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Contents lists available at ScienceDirect

journal homepage: www.elsevier.com/locate/futures

Three electricity futures: Monitoring the emergence of alternative system architectures ⁎ Kristina Hojčková , Björn Sandén, Helene Ahlborg

Chalmers University of Technology, Department of Technology Management and Economics, Sweden

ARTICLE INFO ABSTRACT

Keywords: The electricity system is in transition, but whereto? To large-scale global or regional grids or to Electricity system self-sufficient disconnected prosumers? Although numerous studies have previously dealt with System innovation the future of the electricity system, there is a lack of studies that attempt to monitor the devel- Niche accumulation opment of more complete sets of socio-technical system elements that support alternative futures. Technological innovation systems This paper addresses this gap by first identifying and characterizing three idealized electricity Transition pathways system futures: ‘the Super-grid’, ‘the Smart-grid’ and ‘the Off-grid’, and then using the char- acterization to monitor the emergence, accumulation and alignment of socio-technical elements indicating the initial formation of new systems. Besides tracing the ongoing structural build-up at the niche level, we explore how the emerging systems relate to the existing electricity regime, other sectors and discourses. While the final outcome is undecided, the findings indicate that all three of the investigated systems have gained momentum over the last decade, partly relying on growth trends in shared elements such as the rise of renewables and climate change concerns, but also building on different technologies, actor networks, related industries and political and cultural discourses.

1. Introduction

At the turn of the century the electricity sector was strikingly similar in different parts of the world, based on a model of centralised and large-scale power generation (IEA, 2016a). This system is now facing problems related to climate change, local air pollution, nuclear safety, energy security and aging grid infrastructure, and, consequently, undergoes a transformation towards larger reliance on smaller scale power plants based on renewable energy (RE) (Frankfurt School-UNEP Centre/BNEF, 2016). The technical potential of solar and wind power exceeds current and projected energy demand (Sandén, Hammar, & Hedenus, 2014), and economic competitiveness of these technologies is being reached in an increasing number of regions around the world. In 2015, the global annual installation of solar and wind surpassed 100 GW despite a significant decline in fossil fuel prices (GWEC, 2017; IEA, 2016b). In addition, rapid innovation in technologies for balancing electricity supply and demand across time and space, such as, high voltage cables, energy storage (incl. electric vehicles) and information and communications technology (ICT), is facilitating a transition to an electricity system solely based on renewables. There are, however, several radically different electricity system architectures, that all could satisfy the criterion of hundred per cent renewables, but these would entail different benefits and drawbacks and affect societal actors in various ways. Hence, there is a value in monitoring the development to better understand what is going on and to gain some foresight. While socio-technical change is highly non-linear and to some degree unpredictable, it is not without logic and the process can be studied.

⁎ Corresponding author at: Chalmers University of Technology, Department of Technology Management and Economics, SE-412 96 Gothenburg, Sweden. E-mail address: [email protected] (K. Hojčková). https://doi.org/10.1016/j.futures.2017.12.004 Received 29 June 2017; Received in revised form 26 October 2017; Accepted 21 December 2017 $YDLODEOHRQOLQH'HFHPEHU (OVHYLHU/WG$OOULJKWVUHVHUYHG K. Hojčková et al. )XWXUHV ²

Previous work on electricity system futures has either focused on techno-economic assessment of different system configurations (Battaglini, Lilliestam, Haas, & Patt, 2009; Blarke & Jenkins, 2013; Funcke & Bauknecht, 2016; Meeuwsen, Myrzik, Verbong, Kling, & Blom, 2008), analysis of existing supporting organizations (Lilliestam & Hanger, 2016), or construction of narrative scenarios (Foxon, 2013; Foxon, Hammond, Pearson, Burgess, & Hargreaves, 2009; Verbong & Geels, 2010). There are also numerous reports on the development of singular components. There is, however, a lack of studies that monitor the development of more complete sets of socio-technical system elements and put these in relation to clearly distinguishable alternative futures and transformation pathways. Such monitoring can take as starting point a conceptualisation of the electricity system as a socio-technical system in transition (Geels, 2004), where different alternative solutions emerge, compete and coevolve (Sandén & Hillman, 2011). A broad stream of literature on socio-technical systems and technological change describes such path-selection as a process emerging out of accumulation and alignment of heterogeneous structural components, such as actor constellations, technical artefacts and institutions (Bergek, Jacobsson, Carlsson, Lindmark, & Rickne, 2008; Geels, 2004; Hughes, 1987b; Kemp, Schot, & Hoogma, 1998; Rip & Kemp, 1998). Some of these components may be closely linked to, and build upon, the dominant electricity ‘regime’, as well as other established systems and sectors; while others develop in more isolated niches (Raven, 2007). The aim of this paper is to systematically monitor key structural system components that support different scenarios of future electricity system change. From this we derive four research questions:

- What alternative future electricity system scenarios can be identiﬁed? - What structural components characterise these scenarios? - Which of these structural components are emerging and accumulating at present? - How are the alternative scenarios and their emerging components linked to, or decoupled from, the current electricity regime; and to what extent are they borrowing strength from other sectors and trends?

We address the ﬁrst two questions by deriving three idealised exploratory scenarios (Börjeson, Höjer, Dreborg, Ekvall, & Finnveden, 2006) from a literature review and identifying their overall characteristics and signifying structural components. To address the third question, we use an extensive web-based search to monitor the accumulation of technology, actors and networks, and institutions. Based on these ﬁndings, the fourth question is elaborated on in a discussion on socio-technical overlaps (Sandén & Hillman, 2011).

2. Theory and method

In the following, we review key concepts from the socio-technical systems literature that provide the theoretical base for exploration of electricity systems in transition, and provide a methodological framework for monitoring emergence of alternative system architectures, including: identiﬁcation of ideal system types; monitoring accumulation of heterogeneous components that may form building blocks of these systems; and analysing overlaps with other systems. Thereafter, methodological choices on data sources and system boundaries are reported.

2.1. Socio-technical systems and transitions

The dominant model for electricity supply, based on large-scale centralised installations and extensive grid infrastructure, has been described as a large technical (or socio-technical) system (LTS) (Hughes, 1987a; Loorbach, Frantzeskaki, & Thissen, 2010; Markard, 2011). An LTS consists of numerous heterogeneous components, including physical artefacts as well as social, economic, institutional and organizational structures (Geels, 2002; Hughes, 1987a; Loorbach et al., 2010; Verbong & Geels, 2010). The number and high degree of alignment between components creates inertia and “lock-in” (Unruh, 2000). However, history teaches that also such locked-in systems can and will be replaced, a phenomenon that has been termed ‘technological transition’ (Geels, 2002). Previous research has identified multiple processes driving such change. Transitions can be triggered by new discoveries that offer new opportunities or by efforts to address major problems within the old system, or, more likely, by both processes in combination (Geels, 2002; Geels & Schot, 2007; Sandén & Jonasson, 2005). The Multi-Level Perspective (MLP) describes transitions from one established socio-technical system to another as unfolding from interaction between processes at three systemic ‘levels’ (Geels, 2004, 2011; Rip & Kemp, 1998): first, the regime level, the essence of the large technological system, where a well-established set of institutions is shared by a large number of actors aligned in efficient value chains utilising mature technologies to deliver a certain good or service; second, the landscape level, where broad societal trends unfold that may put pressure on the regime and thus open up windows of opportunity for novelties; and third, the niche level, where new configurations emerge, grow and gain momentum. Phrased in the language of the MLP model, this paper studies structural build-up at the niche level, which indicates the direction of the ongoing transition, i.e. the development of alternative socio-technical systems and their components.

2.2. Identifying alternative future systems

To be able to trace the build-up of alternative systems one needs to have an idea of what to look for. In the early days of a transition, however, it is not a trivial task to discern what potential future systems that may eventually emerge. One strategy is to pick alternatives that are frequently discussed, and that some actors consider to be ‘realistic’. However, since what is considered ‘realistic’

K. Hojčková et al. )XWXUHV ² is often based on myopic worldviews very much coloured by present day systems, this might lead to a too narrow scope. To broaden the search, scenario methodology can be of help. Depending on purpose, different types of scenario methodology is applied (Börjeson et al., 2006). One distinction can be made between forecasting and backcasting. Backcasting typically has a normative starting point, a system that someone would like to see materialise in the future. The analysis then identifies scenarios leading to that system. Here, we have no such normative starting point. Instead, the overarching ambition is to take one step towards forecasting the development of the electricity system. Forecasting typically builds on trend analysis, possibly also on quantitative modelling of interactions between several trends and time-independent constraints. However, since technological transitions are inherently messy and involve long-term processes where heterogeneous elements interact in a non-linear way, it is not immediately clear which trends and constraints one should look for, how to group them in a meaningful way and how to model interactions. Forecasting in any precise way is impossible. However, one can draw a map of potential futures to create a ‘design space’ (Stankiewicz, 2000). Like every space, the design space has dimensions, and every conceivable system should be possible to describe in terms of these dimensions. Instead of deciding, a priori, what are realistic futures within this space, the analyst can first look at the extreme positions. The development from the current state towards one of these extreme positions forms an idealised scenario. Such idealised explorative scenarios take as a starting point, neither what is desirable, as in backcasting, nor what is likely, but what is theoretically possible (Börjeson et al., 2006). The key socio-technical components of these truly alternative scenarios and endpoint systems can then be the focus of monitoring and trend analysis, which in turn is used to determine which scenarios that are starting to materialise.

2.3. Tracing structural build-up by monitoring system components

At one level, the idealised electricity systems can be described by a set of technical artefacts and their relations. However, these need to be accompanied by constellations of actors and institutions that together with the technical components form a socio- technical system. While using slightly different concepts and delineations, various strands of the socio-technical and innovation systems literature seem to agree on a limited number of distinguishable component categories of such systems (Bergek, Jacobsson, Carlsson, et al., 2008; Geels, 2004; Hughes, 1987b; Kemp et al., 1998; Rip & Kemp, 1998; Sandén & Hillman, 2011; Wieczorek & Hekkert, 2012). Here, we structure the empirical data following a categorisation from the technological innovation system (TIS) framework (Bergek, Jacobsson, & Sandén, 2008), an approach that has dealt in detail with the emergence and growth of novel socio- technical systems. Hence, we primarily distinguish between technology, actors and networks, and institutions. Technology here refers to physical artefacts that make use of natural phenomena to produce services (Arthur, 2009), and to descriptions of the same processes, commonly referred to as technical knowledge (Bergek, Jacobsson, & Sandén, 2008; Sandén & Hillman, 2011). Actors and networks refers to an organizational dimension populated by people (Sandén & Hillman, 2011), where ‘actors’ refers to individuals or groups of individuals that are hierarchically linked in organizations, and ‘networks’ to more loosely linked groups of actors. ‘Organizations’ includes not only firms but also knowledge institutes, industry associations, and governmental or non-governmental organizations. Institutions refers to rules that regulate interaction, mainly between actors, but sometimes also between artefacts (Bergek, Jacobsson, Carlsson, et al., 2008; Bergek, Jacobsson, & Sandén, 2008). The category includes regulative, normative and cognitive institutions (Palthe, 2014; Scott, 2001). Regulative and normative institutions include hard regulations controlled by the juridical systems and norms and attitudes towards what is desirable. The cognitive institutions i.e. beliefs and expectations about what is reasonable, or “true” and taken for granted, are as important. Technologies do not pre-exist by themselves but are created through beliefs and expectations about how the world works and will develop. Beliefs and expectations shape the perceived potential and future materialisation of different technologies (Borup, Brown, Konrad, & Van Lente, 2006; Van Lente, 2012; Van Lente et al., 2013). Some of the required components need to be developed afresh specifically for the targeted system, while others can be ‘borrowed’ from other systems due to socio-technical overlaps.

2.4. Socio-technical overlaps, niche accumulation and hybridization

As observed already by Schumpeter (1934), new systems are never independent of old structures and innovation is essentially a process where older and newer elements are combined in novel ways. This means that new electricity systems will make use of technology, actors and institutions available in the old electricity regime and/or borrow such elements from other sectors. In other words, a new system may have a larger or smaller socio-technical overlap with the regime and other industries (Sandén & Hillman, 2011). Novel systems may also share system components with other emerging systems enabling development not only through competition but also through complementarities (Markard & Hoffmann, 2016), leading to parasitic or symbiotic relations (Sandén & Hillman, 2011); the development of one piece of technology, actor constellation or legislation may benefit more than one alternative system. With regards to the relation between niches and regime, Raven (2007) points at two general ways to create spaces for new systems – niche accumulation and hybridization – that differ in their level of overlap with the regime. Niche accumulation is the process where novel systems build up internal momentum, i.e. improve technically and gain economic and political strength, by experimentation and deployment in specific separate niches where the novelty has some kind of performance advantage (Kemp et al., 1998), and where new niches are added as the systems develop. In this case the novel system, or ‘technology’, tends to borrow more from other sectors. A case in point is solar PV that initially was related to and benefitted from the electronics and space industries, and which only lately has made an impact on the energy sector. Another is lithium-ion batteries, that have developed through application in,

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first, consumer electronics and, then, electric vehicles, now making them viable for wider application in the electricity system. In the case of hybridization the development, instead, starts closer to the dominant regime by forming hybrid technologies (Geels, 2002)or ‘bridging technologies’ (Sandén & Hillman, 2011) that partly build on the old and partly on the new system, which then deviates to more radical forms. The use of the old electricity grid itself in new configurations is an example of hybridisation based on a shared component. Another, more speculative, example is electromobility that could develop into a bridging technology by first relying on and supporting the traditional electricity system and its actors, but also, over time, demanding and facilitating its transformation into something quite different. The identification of overlaps may provide insights into the speed and strength of different accumulation and alignment processes.

2.5. System boundaries

While most things in this world are linked in some way, we need system boundaries to delimit and focus data collection. Here, the unit of analysis is not a single technical component but alternative systems comprising various socio-technical components. We set the socio-technical boundary to include components directly involved in electricity generation, storage and transmission. We ac- knowledge that reconfiguration of the electricity system will happen in parallel to transformations of other energy supply chains, e.g. biofuels for heating and transportation, but these are outside the scope of our analysis. Since the purpose is to investigate systems based on hundred per cent renewable (not merely climate neutral) energy, development within nuclear energy and carbon capture and storage (CCS) is not monitored, neither is the development within various electricity end use categories (with the exception of electric vehicles that also can function as storage and balancing technology). Since the electricity system cannot be changed over- night, pathways to hundred per cent renewables require phases where nuclear, coal and natural gas power plants play important roles in balancing the system (Göransson, Goop, Odenberger, & Johnsson, 2017; Johnsson, Odenberger, & Göransson, 2014; Qadrdan, Chaudry, Jenkins, Baruah, & Eyre, 2015). The dynamic techno-economic interplay between different power sources in the electricity mix is of relevance for an in-depth analysis of hybridisation in the electricity systems of individual countries or regions. This is, however, outside the scope of the study. The purpose of this paper is to monitor the development of main components of future (endpoint) electricity systems based on 100% renewables, and to discuss a broader set of sociotechnical overlaps with the current electricity system and other sectors. Furthermore, we set the spatial boundary at the global level. Although many transition studies choose national or regional boundaries, partly for practical reasons, we believe that, in this case, the national scale limits us from capturing key trends. Transitions of this scale in a globalised world economy are partly shaped by supra-national actors such as multi- and transnational organisations (Coenen, Benneworth, & Truffer, 2012; Hansen & Coenen, 2015), and maybe even more so by the aggregated impact of phenomena originating in different countries and spreading across the world, combining in new ways. While, arguably, many roots of current trends stretch far back in history, for practical reasons, the temporal boundary of data monitoring is set to 2000–2016.

2.6. Data

Data were collected from a range of secondary sources. First, we reviewed the existing academic literature to identify three idealised system types that could be positioned at extreme points in a two-dimensional design space. In the second step, we used academic literature to identify key socio-technical components of the alternative systems. The ﬁndings from the literature review were coupled with data collected from websites, reports, newspaper articles and online datasets to monitor potential growth trends among these components. The data is limited to sources available in English. While limiting the depth of analysis, our use of only secondary data sources enabled scanning of a very broad empirical ﬁeld within a limited timeframe.

3. Idealised future electricity systems

In this section, we ﬁrst identify three alternative idealised future electricity system architectures and then trace their evolution in terms of emerging and accumulating system components.

3.1. Three scenarios in one design space

Based on existing literature, we found the level and type of interconnectedness to be a decisive characteristic in descriptions of different future renewable electricity systems. In principle, one can distinguish between systems of dependent, interdependent and independent electricity consumers (Fig. 1). These idealised network models correspond relatively well to three articulated visions: the ‘Super-grid’, the ‘Smart-grid’ and the ‘Off-grid’. In their extreme forms, these idealised systems are positioned in three different corners of a design space that can be described by two variables, the number of production units (P) and the number of grids (G) in the world, and how they relate to an assumed constant number of consumers (N) (Fig. 2). The Supergrid (A) then represents a step from the current system (X) towards the extreme case where there is only one centralised production unit (P = 1) in one global grid (G = 1). All consumers are dependent on this one production unit. The extreme version of the Smart-grid configuration (B) also shows maximum global connectedness (G = 1), but has as many production units as consumption units (P = N). Every consumer is also a producer, i.e. a prosumer, and they are all interdependent. Finally, the endpoint of the extreme Off-grid scenario (C) is a completely disconnected system having as many ‘grids’ as

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Fig. 1. Diﬀerent system organizations of electricity consumers and producers representing the ‘Super-grid’, the ‘Smart-grid’ and the ‘Oﬀ-grid’ scenarios.

Fig. 2. Three scenarios in one design space. The number of independent grids (G) (x-axis), and the number of electricity production units (P) (y-axis), can vary between 1 and the number of consumption units (N). The current electricity system (X) may develop towards a ‘Super-grid’ (A), a ‘Smart-grid’ (B) or an ‘Off-grid’ system (C). production and consumption units (G = P = N). Every consumer is independent. One can then note that the Super-grid and the Off- grid scenarios have one attribute in common: centrality, i.e. each grid is hierarchically organised with one production unit per grid (P/G = 1), allowing for top-down control in each grid. The extreme Smart-grid on the other hand is the ‘ideal market’ with extremely decentralised production (P/G = N), no hierarchy and no top-down control. If we assume that the number of production units does not exceed the number of consumption units, any system configuration can be positioned within the design space illustrated by the grey triangle in Fig. 2. To bring clarity to the analysis we select idealised systems that are positioned quite close to the extreme corners as a starting point, instead of striving to identify some arbitrary ‘realistic’ scenarios (that are bound to be strongly coloured by present day dominant discourses). This also makes it easier to discuss various hybrid and middle-ground system configurations at a later stage. In the following, we refer to our idealised scenarios (and the visionary concept or idea) with capital letter, e.g. the Super-grid. The literature is inconsistent in spelling, so we use organizational and project names as they appear in the literature, e.g. the “European Supergrid”. As illustrated in Fig. 3, a bibliometric analysis indicates a rapidly growing interest, in relative terms, in all three scenarios. The next step is to monitor the emergence of key socio-technical components that enable, or are required for, realization of the three alternatives. An overview of main socio-technical components of the three scenarios, detailed in the following sections, are provided in Table 1.

3.2. The Super-grid scenario

One articulated vision is a system characterised by highly centralised renewable electricity production and large-scale transmission over long distances, spanning across continents or even the entire globe (Battaglini et al., 2009; Funcke & Bauknecht, 2016).

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Fig. 3. Relative growth of interest in three emerging systems. Number of academic articles in the database Scopus that explicitly refer the three system architectures: Super-grid, Smart-grid and Oﬀ-grid. All numbers are scaled to the publication rate in 2015. See also Fig. 6 for absolute numbers. Search terms: ‘Super-grid’, ‘Smart- grid’, ‘Oﬀ-grid’. Source: scopus.com

Table 1 Socio-technical components of the three idealised scenarios.

Super-grid Smart-grid Oﬀ-grid

Key technical Large-scale RE technology parks or plants Small-scale RE technology Small-scale RE technology components HVDC cables Flexible AC transmission systems Small-scale storage Voltage source converters ICT, smart metering, smart sensors Microgrids Large-scale storage Small-scale storage Electric vehicles Main actors National governments & international Regional & national governments Prosumers organizations Transmission System Operators Distribution System Operators Private device developers and maintenance providers Large, often state-owned vertically Incumbent firms and new entrants from integrated utility companies other sectors (ICT, automotive sector) Incumbent power system companies Prosumers Supporting institutions Collaboration and harmonization between Collaboration along the new supply Mistrust in the existing electricity market governmental, regional, international chain actors projects Multilateral agreements Standardization Norms related to independence, self- sufficiency or direct contribution to climate neutrality Tenders Feed-in-tariffs Innovative practices for financing (microfinance, pay-as-you-go) Vision statements, roadmaps Expectations translated into demonstration projects

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The rationale behind such a ‘Super-grid’ is to make eﬃcient use of unevenly distributed renewable energy resources, connect them to load centres, and handle large-scale penetration of variable energy sources, while avoiding the need for storage or demand ﬂexibility (Blarke & Jenkins, 2013; Liu, 2015). It requires close cooperation between central governments and an exclusive number of manufacturers, utilities and transmission system operators (TSOs) (Foxon, 2013). The Super-grid scenario resembles the ‘greening of the centralised production’ scenario, proposed by Verbong and Geels (2010), as the incumbent actors of the dominant electricity sector are assumed to keep their positions, while electricity consumers remain a passive part of the system.

3.2.1. Technology The envisioned electricity system of the Super-grid is based on large power plants, typically power parks at the multi GW scale of on-shore wind in desolated areas, off-shore wind at sea, and solar photovoltaics (PV) and concentrated solar thermal power (CSP) around the equator, combined with large-scale installations of tidal and wave power, biomass and geothermal energy where available (Battaglini et al., 2009; Foxon, 2013; Meeuwsen et al., 2008). Generation is connected to load centres with long distance extra high (EHV) and high voltage cables (HV). Technology seems not to be a show-stopper for turning the global Super-grid into reality (MacLeod et al., 2015). In fact, most of the technical components required are relatively mature and some already exist as parts of the current electricity system. In addition, knowledge production in key technologies has accelerated over the last decade, as illustrated in Fig. 4. HVDC technology is of particular interest since it enables very long-distance transmission on land and ocean floors. According to MacLeod et al. (2015), 2013 saw a breakthrough in HVDC technology, with the introduction of the voltage source converter (VSC) that allows for 50% higher voltage level and the HVDC circuit breaker that is crucial for reliable operation of an interconnected HVDC infrastructure. While a Super-grid can reduce the need for storage, as excess of power at one place can be transferred to other places, the grid also enables hydropower stations to be used as centralised storage. Such storage potential already exists in about 40 countries (Williams, 2016), possibly best exemplified with the endeavour to turn Norway’s hydropower plants into Europe’s battery (Fairley, 2014).

