014


Outline

• Why is governance important?

• Infrastructure transitions: a historical perspective

• Governing interdependencies: two case studies

• Conclusions & implications


Why is governance important?

‘Large scale technology, such as electric light and power systems, incorporate not only technical and physical things such as generators, transformers and high-voltage transmission lines, but also utility companies, electrical manufacturers and reinforcing institutions such as regulatory agencies and laws …’

Thomas Hughes (1989) American Genesis


Why is governance important?Not just government …

‘This plan sets out how the UK will achieve decarbonisation within the framework of our energy policy: to make the transition to a low carbon economy while maintaining energy security, and minimising costs to consumers, particularly those in poorer households.’

The Carbon Plan, 2011


Shift to governance partly due to ‘hollowing out’ of the State: liberalisation and globalisation• Power has transferred ‘upwards’ (e.g. to the EU,

multilateral agreements)• It has also transferred ‘outwards’ (e.g. to regulatory

agencies; public-private partnerships)• In some cases, there has also been decentralisation and

devolution (e.g. to Scottish government)

Governance means decision-making by multiple actors, including government(s), private sector and civil society

But there is no ‘one size fits all’ model

Why is governance important?... but also multiple actors & views


Why is governance important?... but also multiple actors & views


Governing interdependencies


‘We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy … I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use. Because America will develop this resource without putting the health and safety of our citizens at risk.’

Barak Obama, Jan 2012





The ‘Industrial Revolution’ (machines, factories and canals) 1771

Age of Steam, Coal, Iron and Railways 1829

Age of Steel and Heavy Engineering (electrical, chemical, civil, naval)1875

Age of the Automobile, Oil, Petrochemicals and Mass Production1908

Age of Information Technology and Telecommunications1971

Age of Biotech, Bioelectronics, Nanotech and new materials?20??

Infrastructure transitions5 technological revolutions (Perez, 2010)

INSTALLATION PERIOD DEPLOYMENT PERIODTURNINGPOINT

Bubbles of first globalisation

Belle Époque (Europe)“Progressive Era” (USA)1890–95

Railway maniaThe Victorian Boom1848–50

Canal maniaThe GreatBritish leap1793–97

Internet maniaand financial casino

Global Sustainable ”Golden Age”?

2007/08

-???

The roaring twenties Post-warGolden age

Europe1929–33

USA 1929–43

1771Britain

1829Britain

1875 Britain / USA

Germany

1908 USA

1971 USA

1st

2nd

3rd

4th

5th

GREATSURGE Bubble prosperity Maturity“Golden Age” prosperityCollapse &

Recessions

Infrastructure transitions, the economy and society

Source: Perez, 2010


Age of Steam, Coal, Iron and Railways 1850s-1860s

Urban, industry-based VICTORIAN LIVING in Britain

DEPLOYMENT PERIOD LIFESTYLE

Each style became “the good life” redefining people’s desires and guiding innovation trajectories

Age of Steel andHeavy Engineering 1890s-1910s

Urban, cosmopolitan lifestyle ofTHE BELLE EPOQUE in Europe

Age of the Automobile, oil and Mass Production 1950s-1960s

Suburban, energy-intensiveAMERICAN WAY OF LIFE

2010s-20??s

Will the developed and emerging countries develop a variety of ICT-intensive and “glocal” SUSTAINABLE LIFESTYLES?

Age of global ICT

Infrastructure transitions and changes in lifestyles

Source: Perez, 2010


Significant differences between sectors, especially with respect to scale of governance

Complexity of governance increased due to liberalisation, but liberalisation can also have benefits (e.g. greater transparency)

Economic regulation of networks has improved efficiency, but has not fostered innovation until recently

Governance usually has multiple objectives: trade-offs between these objectives are inevitable

Not enough focus on governing interdependencies

Infrastructure governanceRecent UK experience


Governing interdependenciesTwo case studies

Water-electricity interdependencies:

Renewable energy in the water sector

Electricity-transport-ICT interdependencies:

Smart grid demonstrations


Governing interdependenciesTypes of interaction (Raven & Verbong)


Nature of interdependencies has changed over time:

• Symbiosis before privatisation of infrastructure sectors

• During privatisation period, links became stronger:• Stronger symbiosis due to regulations on water quality• Some spill overs of rules for economic regulation• Integration via mergers, though these became less attractive• Common environmental regulator (Environment Agency)

• Post privatisation, some limited competition (renewable electricity generation by water companies) and integration

Governing interdependenciesWater and electricity


• Strong national and international (EU) environmental agendas: improve water quality and reduce emissions

• A shift to an integrated environmental regulator, but internal ‘silos’ and separate economic regulators

• Competing priorities for government and regulators: water quality vs energy demand / emissions reduction

• Some integration of sectors, but this was short lived due to these competing priorities:• Renewable energy generation by water companies• Cross-sector mergers to form ‘multi-utilities’

Governing interdependenciesWater and electricity


• Increasing symbiotic interactions between the ICT and electricity sectors since the 1960s, and between electricity and private vehicles sectors more recently

• Some integration between the ICT and electricity sectors: ICTs used by electricity distribution network companies to manage ‘big data’

• Smart grids are likely to require greater levels of integration. Governance integration still at an early stage

Governing interdependenciesElectricity, ICTs and private vehicles


• Smart grids being driven by electricity network regulation in the UK: increased coordination between government and industry including large ICT players

• Large differences between sectors: regulation, life cycle of assets and products, levels of competition, innovation, relationships with final consumers

• Relationships between sectors tends to be “ad hoc” due to lack of critical mass of demand for services (both EV and smart grid solutions)

• Consumer trust is an important issue for both electricity and ICT sectors




I don’t want no company saying like ‘well right about now your machine’s not going to work because it’s high peak [...]’ it’s like it becomes to know your habits, it knows how you operate, that’s kind of scary

Anonymous participantUKERC public workshop on smart grid scenarios

The answer is GE. What is the question?

Distribution company procurement officer, 2014


Governance reform?

Integrated infrastructure regulator?


‘Fracking has become a national debate in Britain – and it’s one that I’m determined to win. If we don’t back this technology, we will miss a massive opportunity to help families with their bills and make our country more competitive. Without it, we could lose ground in the tough global race.’ David Cameron, Aug 2013

Governance reform?


Thanks

http://www.ukerc.ac.uk

https://twitter.com/watsonjim2

http://www.ukerc.ac.uk/




Science

Governing Infrastructure Interdependencies, Jim Watson, UKERC