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Fig. 4. Knowledge creation related to three characteristic technical components of the Super-grid system (values are deﬂated by scaling annual values to total annual number of publications in the database). Search terms: ‘oﬀ-shore wind’, ‘concentrated solar power’, ’high voltage DC’. Source: scopus.com

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3.2.2. Actors and networks A Super-grid interconnecting all the corners of the world today only exists as an ambitious idea. The planning and implementation of cross-national grids has, so far, been based on ‘the government logic’ with a strong political character, according to which national government actors together with a few large private stakeholders coordinate expansion to achieve energy policy goals (Chatzivasileiadis, Ernst, & Andersson, 2013; Verbong & Geels, 2010). The construction of Super-grid infrastructure is currently in the hands of a few leading incumbent power system companies such as the ABB, Siemens and GE Grid Solutions. A significant number of actors and networks advocating the Super-grid can be found in EU and surrounding regions. In 2008, the European Commission called for the construction of regional transmission grids that could eventually be linked into a pan-European Super-grid and supply Europe with renewable power generated from the Mediterranean region to the North Sea1 (Gellings, 2015). The European Network of Transmission System Operators (TSOs) for Electricity (ENTSO-E), an association of 42 TSOs, from 35 countries, has been given the responsibility to develop a roadmap towards a pan-European power system by 2050, known as e- Highway2050. Since 2012, the industry association Friends of the Supergrid (FOSG) has published annual reports on the roadmap (FOSG, 2016). FOSG represents the entire supply chain required for construction of a Super-grid, comprising of TSOs, experts from cable manufacturers, project developers, consultants and logistics companies (MacLeod et al., 2015). Dominant actors promoting the Super-grid in the wider European region is the Desertec Foundation and the Desertec Industrial Initiative (Dii), both founded in 2009. Desertec Foundation was formed as a non-profit network of scientists, politicians and econ- omists from around the Mediterranean region with a plan to use HVDC to power Europe by Saharan large-scale CSP. Dii was established as an ‘international’ consortium of companies with the target of converting the Desertec concept into a profitable business project (Hamouchene, 2015). Dii brings together firms of mainly German origin such as E.ON, Munich Re, Siemens and Deutsche Bank, but cooperates also with Middle East and North African countries, for instance within the Medgrid project (SETIS, 2014). Inspired by the Desertec concept, an Asian version known as the Gobitec Initiative was proposed in September 2009 by academics in Northeast Asia. The Gobitec Initiative triggered an interest in constructing an Asian Super Grid, which would connect grids of China, Japan, Korea, Mongolia and possibly also Russia (more speculatively also Taiwan, Thailand, the Philippines, and India) and transmit wind and solar electricity from remote areas to load centres. The Asian Super Grid was proposed by Son Masayoshi, CEO of Japan’s Softbank, in 2012 after the Fukushima disaster. Later the same year, the first agreement was announced with a Mongolian company, Newcom, on developing a giant wind farm in the Gobi desert that would be connected to the Super-grid (Mathews, 2012). In 2016, the world’s largest electricity utility company, the Chinese State Grid, officially joined (Colthorpe, 2016; Minter, 2016). China has recently become the world leader in the development and deployment of HVDC technologies, which shows in the significant growth of kilometres of HVDC in Asia over the last fifteen years (Fig. 5). The Chairman of the Chinese State Grid, Liu Zhenya, publicly called himself a supporter of the Super-grid as it will “create a community of common destiny for all mankind with blue skies and green land”, and the Chinese president Xi Jinping proposed an initiative on establishing a Global Energy Interconnection (GEI) to meet global power demand and green alternatives (GEIDCO, 2017; Minter, 2016). In contrast, in the USA a historical heritage of balkanised grid infrastructure with multiple tiny grids and ineffective regulatory structure has hindered upgrades of the U.S. transmission network and the construction of a North American Super-grid (Kraemer, 2009). The only big project in this direction is known as ‘Tres Amigas’, proposed in 2009 with the aim of connecting three separate grids: the Eastern Interconnection, the Western Interconnection, and the Texas Interconnection (Kraemer, 2009). In 2015, however, the billion-dollar plan to connect the three grids had failed to meet its milestones after losing a key partner (St.John, 2015). In other parts of the world, such as South America, Australia and Oceania, or Sub-Saharan Africa, few or no actors promote projects aiming at building a Super-grid.

3.2.3. Institutions The real challenges for turning the global Super-grid into reality are not technical but political and social. According to Gregor Czich, a German Super-grid advocate, if a regulatory framework for the intercontinental grid were established today, our current technical abilities would allow us to build the Super-grid within twenty years (Dauncey, 2009). However, large-scale infrastructural projects across national boundaries is hindered by a low level of institutional alignment (Shuta et al., 2014). A necessary first step towards the required coordination is a shared vision of, and belief in, the Super-grid as the electricity system of the future. Vision statements and roadmaps as well as expectations forming around pilot projects are thus representing the first (cognitive) institutional building blocks of the Super-grid in Europe and Asia (Borup et al., 2006; Van Lente, 2012). In Europe, FOSG articulates the expectation of the Super-grid as the only means to achieve a 90% decarbonised electricity system in Europe by 2050, as well as an enabler of secure, reliable and cost-effective electricity (FOSG, 2014). Although no legal frameworks or regulations are in place at this point, efforts are made, especially within the EU, to encourage collaboration and harmonization between various projects. The vision of the Asian Super Grid is backed up by high expectations that it will bring job creation, poverty alleviation and reduction of carbon dioxide emissions (Shuta et al., 2014). To meet these expectations, the Asian Super Grid Initiative proposed the Energy Charter Treaty (ECT), a legal framework for long-term cooperation between countries that are producing, consuming and transmitting energy across the grid. ECT is an inclusive multilateral agreement that provides a comprehensive set of rules covering the entire energy chain from production and generation to the terms under which electricity can be traded and transmitted across

1 Projects funded by the European Union: Better Project, E-Highway2050, GridTech Project, Market4RES, MEDOW, NSCOGI, The North Sea transnational grid, The North Sea Grid (FOSG, 2016; Gellings, 2015)

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Fig. 5. Number of kilometres of HVDC worldwide (cumulative numbers). (https://en.wikipedia.org/wiki/List_of_HVDC_projects). Source: wikipedia.org different national jurisdictions and markets. So far, 52 countries plus the EU and the European Atomic Energy Community have signed the treaty, which serves as a uniting framework for political and legal aspects related to the Asian Super Grid Initiative (Shuta et al., 2014). Besides these visions and early attempts of grid regulation, we also find that market support of renewables has shifted from investment support and feed-in tariffs (FiTs) towards call for tenders for utility-scale renewable energy projects, which tends to support the development of centralised renewable electricity production. In the case of solar power, the shift from feed-in tariffsto tenders began in 2015 and is expected to continue over the next couple of years (PVPS, 2016).

3.3. The Smart-grid scenario

Another option for the future is a system based on decentralised interconnected electricity production, which we here refer to as the Smart-grid. Although the concept of the Smart-grid can be interpreted in different ways, we understand it as an interconnected bidirectional electric and communication network of ‘prosumers’. Such a system is enabled by the small-scale modular character of many renewable energy technologies (Battaglini et al., 2009). Furthermore, ICT plays a major role in increasing efficiency, reliability and security of the Smart-grid (Blarke & Jenkins, 2013; Hertzog, 2010). Such ‘smart’ technologies enable a system with a flat hierarchy in which everyone has the chance to actively participate in a highly competitive electricity market (Foxon, 2013).

3.3.1. Technical components From a technical perspective and in comparison with today’s system, the average size of production units and the voltage level decreases and the electricity is delivered over shorter distances (Foxon, 2013). Importantly, a Smart-grid system is comprised of not only electricity networks and renewable electricity generation technology but also of interfaces using various innovative communication, metering and storage technologies. Many of these technologies are already considered mature in both their development and application, while others require further development and demonstration (OECD/IEA, 2011). Fig. 6 shows that the scholarly interest in the concept of the Smart-grid has been notably higher than in the other two system configurations over the last ten years. Looking at some of the individual technical components in a Smart-grid, we can also observe increased research activities (Fig. 7). Technical components typically contributing to a Smart-grid are listed in Table 2. A key component is the flexible AC transmission system (FACTS), i.e. flexible power electronics that reduce energy losses by enabling real time reconfiguration of power flows. FACTS allows system managers to send more power through the cable, for example at times of peak hours when solar panels generate higher volumes of electricity than usual (Fairley, 2010). ICT in general enables real-time power control and two-way exchange of information between stakeholders (OECD/IEA, 2011). The two-directional flow of information is enabled by Advanced Metering Infrastructure (AMI) technologies, which provide prosumers and local utilities with

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Fig. 6. Number of articles, in absolute terms, related to the three scenarios (compare relative numbers in Fig. 3). Source: scopus.com time resolved data on prices and electricity production and consumption (OECD/IEA, 2011). Also other, currently less well-developed, artefacts could solve issues of control in the future smart grid; battery technologies and technologies for distribution grid management and customer-side management are increasingly affordable and accessible (OECD/IEA, 2011). In addition, electric vehicles play an increasingly important role as a flexible balancing technology via the vehicle-to-grid (V2G) concept, in which EV and the grid exchange electricity. Existing research has shown that most vehicles are parked almost 95% of the time. These vehicles could be connected to the grid and deliver stored energy required in case of need to balance local electricity supply. In fact, many assume that since available stationary storage technologies are still expensive, EV batteries can act as dynamic storage devices and support the integration of variable RE technologies into the grid (Mwasilu, Justo, Kim, Do, & Jung, 2014) One advanced vision of the Smart-grid could be termed the “internet of electricity” (Mazza, 2002), where anyone would be able to upload and download electrical energy packages at any time (Meeuwsen et al., 2008), also known as Peer-to-Peer electricity trading (Murkin, Chitchyan, & Byrne, 2016; Zhang, Wu, Cheng, Zhou, & Long, 2016). The blockchain technology, applied for instance in the financial sector through cryptocurrencies such as Bitcoin, is increasingly promoted to be the future solution for Peer-to-Peer trading and the ‘internet of things’ (Dickson, 2016). Blockchain seems to offer an alternative to the dominant monopolised supply and distribution of electricity based on administrative systems. Blockchain is a database that automatically records and keeps track of individual actions within a system and stores the results in a secure online folder available to anyone anywhere. In a future system based on prosumers, such technology could enable a quicker and more decentralised transaction system (Hirtenstein & Zha, 2016).

3.3.2. Actors and networks A global network of actors promoting the Smart-grid is the International Smart Grid Action Network (ISGAN) established in 2010 by the Clean Energy Ministerial (CEM), a regular convention of energy and environment ministers from 23 countries and the EU. The USA initiated ISGAN at the Copenhagen climate convention in 2009. It is a knowledge network that serves as a platform for multilateral intergovernmental collaboration and aims to drive the development and deployment of Smart-grid technologies and systems. ISGAN collaborates with various Smart-grid organizations (IEA-ISGAN.org, 2016). One of these is the Global Smart Grid Federation (GSGF) also established in 2010 as a global stakeholder organization comprising public and private organizations involved in Smart- grid development from 15 countries and the EU. Among members of the GSGF we can ﬁnd the European distribution system operators (EDSO), Smartgrid Ireland, France and Norway, the Israeli, Japanese and Korean Smart Grid Associations, India Smart Grid Forum and Smart Grid Mexico (globalsmartgridfederation.org, 2016). The European Commission launched six Europe-wide demonstration projects in 2011, Grid4 EU, that brought together European DSOs; utilities such as Vattenfall, Enel and ERDF; manufacturers such as ABB, Cisco and Siemens; and research institutes. An example

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advanced metering infrastructure' distribution grid management' Flexible AC transmission system' ICT' and 'grid'

Fig. 7. Knowledge creation related to smart-grid technical components (deﬂated values). Search terms: ‘advanced metering infrastructure’, ‘distribution grid management’, ‘Flexible AC transmission system’, ‘ICT’ and ‘grid’, ‘demand-side management’. Source: scopus.com

Table 2 A selection of smart-grid technical components. Adapted from OECD/IEA (2011, 2015).

Technology area Technical components Maturity level

Grid infrastructure Flexible AC transmission systems FACTS Mature ICT integration Communication equipment Mature Routers, relays, switches, gateway, computers (servers) Customer information system Enterprise resource planning software Advanced metering infrastructure (AMI) Smart meters Mature In-home displays Servers, relays Meter data management systems Variable and distributed generation integration Geographic information and management systems Developing Communication and control technology for generation and storage technology Distribution grid management Remotely controlled distributed generation and storage Developing Transformer sensors, wire and cable sensors Automated re-closers, switches and capacitors Distribution, outage and workforce management systems Geographic information systems Vehicle-to-grid storage and balancing systems Customer-side systems Smart appliances, routers, building automation systems Developing Thermal accumulators, smart thermostat Energy management systems and dashboards Energy applications for smart phone and tablets Blockchain electricity transaction platforms is the Nice Smart Solar District at the French Riviera, where voluntary prosumers from residential buildings and commercial local industries had the opportunity to actively manage their electricity consumption (Accenture Consulting, 2015). In total 459 Smart-grid projects from the 28 member states of the EU have been launched between 2002 and 2014. These include all the projects that aim to make the grid intelligent by implementing new technologies and ICT capabilities. Fig. 8 shows the notable increase in the number of new Smart-grid projects between 2003 and 2013 (European Commission, 2014).

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Fig. 8. Annual launch of new Smart-grid projects between 2003 and 2013 in the European Union. Source: http://ses.jrc.ec.europa.eu/smart-grids-observatory.

Furthermore, the Asia-Pacific Economic Cooperation (APEC) launched the Energy Smart Communities Initiative (ESCI) in 2010, proposed by the presidents of US and Japan. ESCI incorporates a knowledge sharing platform that represents a space for collecting and sharing best practices for creating Smart-grid communities (Esci-ksp.org, 2016). After the Fukushima nuclear disaster in 2011, Japan is particularly dedicated to promoting Smart-grids to increase energy efficiency and renewable power generation. The New Energy and Industrial Technology Development Organization (NEDO) has funded several demonstration projects. In 2010, NEDO brought together nine Japanese companies to launch a Japanese-US Smart-Grid demonstration project in Albuquerque, New Mexico. This project is perceived as a good example of the growing international cooperation promoting the Smart-grid (Stuart, 2012). In 2016, NEDO coordinated domestic Smart-grid and international projects in India, Indonesia, China, multiple European countries and the USA. In North America, dedicated supporting legislation in 2011 resulted in record spending on Smart-grid projects in the USA and Canada. In 2012, the major projects funded by the US Department of Energy included 99 Smart-grid investment grants, 32 Smart-grid demonstration projects and nine renewable and distributed system integration projects (Fulli & Bossart, 2012; Smartgrid.gov, 2016). Many of the Smart-grid technologies are being developed and supplied by incumbent power system companies, such as ABB and GE producing FACTS, but also incumbents from other sectors such as Siemens testing AMI technologies, Cisco supplying ICT solutions, and Nissan working together with power company Enel to develop ways to use EVs as storage and balancing technologies for Smart-grids (Lambert, 2016). In addition, a growing number of start-up companies are entering the market and receiving increasing capital funding. They offer innovative solutions for Smart-grids, battery technologies and energy efficiency (Hill, 2016). Thus, a more diverse and competitive market is being created around Smart-grid systems compared to the Super-grid.

3.3.3. Institutions The global community is still in the early stages of creating standards for the technical artefacts and their interoperability in a Smart-grid system. However, despite the lack of universal standards, countries all over the world actively continue Smart-grid related planning and implementation. Given that a Smart-grid system can be built around multiple regional and highly connected systems, the development of standards does not necessarily have to be globally aligned. Rather, alignment needs to take place along the supply-chain, involving various governmental actors, utilities, private vendors and other stakeholders. Their cooperation is crucial for the development of necessary standards (Lundin, 2015). Such collaboration was enabled after the establishment of ISGAN and GSGF in 2010, as platforms that facilitate international discussion related to Smart-grid standardization and development (SAIC, 2011). In 2016, Smart-grid systems existed in the form of demonstration projects. Expectations attached to these initiatives is what drives the further development of Smart-grids. Although the vision of the smart-grid diﬀers among various actors and networks (Fulli &

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Bossart, 2012; SAIC, 2011), the general expectation is to build a grid that can integrate and better utilise distributed small-scale renewables (IEA-ISGAN.org, 2016) and empower the consumer side (ANEC/BEUC, 2010).

3.4. The Oﬀ-grid scenario

Instead of increased connectedness as in the Smart-grid, the electricity system transition could lead to large-scale grid defection (Zinaman et al., 2015). ‘Leaving the grid’ and ‘living off-grid’ have recently become feasible options, mainly due to falling prices of solar cells and batteries. Hitherto, off-grid systems have mainly been viewed as a solution for poor countries, where people still live without access to well- functioning electricity grids. While off-grid systems are not new and not just a vision, they have been perceived as short-term solutions. However, this understanding is shifting and off-grid solutions are more and more seen as a way to leapfrog the conventional centralised mode and avoid carbon intensive electricity production. Off-grid solutions are increasingly accepted as an essential part of future energy solutions that could provide global access to electricity (Ahlborg & Sjöstedt, 2015; Doig, 1999). More recently, increased attention has been given to the phenomenon of going off-grid also in industrialised countries (Bronski et al., 2014; Khalilpour & Vassallo, 2015).

3.4.1. Technical components Off-grid systems are not connected to large-scale utility grid infrastructure. Instead, they consist of stand-alone systems of power generation and distribution that supply electricity to local communities via a mini or micro-grid, to a single house, or even to individual appliances. Key enabling technologies for off-grid systems are small-scale renewables, such as PV, wind or micro-hydropower plants coupled with a storage technology (Zinaman et al., 2015). Off-grid systems based on small-scale hydropower and diesel generators have a very long history, but the recent cost reduction and availability of solar PV and batteries has given off-grid systems a renaissance. The rapid development of these key enabling technologies is also reflected in scholarly knowledge production (Fig. 9). At the household level, the use of Solar Home Systems (SHS) in developing economies is not new but increasingly affordable, and SHS are nowadays seen as a leapfrogging technology for communities without access to the national utility grid. Also, SHS are used in

200 10000

100 5000

0 0

solar home system' stationary battery'

Fig. 9. Knowledge creation related to Off-grid technical components (deflated values with three years floating average). The dashed lines represent values for the primary axis, while values on the secondary axis are represented with the solid line. Search terms: ‘solar home system’, ‘stationary battery’,”(’solar’ and ‘photovoltaics’) or ‘solar cells”’, lithium-ion battery. Source: scopus.com

K. Hojčková et al. )XWXUHV ² urban areas as backup or alternatives to unreliable grids. Between 2009 and 2014, the price of SHS fell by 64% (Bloomberg New Energy Finance, GOGLA, & Lighting Global, 2016). Over the last decade, Solar Pico Systems (SPS) have emerged as a new technology for powering appliances and lighting devices. SPSs often come as a set consisting of solar panels, a battery, a charging station, and an LED lamp. The price dropped by 75% between 2012 and 2016 and is expected to halve again between 2016 and 2020 (Bloomberg New Energy Finance et al., 2016). SPS technologies are now contributing signiﬁcantly to the expansion of the oﬀ-grid market in the Global South (Bloomberg New Energy Finance et al., 2016; Lysen, 2013). Also in industrialised countries, the idea of taking “the energy future into your own hands”, that is, becoming energy independent at the household level, is increasingly popular (Elsasser, 2015; Sonnen, 2016). Innovative integration of PV in walls and windows of buildings, in textiles and all kinds of materials, open for new ways of designing electricity systems. Cost reduction, design thinking and branding make solar home batteries more attractive (Elsasser, 2015). In 2015, the American EV manufacturer Tesla introduced the PowerWall, a lithium-ion home battery that is designed to be paired with rooftop solar panels and enable consumers to ‘go net zero’(Tesla, 2016).The PowerWall is a part of a new generation of batteries with the ambition of not only being automatized, compact and easy to install but also of becoming an interior wall-decoration.2

3.4.2. Actors and networks Actors promoting the Off-grid electricity scenario vary in size, motive, geographical origin and organizational model. There is a clustering of actors in the Global South, where off-grid solutions are seen as a way to electrify remote and poor communities. Currently, the off-grid market is partly commercial and partly driven by donor financing and development aid. It includes private entrepreneurs, social entrepreneurs, charity organizations, international developing agencies and governmental agencies. Charity- based initiatives exist in parallel with business and distribution models targeting different customer segments in urban and rural areas. At the global level, off-grid solutions are promoted by Sustainable Energy for All (SE4All), which was established in 2011 as an initiative under the United Nations. SE4All works to achieve universal access to clean and efficient energy sources for all humans and acknowledges that off-grid electricity systems are not a provisional solution, but rather an economically viable route to sustainable energy for all (SE4ALL, 2016). Lighting Global was initiated by the World Bank to support the off-grid solar market targeting those without access to grid electricity. It brings together the World Bank, the Global Off-Grid Lightning Association (GOGLA), manufacturers, distributors and other development partners to develop the off-grid electricity market (Lightingglobal.org, 2016). GOGLA is an independent and non- profit industry organization with the overall mission to scale-up the off-grid electricity solutions sector (Bloomberg New Energy Finance et al., 2016; GOGLA, 2016). In 2016, more than 100 private companies were providing SHS and SPS and approximately 20 companies offered “pay-as-you-go” financing mechanisms instead of payments in cash. Investment in the off-grid market increased 15-fold between 2012 and 2016. According to Bloomberg New Energy Finance (BNEF), the number of electrified off-grid households will grow from 25 million in 2016 to 99 million in 2020 (Bloomberg New Energy Finance et al., 2016; Zaripova, 2016a). In places where the electricity grid infrastructure is fully developed, actors promoting Off-grid systems as a vision are often individuals or communities of individuals who aim to become independent from the centralised electricity system, avoid costly electricity bills, or simply take the sustainability transition into their own hands. Here we also find the emerging concept of “energy democracy” with its focus on social justice, sustainable development and grassroots mobilization (Angel, 2016; The Center for Social Inclusion, 2013). Importantly, internet and social media makes it easier to form grassroots initiatives that encourage others to join ‘the off-grid movement’. The ‘off-griders’ usually communicate via websites that enable people from all over the world to share experiences in going off-grid. Off-grid.net, an online portal that encourages and supports people interested in building off-grid systems, is accessed by 75 000 visitors every month (in 2017), mainly from the USA and Great Britain. This webpage serves as a knowledge sharing platform and a news portal related to off-grid life-style. A special networking opportunity is the ‘Landbuddy’ section that serves for finding ‘buddies’ to go off-grid with (Off-grid.net, 2016). In relation to off-grid solutions, some important innovative companies might influence the electricity system transition. For instance, the recently merged innovative energy businesses SolarCity and Tesla, create a vertically integrated energy company offering a single system for off-grid living. Together, they envision a future of a “one-stop solar plus storage experience” offering one installation, one service contract and one phone application (Hanley, 2016). Many ‘off-griders’ live in the US, especially in those states where the electricity costs are very high and solar energy is abundant, such as Hawaii, Arizona, Nevada and California. Even though only 1% of US consumers lived off-grid in 2014, going off-grid is no longer seen as a rebellious step but rather as a decision of a savvy homeowner (Chediak, 2014). In Australia, a combination of high electricity prices and a high risk of electricity outages due to natural disasters creates favourable conditions for off-grid system (Parkinson, 2015; Zaripova, 2016b). In fact, Australia has the highest penetration of residential rooftop PV in the world and presents an attractive market for many companies specializing in battery technologies, such as Tesla, Bosh, Redflow, Samsung, LG and Sonnen. Since off-grid systems became a viable option, many local utilities and electricity suppliers offer a PV plus battery system combined with grid access in order to keep the customers connected to the grid (Parkinson, 2015).

2 The creative burst related to local electricity production does not stop at solar and battery technologies. An example of a novel wind power technology is the ‘Vortex Mini’ for domestic power generation, which has no blades, gears or bearings and looks just like a slim cylinder that oscillates or vibrates (Vortex, 2016).

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3.4.3. Institutions Besides increased performance and reduced cost of key enabling technologies, there are also examples of regulations that encourage individuals to leave the grid. The cost barrier for going off-grid can be reduced by subsidy schemes for PV plus battery systems, such as in Germany since 2013 and Japan since 2014 (Colthorpe, 2014; Enkhardt, 2016). In the first half of 2016, the Green party in Australia also proposed such subsidies (Gifford, 2016b). However, if the PV plus battery subsidy schemes are combined with reasonable FiTs (and if the seasonal variation of solar influx is larger), as they are in Germany or Japan, then it is more beneficial for the consumer to stay connected. This is, however, not the case in Australia or Hawaii where FiTs are very low and fees for houses with installed solar panels are high, making the off-grid systems increasingly cost-effective (Gifford, 2016a). As the Australian environmental minister Grent Hunt (in Parkinson, 2015) said: “it’s up to individuals”. Some consumers may leave the grid because of economic and regulatory issues, while others leave the grid in order to declare their independence or to directly contribute to the carbon-free electricity system (Off-grid.net, 2016; Parkinson, 2015). In the countries of the Global South, off-grid solutions are often the only option; yet, these are usually not supported by formal regulatory frameworks. Formal institutions are therefore being substituted with innovative practices that are emerging in relation to all aspects of electricity provision. Through these practices, many actors attempt to enter the growing market for off-grid systems by adjusting to the context of poverty, no access to financial services from commercial banks, ineffective payment structures, gender inequality or criminality. To exemplify, micro-loans are often provided by microfinancing institutions to support diffusion of renewable technologies in poor areas; users are enabled to pay for services via ‘pay-as-you-go’ business models with help of ICTs; local communities are trained to ensure technical service and maintenance with a special attention to women; and technologies are designed to avoid theft. Such practices are often borrowed from other sectors, such as micro-financing, ICT solutions, water and sanitation (Adib, Gagelmann, Koschatzky, Preiser, & Walter, 2001; Sanyal, 2017).

4. Socio-technical overlaps

We have identified three different stylised alternative systems and traced the emergence and accumulation of a range of socio- technical components supporting these systems and how they take form at the niche level. We now turn to the question of how these components relate to the incumbent electricity regime, other sectors and discourses. We can conclude that the Super-grid system configuration develops close to the existing electricity system, and can be characterised as hybridization processes. The global and continental Super-grid is enabled by incremental innovation in power transmission and supported mostly by regime actors such as national governments, research institutes and dominant firms that possess the capabilities to coordinate such megaprojects. At this point in time, visions, roadmaps and pilot projects seem to be particularly important to hold the main actors together and enable the top-down harmonization required for the centralised, border-crossing and capital-intensive transition to the global Super-grid. The vision alludes to ideals of control and efficiency (Lilliestam & Hanger, 2016) and link up to trends of economies of scale and globalism (Liu, 2015). The Smart-grid seems to be emerging out of a combination of hybridization and niche accumulation. The Smart-grid system deviates from the dominant centralised system by creating a decentralised system configuration enabled by small-scale renewables and innovative communication, metering and storage technologies. Some technical components of the Smart-grid, such as ICT and batteries, which have primarily been developed in other sectors, have found niche market opportunities in Smart-grid development. Transaction technologies such as blockchain are borrowed from the banking sector. The parallel development of electromobility may both create demand for and enable Smart-grid solutions, e.g. via vehicle-to-grid systems. New entrants are increasingly contributing to the market for Smart-grid components and systems, and a range of public and private house owners and industries are becoming involved as prosumers directly contributing to Smart-grid experiments. Arguably, the Smart-grid scenario borrows legitimacy from other systems that build on networks of prosumers, most importantly the Internet, and from ideas such as the ‘sharing economy’,or the ideal market. However, governmental actors still hold a strong position in propelling the Smart-grid development by forming special organizations and financing demonstration projects. These projects most often involve incumbent actors such as existing DSOs, utilities and large power system companies, which are assigned to plan and carry out the project in collaboration with research centres and universities. Furthermore, in a transition period the relation to traditional power plants is complex, possibly allowing for some symbiosis with flexible gas power plants while being less compatible with coal and nuclear (see e.g. Göransson et al., 2017). The Off-grid scenario is clearly an example of niche accumulation. It deviates from the regime by creating a highly disconnected and decentralised electricity system without the conventional utility grid infrastructure and electricity market. It is enabled by the rapid development of energy storage technology and small-scale renewables such as solar PV that, historically, have benefitted from a growing demand for electricity in remote areas and in mobile applications, in turn driven by progress in the aerospace, ICT and automotive industries. Currently, off-grid systems find growing markets in developing economies, where large-scale grid infrastructure is unreliable or non-existing. Since the current institutional frameworks offer very limited regulation of off-grid systems, practices are borrowed from other more established sectors such as ICT or banking. This has contributed to faster diffusion and easier maintenance in countries of the Global South. Over time, the perception of and vision for Off-grid systems has changed from it being considered a temporary fix until the conventional grid arrives, to a long-term solution with increasing economic and political strength and recognition. Moreover, the decreasing costs of solar and battery technologies make the Off-grid system scenario an increasingly feasible option even in countries with a fully developed electricity grid. Here, several innovative companies have found a growing market opportunity for stand-alone systems enabling off-grid living. The Off-grid vision in industrialised countries link up to quite different political and social discourses and ideals, including not only environmental responsibility but also social justice, individual independence and design-driven consumerism.

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5. Conclusions

This paper represents an attempt to monitor the socio-technical transition in electricity systems around the world by mapping accumulation and alignment of structural components that indicate an initial formation of new alternative systems. The results make evident that there is indeed an ongoing transformation process, while its direction is not yet decided. We identify three distinct idealised transition endpoints: ‘the Super-grid’, ‘the Smart-grid’ and ‘the Off-grid’ systems. We find that all three alternatives have built momentum since the turn of the century through development of technology, mobilisation of actors, formation of networks and institutional work, as well as by linking up to the existing regime, the development in other industries and to various societal discourses and ideals. While the proponents of each scenario tend to articulate their vision as the most likely and beneficial future, we find it to be too early to announce ‘a winner’, i.e. a future dominant configuration, or even to clearly state in which direction in the design space we are heading. Some findings suggest that the future path will be closely aligned with the current electricity system and result in a ‘greening of the existing system’, while other findings suggest that the currently dominating system will be radically reconstructed. A next step towards a deeper understanding of the ongoing transition processes would include a closer study of each system and the causal links between structural components to identify drivers and barriers enabling or hindering the breakthrough of each alternative system configuration.

Acknowledgements

This research is funded by the Swedish Energy Agency as a part of the ‘New networks of power: on the emergence, diﬀusion and impact of alternative electricity system architectures’ project. We are grateful to two anonymous reviewers for constructive com- ments.

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Paper II

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Entrepreneurial use of context for technological system creation and expansion: The case of blockchain-based peer-to-peer electricity trading ⁎ Kristina Hojckovaa, , Helene Ahlborga, Gregory M. Morrisonb, Björn Sandéna a Environmental Systems Analysis, Technology Management and Economics, Chalmers University of Technology, Gothenburg, Sweden b Curtin University Sustainability Policy Institute, Curtin University, Perth, Australia

ARTICLE INFO ABSTRACT

Keywords: This paper engages with the question of why certain radical innovations succeed while others fail or stagnate Resistance to innovation when encountering established actors and sector logics. We develop an analytical framework that extends the Innovation context technological innovation systems (TIS) functional approach to explicitly account for contextual factors and Entrepreneurship entrepreneurial activities. We contribute to two ongoing debates: the conceptualization of context in TIS and the Energy transition micro-foundation of TIS. First, a two-dimensional matrix is constructed to locate influential factors in the spatial Peer-to-peer electricity trading (geographical) and sociotechnical (sectoral) contexts. Second, for early stages of the innovation process, we Blockchain identify entrepreneurial activities as the locus of the system-building functions, i.e. the activities that use contextual and system-internal factors to develop the novel technological system. We use the TIS approach to analyze the innovation system build-up of peer-to-peer (P2P) electricity trading on a blockchain platform, materializing in two local projects, one in Australia and another in the USA. We find that how and why the new configuration succeeded in productively encountering electricity sector incumbents can be explained by the extent to which entrepreneurs could use opportunities in various contexts across spatial and sectoral boundaries.

1. Introduction an analytical tool to describe and explain the emergence and growth of novelties or the lack thereof (Bergek et al., 2008; Hekkert et al., 2007). Growing environmental, social, and economic sustainability chal- This article contributes by improving the understanding of the role lenges are putting pressure on established sectors around the world to wider contexts play in enabling radical system innovation. While it is innovate and transition to more sustainable modes of production and well established that context matters for successful innovation (Bergek consumption. In most sectors, sustainability transitions require major et al., 2015; Coenen et al., 2012; Coenen and López, 2010; Hansen and changes of dominant system designs (Markard et al., 2012). Such ra- Coenen, 2015; Truffer et al., 2015), the innovation system literature has dical innovation poses great difficulties for incumbent firms, which differing assumptions regarding what context is and what aspects of it therefore may seek to block new alternatives or steer change in less matter the most. radical directions to reinforce their dominance (Geels, 2014; Henderson We argue that to overcome the resistance of established actors, ra- and Clark, 1990). dical innovation requires substantial agency on the part of new chal- Overcoming incumbent resistance in order to achieve fundamental lengers. Previous TIS literature has emphasized the role of en- system transformation has been a central theme in the innovation and trepreneurs (Alkemade et al., 2011; Farla et al., 2012; Markard and sustainability transition literature (Dahmén, 1989; Foxon and Pearson, Truffer, 2008; Musiolik et al., 2018; Planko et al., 2017)assystem 2008; Foxon, 2014; Geels, 2014). This line of research stresses that builders who can skilfully use opportunities and structures from dif- innovations and transitions are always sociotechnical in nature and ferent contexts to create momentum for their innovations under con- occur as processes in which ‘the social’ and ‘the technical’ influence ditions of extreme uncertainty (Sarasvathy, 2007). This is arguably each other (Hughes, 1987; Van den Bergh et al., 2011). more pronounced at the early stages of the novel configuration build- By applying a sociotechnical systems perspective, this study con- up, when actors are few, institutions and technical infrastructures favor siders why certain radical innovations succeed while others fail or incumbents, and the novel configuration has little momentum. stagnate when encountering established actors and sector logics. More For our empirical investigation of encounters between en- precisely, we use the technological innovation system (TIS) approach as trepreneurs and incumbents, we select the ongoing innovation process

⁎ Corresponding author. E-mail address: [email protected] (K. Hojckova). https://doi.org/10.1016/j.respol.2020.104046 Received 23 January 2019; Received in revised form 26 May 2020; Accepted 14 June 2020 (OVHYLHU%9$OOULJKWVUHVHUYHG K. Hojckova, et al. 5HVHDUFK3ROLF\ in the electricity sector. The existing capital-intensive electric grid and the same theoretical categories from being applied to study the emer- associated regulatory frameworks generate substantial inertia and ob- gence and expansion of very immature and small systems early in their struct fundamental changes (Bolton and Foxon, 2015; Frantzeskaki and structural formation (see Andersson et al., 2018; Hellsmark et al., Loorbach, 2010; Markard, 2011). However, the ongoing growth of 2016). distributed renewable energy technologies is disrupting the dominant The TIS framework highlights collective (‘systemic’) processes of system built around centralized nuclear, hydropower, and fossil fuel- forming, aligning, and expanding the heterogeneous structural com- based generation (Markard, 2018), opening it to radically different ponents required for a successful novel ‘technological system’ (com- system architectures and new innovations (Foxon, 2013; Gui and prising actors, networks, institutions, knowledge, financial resources, MacGill, 2018; Hojčková et al., 2018; Verbong and Geels, 2010). and physical artefacts) (Bergek et al., 2008b; Hillman and Sandén, One example of such an innovation is peer-to-peer (P2P) electricity 2008).2 These processes, termed ‘functions’, carry different weights and trading via blockchain, a distributed software technology that redefines matter in different ways during a technology lifecycle; accordingly, the roles of, or even removes the need for, utilities and energy retailers Table 1 summarizes the key functions as we understand them to matter in the electricity market, by creating a programmable digital utility at the early stage of system build-up, based on the various formulations managed by consumers and prosumers.1 It has the potential to disrupt presented in the literature.3 the centralized institutional arrangement in the electricity sector by The strength of each function depends partly on the internal state of creating a distributed electricity trading network, often referred to as the growing technological system itself (i.e. internal factors such as the energy democracy (Angel, 2016; Burke et al., 2017; Fairchild, 2017). number and size of actors, level of knowledge, and technology-specific This study has both conceptual and empirical aims. Conceptually, institutions) and partly on supporting and blocking factors in its en- we aim to improve the TIS functional approach to enable a more vironment (Bergek et al., 2008b; Hillman and Sandén, 2008; Sandén nuanced description of how actors’ entrepreneurial activities use and and Hillman, 2011)(Fig. 2a).4 As the system grows, internal factors are influenced by various factors when building a new system and become increasingly important. With the entrance of new actors, the overcoming resistance from incumbent actors. In particular, we aim to development of physical artefacts, networks, and knowledge, and the develop and test a categorization of system contexts that may help alignment of institutions, internal factors become linked in loops of describe the origin of a broad range of supporting and blocking factors. positive feedback, setting off a process of ‘cumulative causation’ Our empirical aim is to better understand how this process influences (Hekkert et al., 2007; Hillman et al., 2008). Over time, the new system the success of blockchain-based P2P electricity trading and its en- gains momentum (Hughes, 1987). This also implies that the new system counter with the incumbent sector. exerts increasing influence on its environment as it grows – that is, the To achieve our aims, we review how the context has been con- interplay between system and context becomes more bidirectional. ceptualized in the innovation system literature and propose a two-di- Immature systems, however, are heavily dependent on contextual fac- mensional matrix that systematizes previous insights. We also link the tors, as the internal structure is not yet well developed and provides TIS context to the agency of entrepreneurs as innovators and system only weak support.5 builders. Consequently, we provide a framework for analysing how Apparently, the external environment, or context, is crucial for the entrepreneurs can utilize various contexts across scales and socio- early development and overall prospects of a novel system. However, technical sectors, how this contributes to the build-up of a new tech- scholars have recently argued that, in the TIS framework, the context is nological system, and how, in turn, this affects the encounter with the under-theorized (Andersson et al., 2018; Bergek et al., 2015; Coenen established sector. We illustrate the framework in a comparative case et al., 2012; Hansen and Coenen, 2015; Truffer et al., 2015). To better study of two local demonstration projects of blockchain-based P2P understand why certain innovations develop successfully in some con- electricity trading. texts but not in others, and how the context not only helps or hinders novel technological systems but also shapes them, we need a more elaborate conceptualization of the system context. 2. Theoretical foundations

2.1. Technological innovations systems and early system build-up 2 The literature provides many examples of a growing system being called a ‘TIS’. In our view, using the same term for the model of change (which can be The TIS framework, or model, is a tool for analysing the emergence viewed as a higher-order ‘system’ that creates change) and the object under- and growth of new technologies, products, and related industries going change creates conceptual confusion. Here, we follow Hughes (1987) and (Bergek et al., 2008a; Hekkert and Negro, 2009). Studies applying the Hillman and Sandén (2008) and call the growing system a ‘technological TIS framework have predominantly focused on sustainability-oriented system’, reserving the term ‘technological innovation system’ for the model innovations, making TIS a prominent framework in the growing field of describing and explaining the growth process. innovation and sustainability transition research (Markard et al., 2012). 3 We follow Hekkert and Negro (2009) and do not include the function The popularity of the TIS functional approach is attributable to its ‘creation of positive externalities’, which we view not as an independent usefulness in identifying ‘blocking factors’, or ‘system weaknesses’, function but rather as an aspect of other functions; for example, knowledge and thereby guiding policy intervention to support particular technologies. markets may be shared or used exclusively by individual actors (through se- Although the framework has mainly been used to study the emer- crets, patents, contracts, and monopolies). 4 gence and growth of systems producing and using tangible products In some texts, the term ‘resources’ is used instead of ‘factors’ (Andersson et al., 2018; Musiolik et al., 2012; Musiolik et al., 2018). Here, we prefer the such as windmills or PV panels, we propose that it is generic enough to more general term ‘factor’ to allow also for the negative impacts of blocking be useful in analysing any sociotechnical innovation phenomena, in- factors. In addition, while most supporting factors can be viewed as resources in cluding new products, business models, and service-delivery models a broad sense, a narrower interpretation of ‘resources’ would likely exclude enabled by digitalization and new communication technology (see also supporting factors such as beneficial regulations and positive attitudes. Hallingby, 2016). This also applies to studies of systems of different 5 As proposed by Bergek et al. (2008b), in TIS models, it is in principle pos- sizes and levels of maturity. While many studies focus on semi-mature sible to work with layers of system boundaries, creating a hierarchy ranging emerging industries in which many firms, artefacts, and technology- from very internal to very external factors, relative to certain actors or tech- specific institutions already exist, nothing in the framework precludes nologies. Musiolik et al. (2012), for example, differentiate between organizational, network, and system resources. Due to the small size and low complexity of the systems studied here, we abstain from a refined internal stratification; 1 ‘Prosumers’ are actors who both produce and consume electricity, such as a however, a major aim of the paper is to identify layers of external structure, or homeowner whose house has a solar roof. contexts (Section 2.2).

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Table 1 Functions of the TIS (left) with corresponding descriptions (right); abbreviations will be used in Section 5 (Bergek et al., 2008a; Hekkert et al., 2011; Hekkert and Negro, 2009; Perez Vico, 2014).

Function Description

Guidance of search G The process of attracting and motivating new actors to enter the system, completing value chains. Network formation (social capital developmenta) N The process of building networks and coalitions in which social relations are created and maintained; social relations in these networks are built and maintained through trust, mutual recognition, dependence, authority, and shared norms. Knowledge development and diffusion K The process of importing and creating new knowledge and diffusing it across actor groups. Entrepreneurial experimentation E The process of experimenting and combining knowledge and other resources to create something new that can be sold on a market; experimentation creates and tests variety, thus reducing uncertainty. Legitimation L The process of creating formal and informal institutions to overcome resistance to change, making an innovation accepted and perceived as a relevant and appropriate new technology. Market formation M At the stages of experimentation and early build-up, this captures the demand formation that often occurs by creating niche markets with a competitive advantage for specific applications of the focal technology. Resource mobilizationb R The process of accessing necessary resources in the form of technical (i.e. hardware and software), natural, financial, and human resources.

a This function was added by Perez Vico (2014) and Andersson et al. (2017), who called it social capital development. We chose the name ‘network formation’, which we ﬁnd more appropriate as the focus is on creating networks of relationships instead of social capital as an asset. b Unlike elsewhere in the literature, here we add technical resources to account for resources such as complete technical modules from somewhere else (i.e. other industrial sectors), for example, ‘plug and play’ software.

2.2. Conceptualizing the context: spatial and sociotechnical dimensions (e.g. the electricity sector) is what matters most for innovation processes (Malerba, 2002; Stephan et al., 2017). Hanson (2018) and Raven As TIS scholars often pay empirical attention to how contextual (2007) noted the importance of interactions with incumbent actors in factors influence the processes they study, the literature provides rich focal and adjacent industrial sectors, and with sector-specific institu- accounts of context-influenced processes. However, it is much less clear tions and logics. Others have stressed the interaction dynamics between how the ‘context’ is understood conceptually, what is considered im- a novel focal technological system and other related novel or mature portant, and how and why some factors matter more. There is also a technological systems (Haley, 2014; Hanson, 2018; Hillman et al., need to reflect on how systems are framed analytically and how the 2008; Mäkitie et al., 2018; Markard and Hoffmann, 2016; Sandén and setting of system boundaries sheds light on some actors, activities, and Hillman, 2011; Wirth and Markard, 2011). Here, we refer to sector- events while obscuring others (Bergek et al., 2015). When reviewing specific structures in the categories of ‘focal industrial sector’ and ‘ad- the innovation system literature, we find that existing frameworks jacent industrial sectors’, which in turn comprise a range of more nar- differ in their assumptions, with the resulting analytical biases often rowly defined technological systems (see Fig. 1).6 incurring criticism. Yet other innovation scholars have stressed the key role of society- In regional (RIS) and national (NIS) innovation system studies wide sectors providing specific system-level assets (see e.g. Van de Ven, (Cooke et al., 1997; Lundvall, 1988), the territorial context is crucial, 1993). In the TIS literature, Karltorp (2014) discussed the educational with analytical priority given to the regional or national geographical and financial sectors as specialized ‘resource sectors’ providing skilled scales and organizational levels. The TIS framework was developed labor and financial capital for innovation systems (Karltorp, 2014; partly in response to RIS and NIS, focusing on technology-specific fac- Karltorp et al., 2017), while Bergek et al. (2015) elaborated on how the tors rather than factors specific to given geographical areas. Although political system can adjust regulatory institutions to support novel early formulations of TIS emphasized the importance of factors and technologies. Other sectors can be added to this list, for example, the causalities crossing spatial boundaries, this became less explicit in media sector, influencing legitimizing and delegitimizing processes (i.e. subsequent formulations, and TIS case studies often adopted the na- normative institutions), and the research sector, providing formal tional scale as the system boundary. This has led to recent efforts to knowledge. Besides these societal sectors, it has also been noted that revisit the issue of geographical boundary setting. basic physical resources (e.g. energy and materials) and services and The strongest criticism of analytical bias originates in the ‘geo- disservices are provided by natural systems (Markard and Hoffmann, graphy of TIS’ literature. Here scholars emphasize the variety of geo- 2016; Sandén and Jonasson, 2005; Wirth and Markard, 2011).7 Here, graphical contexts and illustrate how places can be more or less con- we call these systems that, from the TIS viewpoint, support or weaken ducive to sustainability-oriented innovation. They argue that system specific functions ‘supporting sectors and systems’ (see Fig. 1). Note build-up depends on processes and interactions at different spatial that they do not necessarily only support the development of the novel scales and organizational levels, ranging from local to global (Coenen configuration but may also host blocking factors. et al., 2012). In their view, geographical locations contribute to the Bergek et al. (2015) made a first attempt to combine many of the success of innovation processes by providing local supporting factors such as natural resources, favourable policies and visions, industrial specialization, knowledge and networks, supportive informal institu- 6 An industrial sector, in our terminology, is a broadly defined technological tions, and markets (Binz et al., 2012; Hansen and Coenen, 2015). They system. All technological systems contain more narrowly defined technological argue that nationally focused TIS studies may also overlook how the systems. For example, the electricity sector (or system) contains technological global level works as an important source of knowledge and production systems built around technologies such as wind, nuclear, and natural gas power, as well as batteries, HVDC cables, and smart meters, but also those centered on skills (Lee et al., 2018) and how multi-scalar actor networks and in- different grid infrastructures such as microgrids and super grids, and associated stitutional contexts support or hinder development (Binz and Truffer, business models such as P2P electricity trading and virtual power plants. 2017). Furthermore, an emerging body of work suggests making the TIS 7 Obviously, one can make a case for not including natural systems in a di- approach more relevant also in non-Western contexts and developing mension labelled ‘sociotechnical’. However, as systems are made of matter and economies, where established sectors are less monolithic and society- information, providing certain kinds of resources, services, and threats, these wide institutions less stable (Edsand, 2017; Van Welie et al., 2018). natural systems are similar in kind to sociotechnical systems, for example, Parallel to territorially focused innovation system studies, sectoral compared with segments of the spatial dimension. While future research may innovation system (SIS) scholars argue that the industrial sector context want to expand this dimension into a socio–techno–ecological space, the proposed simplification is sufficient for our aims.

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GLOBAL NATIONAL/STATE LOCAL

Related tech.

Focal system A DIMENSION SOCIO-TECHNICAL sector Related tech. system B INDUSTRIAL SECTORS Related tech. system C Adjacent Related tech. sectors system D Related tech. system E

Political/juridicial sector Financial sector SUPPORTING Educational sector SECTORS AND SYSTEMS Research sector Media sector Natural systems

SPATIAL DIMENSION

Fig. 1. A two-dimensional matrix describing the context of the focal technological system. Contextual factors supporting or blocking the focal technological system may be located in any part of the matrix, for example, in the local focal industrial sector or in the global financial sector. contextual factors emphasized as important for system build-up into a In addition, Bergek et al. (2015) distinguished between ‘external links’ more comprehensive framework. Here, we intend to take this one step and ‘structural couplings’, differing in degrees of reciprocity.9 Con- further. Based on the above literature review, we identify two main textual factors could potentially be placed on a scale ranging from ex- ways in which the wider innovation system literature conceptualizes ternal links, affecting the system in a one-directional way, to fully bi- context. First, there is the spatial dimension of the context, in which directional couplings, where the context is also influenced by the focal contextual factors reside at a certain level along a spatial scale, re- system. The TIS framework, however, is primarily intended to describe sulting in differentiation between factors from the local to global, with the development of a focal technological system, not the development many possible relevant levels in between; for simplicity, these are vi- of the rest of the world. The level of bidirectionality is thus of interest sualized in Fig. 1 as local,8 national, and global. Second, factors can be only to the degree that it affects the development trajectory of the focal positioned along a sociotechnical dimension of the context, resulting in system. differentiation between industrial sectors and supporting sectors and One specific form of bidirectionality is when interaction between systems. Industrial sectors are subdivided into a focal industrial sector the system and a contextual sector results in the inclusion of new ele- and adjacent industrial sectors. These can be further subdivided into ments in the focal system, leading to system growth. However, since more narrowly defined technological systems to enable visualization of any real-world entity is part of many different systems, a new element, the influence of specific related technological systems. Similarly, sup- such as a firm, may still be part of a context, controlling resources that porting sectors and systems can be subdivided into more specific ca- are not yet mobilized for the novel system. The boundary between any tegories (e.g. political/juridicial, financial, educational, research, sociotechnical system and its closest context will therefore be somewhat media, and natural systems). The two-dimensional matrix presented in fuzzy and dependent on analytical choices. Fig. 1 highlights that spatial factors crosscut the sociotechnical dimensions of the context. For example, the housing sector and political/ juridicial systems also have a spatial dimension, as they can range from 2.3. Micro-level understanding of the system build-up: the role of local to global. To us, this matrix permits analytical and empirical entrepreneurs richness, encouraging explorative framings rather than a priori assumptions about which contextual factors matter for the growth of new We now turn to the criticism that TIS lacks a micro-level foundation technological systems. A strength of using TIS, versus the other in- and pays too little attention to actors’ agency and the role of en- novation system frameworks discussed above, is that it does not come trepreneurs (Alkemade et al., 2011; Farla et al., 2012; Markard and with an inherent bias towards a (single) specific spatial scale, nor does Truffer, 2008; Musiolik et al., 2018; Planko et al., 2017). The TIS fra- it assume that sectoral dynamics matter more than spatial ones. Instead, mework proposes that the emergence and development of a novel it is flexible enough to allow for empirical exploration of how and why technological system depends on internal (technology-specific) and contextual factors matter along this two-dimensional categorization. external (contextual) factors (e.g. actors, networks, institutions, While this matrix describes the sources of contextual influence, TIS knowledge, and physical artefacts). This build-up process is con- scholars have also discussed the sign and directionality of the interac- ceptualized by a set of abstract functions (Fig. 2a; Table 1). However, tion between context and focal system. We have already noticed that influence may be supporting (positive sign) or blocking (negative sign). 9 A similar way to think about contextual interaction in TIS was developed by (Markard and Hoffmann, 2016), who defined unilateral and bilateral complementarities with structures outside a systems analytical boundary. Sandén 8 These classical levels and the idea of the ‘local’ are simplifications that and Hillman (2011) provided a framework accounting for positive/negative sometimes result in analytical blindness unless critically examined. For a case interaction as well as the degree of symmetrical/asymmetrical dependence, study illustrating overlapping and messy jurisdictions and social relations including not only competitive and symbiotic relations, but also neutral, shaping electricity provision, see (Nucho, 2016). parasitic, and ammenalistic ones.

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SUPPORTING AND SUPPORTING AND BLOCKING FACTORS IN BLOCKING FACTORS IN THE CONTEXT THE CONTEXT +/- +/-

ENTREPRENEURIAL FUNCTIONS + + ACTIVITIES

NOVEL TECHNOLOGICAL SYSTEM NOVEL TECHNOLOGICAL SYSTEM (Internal supporting factors) (Internal supporting factors)

Early phase a) b)

Fig. 2. Systemic visualizations of technological system build-up: a) The system-building processes are conceptualized as functions (arrow), whose strengths (arrow width) are influenced by internal and contextual factors (based on Bergek et al., 2008b; Hillman and Sandén, 2008); b) in immature systems (early phase), the functions can be interpreted as micro-level entrepreneurial activities, i.e. agency in building the novel system by utilizing supporting contextual factors and (initially weak) internal factors (thin lines), while counteracting blocking contextual factors. Each visualization also includes a dotted line depicting the potential influence of the system on some part of the context, which may in turn influence the system (bidirectionality). when we look more closely at the micro-level of innovation processes, practices differing significantly from those in established sectors (i.e. for example, in local demonstration projects, we discover the im- radical rather than incremental innovation), and (ii) ‘system builders’ portance of individual actors who can utilize available resources and (Hellsmark, 2010; Hughes, 1987; Musiolik et al., 2018) striving to build initiate collective action to promote system development. These actors novel systems. Hence, we abstain from viewing entrepreneurial activ- are often entrepreneurs10 who play crucial roles as inventors with ities as merely one of the innovation system functions; instead, we strong incentives to support their emerging technologies’ market in- argue that entrepreneurial activities embody all functions as they use troduction. supporting internal and external factors in building the system while The role of entrepreneurs in TIS approaches has so far been reflected being hindered by blocking factors (Fig. 2b). We study the emergence of in the ‘entrepreneurial experimentation’ (Bergek et al., 2008a)or‘en- technological systems through the entrepreneur's efforts to combine trepreneurial activities’ functions (Hekkert et al., 2011). While se- system-internal resources with means and opportunities across spatial mantically similar, there seems to be a clear difference between these and sociotechnical contexts, as well as their efforts to counteract ne- concepts. Bergek et al. (2008a) viewed ‘entrepreneurial experimenta- gative contextual influences (i.e. blocking factors), considering how tion’ as a system-level phenomenon simultaneously generating variety these efforts help make the new system potentially strong enough to and reducing uncertainty. In contrast, Hekkert et al. (2007) highlighted challenge established systems (Bergek et al., 2015; Hansen and Coenen, micro-level activities, with the role of the entrepreneur being ‘to turn 2015). the potential of new knowledge, networks, and markets into concrete actions to generate – and take advantage of – new business opportu- 2.4. Productive and repressive encounters with the established sector nities’ through experimentation in different applications (see also Alkemade et al., 2011; Hekkert et al., 2007, p. 421). Although such a The importance of the entrepreneurial role in innovation systems definition seemingly favours a focus on agency, the presence of this was already emphasized in the 1980s by the industrial economist function is usually measured quantitatively by counting the number of Dahmén (1989), who considered entrepreneurial activities central to involved entrepreneurs (firms) (Bergek et al., 2008a; Hekkert et al., creating a ‘development block’ that encounters the wider system, i.e. 2007). While the number of entrepreneurs can be an important in- the incumbent industrial sector. This concept influenced the first defi- dicator when analysing larger national and global systems over longer nitions of technological systems (as a forerunner of TIS) developed by periods, this is not the case for micro-level analyses of local technology Carlsson and Stankiewicz (1991). The system innovation and transition demonstrations. Here, Alkemade et al. (2011) highlighted that en- literature has traditionally described incumbents as resistant actors, trepreneurs are enacting substantial agency through their strategic ac- trying to prevent transition (Geels et al., 2017; Lauber and Jacobsson, tions in the early phases of innovation build-up, when only a few actors 2016), joining innovation efforts merely for fear of ‘missing the boat’ are involved. (Van Lente, 2012). However, the relation between incumbents and in- In line with their view, our interest in the roles and activities of novators may be more ambiguous and can also change character over 11 entrepreneurs does not concern their search for profit but rather their time (Berggren et al., 2015). The encounter with the incumbent sector activities as (i) ‘innovators’ (Schumpeter, 1934) introducing new may lead to the disruptive innovation being suppressed or tamed into an incremental innovation, leaving the incumbent system intact (Henderson and Clark, 1990). However, in other cases, the encounter 10 The recent transition and innovation literature has paid increasing atten- with incumbents may lead to system change, especially when the in- tion, not just to entrepreneurs, but also to the key role of systemic intermediaries novation affects substantial parts of ‘their’ production–consumption as important individuals able to align other actors to affect the transition (Gliedt et al., 2018; Kivimaa, 2014; Lukkarinen et al., 2018). While we ac- chain. Taking an example of transition in the electricity sector, changes knowledge the importance of intermediaries in the innovation process, our in electricity generation technologies do not necessarily challenge the interest goes beyond actor-to-actor interaction. incumbent architectural logics. However, when these are combined 11 Our use of the term ‘entrepreneur’ is inclusive, emphasizing all actors who with changes in other parts of the electricity system, such as grid in- actively innovate, promote, and engage in system-building activities. frastructure, storage, and market dynamics, they may have a more

K. Hojckova, et al. 5HVHDUFK3ROLF\ destabilizing effect on the established sector (Markard, 2018). In this During case selection in late 2016, blockchain-based P2P trading changing environment, both the innovators and incumbents must na- systems were being trialed in just a few demonstration projects around vigate a complex and multifaceted terrain, which may permit un- the world, of which we selected the Brooklyn Microgrid (BMG) in New expected alliances and collaborations and increasingly bidirectional York City (NYC), USA, and the White Gum Valley (WGV) project in influence. Fremantle, Western Australia (WA). Here, we move away from a view of the encounter as a conflict between resistant incumbents and challenging actors (Wassermann 3.1.1. The White Gum Valley project et al., 2015) and suggest that encounters are indeed more complex – The White Gum Valley project is a housing development located in that is, encounters tend to have ambiguous effects on the development Fremantle, WA. Since early 2016, the WGV project has been a de- of new technological systems. We draw on an idea regarding the ex- monstration site for blockchain-based P2P electricity trading. The de- ercise of power to describe these encounters as productive in how they sign of the P2P trading is based on research conducted at Curtin enable action or repressive in how they block or hinder it (Ahlborg, University in Perth, which also provided partial financing for the P2P 2017; Lukes, 2005). Encounters may be productive in generating stra- trading out of governmental funding (Interview 3). The City of Fre- tegic responses, causing the emergence of new relations and processes, mantle provided institutional support for innovation in the WGV area. creating multiple positive and negative outcomes. In contrast, re- Housing developers LandCorp, AccessHousing, and Yolk Development pressive encounters are characterized by eliminated possibilities, sta- Group integrated P2P trading into new apartment buildings in WGV. lemates, actor incapacitation, and innovation processes being blocked These buildings (for 150 residents) were built with integrated PV plus from continuing. battery systems, installed by Solar Balance, a microgrid expert com- While encounters between innovators and incumbents certainly pany. After construction, the ownership and operation of the PV and occur outside the local geographical and sectoral boundaries as well as battery systems were transferred to the strata title companies12 acting in different sectors and supporting systems, we argue that the encounter as the ‘citizen utilities’.13 Power Ledger, a locally based start-up, pro- with the local incumbents in the focal sector is particularly decisive for vides a blockchain-based trading platform that enables citizen utilities early-stage innovation processes developing locally. We argue that to to share renewable electricity P2P within apartment buildings, behind better understand these encounters, we must pay attention to the the meter14 (Interview 1). By regulation, the distribution system, across agency of entrepreneurs, who can use various contextual factors to the meter, between the buildings in WGV is operated and managed by stimulate novel system build-up, accumulate enough momentum, and Western Power, the public grid operator, and Synergy, the public overcome obstacles in order to establish productive interaction with the electricity provider and retailer (Accesshousing.org.au, 2016; Diss, local incumbent sector. 2015).

3. Case study description 3.1.2. The Brooklyn Microgrid (BMG) The Brooklyn Microgrid is located in residential areas of Park Slope 3.1. Blockchain-based P2P electricity trading systems and Gowanus in Brooklyn, NYC. The project was established at the beginning of 2016 by Lo3Energy, a start-up that intended to build a As electricity production from variable small-scale renewable community microgrid with blockchain-based P2P electricity trading. sources on the consumer side is increasing, it is becoming evident that Lo3Energy started the project in collaboration with Siemens, a multi- the existing electricity market design must adapt. Maintaining a design national energy manufacturing company that provided technological that fails to include prosumers as direct market participants could in- and financial support to develop the infrastructure for the microgrid. crease investment costs, lower system efficiency, and increase elec- Via community outreach, Lo3Energy recruited local residents in Park tricity prices, gradually leading to a death spiral for traditional utilities Slope and Gowanus, i.e. approximately 80 prosumers and 500 con- (Say et al., 2018; Sousa et al., 2019). However, no clear solution for sumers, as future P2P trading participants (Interview 16). By regula- integrating prosumers in the electricity market structure has yet been tion, the distribution grid in Park Slope and Gowanus is operated and established (Ahl et al., 2019). managed by Con Edison, the public utility that also provides most of the Blockchain technology has recently been promoted as a potential electricity retail in Brooklyn (ConEdison, 2018; Lo3Energy, 2017). game-changer enabling P2P electricity trading within autonomous markets of prosumers and consumers. Blockchain is a digital infra- 4. Methodology structure that allows a network of decentralized actors to reach con- sensus around a shared data state (e.g. transaction data) without a 4.1. Research design central coordinator or the involvement of an intermediary. Applied to the energy sector, the blockchain platform could allow consumers and This study is designed as a comparative case study (Flyvbjerg, 2006; prosumers to buy and sell self-generated electricity and other services, Yin, 2009) based on a qualitative research design. Comparative analysis such as flexibility or demand response, in an open P2P electricity is undertaken to find ‘puzzles’ that can be difficult or even impossible to market (Parag and Sovacool, 2016; Sousa et al., 2019). While in the identify without making comparisons (Pennings et al., 2006). The two existing market design, prosumers are obliged to either self-consume cases have a suitable mix of similarities and differences: they started the their electricity or sell it to a licensed electricity retailer, in a P2P same year and both use blockchain technology to enable P2P trading, market, the conventional retailer is replaced by a software platform and the ownership and control can be shared in a distributed network of prosumers and consumers (Ahl et al., 2019; Sousa et al., 2019; Zhang 12 Strata title is a combination of individual ownership of part of a property et al., 2018). However, as of 2019, P2P electricity trading across the (e.g. an apartment) and shared ownership of the rest of the ‘common property’ regulated grid infrastructure is not allowed in most industrialized (e.g. foyers, driveways, and gardens) through a legal entity called a strata company (https://www.strata.community/understandingstrata/what-is- countries without the involvement of licenced electricity retailers and strata). grid operators, whose business models depend on their central role in 13 A citizen utility is a consumer, producer, and electricity system manager in electricity retail and in ensuring reliable and secure electricity supply one. It is the foundation of the blockchain-based P2P system developed by (Parag and Sovacool, 2016). When encountering the electricity sector, Power Ledger. it remains unclear whether and how blockchain-enabled P2P trading 14 Keeping electricity ‘behind the meter’ refers to individually generated or can overcome all regulatory, technical, and cultural barriers (Lavrijssen stored electricity kept at a residential or commercial property without entering and Carrillo Parra, 2017). the utility metering system.

 K. Hojckova, et al. 5HVHDUFK3ROLF\ 

Fig. 3. This analytical framework captures (1) the origin of various contextual factors that influence system build-up (+/–), the positive ones being opportunities used by entrepreneurs to develop the system structure, thus (2) creating an internal positive feedback loop that further enhances entrepreneurial capabilities. These interactions shape (3) the encounter between the novel system and the focal sector, as well as how entrepreneurs and incumbents respond to this encounter, with implications for further development. Based on Figs. 1 and 2. yet they differ in their local geographical, physical settings and in the describing a process rather than a snapshot in time, meaning that new institutional environment in which they developed. system elements will be included within these boundaries over time. In TIS studies may be retrospective and descriptive, trying to explain very early phases, when the technology exists only as an entrepreneur's the sociotechnical dynamics behind a certain historical development ambition (or a start-up), very few structural elements are ‘inside’ the path and outcome, or they may be prospective and prescriptive, aiming system boundaries. The entrepreneur thus seeks external elements (e.g. to identify current weaknesses in a specific system hindering it from specific firms and policy targets) in various sectors and supporting reaching a future system goal. This retrospective study uses the TIS systems, and attempts to internalize them in the new technological framework as an analytical scheme to guide and create coherence in system through innovation system processes (e.g. market formation and data collection, analysis, and interpretation. Interview guides were legitimation). As the new system accumulates structure and strength, it designed to identify structural components, functions, the roles of dif- becomes less dependent on specific agency as the internal positive ferent contexts, and entrepreneurial agency. The analytical framework, feedback loop allows for systemic ‘collective’ processes. presented in Fig. 3, builds on the TIS literature, but was refined based Retrospectively, we make judgements regarding when an initially ex- on empirical and conceptual insights emerging from the analysis. In ternal element can be considered internal. section five, we present the findings using a narrative approach Spatially, our empirical investigation sets the starting point at the (Clandinin and Connelly, 2000). In the narratives, we make explicit the geographical location of our P2P development projects, i.e. in White connection to the analytical framework using parentheses to indicate Gum Valley, Fremantle and Brooklyn, NYC. From here, we explore what TIS function is supported or blocked by a factor located in a contextual factors from other spatial levels ranging from local to global, specified part of the two-dimensional context matrix. For example, re- as contributing to the local P2P system build-up. Examples of local search at the local university (supporting sectors and systems) con- factors are the housing sector sustainability targets and housing de- tributes to P2P trading through the function of knowledge develop- velopers (adjacent sector), and examples of global factors are the ment, indicated as (+K; local; supporting). National regulations for emergence of blockchain technology (adjacent sector) and the attention electricity infrastructure that hinder the legitimacy of P2P trading of global media (supporting system). We denote trials of P2P electricity across the grid are indicated as (–L; national; focal), with ‘focal’ de- trading elsewhere in the world as ‘global’ relative to our empirical noting the focal industrial sector, i.e. the electricity sector. starting point, although these could be viewed as ‘local’ from their own perspective. From a temporal perspective, this study captures the novel system 4.2. Analytical system boundaries build-up from its inception in 2016 until 2018. The focal technology is a new electricity trading model, i.e. P2P trading via blockchain. This study sets the system boundaries of the 4.3. Analytical framework focal technological system around those structural elements that are part of the production–consumption system developing around the Fig. 3 visualizes our analytical framework for studying the influence focal technology. While we are interested in studying the system build- of micro-level entrepreneurial activities on the enactment of key TIS up around the blockchain technology, the details of its technical per- processes to translate the contextual factors into a novel technological formance and suitability for P2P electricity trading are beyond the system that can in turn shape the productive or repressive encounter scope of this study and are addressed elsewhere (Ahl et al., 2019; Sousa with the focal industrial sector. et al., 2019). In terms of generic value, the findings of the comparative case The ‘context’ of interest is kept analytically open a priori.Weare analysis provide nuanced and concrete knowledge from which we may

 K. Hojckova, et al. 5HVHDUFK3ROLF\ 

learn much about the importance of contextual factors, especially given that the two cases are similar in many respects but diﬀer in the two main aspects we are interested in: the strategic actions of entrepreneurs and the context in which they experiment. The explanatory focus and in-depth analysis provide a basis for developing theory, and we identify theoretical propositions and questions for further study (Flyvbjerg, 2006).

4.4. Data collection

The analysis is informed by data from interviews, participatory BMG December 2017 BMG December 2017 BMG December 2017 BMGBMGBMG March 2017-Navember 2017 December 2017 December 2017 BMGBMG December 2017 December 2017 Affiliation Date BMGBMG December 2017 December 2017 BMG December 2017 BMG December 2017 BMG December 2017 observations, and desktop research. Semi-structured interviews were chosen as a primary data source to ensure good control over the data relevance and quality, which is not always possible with secondary data sources (Karlsson et al., 2011). From February 2017 to February 2018, 28 semi-structured interviews were conducted, 14 for each case, with various participants directly involved in the P2P electricity trading demonstration projects, including representatives of small entrepreneurial companies, researchers, electricity system operators and retailers, and local residents (see Table 2). The selection and number of interviews were limited by the researchers’ time in the field and ability to access key informants involved in the studied projects. For example, more residents were interviewed in Brooklyn because of the size of this actor group and their degree of influence on the project. Their input was therefore important but only accessible via direct interviews. Most interviews were conducted face to face during a field visit. Open-ended questions were posed, to explore interviewees’ perspectives on the innovation process. All interviews, generally one hour long, were recorded, transcribed, and analysed in a first round by the first author, using the Visual Understanding Environment software as a coding tool to categorize data thematically based on our theoretical categories (e.g. structural components, functions, contextual factors, entrepreneurial activities, motivations, capabilities, and encounters with incumbents). In a second round, the authors jointly analysed and discussed the interpretation of the findings. The interviews were triangulated with Number Position other data sources, such as field observations and secondary case-related documents, in an effort to improve the validity of our primary data source.

5. The early-phase development of P2P electricity trading models

In this section, the case analysis is presented as chronological narratives supported by the analytical framework (Fig. 3), allowing us to WQVWQVWQV February 2018 February 2018 18 February 2018 19 20 Analysts at Department of Distributed 5th Resource Avenue Integration, Committee, Con Gowanus Edison Brooklyn Director at CHIPS shelter, Gowanus BMG Brooklyn, BMG participant December 2017 WQVWQV February 2018 January 2018 16 17 Brooklyn Microgrid Community Outreach Policy Director at the Oﬃce of the Brooklyn Borough President WQVWQV February 2018 February 2018 21 22 Director at Architectural Grille, BMG Resident, participant BMG participant Aﬃliation Date WQVWQV February 2018 February 2018 23 24 Resident, BMG participant Resident, BMG participant WQVWQV February 2018 February 2018 25 26 Resident, BMG participant Resident, BMG participant WQV February 2018 27 Resident, BMG participant expert February 2018 28 Resident, BMG participant interpret the system build-up process from the perspective of entrepreneurs using contextual factors to build the novel system structure and improve their own capabilities, improving their position vis-à-vis incumbents in the focal sector. A detailed summary of the build-up processes in each case is found in Tables A and B in the Appendix.

5.1. The White Gum Valley project

The electricity sector in Western Australia has been undergoing rapid changes, with the rooftop PV and battery market becoming increasingly successful, driving innovation in microgrid technologies and related prosumer-focused business models (+G; local; focal). The increase in rooftop PV installations was largely supported by the high utility-provided electricity prices and availability of solar irradiation throughout most of the year. However, this market has evolved almost exclusively within the single-household residential sector (Interview 2; Interview 3). The system build-up of P2P electricity trading in WGV started with the ambition to support the diﬀusion of rooftop PV and battery installations in the high-density residential sector (+G; local; adjacent). In 2016, Professor Peter Newman and PhD student Jemma Green of Curtin University developed the concept of ‘citizen utilities’ that create commercial incentives for PV and battery adoption in 46 Project Manager at LandCorp Access Housing Project Manager 5 Architect at Yolk Development Group 78 Mayor of Fremantle Chairman of Solar Balance 123 PhD graduate at Curtin University, Professor Co-founder at of Curtin Power University Ledger of PhD Technology candidate at Curtin University WQV February 2018 15 Business Manager at Lo3Energy 910 Power Ledger CEO Power Ledger CTO Number Position 11 Power Ledger Co-founder 12 Bussiness Development Manager at Western Power 13 New Energy Delivery Manager at Synergy 14 AEMO-Principal and Market Development Analyst

Table 2 Performed interviews. apartment buildings (Green and Newman, 2017) by enabling P2P

K. Hojckova, et al. 5HVHDUFK3ROLF\ electricity sharing among tenants and apartment owners (+K; local; blockchain-based trading platform. Ledger Assets saw potential for the supporting). Under this model, the PV and battery systems become the blockchain platform to resolve the pricing issues in WGV, by providing common property of the strata company, which assumes the ‘citizen a distributed ledger for electricity transactions (Interview 9). Ledger utility’ role within the building. Residents pay their electricity bills to Assets joined the WGV project partners (+G; +N; local; adjacent) and the citizen utility, which is in charge of electricity management and the P2P sharing experiment was improved with the blockchain tech- redistribution. This utility charges a small fee for its services, but its nology, providing the backbone for the digital P2P trading platform revenue is returned to the residents in the form of PV and battery (+K; +R; global; adjacent) implemented in the WGV housing devel- system maintainance, for example (Interview 1; Interview 2; Interview opments (+E; local; adjacent). In analytical terms, by finding a 3; Interview 4). The model thus reduces dependence on the public blockchain solution in the global IT sector, provided through a local utility and enables residents to earn revenue from their self-generated software company with global expertise, the P2P innovation build-up electricity. While beneficial for residential consumers, the model started expanding beyond the local context of the housing sector. threatens the monopoly of local incumbent utility companies, which Assisted by Ledger Assets, Curtin researchers approached local en- lose revenue with increasing grid defection (Say et al., 2018). ergy sector specialists, Future Effects, to explore electricity sector-wide The model does not disrupt the housing sector, which it can help opportunities for the blockchain-based P2P model (+G; + N; +K; +L; attain ambitious energy efficiency targets (Interview 4; Interview 7). local; focal). Together, they created the start-up Power Ledger. The Aware of this opportunity, Green identified a suitable housing devel- creation of the new company increased the ambitions to develop a local opment in WGV led by LandCorp, a public housing developer. WGV, a niche solution for P2P electricity sharing into a global P2P electricity high-density housing15 project with ambitious energy and water effi- trading solution with applications beyond apartment buildings ciency targets, was a suitable testbed for innovation. WGV is located in (Interview 9; Interview 11). At this point, the new system structure had Fremantle, a city that prides itself on being a sustainability leader and built internal momentum, but its shift of focus and new, more radical provided a suitable environment for sustainability-oriented innovation, vision brought new challenges. such as P2P electricity sharing (+L; local; adjacent; supporting) In 2017, the use of blockchain technology in electricity trading was (Interview 4; Interview 5). Here, Curtin researchers successfully formed still immature and required further experimentation. Power Ledger a collaboration with LandCorp developers and the city council of Fre- started seeking financial resources to improve the P2P trading platform mantle, with clear support from the Mayor (+G; +N; local; adjacent; and demonstrate it locally as well as globally. As a blockchain company, supporting). LandCorp saw potential in the ‘citizen utility’ concept and Power Ledger used a novel type of fundraising, initial coin offering decided to experiment with the P2P sharing model in one of its de- (ICO),16 to fund its innovation. Power Ledger's ICO was very successful velopments – the ‘Gen Y’ multi-residential building (+E; local; ad- and raised AUD 34 million from investors around the world to develop jacent). The Gen Y building provided necessary physical resources and a its P2P trading digital platform (Higgins, 2017). With its success in market for the P2P model (+R; +M; local; adjacent) in the form of PV gaining global investment (+R; global; supporting), Power Ledger at- and battery systems embedded in a distribution network owned and tracted significant interest from the global community of blockchain operated by the strata company (+M; local; adjacent). enthusiasts as well as media attention (+L; global; supporting) For the trial, the local microgrid expert company Solar Balance was (Interview 1). Global publicity attracted the attention of electricity invited to join the WGV actor network (+G; +N; local; focal) to im- utilities in other countries, offering Power Ledger opportunities to ex- prove the integration of the PV and battery systems with the P2P model pand P2P trading trials abroad (+G; global; focal). Electricity utilities in the apartment building (+K; local; focal). With their expertise, the in Thailand, Japan, and the USA integrated Power Ledger's P2P trading WGV network obtained funding from the Australian Renewable Energy platform in their electricity systems (+R; +E; global; focal), improving Agency (ARENA) to invest in additional PV and battery systems, the knowledge development (+K; global; focal), as well as the legitimacy most expensive part of the physical infrastructure (+R; national; focal). of Power Ledger's technology (+L; global; focal) (Interview 11). With reduced financial constraints, the PV and battery systems together Up to this point, a new system structure for P2P electricity trading with the P2P sharing model were integrated and trialed in another two in the WGV had been built without having to directly interact with the buildings in WGV (+R; +E; local; adjacent) (Interview 5; Interview 8). local electricity sector. The encounter was delayed thanks to the nur- The strata companies in these buildings provided new markets for the turing space provided by the WGV housing development, which al- P2P model (+M; local; adjacent) (Interview 5; Interview 6). lowed P2P trading to achieve the initial system build-up. Consequently, Theoretically, this means that the early system build-up was locally no significant blocking factors were experienced while the P2P elec- grounded in a discourse on sustainability and the growing PV and tricity trading was kept ‘behind the meter’, beyond the reach of the battery market, but entrepreneurs could also find supporting factors in local focal incumbents. However, when Power Ledger proposed P2P adjacent industrial sectors and supporting systems. In the initial phase, electricity trading as a solution across the city of Fremantle in early researchers were instrumental in facilitating the system build-up pro- 2018, interactions with the incumbent electricity sector became more cess by partnering with other actors to turn the governance model from frequent and some friction emerged. a research concept into a real-world experiment. This illustrates how At the time, the local electricity sector did not provide favourable activities of a key entrepreneur can create momentum for the early- regulatory conditions and incentives for P2P electricity trading across phase system build-up, without having to encounter the incumbent the regulated electricity grid (–L; local; focal). On this grid, exclusively electricity sector (i.e. the focal industrial sector). operated and managed by the incumbents, Western Power and Synergy, A need to look outside the local housing and electricity sectors small-scale electricity producers, such as residential prosumers and emerged when Curtin researchers and Solar Balance identified pro- strata companies, could not act as ‘citizen utilities’, but were instead blems in fairly pricing self-generated electricity within residential obliged to trade via the incumbents. In addition, the grid tariffs were buildings (Interview 8). Around the same time, Perth-based company too high to make P2P trading economically more viable than trading Ledger Assets was actively seeking investors and market niches for their with utilities, blocking demand from small residential prosumers in Fremantle (–M; local; focal) (Interview 3).17 Consequently, it was

15 The WA housing sector has historically been dominated by low-density residential developments, making Perth one of the most geographically ex- 16 ICOs are similar to IPOs and have recently been used extensively by tended cities on earth. The WA government has set density targets, to build cryptocurrency ventures to raise funds from individual investors and en- more apartment buildings to eliminate further urban sprawl (Matan and thusiasts. ICOs bypass the otherwise highly regulated process that is a criterion Newman, 2012; Newman and Kenworthy, 2007). for raising capital from banks or venture capital investors.

K. Hojckova, et al. 5HVHDUFK3ROLF\ practically impossible to trial P2P electricity trading across the regu- community microgrids became one of the most important components lated grid infrastructure without incumbent involvement (–E; –R; local; of the REV strategy, and microgrid development projects started focal). flourishing across NY State (Wood, 2016). Despite significant barriers imposed by the local regulations, the Via REV, the NY State government provided public funding to the legitimacy of the P2P trading, both locally in WGV and globally, en- companies providing the best solutions. From Lo3Energy's perspective, couraged the local incumbents to join the WGV project. They did not the REV strategy in NY State conferred legitimacy on their innovative join out of mere curiosity but also in an effort to find a solution to their technology (+L; local; supporting) as well as potentially providing own local challenges (+G; +N; local; focal). Increasing penetration of public funding. Within Brooklyn, Lo3Energy targeted the residential rooftop PV production in residential buildings and ‘behind the meter’ areas of Park Slope and Gowanus due to their reputation for strong electricity consumption had been substantially affecting the revenue community and sustainability values as well as their high penetration of streams of both incumbents. They viewed P2P trading as a potential residential PV systems, indicating strong market potential (+M; local; opportunity to re-engage with disconnecting customers, increase utili- focal). Analytically, we see deliberate action by entrepreneurs seeking a zation of the utility grid infrastructure, and improve demand flexibility market for their innovation, finding opportunities in the seemingly fa- (Interview 12; Interview 13). The entry of incumbents further legit- vorable industrial and institutional context of NYC. imized the P2P innovation (+L; local; focal). Theoretically, we see an Actor network formation in the BMG project began with Lo3Energy example of how the successful build-up of a novel system can attract the convincing residential electricity prosumers and consumers to partici- attention of local incumbents that, facing serious challenges to their pate in BMG. These participants became the main source of legitimacy business model, choose to engage in a productive encounter with dis- and demand for blockchain-enabled P2P trading (+G; +L; local; focal). ruptive system builders. The startup focused specifically on residents, businesses, and commu- The novel system had gained significant momentum at this point, nity organizations affected by blackouts after Hurricane Sandy and thus but further development necessitated financial and institutional presumably critical of the incumbent electricity sector (Interview 15; changes. Joined by the local utilities, the existing actor network mo- Interview 16). Many were persuaded to install blockchain-based elec- bilized additional financial resources from the federal government tricity meters and thus provide Lo3Energy access to their production (+R; national; supporting) to trial and expand P2P trading across the and consumption data, a key resource for P2P trading experimentation city of Fremantle and establish the Smart Cities and Suburbs project (+R; +E; local; focal). Lo3Energy also used the opportunity to involve (+R; +E; local; focal) (Interview 7). This motivated the incumbents to two of the residents, one with and one without PV systems, to film a use their institutional power to create flexibility in existing regulations demonstration video of the first P2P transaction in April 2016 and revisit the electricity pricing structure to enable P2P electricity (Interview 22; Interview 23). The video spread rapidly across the In- trading across the regulated grid in Fremantle (+L; +R; local; focal). In ternet, attracting considerable attention internationally from block- addition, the new project strengthened the local actor network, which chain enthusiasts, increasing the legitimacy of the BMG project (+L; formed a consortium of partners who signed a binding contract, in- global; supporting) (Interview 22). In theoretical terms, the en- stitutionalizing actors’ responsibilities in the new P2P trial (+N; +L; trepreneur sought to build an actor network involving future customers, national, supporting) (Interview 9; Interview 10; Interview 11). and used media and global interest in blockchain to enhance its legitimacy. 5.2. The Brooklyn Microgrid project Despite the seemingly favourable environment in NYC for P2P electricity trading via blockchain, the entrepreneurs soon faced barriers The BMG system build-up was from the outset a global innovation that developed into a repressive encounter with the incumbent elec- effort. It was initiated by Lo3Energy, a small start-up company that tricity sector. Lo3Energy did not manage to form a strong local actor since 2012 has promoted the innovative transactive energy model18 to network with PV system providers or housing developers that could enable self-sufficient community-driven microgrids (+G; global; focal). provide support during the initial system build-up and encounter with Lo3Energy aimed to improve transactive energy model ideas by com- the local incumbent sector. In fact, negotations with local actors such as plementing them with blockchain technology (+R; global; adjacent), the electricity utility, community board, and local government were which had the potential to tackle what they saw as the biggest technical unproductive, resulting in little to no interest in joining and supporting barrier for local microgrids – i.e. tracking a large number of transac- the BMG project (–G; –L; local; focal). Many residential customers, tions and near real-time settlement in a distributed grid network and despite being interested in the benefits of P2P trading, considered the allowing for P2P trading (Interview 15; Interview 16). Lo3Energy de- incumbent utility, Con Edison, more trustworthy than small energy veloped a blockchain-based electricity meter for community micro- service companies and start-ups such as Lo3Energy (Interview 17; grids, and in 2016 received technical support and capital investment Interview 23). In addition, residential customers were also obliged and from Siemens (+R; +K; global; focal). financially incentivized to continue trading with Con Edison through While not originally from NYC, Lo3Energy identified Brooklyn as a the net-metering scheme19 versus trading electricity with their neigh- suitable environment for the first blockchain-based P2P microgrid trial. bours (–L, local; focal) (Interview 22; Interview 23; Interview 24). Their decision was influenced by NY State's Reforming the Energy Consequently, consumer demand remained weak as local residents Vision (REV) plan to re-build NY's aging electricity infrastructure into a were not convinced of the P2P trading-related benefits (–M; local; clean, resilient, and affordable energy system for all (NYSERDA, 2017). focal). REV was established after NY State was severely impacted by Hurricane The BMG project eventually failed to access financial resources Sandy in 2014 and experienced widespread blackouts. Building provided by the REV fund, mostly because the funding for community microgrids was only available for Con Edison-led project proposals (–R; local; focal), giving local incumbents a chief position and control over 17 The network charges in WA are high due to socializing the costs of previous the innovation process. Con Edison had freedom to select which en- investment in bolstering grid infrastructure and long-distance transmission. trepreneurs to engage with and financially support, and Lo3Energy was These charges do not reflect the increasingly local and distributed character of the grid. 18 Transactive energy markets are essentially smart distributed grids combined with the Internet of Things, a software platform for monitoring, ana- 19 This is a financial mechanism that pays prosumers retail price to feed their lysing, and managing a large number of smart devices instead of market actors. solar energy into the utility grid. Net-metering offers prosumers an attractive Advocates believe that the production and utilization of electric energy will in way to reduce their electricity bills, so prosumers are strongly incentivized to the future become indistinguishable from the Internet of Things (Collier, 2015). feed electricity back into the utility grid.

 K. Hojckova, et al. 5HVHDUFK3ROLF\ 

Fig. 4. The contextual origins (Fig. 1) of supporting and blocking factors are presented in terms of the entrepreneurial activities (i.e. functions) they inﬂuence (abbreviations explained in Table 1). Contextual factors successfully used by the entrepreneurs are represented by ‘+’, while those blocking entrepreneurial agency are represented by ‘–’. If multiple factors inﬂuence the same function and originate in the same part of the context, the circle around the function is enlarged.

not among them (Interview 17; Interview 18; Interview 19). Conse- 2002; Stephan et al., 2017). This was true of both WGV, which was quently, the entrepreneurs failed to operationalize P2P trading across created in the local context of a growing PV and battery market in the Con Edison-owned grid infrastructure in Brooklyn (–R; –E; local; Western Australia, and of BMG, which was attracted by the opportu- focal) (Interview 16). Unlike in the WGV case, the local incumbent nities potentially afforded by the REV strategy in NY State. However, as sector was not under pressure to engage in the project and saw little the BMG case showed, a seemingly conducive institutional environment potential in the innovative technology (Interview 18). After the initial can in fact favor incumbents and incremental innovation at the expense set-back, Lo3Energy decided to open negotiations with the energy of radical innovation. market regulators in NY State, with the strongest institutional power, to Furthermore, our findings support the arguments of ‘TIS geo- push for experimental ‘sandboxes’ and regulatory exemptions. In the graphers’, as we find that achieving productive encounters with in- meantime, the BMG project was put on hold, blocking further local cumbents requires converting contextual factors from multiple spatial system build-up (Interview 16). scales into a new system structure to stimulate local support or com- In the face of the repressive encounter with the local incumbents in pensate for a lack of it (see Fig. 4)(Binz and Truffer, 2017; Binz et al., NYC, Lo3Energy used the positive global media attention to continue 2014; Coenen et al., 2012). We contribute to this argument by pro- the system build-up in other institutional environments. By early 2018, viding evidence that ‘multiscalar’ innovation activities in the early in- Lo3Energy had initiated collaborations with Karlsruhe Research novation phase require substantial entrepreneurial agency, citing the Institute in Germany and with utilities and energy communities examples of Power Ledger in WGV and Lo3Energy in BMG (Alkemade worldwide (+G; +N; +K; global; focal; supporting). These new col- et al., 2011; Planko et al., 2017). laborations resulted in the creation and exchange of new knowledge In fact, our cases confirm that entrepreneurial capabilities to navi- about P2P trading, for example, via a joint research paper about the gate uncertain conditions are key to successful early-stage build-up BMG project (see Mengelkamp et al., 2018). Together with new part- (Jansma et al., 2018; Planko et al., 2017). We found that those en- ners, Lo3Energy initiated trials in residential, commercial, and uni- trepreneurs who recognize the importance of engaging with incumbents versity microgrids in Germany, the USA, Australia, Japan, and the UK in adjacent industrial sectors can protect and nurture their immature (+E; +R; global; focal; supporting) (Interview 15; Interview 16). They technologies (Farla et al., 2012; Hanson, 2018; Markard and Truffer, also attracted financial support and expertise from major private 2008; Musiolik et al., 2018; Raven, 2007), confirming established ideas companies such as Breamer Energy Ventures and Centrica (+R; +K; in the literature regarding niche market management (Kemp et al., global; focal). Forming international actor networks and acquiring fi- 1998; Raven et al., 2010; Smith and Raven, 2012). As Fig 4. shows, the nancial capital and technical expertise further increased the global le- entrepreneurs in WGV benefitted from a protected niche market in the gitimacy of the BMG project (+L; global; focal). Experimenting in other local housing sector that provided them with actor support, physical locations helped maintain the momentum of Lo3Energy's P2P elec- infrastructure, financial resources, and legitimacy before they en- tricity trading platform, despite Lo3Energy's failure to achieve its initial countered local electricity utilities. In contrast, the entrepreneurs from ambitions in NYC (Interview 15; Interview 16). the BMG challenged the local electricity incumbents from the outset, by trying to convince Brooklyn residents to leave the old electricity system 6. Discussion and join the new P2P-based microgrid, yet stood little chance against Con Edison. 6.1. Key insights from the case comparison Based on these two cases, we also found that entrepreneurs have a competitive advantage in that they, unlike incumbents, are not tied to a In line with previous literature, our findings confirm that local in- local infrastructure and have no local role to uphold, and are therefore dustrial and supporting systems matter, especially in guiding the search more flexible and spatially fluent system builders (Jansma et al., 2018). and attracting disruptive entrepreneurial activities (Coenen et al., 2012; The BMG case indicates that even though the encounter with incum- Cooke et al., 1997; Hansen and Coenen, 2015; Lundvall, 1988; Malerba, bents in one place is repressive, the entrepreneurs can still continue the

K. Hojckova, et al. 5HVHDUFK3ROLF\ system build-up by seeking productive encounters with incumbents based P2P electricity trading is intended to disrupt the centralized elsewhere. Using contextual factors outside the proximate local context character of the electricity sector, its realization still relies on accessing allowed Lo3Energy to maintain the momentum of their technology by physical grid infrastructure typically owned and managed by incum- creating a supporting network, gaining financial resources, and im- bents. To avoid premature repressive encounters with incumbents that plementing their technology in other countries. Power Ledger in the wish to maintain their centralized position, experimentation could WGV case also used a range of non-local factors. This finding could begin behind the utility meter, for example, in apartment buildings, provide new insights into why, when, and how entrepreneurs can university campuses, and remote microgrids, where the electricity grid overcome fierce resistance and generate momentum for disruptive in- is privately owned and operated by non-utility actors. Through a novations (Alkemade et al., 2011; Hekkert et al., 2007). growing global patchwork of behind-the-meter experiments, P2P elec- However, the position of local incumbents was also found to be a tricity trading may gradually gain momentum that can no longer be key factor. The productive encounter in WGV was possible not only due ignored or resisted by the incumbent utilities. to the successful entrepreneurial use of contextual factors, but also However, to expand P2P electricity trading across the regulated because the utilities in WA were in a destabilized position (Karltorp and grid, entrepreneurs may still have to collaborate with established uti- Sandén, 2012), shaken by growing load defection, and had to rethink lities. That is also the reason why many experiments are currently de- their business model. It remains to be explored whether there is a signed as ‘peer-to-utility-to-peer’. It seems unlikely that all communities general pattern to the combination of contextual supporting factors, of prosumers and consumers will be willing to create P2P marketplaces entrepreneurial activities, and type of threat to incumbents that can bottom–up, since individuals are generally not allowed or able to take encourage radical innovation. on the responsibility and complexities that P2P electricity trading A surprising insight is the absence of national-level factors in our would entail, without the safety net of the electricity retailers and grid two cases, with the main dynamic in both cases being the local–global operators, who in many countries provide high-quality public services. interaction (see Fig. 4). We have not seen this pattern as clearly in Productive encounters between incumbents and entrepreneurs are previous TIS literature, which tends to interpret the national level as an therefore central to the future of P2P electricity trading. Nevertheless, important driver of innovation. We propose that further investigation is one should expect that incumbents will try to ‘hybridize’ disruptive necessary to reveal whether this is a unique pattern, a pattern char- trading models to maintain their position, potentially hindering radical acteristic of very early system build-up, or a common pattern over- architectural innovation (Henderson and Clark, 1990). looked due to prior analytical bias favouring the national level. There Our study, albeit limited to two cases, suggests that to explore the may be a need for improved theorizing of the polycentric structure of an potential of distributed software technologies, policy frameworks emerging ‘glocal’ technological system that grows in local clusters with should provide institutional flexibility and reduce incumbent control increasingly important cross-scale linkages to similar clusters else- over the innovation process, in order to challenge the myopic thinking where, combining the local ‘geographically immobile’ and global ‘ubi- about the future electricity system configuration and how to realize it. quitous’ supporting structures (Asheim and Isaksen, 2002). Inviting disruptive innovation is important in order to address transition-related unknowns and trade-offs, such as the possibility of em- 6.2. Contributions to the TIS approach powering end-users while ensuring public service provision, security of supply, price stability, and paying for the existing grid infrastructure. This study confirms that TIS is useful for analysing early-stage innovation processes when the novel system has a weak internal structure and is almost fully dependent on micro-level agency to gain support 7. Conclusions from external factors. Moreover, we demonstrate the usefulness of the TIS approach in analysing the emergence and growth of software-based This study addresses the generic question of how a radical innova- focal technologies. We suggest that using TIS as a lens for analysing a tion that fundamentally challenges an established industry can over- more varied set of technologies, beyond physical artefacts such as wind come the resistance of incumbent actors. Addressing this question re- turbines and PV panels, can be beneficial for gaining new transition- quires an analysis that considers influential factors across multiple related insights. This is of particular importance in the era of digitali- scales as well as the role of entrepreneurial activities. This study pre- zation, when software and Internet-based technologies are radically sents a framework that extends the TIS functional approach with a two- transforming the sociotechnical fabric of established industries. dimensional matrix of contextual structures and an explicit con- We contribute to the TIS approach by developing and testing a two- ceptualization of entrepreneurial activities. dimensional matrix of contexts, and by linking it to the role of agency The framework is applied to a comparative case study of two within a single analytical framework (Fig. 3). Our framework improves blockchain-based P2P electricity trading experiments that challenged the TIS approach by connecting the previously separate concepts of the established centralized architecture of the electricity sector. The context and agency through conceptualizing the TIS functions as ac- case study suggests that if the position of the incumbents remains se- tivities of system builders, i.e. entrepreneurs, who transform a rich set cure, as leaders of the sustainability transition, innovation processes are of contextual factors into a new system structure (Alkemade et al., likely to remain slow and incremental. However, disruptive innovation 2011; Bergek et al., 2015; Binz and Truffer, 2017; Coenen et al., 2012; can still succeed with the help of dedicated entrepreneurs who use Planko et al., 2017). While the analytical framework in this study im- opportunities in various contexts across spatial scales, ranging from the proved our understanding of how entrepreneurs can use contextual local to the global, and across sociotechnical sectors, going beyond the factors to start building a system and achieve productive encounters focal electricity sector. This study is limited to retrospectively studying with incumbents, we argue that the proposed way of structuring context two cases of local P2P demonstration projects over a two-year period has generic value, and may also be applied to studies of more mature and it cannot predict future developments. Further studies of other technological systems. demonstration projects elsewhere in the world can confirm whether the patterns observed here during the initial build-up are unique or are 6.3. Implications for the blockchain-based P2P trading model repeated elsewhere.

A key empirical discovery from both cases is that while blockchain-

 K. Hojckova, et al. 5HVHDUFK3ROLF\ 

CRediT authorship contribution statement consultancies, stock ownership, or other equity interest; and expert testimony or patent-licensing arrangements), or non-financial interest Kristina Hojckova: Conceptualization, Methodology, Formal ana- (such as personal or professional relationships, affiliations, knowledge lysis, Writing - original draft, Writing - review & editing, Visualization. or beliefs) in the subject matter or materials discussed in this manu- Helene Ahlborg: Conceptualization, Data curation, Writing - original script. draft, Writing - review & editing, Visualization, Supervision. Gregory M. Morrison: Resources, Supervision. Björn Sandén: Funding acquisition, Conceptualization, Writing - original draft, Writing - review & Acknowledgments editing, Visualization, Supervision. This research was funded by the Swedish Energy Agency as part of Declaration of Competing Interest the project, ‘New networks of power: on the emergence, diffusion and impact of alternative electricity system architectures’, and by the The authors whose names are listed immediately below certify that Kamprad Family Foundation. We would like to express special thanks to they have NO affiliations with or involvement in any organization or our reviewers for their constructive feedback that challenged our entity with any financial interest (such as honoraria; educational thinking and helped us improve the theoretical coherence and the grants; participation in speakers’ bureaus; membership, employment, quality of this paper.

Appendix

Table A

Table A The White Gum Valley case summary of entrepreneurial activities making use of contextual and internal factors to build a new system structure. Table is organised chronologically.

Entrepreneurial activity making use of contextual (and internal factors), Origin of contextual factor New (or blocked) system structure or blocked activity inﬂuencing a function (+/-)

EARLY BUILD-UP Identification of opportunities for microgrids and prosumer-based (+G; +K; local; focal; New actor: business models stemming from growing residential solar adjacent; supporting) PV + battery market, but lack of installations in high-density residential buildings Researcher group at Curtin University, WA New knowledge: ‘Citizen utility’: P2P electricity sharing model The WGV in Fremantle, WA development identified as a place for P2P (+L; local; adjacent; New institution: technology due to sustainability targets in the WA housing sector and supporting) in the city of Fremantle Positive expectations about the potential of P2P sharing in WGV housing development Negotiations with actors from local housing development company and (+G, +N; local; adjacent; New actors and network: the city government supporting) -WGV partners: Curtin researchers collaborate with a public housing development company and Fremantle city council Housing demonstration - the ‘Gen Y’ multi-residential building in WGV (+E; +R; +M; local; New physical artefacts: selected as a first demonstration site adjacent) P2P sharing integrated in the embedded solar distribution network of ‘Gen Y’ New market: ‘Gen Y’ strata company become the first ‘citizen utility’, making use of P2P sharing Local microgrid expert company was invited to join and provide the (+G, +N; +K; local; focal) New actor, reinforced network and new knowledge: technical expertise WGV partners joined by a microgrid expert with microgrid specific knowledge WGV partners obtained funding from the Australian Renewable Energy (+R; national; focal) New financial resources and physical artefacts: Agency (ARENA) to invest in the PV and battery systems in two more buildings in WGV (+R; +E; local; adjacent) P2P sharing model was integrated and experimented with in two additional housing developments in WGV Two local housing companies provide new customers (+M; local; adjacent) Enlarged market: Two new housing companies applies the technology of P2P sharing Blockchain company invited to solve the accounting issues in the WGV (+G; +N; local; adjacent) New actors and reinforced network: project (+K; +R; global; adjacent) Blockchain company joins WGV partners (+E; local; adjacent) New knowledge and physical artefact: Programming expertise and blockchain technology is combined into a P2P trading digital platform trialed in the WGV housing developments (continued on next page)

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Table A (continued)

Entrepreneurial activity making use of contextual (and internal factors), Origin of contextual factor New (or blocked) system structure or blocked activity inﬂuencing a function (+/-)

Incumbent energy sector consultants approached to explore electricity (+G; +N; local; focal) Reinforced network and new actor created: sector-wide opportunities (+K; +L; local; focal) Curtin researchers, blockchain company and consultants create a P2P start-up Power Ledger New knowledge and institutions: Incumbent sector expertise and the ambition to take P2P electricity sharing to a global P2P electricity trading solution moving beyond embedded microgrids in high-density buildings Power Ledger uses blockchain-based fundraising - Initial Coin Offering (+R; global; supporting) New financial resources: (ICO) Capital for Power Ledger to improve the P2P trading digital platform Via ICO, P2P trading from WGV attracts significant global interest from (+ L; global; supporting) New institutions: the community of blockchain enthusiasts as well as substantial media attention Positive expectations about the potential of P2P trading in disrupting the electricity sector SPATIAL BROADENING Via ICO and global media, electricity utilities from other countries are (+ G; global; focal) Reinforced network: interested in collaborating with Power Ledger With electricity utilities from other countries, the actor network grows beyond WGV Foreign electricity utilities integrate Power Ledgers P2P trading platform (+R; +E; +K; global; New physical artefacts and knowledge: and trial it in electricity systems outside WGV focal) (+L; global; focal) Power Ledger access electricity grids, solar and battery systems in other countries, more experimentation and improved knowledge on P2P trading Reinforced institutions: Global collaborations reinforce the legitimacy of Power Ledgers P2P trading platform ENCOUNTER Rights to trade electricity across the public grid are exclusive to public (-L; local; focal) Lack of aligned institutions: electricity utilities in WA Electricity market regulations in WA do not allow for P2P trading across the public electricity grid P2P trading is economically infeasible due to high grid tariffs (-M; local; focal) Lack of markets: Potential customers do not wish to leave current contracts for the P2P trading model Public utilities in WA own and manage the public grid infrastructure (-E; -R; local; focal) No access to physical artefacts: Lack of access to physical infrastructure restricting experimentation across the regulated grid Electricity utilities in WA joined the WGV project in the effort to find a (+G; +N; local; focal) Reinforced network: potential solution to the electricity sector challenges in WA (+L; local; focal) WGV partners joined by local utilities seeking for a solution to sector challenges Reinforced institutions: The entry of incumbents increases legitimacy of P2P trading and expectations for trading across the grid WGV partners mobilized additional financial resources from the federal (+R; national; supporting) Reinforced financial resources and physical artefacts: government (+R; +E; local; focal) - Funding for the Smart Cities and Suburbs project was raised to trial and expand P2P trading across the regulated grid in Fremantle WA utilities used their institutional power to reshape the existing (+L; +R; local; focal) New institutions: regulations to enabled P2P trading in Fremantle Regulatory exception allowing P2P trading across the regulated electricity grid in Fremantle New physical artefacts: Funding and access to the grid enable trial of P2P trading across the regulated grid WGV partners institutionalizes the existing actor network, partly as a (+N; +L; national; Reinforced network and institutions: result of the nationally funded project supporting) Partners establish a ‘Consortium’ and sign a binding contract about P2P- related experiments in Fremantle

 K. Hojckova, et al. 5HVHDUFK3ROLF\ 

Table B

Table B The Brooklyn Microgrid case summary of entrepreneurial activities making use of contextual and internal factors to build a new system structure. Table is organised chronologically.

Entrepreneurial activity making use of contextual (and internal factors), or Origin of contextual factor New (or blocked) system structure blocked activity inﬂuencing a function (+/-)

EARLY BUILD-UP Identification of opportunity to create community-driven microgrids with (+G; global; focal) New actor: transactive energy market models Creation of start-up LO3Energy Lo3Energy combine transactive energy models with blockchain technology (+R; global; adjacent) New physical artefact: Lo3Energy develops a blockchain-based electricity meter for P2P trading in microgrids Lo3Energy receives capital investment and technical support from Siemens (+R; +K; global; focal) New financial resources and knowledge: Investment and technical expertise raise Lo3Energy's capability to improve the smart meter Lo3Energy make use of the REV strategy which provides institutional (and (+L; local; supporting) New institution: financial) support for community microgrids Higher expectations for P2P trading technology in NY state Residential areas in Brooklyn identified as a place for the P2P technology due (+M; local; focal) Potential market: to local community, sustainability values and high share of solar PV installations Community and sustainability values and high shares of PV installations supports the case for P2P trading in Brooklyn Lo3Energy approaches residential customers asking them to become BMG (+G; +L; local; focal) New network and reinforced institutions: participants, to legitimize and create demand for blockchain enabled P2P trading Residents and businesses in Brooklyn sign up as participants of the BMG and share the positive expectations for P2P trading By recruiting residents, Lo3Energy can access their PV rooftop systems and (+R; +E; local; focal) New physical artefacts: metering data Access to residential PV systems to enable experimentation with P2P electricity trading Marketing of the first P2P transaction between Brooklyn residents in global (+L; global; supporting) Reinforced institutions: media Video attracts attention from a global community of blockchain enthusiasts and media, increasing expectations. ENCOUNTER Unproductive negotiations with local electricity utility, community board (-G; -L; local; focal) Lack of networks and weak institutions: and government Failure to attract a local actor network and further legitimize the potential of BMG in Brooklyn Residents perceive incumbents as more trustworthy than small retail (-L; -M; local; focal) Lack of institutions and markets: companies and are obliged and incentivized to trade electricity with the utility through the net-metering scheme, with a better financial outcome than P2P Existing regulations, incentives and relations motivate residents to remain customers of the incumbents REV funding only available via incumbents (-R; local; focal) No access to financial resources Lack of financial resources Incumbents own the grid infrastructure and have exclusive rights to trade (-R; -E; local; focal) No access to physical artefact electricity in Brooklyn No access to grid infrastructure for P2P trading trial in Brooklyn and SPATIAL BROADENING Media attention to BMG project attracts collaboration with research (+G; +N; +K; global; focal; Reinforced network and knowledge: institutes, utilities, energy communities in other countries supporting) New partnership with researchers abroad leads to improved P2P- related knowledge and internationally diffused knowledge via a joint research paper New actor network allows access to electricity systems abroad for P2P (+E; +R; global; focal; New physical resources: trading platform experiments supporting) Access to electricity microgrids, solar and battery systems in other countries, more experimentation with P2P trading Successful search for financial support and expertise from multinational (+R; +K; global; focal) New financial resources and knowledge: companies and investors Capital to further improve blockchain-based P2P trading platform and related knowledge Global interest increases the legitimacy of the BMG project and the P2P (+L; global; focal) Reinforced institutions: trading platform P2P trading perceived as a potential solution for the electricity sector challenges outside BMG

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Paper III

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Energy Research & Social Science

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Original research article Is peer-to-peer electricity trading empowering users? Evidence on motivations and roles in a prosumer business model trial in Australia ⁎ Sam Wilkinsona, , Kristina Hojckovab, Christine Eona, Gregory M. Morrisona, Björn Sandénb a Curtin University Sustainability Policy Institute, Curtin University, Bentley, WA 6102, Australia b Chalmers University of Technology, 412 96 Gothenburg, Sweden

ARTICLE INFO ABSTRACT

Keywords: Peer-to-peer (P2P) electricity markets have attracted significant attention as a promising model enabling the Prosumer integration of distributed energy sources by creating consumer-based electricity markets. Despite the sig- Consumer role nificance of users in this model, knowledge is still lacking as to who the users interested in P2P electricity Blockchain markets are and what role they can play in building them. We aim to fill this knowledge gap by providing Peer-to-peer electricity markets evidence from the first real-world trial of a P2P electricity market facilitated by blockchain technology across a Sustainability transitions regulated electricity network. We apply sustainability transition and innovation thinking to analyse the trial Innovation diffusion participants as users shaping the P2P-related innovation process. Supported by our empirical results, we found that users joined the P2P market trial to learn and co-create the future of prosumer-centred electricity markets. We also found that if P2P is to enter the mainstream market, the assistance of other actors (e.g., intermediaries and activists) is important in order to cross the chasm to reach the majority of users and move from a learning and probing phase to breakthrough and wide diffusion.

1. Introduction nature of the new electricity system [11] and facilitating the transition to a distributed and clean electricity system [12,13]. One such business In traditional electricity systems, end users act only as passive model innovation is the peer-to-peer (P2P) market model [5,10,14-18], consumers and receivers of electricity supplied from centralised gen- which in principle allows prosumers and consumers to trade with each eration via transmission and distribution grids [1]. This traditional other without needing an electricity supplier or retailer as middleman. model is being challenged as falling prices of small-scale solar photo- The middleman is replaced with a third-party digital platform, such as a voltaic (PV) systems and batteries motivate households and commercial blockchain-based platform, that allows prosumers and consumers to properties to install their own on-site generation capacity. This is interact directly and negotiate better prices for their electricity, in transforming traditional end users into active parts of the electricity contrast to relying on the offer from a licensed supplier [5,14]. It is system [1-3], earning them the title of prosumers – actors who both believed that P2P markets will create future electricity markets with produce and consume electricity [4-6]. users at their heart, democratising local energy provision [15].Inad- In countries such as Australia, nearly one quarter of households dition, the P2P model could improve access to affordable clean elec- have installed PV systems [7] and prosumers are remunerated for ex- tricity for those users who do not own renewable energy technologies. cess energy production through government-sponsored feed-in-tariff This concept has been described as energy and flexibility justice [19- (FiT) or buy-back schemes via existing electricity retailers. Here, the 23]. high level of PV penetration is affecting the technical and economic While the concept of P2P electricity trading has recently attracted stability of the centralised electricity system [8], making subsidies and increasing research interest [18,24-27], it has only existed in the form retailers’ default purchase of self-generated energy exported to central of conceptual models and experiments in closed environments such as grids unsustainable [9]. However, as subsidies decline and eventually embedded networks [15], university campuses [17,28], and organised expire, prosumers are left in a post-subsidy era with no alternative energy communities in islanded micro-grids [5,16 ,26] where P2P revenue model for their excess electricity [4]. There is increasing in- sharing and trading occurs in the form of a computational simulation, terest in post-subsidy market models that could create new value or behind the utility meter in environments shielded from incumbents streams for prosumers [1,4,5,10], better reflecting the bidirectional and regulations [29]. The P2P case study described here provides

⁎ Corresponding author. E-mail address: [email protected] (S. Wilkinson). https://doi.org/10.1016/j.erss.2020.101500 Received 16 September 2019; Received in revised form 26 February 2020; Accepted 27 February 2020 (OVHYLHU/WG$OOULJKWVUHVHUYHG S. Wilkinson, et al. (QHUJ\5HVHDUFK 6RFLDO6FLHQFH evidence from the first real-world P2P electricity trading trial facilitated framework in Section 6, while the conclusions are presented in by blockchain technology, which allows consumers and prosumers to Section 7. trade electricity over the regulated electricity network, directly affecting their electricity bills. 2. Peer-to-peer electricity trading models Existing research into the P2P model is limited by its concentration on the technological and pricing aspects of P2P electricity trading. Environmental concerns, technological innovation, and the impacts Much less attention has been paid to real-world prosumers and con- of prosumers on markets and system operability have led to increasing sumers (here collectively referred to as electricity users), i.e., in- interest in distributed renewable electricity systems as alternatives to dividuals or groups that use electricity as well as associated technolo- the dominant centralised model of electricity production and con- 1 gies (e.g., solar panels) to consume, produce, and distribute energy. sumption [34, 35]. Growing numbers of scholars and industry actors are The users in the P2P model are no longer passive consumers of the emphasising that new distributed grids will require marketplace in- output (as in traditional business models), instead being directly innovation to reflect the decentralised infrastructure and the changing volved in the P2P value exchange and thus central to its successful character of users who, by adopting distributed energy technologies, development [31]. Ahl et al. [24] reported that the relationship be- have become active market participants who can produce, sell, and buy tween electricity users and blockchain-based P2P business models (and electricity as well as reap benefits from their demand flexibility vice versa) has yet to be empirically studied. Furthermore, they also [4,11,15,19,20]. Yet many challenges remain, including finding busi- found no published research into why and how consumers would want ness models that can fairly distribute costs and benefits among a large to participate in P2P market innovation. This paper aims to fill these number of self-interested market participants [24] and facilitate energy research gaps and provide knowledge of how users can contribute to and flexibility justice [19,20]. Several prosumer-focused solutions are P2P model-related innovation processes that go beyond merely con- being proposed, with different levels of interaction and levels of de- suming [10,24,30]. By doing so, we hope to assist the research com- pendence on the existing energy system [4,5]. This paper examines an munity, policy-makers, and industry actors to grasp the potential im- autonomous P2P model,2 defined by Parag and Sovacool [5],thatin plications of this business model [24]. theory allows prosumers and consumers to interconnect and trade di- We have looked beyond the techno-economic literature to better rectly with each other. This model is perhaps the farthest from today's understand and conceptualise the relationship between users (here, electricity market design [4], serving as a starting point for establishing trial participants) and the development of a business model innovation the P2P trial that is our case study. (i.e., the P2P market trial). We engage with the sustainability transition The research literature defines the P2P electricity market as an and innovation diffusion literatures, which provide us with a con- autonomous P2P network of prosumers and consumers, often compared ceptualisation of users that goes beyond the one-dimensional view of to an Uber or Airbnb model for the electricity sector [5]. Influenced by users as playing a role only in consuming innovations [30]. In this body ideas of the “sharing economy”, a software-enabled P2P market model of literature, scholars emphasise that users are important change allows consumers and prosumers to buy and sell self-generated elec- agents, enacting agency throughout the innovation process, from the tricity and other services, such as flexibility or demand response, in an development of niche market ideas to adopting the niche innovations in open electricity market across the regulated distribution network everyday practice [32]. However, earlier studies have largely empha- [10,18,24,36]. Blockchain technology is the software platform con- sised the role of users in supporting product innovation, while user sidered to enable the P2P marketplace [14,24,27,36]. Blockchain is a contributions to new business model development remain under-ex- decentralised Internet protocol that could, in theory, enable transac- plored in the transition literature [12]. Existing business model in- tions of monetary and non-monetary digital assets3 directly between novation research is still mainly concerned with the roles of firms, peers without the necessary involvement of a middleman, such as a managers, entrepreneurs, and advocacy organisations in the process of licensed energy retailer [14,36]. Due to its ability to create smart business model implementation [13,33]. This paper attempts to fill this contracts and ledgers, blockchain algorithms could replace the need for research gap by conceptualising P2P electricity trading as a niche a licensed retailer to overlook and verify contractual agreements be- business model innovation within a broader transition to sustainable tween peers [27]. energy systems [4,32,35] and by placing users at the centre of our Like other new technologies and business models, the P2P model is analysis. still unsupported by existing regulatory structures, financial institutions The aim of this study is to investigate the motivations and roles of and lacks societal awareness or acceptance [24]. Ruotsalainen et al. users in developing P2P electricity markets. We provide evidence from [29] identify the importance of considering that the P2P market model the first real-world example of P2P electricity trading via a blockchain currently only exists as a vision of a desirable future without accounting platform, located in Fremantle, Western Australia (WA). This aim is for existing electricity sector actors and infrastructure. Embedding the fulfilled by addressing the following research questions: P2P model in real-world settings across the public grid infrastructure entails significant caveats and complexities that must be resolved if the 1 Who are the electricity users who are willing to experiment with theoretical benefits are to be realised [4,5]. P2P electricity trading and what motivates them? An increasing number of scholars and industry actors believe that 2 What roles do electricity users play in shaping P2P electricity the P2P model is unlikely to result in the complete collapse of the in- trading-related innovation? cumbent electricity sector; instead, utilities and public authorities may continue to exist alongside prosumer networks. However, the future The paper is structured as follows: In Section 2, we introduce the background to the P2P market model and its potential to support the 2 renewable energy transition. In Section 3, we look more closely at how The P2P model is the most radical prosumer-based business model in- users are conceptualised in the transition and innovation literatures, novation, in which prosumers and consumers trade directly with one another in a seamless network without a need for the large grid market. Other prosumer- before synthesising these literatures into a conceptual framework for based models are “prosumer-to-interconnected or islanded microgrids” and analysing the empirical case. Section 4 introduces the research design, “organised prosumer groups market”, both including different levels of inter- methodology, and case study, followed by the empirical results in action between prosumer networks and the large grid market [5]. Section 5. The results are analysed and discussed using the conceptual 3 Digital assets that can be traded on a blockchain are not limited to financial transactions (e.g., payments for electricity). In the energy sector, other non- monetary assets that could be traded are, for example, demand-side and flex- 1 Definition inspired by Schot et al. [30]. ibility services, energy certificates, carbon offsets, and/or storage services [37].

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Fig. 1. Categorisation of users along the innovation adoption bell curve [50] (x-axis labels) and typology of user at different points of the innovation S-curve [30] (S- curve labels). roles of various actors in a P2P trading model are not yet known analysing specific technological novelties. This is evident in most [10,29]. We do not wish to study actor roles in the future P2P market single-case studies using MLP, for example, examining the struggle of (assumed to be a mature and established system design). Instead, we plant-based “milk” against entrenched dairy milk [42] or the niche- examine the transition and innovation processes leading to this market, regime interaction of solar PV technology in the Netherlands [43]. and the specific roles prosumers and consumers can play in developing However, existing transition research has concentrated on novel tech- P2P markets by studying their motivations, expectations, and conduct nological products within niches as drivers of change. Scholars have in a real-world P2P trial. Specific technical details and critique of the stressed that new technologies alone will not suffice to achieve systemic blockchain-enabled P2P transaction model lie outside the scope of this change, noting the importance of business model innovations because study. they connect multiple actors, mediate between the production and consumption sides, and support the introduction of novel technologies 3. Achieving transition through business model innovation in the market. [12,13,31,33]. Business model-oriented transition research became established As described in the previous section, the P2P model offers several with the analysis of energy service companies in the UK [13,44], new potential social and technical benefits for the future of distributed en- business models for whole-house retrofitting in the Netherlands [12], ergy systems [5]. Yet the challenge remains to understand how this and distributed business models under the Energiwende in Germany niche business model innovation can break through and challenge the [31]. Similarly, we consider business models to be niche innovations in dominant electricity market model, and to identify the roles users can their own right. We therefore use MLP to position our case study in the play in this process. The sustainability transition and innovation lit- broader electricity sector transition, in which the centralised energy eratures offer useful frameworks with which to study the role of niche market is challenged by innovative electricity market models emerging innovations in systemic sectoral transitions. The multi-level perspective as niche innovations. While this study focuses on the P2P model, we (MLP) [38] has been one of the most prominent frameworks in this understand that different business model innovations are competing, field, treating technological change as an interaction between three interacting, and complementing one another in gradually developing analytical levels: the niche, regime, and landscape. The socio-technical the future market model for a decarbonised electricity sector regime consists of actors, institutions, and infrastructure aligned around [13,45,46]. a dominant design. The regime can be challenged from the niche level, a protected space in which radical technological innovations emerge 3.1. Users in niche business model innovation and grow. Regime change can also be affected by external landscape forces, emerging from the broader socioeconomic system (e.g., political Transition thinking has recently been refined by integrating busi- agenda). A regime transition is a complex co-evolutionary process that ness model innovation ideas [12,13]. Existing transition studies have involves fundamental reordering of the social and technical compo- focused on the roles of firms, entrepreneurs, managers, and advocacy nents of a socio-technical system. The MLP is described in more detail organisations when implementing new business models in the context in seminal papers by Geels and Schot [39], Rip and Kemp [40], Geels of a sector in transition [4,12,13,31,33]. In the transition literature, [38], and Smith et al. [41]. business models are traditionally regarded as integral to firms, as a While MLP emphasises building new regimes, which takes decades, means to deliver customer value, with customers seen as passive busi- we argue that this perspective can be useful in understanding more ness model adopters. If the dominant business model logic in the recent innovations within the context of long-term systemic change. electricity sector is to be broken, more knowledge is needed of the role The ability to see the “context of a transition” can be useful when users can play in business model innovation as they evolve from being

S. Wilkinson, et al. (QHUJ\5HVHDUFK 6RFLDO6FLHQFH mere consumers to being key actors in the electricity market. categorisations support the view that users are not a homogenous group Although not specifically emphasised in research into business with a single role but are heterogeneous actors who play different roles model innovation, the system-building role of users in the energy in supporting innovations. By combining these perspectives, we em- system transition has been highlighted by Schot et al. [30], who, using phasise that users can play a role in both system- and micro-level (i.e., the MLP framework, defined a typology of users who support new user-to-user) dynamics. Both these categorisations can be plotted over technologies in different innovation phases along the innovation S- time, creating the foundation for our analytical framework (see Fig. 2). curve [30,47-49]. In their conceptualisation, users can act as producers, As indicated earlier, sustainability transitions and innovation occur legitimators, intermediaries, citizens, and consumers (see Fig. 1). While over time, conceptualised as the phases of system innovation. Various Schot et al. [30] claim that this user typology matters in long-term authors have described the technological innovation phases; for our systemic transition, they also cite examples of its application to rela- framework, we apply the four-phase model developed by Geels [51] tively specific and recent niche developments related to small-scale (described in Table 1), because it includes the probing and learning consumer-side renewables. We accordingly argue that this user ty- phase as a separate category (Section 3.2). pology can be applied in studying early-stage innovations as well. This framework offers a user-to-system perspective in which users 3.2. Analytical framework are one of the system builders, breaking down the structures of dominant regimes. For example, user-legitimators focus on convincing reg- While the work of Schot et al. [30] and Rogers [50] emphasises user ulators, while user–citizens focus on opposing incumbents. The users in contributions to all innovation phases, other scholars emphasise the this framework are important in aligning system components for suc- user role in specific phases of the innovation process. Through a lit- cessful systemic innovation. Though it provides important insights, this erature review, we strengthen our initial analytical framework, shown perspective pays insufficient attention to micro-dynamics and agency in Fig. 1, broadening our view of how users are conceptualised in among the users themselves, which are important when studying small- specific innovation phases; the end result is depicted in Fig. 2 and scale local innovations. The diffusion of innovation literature highlights summarised in Table 2. the importance of the user-to-user influence on innovation [50]. In this In the first phase of innovation, when the novelty is emerging, re- body of literature, the most widely applied user categorisation was searchers have noted the importance of users in inventing and creating developed by Rogers [50], who divided users into ideal types of novel solutions and routines [30]. These users can either be self-moti- adopters ranged along a bell curve based on innovativeness, i.e., the vated, or can be identified by other actors, such as private firms, in different time points when particular users adopt an innovation give order to customise the new technology and improve its quality, per- them different influences on its development and diffusion. Here, users formance, and user-acceptance before introduction in the mainstream range from the most innovative innovators, through early adopters, market [52]. These users are often cosmopolitan, connected inter- early-majority adopters, and late-majority adopters, to sceptical lag- nationally to a small group of innovators with whom they share interest gards (see Fig. 1). in and enthusiasm for novel ideas and technologies [50]. They can As Roger's bell curve is a derivative of the S-curve, we propose that understand and apply complex technical knowledge and cope with a these typologies can be synthesised into the categorisation of user roles high degree of uncertainty. To afford potential losses resulting from in niche development processes depicted in Fig. 1. Both these supporting an innovation, they usually have substantial financial

Fig. 2. User roles (graph labels) across four phases of innovation (x-axis labels), showing the innovation phase in which each user type is most active. This schema includes the chasm to be crossed to move from learning and probing to breakthrough and wide diﬀusion with the assistance of user–intermediaries and activists.

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Table 1 Four phases of system innovation, adapted from Geels [51].

Phase Characteristic

Phase 1. Emergence of novelty An innovation emerges to solve a problem or offer a new alternative to the dominant regime, i.e., sector. It is nurtured by a small actor network (of technology pioneers and innovators) sharing expectations of the future performance of the innovation. To improve the innovation's price and performance, they experiment to improve the design and accommodate user preferences. Phase 2. Probing and learning The supporting network evolves into an established group or community of specialists, producers, and consumers. These actors work together to improve the innovation through learning about market preferences and understanding the necessary legislative change. Phase 3. Breakthrough and wide diffusion With the help of external pressures and internal momentum, the innovation gains more actor and legislative support, which improves the price/performance ratio and achieves economies of scale and learning. The linkages and co-development of new system elements increase, building new infrastructures, new governmental agencies, and professional organisations. Phase 4. Stabilisation of the new regime A new socio-technical regime is created around the innovation with new infrastructure and new widely adopted user practices, policies, and regulations. resources [50]. Alternatively, these users seek and utilise new suppor- the innovation locally, reducing the innovation-related uncertainty by tive institutions such as tax reductions and subsidies to support an in- learning about and probing the innovation, making errors and im- novation [30]. Extensive research has long acknowledged users’ co- proving innovation-related knowledge [30]. With their local influence, creation role in how both systems and technologies are developed, they can convince people and increase expectations of the relevance adopted, and appropriated by society [53-60]. Existing literature refers and significance of the innovation. They create narratives to align to these users as user-innovators [50], producers [30], enthusiasts, or opinions about the innovation among their peers and other system product designers [56,59,61-64]; in our framework, we refer to them as actors [30,50,65,66]. These users try to stimulate acceptance of the innovators (Fig. 2). innovation in their peer networks by encouraging imitation and com- In the second innovation phase, users are important in supporting petitive reactions among most users, playing a crucial role in creating the application of the innovation in a local context, legitimising it. conditions for the wide diffusion of the innovation [66-70].Existing Compared with users in the first phase, these users are locally in- literature calls them early adopters [50], user-legitimators [30],en- tegrated and have more influence on their proximate environment. trepreneurial users, and lead users [57,71,72]; we call them legitimators They adopt the innovation soon after launch because they see a com- (Fig. 2). pelling reason to use it and are willing to accept the related un- By considering how the existing literature identifies the way in certainties and costs in exchange for future benefits [50]. They embed which users contribute to development in different innovation phases,

Table 2. Summary of the user roles across the transition phases with descriptions of how these users contribute to the innovation and transition process.

Transition phase User role User role defined in the existing literature Contribution to the innovation and transition process Emergence of novelty Innovators • User–producers [30] • Invent and create new technical and organisational solutions • Innovators [50] and routines • Product designers [50, 56, 59, 61-63] • Use supporting institutions (e.g., tax reductions and subsidies) • Energy enthusiasts [64] • Enthusiasm for new ideas; understand and apply complex technical knowledge • Look for ideas outside of the local context • Can cope with high uncertainty • Have substantial financial resources Probing and learning Legitimators • User–legitimators [30] • Embed innovation in the local context • Early adopters [50] • Reduce uncertainty by making errors and learning • User–entrepreneurs, entrepreneurial lead users • Convince and increase expectations of the relevance and [57,71,72] significance of the innovation • Opinion leaders [65,66] • Stimulate acceptance of the innovation among their peer networks Breakthrough and wide Intermediaries • User–intermediaries [30] • Create space for alignment of new actors, institutions, and diffusion • Energy user communities [76-79] technologies • Voice expectations, interpretations, and uses of new technologies to the regime actors • Enrol new actors, creating networks between them • Cooperate with other actors such as firms and (non) governmental organisations Activists • User–citizens [30] • Involved in transition politics • Grassroots movements [76,81-84] • Mobilise social movement for reform • Activist groups [30,80] • Actively try to overcome resistance of incumbent actors • Dissatisfied with current regime Mainstreamers • Early-majority users [50] • Important in creating network effects among users • Adopt just before the average member of a system • Seldom hold an opinion-leadership position • They have great willingness to adopt but seldom lead Stabilisation of the new Consumers • User–consumers [30] • Buy products and embed them in their daily practices regime • Late-majority users [73] • Adopt just after the average user, after innovation-related • Market product consumers [86,87] uncertainty is reduced • Market participants [25] • Use the innovation due to peer pressure or because it has • End-users [88-91] become the dominant choice • Consumers with preferences, needs, behaviours, and practices [92]

S. Wilkinson, et al. (QHUJ\5HVHDUFK 6RFLDO6FLHQFH we can see how existing categorisations and descriptions overlap. We 4. Methodology can also identify disagreement regarding what it takes to move from one phase to the next. While Rogers’ [50] categorisation suggests that 4.1. Case study: Western Australia and the case of the RENeW Nexus early adopters can take an innovation from niche to wide diffusion by project acting as influential opinion leaders, evidence shows that the diffusion process is not always as linear as this theory predicts [73]. A relevant The Renewable Energy and Water Nexus (RENeW Nexus) project criticism comes from Moore [73], who has claimed that, in some cases, was implemented in Fremantle, WA. It consisted of an early trial of a an innovation that is well received by early adopters will not necessa- blockchain-based P2P trading model in real-world conditions, oper- rily succeed among most users due to significant differences between ating across the regulated electricity network and affecting participants’ their motivations for adopting the innovation, creating a chasm (see electricity bills. The aim of RENeW Nexus was to test both the technical Fig. 2) between these two user groups [73]. Moore [73] theory explains and social aspects of P2P trading. Considering the social aspects, which the issue of bridging the chasm between early adopters and early-ma- are the focus of this paper, the project aimed to understand why and jority users, noting that an early adopter looks to other early adopters how participants engaged in P2P trading as well as how the P2P model for validation, whereas members of the traditional user group look to itself affected participants’ engagement with the novel trading option. other traditional users for validation that the business model is worth The project consortium comprised a city council, a land developer, adopting and/or promoting. It is also important to note that Rogers’ two universities, a blockchain start-up, as well as an electricity network [50] perspective assumes that early adopters have a good position from operator, retailer, and generator. While the retailer is also the largest which to access the rest of their social network of peers within a firm or generator in the state's electricity market, constituting a combined re- industry. tail and generation organisation, for the purposes of this trial, it is The users’ importance in bridging the chasm by enabling the treated as a retailer alone and is referred to as such. Existing regulations breakthrough to pass from experimentation to wide diffusion has been require that residential users must purchase their electricity from the emphasised by Schot et al. [30]. They label these users intermediaries4 public retailer. The retailer's involvement in the trial was therefore and activists, terms we decided to adopt in our framework. Inter- essential to allow payment of the half-hourly P2P trades, which were mediaries represent those users who not only attempt to communicate settled in the end-of-month retail electricity bills. with other more sceptical users, but also create space or serve as a The retailer provided secondary meters to display real-time data to bridge for alignment between different actor groups, institutions, and the participants and to manage the customer relationship and billing. It technologies to support the wide diffusion of the niche innovation. They also acted as a buyer of last resort for unsold solar exports, a seller of are active in communicating innovation-related preferences and ex- any shortfall electricity that could not be supplied by peers at any time, pectations with existing regime actors to appropriate and align existing and an enforcer of consumer protection rules. While the active P2P regulations and standards, thereby promoting the innovation [30]. trading component of the RENeW Nexus project is outside the scope of Another example of user-intermediaries cited in the literature is that of this paper (Fig. 3), this information is provided to explain the relevance energy user communities [76-79]. Activists play a crucial role in en- of the middleman to a trial of an autonomous concept. abling the niche innovation breakthrough by being involved in transi- The trial was run in the City of Fremantle, which offers a suitable tion politics. These users are generally dissatisfied with the existing context for sustainability-oriented innovation, given its history of po- regime, actively lobbying for reform to overcome the regime resistance litical and civil sustainability leadership. The city's higher number of and weaken the position of incumbents. These users have previously prosumers and lower energy grid electricity consumption than state also been called activist groups [30,80] and grassroots movements averages [93] strengthens its suitability for trialling the P2P electricity [17,76,81-85]. trading model. After a successful breakthrough is achieved, users start playing an important role in the wider diffusion process by adopting the innova- 4.2. Participants in the P2P trial tion in their everyday practices. This category was emphasised by Rogers [50], who called these users early-majority users, seeing them as Voluntary participants in the P2P trial in Fremantle were sought via crucial for creating a network effect to mainstream the innovation. announcements on social media and the city council's website as well as Based on their role, we therefore call these users mainstreamers (Fig. 2). through word of mouth. Fifty participants in total – forty prosumers and While they have great willingness to adopt an innovation, they seldom ten consumers – self-nominated for inclusion in the trial. A participant hold strong opinions or leadership positions and take longer to decide represents a household rather than an individual; the choice of the to adopt an innovation. These users wait until other users develop and household level for analysis was influenced by the context of the elec- experiment with an innovation to improve its price and performance tricity sector, in which the household remains the main unit of analysis. before they adopt it [50]. The prosumer participants were home owners, which was necessary to After the innovation has achieved wide diffusion, the stabilisation allow for the installation of updated metering infrastructure and was phase follows. In this phase, users play the most important role by typically a prerequisite for having a solar PV system. As shown in Fig. 3, buying products and embedding them in their daily practices. In this the numbers of trial participants declined to twelve prosumers and six phase, consumers, as they are called in our framework, adopt the in- consumers following presentation of the P2P trading tariff structures. novation just after the average user, once innovation-related un- Readers are referred to Section 5.4 for reasons why participants chose to certainty is reduced. They do so because it has become the dominant withdraw and to Appendix A for details on the specific P2P trading ap- choice or because of peer pressure. Existing literature describes these proach and associated pricing structures used in the trial. users as late-majority users and laggards [50], consumers [30,50,86,87], market participants [26], and end-users [88-91]. 4.3. Research design

This paper presents a single-case study analysis based on a mixed- method research design [94-96]. One benefit of single-case studies is that 4 The role of an innovation intermediary is not limited to users. Extensive they can be particularly useful in exploratory work and in generating literature on intermediary actors in sustainability transitions identifies the in- new hypotheses [97]. While we are aware that the generalisability of termediary roles of specialised private and public organisations, government- single-case study findings can be limited, the case chosen is exemplary, funded agencies, consultancy firms, as well as individuals such as managers and reflecting a real-life phenomenon not studied in the past [94], i.e., the academics [74,75]. world's first P2P model of electricity trading across the public electricity

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Fig. 3. Stages of qualitative and quantitative data collection up to the commencement of the live P2P trial. This paper focuses on research findings stemming from the data collected in the “In scope” box. The P2P trading trial results are out of the scope of this paper. grid. While the sample is small, at the time of writing, it represented the focus group discussion drew out issues more important to the groups. only participants globally who were actively P2P trading across a regulated electricity network using blockchain technology. The absence of 5. Results other comparable real-world case studies precluded employing a comparative case study methodology. Considering these weaknesses, scholars 5.1. The first P2P electricity trading users seeking to apply the present findings should consider the nature of the community in which the trial was undertaken [98] (see Section 4.1). According to the survey, the participants had a median household An inductive research approach was selected, starting with exploratory income of over AUD 156,000 per year. This is 48% greater than the data collection that would guide us to suitable conceptual perspectives, median household income for Fremantle residents [101], indicating serving as a foundation for our analytical framework [99]. Data were col- that the users involved in the trial were from relatively financially selected in three separate rounds using mixed methods to gain a broader cure households. perspective on our research object [100]. These rounds included three Eight prosumers had acquired their PV systems in 2009 or earlier, surveys and two focus group discussions with the self-nominated partici- while over 50% of all prosumers had installed rooftop PV systems be- pants, as detailed in Fig. 3. Questions in the first survey and first focus group tween 2016 and 2018 (Fig. 4). session (Appendix B) were exploratory and designed to suit a diverse range The survey revealed that the participating prosumers perceived of research aims for the broader RENeW Nexus project. The successive themselves as having a good understanding of PV technology and of survey instruments (Appendices C and D) and focus groups were designed how to make the most of their self-generated electricity. In fact, 67% of to test emergent theories and our evolving analytical framework. The prosumer households revealed that they often or very often adjusted benefit of having used different data collection methods is that they allow their consumption patterns to use more electricity during the daytime; triangulation of our primary sources [96], especially given that secondary 55% claimed to set their appliances on a timer to increase the con- sources relating to users of P2P electricity trading models are still lacking sumption of self-generated electricity. [100]. Fig. 3 summarises both the focus of each data collection activity and the numbers of participants in each activity. 5.2. Motives for trialling P2P electricity trading While surveys were conducted with individuals each representing a household, the focus group sessions were conducted with individuals in The initial survey asked participants about their attitudes towards groups of four or five with an independent facilitator allocated to each the incumbent electricity sector in WA in order to explore whether table. At the first focus group workshop, each participant provided in- these had affected their motivations for joining the trial. The results dependent written responses to the two questions (regarding partici- indicate that 58% of participants were dissatisfied with the existing pants’ understanding of P2P and their motivations for participating) on electricity retailer, prosumers generally being less satisfied than con- Post-it notes. Each note was then discussed at each table to identify sumers (Fig. 5). The most common reason for dissatisfaction was fi- common themes and areas for extrapolation. All written notes were later nancial, related to high grid electricity prices (AUD 0.28/kWh) and low themed and coded using NVivo 12 qualitative analysis software. At both financial compensation for the renewable energy generation (the FiT is focus group workshops, audio recordings of the discussions at each table AUD 0.07/kWh). For a full breakdown of the tariffs relevant to the P2P were transcribed verbatim into NVivo 12. The same coding categories trial in the local electricity market, see Appendix A. used for the written responses were then applied to each transcript. A significant number of respondents also mentioned dissatisfaction Coded themes from the written responses can be considered more re- with the network grid operator's supply charges. Concerns were raised presentative of individual thoughts, whereas those mentioned during the that the supply charges were passing through transmission costs that

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Fig. 4. PV installation year for the prosumer households. participants perceived to be unnecessary in the context of the high le- I feel good that Fremantle is starting this and we can say, you know, vels of local renewable energy generation. that you are proud of this. Other less frequent reasons for dissatisfaction with the electricity In 30 years’ time when it is common practice – knowing that you retailer concerned the lack of detailed electricity usage information in were at the beginning. electricity bills, lack of incentives to save electricity, and perception that the retailer/generator does not invest enough in renewable energy Sends a very clear message to the government that people are in- production (Fig. 6). terested in sustainability and they want better policy. The results of the first focus group workshop revealed that the largest Love being involved in stimulating renewable uptake. single motivation for joining the trial was participant interest in knowledge acquisition, including the opportunity to learn about: personal The participants were motivated by the potential to steer the sus- electricity use and the electricity system in general; what will happen tainability transition towards a more socially equitable and clean en- after the FiTs expire; and the potential solution offered by P2P trading ergy system by demonstrating the successful application of a P2P (see Fig. 7). The second strongest motivation was the chance to be “ahead trading model. Around half of the participants were motivated by ef- of the curve” and trial a cutting-edge technology. Interactions between ficiency improvements, described both in terms of financial efficiency, participants during focus group discussions reflected a sense of excite- which might be achieved by eliminating the retailer/middlemen, and in ment at being part of a cutting-edge innovation. There was also a collegial terms of energy transfer efficiency, with more local solutions and less tone, as many participants were early adopters of rooftop solar tech- need for long-distance transmission. Notably, during the focus group nology and shared enthusiasm for renewable energy and sustainability, discussion, only 25% of respondents stated that they were motivated to with the P2P trial seen as embodying these principles. This is shown from join the trial to save money or by the expectation of being financially the following quotations recorded from each workshop table: better off, and this was mentioned apologetically: Light a fire that could go global quickly … and have a rapid tran- This is going to sound really terrible, but one of my motivations was sition to a clean energy future. to get cheaper power.

Fig. 5. Participant satisfaction with the current electricity retailer.

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Fig. 6. Reasons for participant dissatisfaction with the electricity retailer: key themes (left pie chart) and broken down into sub-themes (right bar chart).

Despite this apparent irreverence to the financial implications of the technology and crypto currencies (Fig. 8). Fewer expectations con- P2P model, many follow-up questions at the end of the session were cerned the potential of P2P trading, for example, to increase the use of related to potential financial implications of the trial. the distribution grid infrastructure, increase adoption of renewable energy production and batteries, and ensure a secure trading platform. 5.3. User expectations of P2P electricity trading 5.4. User reaction to the design of the P2P electricity trading model Asking participants about their expectations revealed that they had good knowledge of P2P trading and clear expectations about the future Following the first focus group workshop, the design of the P2P potential and performance of this new trading model. The most frequently electricity trading system was negotiated and developed by the project voiced expectations concerned local community trading, flexible and consortium and later introduced to the participants during the second lower prices, and improved system efficiency. Eight participants in- workshop. A notable shift in user willingness to participate occurred dependently noted that they expected the P2P scheme would reduce the when they received detailed information about the final design of the need for involvement of the existing retailer. This view was then generally P2P trading model. Appendix A details the pre-existing tariff structure agreed on during the focus group discussions, with the following quotation and a comparison with the P2P pricing design that was trialled. being indicative of the expectations raised during discussion: The consortium-developed tariff design adopted in the trial evoked concerns among the trial participants, particularly in terms of the im- So you're providing your neighbours with some of the electricity you pact this would have on any remaining FiTs they were entitled to. This acquire through your PV panels, and not necessarily going through the was mostly the case for small electricity users and those receiving the retailer and the main energy companies. So I don't understand the legacy AUD 0.4/kWh FiT, which they would have to forfeit if they software involved with it, but I understand it is about sending power joined the trial. A price forecast model presented at the workshop from your PV panels to your neighbours and cutting out the middleman. showed that, with the new fixed daily charges, participants who were Seven participants independently noted expectations related to de- large electricity users would benefit, whereas households that currently centralising and localising the market, improving use of the local dis- purchased and sold small amounts of electricity, and thus used the grid tribution network, and the possibility of local electricity sharing: less, would be disadvantaged by participating in the trial. Responses to the survey administered immediately after the pre- This way of working means that you're not beholden to the big sentation demonstrated that attendees understood the justification for picture of power. It's really very local. the new daily charges embedded in the P2P model, i.e., that they were Six participants related P2P trading to the specific use of blockchain important for maintaining the distribution system and ensuring

Fig. 7. Motivations for participating in the P2P trial, showing the number of times individual participants mentioned the themes during independent note-taking in the ﬁrst focus group workshop.

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Fig. 8. Participant expectations of P2P electricity trading based on the number of times individual participants mentioned the themes during independent note-taking in the focus group workshop. adequate generation capacity. The general acceptance of the P2P Many participants joined based on a desire to support local com- trading charges to support the broader electricity system was matched munity trading and positive societal change. However, there was a by nearly unanimous agreement that electricity should be made avail- mismatch between the trading design and participants’ expectations. able to everyone in the community at reasonable prices. The trading was considered overly market driven, based purely on Despite understanding the basis for higher prices, the participants demand and supply but with no ability to selectively support and sell to expressed concern that the trial would reward big electricity users and selected individuals within the community. Other concerns related to a penalise small ones. Many of these participants said that the design design that was inappropriate for the actual participants, not reflecting benefited the incumbents and lacked appropriate compensation for the local movement of electricity and presenting a high financial risk small residential electricity producers and consumers. Many of them for the prosumers involved in the trial. Concerns about the design are thought that P2P trading should be subsidised to encourage uptake, as summarised into themes in Table 4. had occurred previously with solar PV. After the P2P trial design was presented, almost half of the initial The mood of participants was less positive in the second focus group participants decided to leave the trial. An exit survey was completed by workshop than in the first. This was expressed during the focus groups 13 of the original participants who elected to leave. Ten said they in terms of the final P2P model not aligning with participants’ initial would have stayed in the trial if it did not make them financially worse expectations. This misalignment is evident in Table 3, which contains off than continuing with their existing tariffs. Of those who decided to contrasting quotations from the first and second workshops. Discussion proceed with the P2P trading trial, 10 were estimated to be approxi- in the focus groups indicated ongoing enthusiasm for P2P trading as a mately AUD 200 per year worse off, two were expected to break even, concept, but people were unsure of its benefits for themselves. Many and the remainder was expected to benefit. Only the households with stated that they would need time to review the information before large PV systems were expected to benefit financially from the P2P committing to participate in the active trial. trading model.

Table 3. Quotations from the ﬁrst and second focus group workshops showing the divergence between initial expectations (ﬁrst workshop) and the realities of the P2P market model to be trialled (as understood by participants in the second workshop).

First focus group session Second focus group session

I feel strongly about the sharing economy, and this is another way of sharing. We're looking at something that's competitive with one another. And it – to me, it just doesn't actually sit right to have that, the spirit of it doesn't gel.

I love the idea of hooking into the shared community battery … and just the actual value of sharing for a common cause. Yeah, we all have these systems. If we can share our It is very market-driven. energy, it makes so much more sense than having all these individual unique systems that we've got to pay for, look after, so it's a common cause.

It's a lot like … stock trading.

So, people who want to buy electricity can trade online, and ideally get slightly below the wholesale price, and ideally we get paid more than what the retailer, the monopoly, oﬀers.

Because for all my good intentions, I'm working full-time, I've got two children to look after and there's a lot of things to do in the day – I don't, can't guarantee I'm going to get the time to sit down, look at, open the platform and compare the platform with the current buy and sell prices for what I'm producing and change the price.

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Table 4. Key themes emerging from the workshop in which the P2P trading model and associated tariﬀ structure were revealed to trial participants.

Theme Summary

Financial incentives matter Worse Off: If people are going to be worse off financially, then they would be less likely to participate. Fixed charges were understood but discouraged participation. Subsidies Required: All groups thought that P2P trading should be subsidised to encourage uptake, as occurred with solar PV. Alignment with community values Design is too market driven or not community oriented enough: Many participants joined on the basis of supporting the local community and broader social equity issues. The design is too market driven with no ability to trade with individuals of one's choice. Social equity: The design is similar to the stock market; the uneducated or disadvantaged will be less able to trade effectively and therefore will be further disadvantaged. Need to support community trading: Participants were willing to accept the small additional costs of P2P in the trial to demonstrate the benefits of P2P for the community sharing of electricity, in the expectation that it would lead to lower costs in the longer term should the P2P network be scaled up. The P2P market design Different design required: Participants liked the concept of P2P but thought it would be better suited to either closed networks, such as trading within apartment blocks, or to those who have batteries and can sell their excess electricity during peak times. Reflect local movement of electricity: Some wanted the design to reflect cost savings from reduced electricity transmission, and others wanted the fixed capacity charge to be increased to encourage energy-efficiency outcomes. Risk too high for prosumers: Some felt that prosumers were taking on too much risk by offering their own electricity production and selling into an unknown market with a limited number of consumers, which could lead to reduced returns on their investment.

Fig. 9. Survey results concerning reasons why people dropped out of the trial. Respondents could select multiple reasons and then rate them in order of importance. The position of the bubble on the y-axis indicates the number of times the reason was selected, whereas the bubble size represents how often the reason featured as one of the top four reasons for each respondent withdrawing from the trial.

The various opinions about the pricing design of the trial expressed financially secure households with a high interest in social equity and by focus groups during the second workshop were mirrored by re- transitioning to decarbonised energy systems. They have good knowl- sponses obtained in the exit surveys. The strongest reason why parti- edge of their local context and the issues that they would like to help cipants withdrew from the trial was that the P2P trading design was too resolve. An important attribute of the trial participants is their good expensive and/or unaligned with the participants’ initial expectations understanding of renewable energy technologies and their consumption about the future potential of the innovation (see Fig. 9 for a summary). and production patterns. They are also strongly motivated to learn about their own electricity use and broader innovations in the elec- 6. Analysis and discussion tricity sector, without being discouraged by initial complexities and financial losses. They also want to be “ahead of the curve” and have In the following section, we analyse the results and discuss them first-hand experience of a cutting-edge technology. These findings in- within the context of our analytical framework (Fig. 2). dicate that they aspire to be innovators (Fig. 2). However, while they are interested in supporting the emergence of 6.1. Roles of P2P trial participants in innovation processes the niche P2P market and are self-motivated to do so, they are neither independent inventors nor creators. Instead, they show great interest in Our findings indicate that the users in the P2P trading trial are learning about the innovation and in embedding it in the local context.

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This points to the trial participants being legitimators (Fig. 2), as de- shaping the sustainability transition process, as proposed by Schot et al. scribed in Table 2. They strongly believe their participation could in- [30]. However, our empirical results indicate that their conception of the crease outside expectations and therefore support the transition to more user role entails several limitations. First, they assume that users involved socially equitable and local renewable energy systems through de- in innovation always seek to have specific system-level influence as an monstrating the P2P model. organised group with a clear identity related to the innovation [30,50,63]. According to the results, most of the trial participants share a degree Our results instead indicate that users can advance transition efforts of dissatisfaction with the incumbent electricity companies, whom they without necessarily being the instigators or drivers of a transition. Instead, perceive as controlling and undervaluing the price of self-generated re- users can support the transition by adopting the innovation and colla- newable electricity. Although this finding recalls the role of activists borating with other project actors, provided the innovation appears to (Fig. 2), i.e., users actively speaking out against the status quo and in- align with their idealised vision of the future and/or is financially bene- cumbents, the dissatisfaction is strongest among prosumers and mostly ficial to them. They need not be part of a collective movement, but rather concerns the low financial reward for self-generated electricity. These can be organised and assisted by another intermediary actor in the system users differ from grassroots movements and activist groups in that they [48,102,104]. Second, their conception places users in idealised categories are not a self-organised group of consumers defining their identity that are exhaustive and often mutually exclusive. Our results suggest that through fighting the establishment to allow for the future of P2P trading. the participants in the P2P trading trial do not belong to a certain group or These participants are not stubbornly acting against the incumbents; conform to a user category with a single role, but instead assume multiple instead, they prefer acting with the incumbents via the project con- key roles in the innovation process, often as individuals [32]. Our findings sortium to improve the quality, performance, and user-acceptance of the support the recent conclusion of Sopjani et al. [32] that users can assume model before its potential introduction in the mainstream market. multiple roles simultaneously within transition processes. However, the initial design of the P2P trading model was developed with In addition, the user typology developed by Schot et al. [30] is useful little consideration of user input and the co-production process was for analysing the user-to-system dynamics, though it ignores the micro- weak, resulting in user criticism of poor system design with in- level agency and user-to-user interaction through the different innova- appropriate pricing. These factors contributed to a high number of tion phases (see Section 3.2). Complementing the transition perspective dropouts from the project. This result supports existing literature that on users with innovation diffusion research and with additional user- identifies the importance of collaborating with users to help co-create the related literature (see Table 2) has been helpful in emphasising that trial innovation design and improve user acceptance [56,59,64]. participants can both shape the wider socio-technical system change as Although all trial participants initially appeared to be legitimators of well as influence their peers in the innovation process. P2P trading, fewer than half of them remained in the trial after the in- Perhaps our biggest contribution to the user-focused transition lit- troduction of the P2P tariff structure that indicated likely financial losses. erature is the application of our analytical framework to a case of Those who exited were unprepared to adopt the new approach until fi- business model innovation. While an increasing number of studies nancial uncertainties and risks declined. While these users did not wish analyse the role of managers, private firms, and entrepreneurs in to legitimise the innovation, they could still play an important role in a business model innovation processes, we have shown that successful later stage of innovation as mainstreamers (Fig. 2), i.e., users contributing business model innovation requires attention to users as explicit tran- to wider diffusion, after the price–performance ratio has improved. sition-shaping agents. Our analysis uncovers important findings in relation to the hypothesis of the chasm (see Fig. 2), i.e., a gap between the experimentation and 6.2. Policy implications and areas for further research wide diffusion phases [73]. We found that the two groups of trial participants seemed to have different motivations for adopting the innova- The present findings have several policy- and industry-related implica- tion, being on the opposite sides of the chasm. However, none of the trial tions. First, our theoretical framework suggests that in innovation trials, it is participants expressed interest in helping to bridge the chasm by aligning important to consider the innovation phase when designing a project and other actors or recruiting other users in the community. This bridging recruiting trial participants. Very-early-stage projects may be best served by role needs to be filled by another/external actor, an intermediary actor targeting users wishing to co-create and legitimise an innovation and who [12,102], which in our case could be the project consortium, primarily are specifically interested in learning about and probing it. It is also essential the retailer and network operator, due to their direct access to most for recruiters to understand the important roles of these users, namely, to customers. They could bridge the chasm by taking the lessons from the facilitate learning processes, embed the innovation locally, and raise ex- innovators and legitimators to the mainstreamers and consumers. pectations directly related to local issues. The actor consortium could have However, the chasm will not be bridged until the project consortium involved participants in the initial design processes to increase the trial acknowledges the roles the trial participants wish to play. Our findings success, which directly depends on the consumer's image of what a P2P point to a misalignment between how consortium members perceive the market design should be like. For the Fremantle trial community, this in- participants’ involvement and how the participants want to be involved. cluded aspects of social equity and sharing energy within the community, Our results indicate that most trial participants viewed themselves as an aspects that the eventual market design failed to deliver. active part of the trial, contributing to learning and locally implementing As the high rate of drop-outs from the project demonstrated, finding the new business model as innovators and legitimators; in contrast, the users who are interested in supporting early innovation processes is not project consortium viewed the participants merely as consumers, playing easy, as most users tend to get discouraged by high uncertainty and/or a role in consuming the new market product. Incumbents, such as the lack of alignment with their underlying values and expectations. While utilities in the consortium, often strive to induce the users to conform to this is not surprising, it emphasises the need to involve trial participants their view of the niche market solution rather than working with them in in the tariff design process to minimise their disappointment and reduce a co-creation process [103]. This discrepancy in the perception of the the number of drop-outs. user's role was likely a main reason for the high dropout rate and the Furthermore, early efforts should be made to target the recruitment perception of a weak trial design. While at first glance, high prices of local opinion leaders, i.e., those whose views future customers will seemed to have been the main reason for losing almost half the initial value and listen to. In addition, effort should be made to recruit users trial participants, our analytical framework helped us understand that who wish to intermediate and lobby for the innovation. These represent the high drop-out rate could also have been a consequence of the con- the users essential for taking the innovation to the breakthrough and sortium side failing to consider the user role. wide diffusion phases. This could include the recruitment of in- Regarding our conceptual starting point in transition thinking, our stitutionalised user communities already committed to the transition, analysis confirms the importance of viewing electricity users as agents such as the energy communities recognised in the UK [82 ,105], the

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Netherlands, and Germany [106]. More effort could have been made to motivated users to participate in this novel trading model and about include a public participant as a prosumer, such as the City of Fre- their role in its development and diffusion. This adds to our limited mantle and its facilities, given that they have local influence, could knowledge of the users interested in P2P electricity trading, a knowl- have acted as an intermediary, and would have balanced the residential edge gap identified by Ahl et al. [24]. Our findings indicate that the participants with complementary load profiles. users who joined the P2P trial were typically financially secure When it comes to areas of future research, future trials of P2P market households with great interest in social equity and transitioning to models should strive to accommodate a range of users and load profiles, environmentally cleaner energy systems. They have good knowledge of thereby demonstrating marketplace structures closer to real-world condi- their local context and of the issues that they would like to help resolve. tions. The fact that this was not done in the present trial was partly due to In addition, by synthesizing existing concepts from the transition the inherent inflexibility of the regulatory environment, but was also a by- and innovation literatures, we constructed an analytical framework that product of the tight project timelines. The tight timelines precluded the allows for a more comprehensive understanding of the roles users can resolution of constraints, collaborative design, and the strategic recruit- play in different innovation phases: from idea creation, through ment of participants. Future projects should allow sufficient time to work crossing the chasm, to integrating a novelty into everyday practices. We through and resolve these issues. Another area that should be analysed is found that the users who joined the P2P trial wished to learn about a the choice of technology employed – in this case blockchain – and its cutting-edge technology, locally validate and implement a new com- ability to fulfil the specific needs of P2P market participants. We believe a munity-based electricity market model, and actively challenge the in- more careful study should be made of whether the blockchain ledger is cumbent sector, with which they were dissatisfied. These participants well suited to users’ intentions to create a local community electricity remained dedicated, despite the innovation-related complexities of market with local benefits. This is important to consider, as blockchain price and performance. While such users are crucial for the learning technologies have evolved to suit adversarial contexts in which trading is phase of innovation, our analytical framework indicates that they are verified by computer code rather than by social agreement, making it unlikely to cross the chasm and reach the more hesitant mainstream potentially at odds with the underlying values of trial participants. users. Here, we suggest that the project consortium could potentially Future studies could also address aspects outside of the scope of this act as intermediaries where users cannot. The consortium could bridge study. Analysing users involved in prosumer-based electricity markets the chasm between different users, helping take new innovations into elsewhere in the world, in both local and broader regional electricity the mainstream. However, the chasm can only be bridged if the con- markets across different geographical regions, could strengthen the sortium acknowledges the diverse roles users can play, instead of present findings. Positioning these studies within the analytical fra- viewing them solely as passive consumers. mework outlined here could improve our understanding of user interest The conceptual contribution of this paper stems from a synthesis of in and adoption of the P2P model and allow for further testing of the the sustainability transition and innovation diffusion literatures that relationships between user roles and transition phases. allows for both systemic [30] and micro-level understandings [50] of While this study has provided important insights into the roles of user roles in all stages of the sustainability transition process. This study first users in transition processes, it has not been possible to demon- has demonstrated that users are important not only in developing and strate the potential systemic effects or broader benefits of scaling up adopting sustainable product innovation, but also in related business P2P electricity markets. Empirical studies of these matters must wait model innovation, through which value is created from new sustain- until there has been greater uptake of P2P electricity markets. ability-oriented technologies [12,13]. Conclusive results will require substantially longer time horizons that are more consistent with broader transitions. Acknowledgements and Conflicts of Interest

7. Conclusions The RENeW Nexus project is funded by the Australian Government through the Smart Cities and Suburbs Program. There are no conﬂicts of This paper provides new insights into the role that electricity users interest between the funding source and the outcomes presented in this can play in innovation, paving the way to a fossil-fuel-free electricity paper. Partners involved in the project were the City of Fremantle, system. Using the empirical case of a P2P electricity trading innovation LandCorp, Curtin and Murdoch universities, Power Ledger, Western trial in Western Australia, we present new ﬁndings about what Power, and Synergy.

Appendix A. P2P Tariﬀs

Pre-existing tariﬀs comprised a subsidised renewable energy buy-back rate, a daily supply charge, and a charge based on the kilowatt hours of usage. The daily supply charge comprised a state government-subsidised network supply fee, while the electricity charge comprised a bundle of both energy- and non-energy-related expenses. The largest non-energy expense was related to recovering costs associated with capacity payments made to all generators in the network. These are part of the local capacity market designed to ensure suﬃcient generation capacity in the market to meet the demand during peak periods that last for only a few hours each year, typically on the very hottest summer days.

Table A1 Pre-existing and trialled peer-to-peer tariﬀs (AUD).

Existing tariﬀ items Rate (AUD) P2P trial tariﬀ item Rate (AUD)

Supply charge 1.015/day Network supply charge 2.20/day Capacity charge 1.10/day Electricity charge 0.2833/kWh Peak (3–9 pm) 0.0909/kWh Off-peak 0.0572/kWh Renewable energy buy-back rate (no feed-in tariff) 0.07135/kWh Renewable energy buy-back rate 0.04/kWh Renewable energy buy-back rate (with feed-in tariff) 0.4/kWh P2P trading platform operator's charge (paid by buyer) 0.005/kWh P2P sale price Set by participants

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As summarised in Table A1, the trial introduced time-of-use tariffs (9.09 cents/kWh peak and 5.72 cents/kWh off-peak), which had substantially lower per-unit costs than were payable by non-trial electricity users (28.33 cents/kWh). This was balanced by fixed daily charges (AUD 3.30/day) introduced during the trial to separate the real energy-related costs from the service- and capacity-related costs of energy supply. This tariff design allowed for trading of the energy-only component. The daily network and capacity charges were also designed to reflect the pricing model that both the network and retailer considered likely to be introduced before any P2P trading schemes were enabled within the jurisdiction. Notwithstanding, it is acknowledged as a potential limitation of the study that trial participants were required to pay an AUD 3.30 daily fee, versus those not in the trial, who paid AUD 1.015 per day. This tariff structure rewards the participants using more energy and would have resulted in cost increases for the households using less energy. Many of the initial trial participants were at the lower energy-use end of the Western Australian spectrum, as would be expected in a conservation-minded community. Participants could set their own rates for the energy they intended to buy or sell on the P2P trading platform. Any excess energy not sold on the platform was bought by the retailer at a buy-back rate of 4 cents/kWh. The buy-back rate was set low to incentivise P2P trades. Participants could amend their buy and sell rates at any point for current and/or future half-hour trading periods. Prosumers with the lowest sell prices had first priority in trading. When there was more supply than demand in the trading environment, electricity offered at the lowest sell prices was sold and that offered at higher sell prices was left over, to be bought by the retailer, which was the buyer of last resort. Consumers offering higher buy prices had the first priority in buying energy. When there was more demand than supply in the trading environment, the highest buy prices were accepted first and the lower buy prices were left over, to be accepted by the retailer. Sellers were charged a transaction cost of 0.5 cents/kWh by the P2P platform operator.

Appendix B. Initial User Characteristics Survey Instrument

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Appendix C. Second Survey Instrument – Testing how the P2P pricing design aligned with expectations and values and how this inﬂuenced perception of the incumbent utilities

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Appendix D. Third Survey Instrument – Testing reasons for households exiting the trial

Consent tick box As part of the RENeW Nexus project, we are interested in gaining a better understanding of why householders have decided not to participate in the RENeW Nexus Plan peer to peer energy trading trial. If you would like to participate in the RENeW Nexus Plan trial but have not yet registered please do so via the Synergy link that was sent to you on the 31st October. Thank you for your participation in the trial up to this point. If you maintain your decision not to participate in the RENeW Nexus Plan peer to peer energy trading trial, we encourage you to remain engaged with the project as it progresses. You are still able to monitor your generation and usage via the energyOS platform. Property address (so we can match their results from the ﬁrst survey) Did you ﬁll out the Survey Monkey questionnaire in August?

- If so, skip - If not, do you have solar PV system? Y/N

I attended the August RENeW Nexus trial workshop and information session/s on 3rd August and/or 19th October (tick attendance) Are you satisfied with the service provided by Synergy (e.g. tariffs, service, model)? - Y/N, open ended response Are you satisfied with the service provided by Western Power- Y/N, (open ended response) I would have participated in the RENeW Nexus Plan trial if: (open ended response) Why are you choosing to not participate in the RENeW Nexus Plan trial (choose as many options as apply to you and then number your top 5 from 1 (biggest reason) to 5):

• I do not produce enough excess solar PV energy to trade • I do not require additional energy than what I currently generate • I do not wish to virtually purchase energy from other participants • It looks like too much extra work for the potential savings • The version of peer to peer trading being trialled doesn't align with how I think peer to peer trading could be done • I thought peer to peer trading would be more community oriented, but this is very impersonal and “free-market”, kind of like the stock exchange • The approach being trialled creates an extra administrative cost layer rather than removing one • Using the peer to peer trading platform looks too diﬃcult • The peer to peer trading platform does not show me what I want to see • The version of peer to peer trading being trialled does not reward local generation over transmission from further sources • It doesn't allow me to trade with the person/people of my choice • I think it rewards big energy users and penalises low energy users • I think the tariﬀ has been poorly designed • I think the set fees are too high • The set fees are more than what I pay now • The set fees are outside of my household budget • There isn't scope for me to change my energy use patterns, so I wouldn't get much value out of the peer to peer trading • I cannot see how this will help the transition to a cleaner energy future

Answer strongly agree, agree, neutral, disagree or strongly disagree to the following:

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• Comfort at home in summer is important to me even if it means spending more on energy • Comfort at home in winter is important to me even if it means spending more on energy • I value monetary savings over comfort • It is important for me to reduce my energy costs • It is important for me to reduce my water costs

Have you looked at the energyOS platform to view your energy usage patterns over the past couple of months? Yes/No If yes, did using the energyOS platform inﬂuence your energy use at home? (open ended response)

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Maran, Energy justice revisited: a critical review baton: how intermediaries advance sustainability transitions in different phases, on the philosophical and political origins of equality, Energy Res. Soc. Sci. 59 Environ. Innov. Soc. Trans. 31 (2019) 110–125. (2020) 101310. [49] R.U. Ayres, The industry-technology life cycle: an integrating meta-model?, IIASA [23] A. Aboushady, A.I. Gowaid, Small scale renewable generation unlocking an era of Research Report. IIASA, Laxenburg, Austria: RR-87-003 (1987). peer-to-peer energy trading and internet of energy, Renew. Energy Sustain. Dev. 5 [50] E.M. Rogers, The Diffusion of Innovation, fifth ed., Free Press, New York, 2003. (1) (2019) 1–2. [51] F.W. Geels, Technological Transitions and System innovations: a Co-Evolutionary [24] A. Ahl, M. Yarime, K. Tanaka, D. Sagawa, Review of blockchain-based distributed and Socio-Technical Analysis, Edward Elgar Publishing, 2005. energy: implications for institutional development, Renew. Sustain. Energy Rev. [52] V. Bilgram, A. Brem, K.-..-I. Voigt, User-centric innovations in new product de- 107 (2019) 200–211. velopment—systematic identification of lead users harnessing interactive and [25] E. Mengelkamp, B. Notheisen, C. Beer, D. Dauer, C. Weinhardt, A blockchain- collaborative online-tools, Int. J. Innov. Manag. 12 (3) (2008) 419–458. based smart grid: towards sustainable local energy markets, Comput. Sci. – Res. [53] J. Redström, Towards user design? On the shift from object to user as the subject of Dev. 33 (1–2) (2017) 207–214. design, Design Stud. 27 (2) (2006) 123–139. [26] E. Mengelkamp, P. Staudt, J. Gärttner, C. Weinhardt, J. Huber, Quantifying factors [54] J. Vines, R. Clarke, P. Wright, J. McCarthy, P. Olivier, Configuring participation: for participation in local electricity markets, Proceedings of the 15th International on how we involve people in design, Proceedings of the SIGCHI Conference on Conference on the European Energy Market (EEM), IEEE, 2018, pp. 1–5. Human Factors in Computing Systems – CHI 2013: Changing Perspectives, Paris,

 S. Wilkinson, et al. (QHUJ\5HVHDUFK 6RFLDO6FLHQFH 

• Comfort at home in summer is important to me even if it means spending more on energy • Comfort at home in winter is important to me even if it means spending more on energy • I value monetary savings over comfort • It is important for me to reduce my energy costs • It is important for me to reduce my water costs

Have you looked at the energyOS platform to view your energy usage patterns over the past couple of months? Yes/No If yes, did using the energyOS platform inﬂuence your energy use at home? (open ended response)

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Paper IV

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Paper VI

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