Development of Micro CHP in Germany
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Freie Universität Berlin Department of Political and Social Sciences Development of micro CHP in Germany: analyzing the influences of regulatory framework and institutional setting in combination with German culture on development of entrepreneurial activities By: Arash Rezaeian A Dissertation Submitted to Freie Universität Berlin In partial fulfilment of the Degree of Doctor of Philosophy (Environmental Management) Supervisors: PD Dr. Lutz Mez, Freie Universität Berlin Prof. Dr. Yadollah Saboohi, Sharif University of Technology Prof. Dr. Miranda Schreurs Defended on 21th of December 2015 Berlin 2015 Acknowledgment I thank my Family for their supports specially my parents in Iran and my wife Samira. I would like to express my special gratitude to Mr. Lutz Mez, for his vital role in accomplishing this piece of research, which without his helps and advices this work would not have been possible. I offer my thanks to my supervisors Mr. Yadollah Saboohi and Ms Miranda Schreurs for all their supports, helps and advices. Moreover, I thank Mr. Behrooz Abdolvand, Ms. Karoline Steinbacher, Mr. Matthias Corbach and Mr. Nima Feyzi Shandi for their generous comments. I Preface In this research, we emphasized the role of entrepreneurs in the adaption of technological innovations regarding micro Combined Heat and Power (micro-CHP) to the Germany's energy system. This research is going to make a contribution in following areas: Analyzing the institutional setting and the role of macro phenomena and the dynamics of the regime in a multi-level perspective analysis. Discussion of the cultural dimension in Germany and its influence on micro-CHP development. Analyzing the current regulatory framework regarding micro-CHP and its effects on benefits or costs of technology users. The main research question is: How do the regulatory framework and institutional setting in combination with German culture influence the development of entrepreneurial activities regarding micro-CHP? The approach to answer this question includes mixture of qualitative and quantitative analysis. For studying the interaction between the institutional setting, regulations and culture to understand the development of the technological innovation system of micro-CHP in Germany, one theory and two approaches were used for analysis: 1) Economic theory of entrepreneurship, 2) Multi- level perspective analysis to explaining Institutional changes, 3) Value proposition concept for analyzing the regulatory framework. This research has been structured in six chapters as follows: In chapter 1 as an Introduction, after a short description of Germany’s energy system, the importance of this research and motivations are explained. In chapter 2, the state of the art and analysis paradigm are explained. The research questions, dependent and independent variables, hypotheses and methodology for conducting the research are discussed. In chapter 3, the theoretical formulation of the first hypothesis regarding the importance of the entrepreneurial activities and theoretical framework for analyzing entrepreneurial activities in the technological innovation system of micro-CHP are II discussed. Because entrepreneurs’ innovations must propose more value to the economy and all stakeholders inside it, we argued that the economic theory of entrepreneurship, Multi-Level Perspective analysis and value model approaches fit the aim of this research. Chapter 4 is focusing on general factors and the role of institutional setting on the development of micro-CHP. The cultural dimensions in Germany and its effects on entrepreneurial activities regarding micro-CHP development are analyzed in this chapter. Moreover, a multi-level perspective analysis on the transition of Germany's energy system is conducted to explain the institutional setting changes. In chapter 5, Regulatory framework regarding development of micro-CHP in Germany is analyzed. Quantitative analysis of different supportive policies such as CHP Act and RE Act is the aim of this chapter. The analysis shows that the installed capacity of micro-CHP in Germany is directly related to the amount of incentives provided by each state. Among several incentives, CHP Act is the most positively influencing factor for reducing risks regarding development of micro CHP in Germany. Chapter 6 is discussion and conclusion. In this chapter we discuss, summarize and integrate the previous chapters in order to draw a conclusion and to answer the research questions. Following hypothesizes discussed in chapter 6: The cultural and institutional system in Germany is positively affecting entrepreneurial activities but it has some weaknesses. The uncertainty avoidance culture of Germans and complexity of regulations are among them. Macro level phenomena at global and EU level, helped establishment of a supportive institutional setting in favor of micro CHP development positively. For example, Phase out of nuclear and less supports of Renewable energies in recent years provide more space for micro CHP development At regime level, the institutional setting also was against the development of micro CHP in the past; however, both market liberalization and purchasing the micro CHP developers by big utilities provided more hopes for future development. For example, the goal of energy market liberalization was raising competitiveness and innovation, and several CHP acts passed by the government in order to support the technology. III Table of Contents Preface ........................................................................................................................................... II List of Figures ............................................................................................................................ VII List of Tables .............................................................................................................................. XII List of Abbreviations ................................................................................................................ XIV An introduction to the situation of micro-CHP in Germany’s energy transition ..................... 1 Energy system of Germany ....................................................................................... 1 Distributed generation and combined heat and power (CHP) ................................... 7 Micro-CHP: principle, concepts and technologies .................................................... 9 Research Motivation: Micro-CHP development in Germany ................................. 12 State of the art, research questions and Methodology ............................................................ 15 State of the art and research contribution ................................................................ 15 2.1.1 Literature on the theoretical framework of innovation ....................................... 15 2.1.2 Literatures on theoretical Framework of entrepreneurial activities .................... 18 2.1.3 Literature on the cost-benefit model of micro-CHP development ..................... 21 2.1.4 Literature on micro-CHP development in Germany .......................................... 26 Research Design and Methodology ......................................................................... 32 2.2.1 Analytical arena .................................................................................................. 32 2.2.2 Research questions and hypothesis ..................................................................... 33 Theoretical framework of research .......................................................................... 34 2.3.1 Dependent and independent variables of research: ............................................ 35 2.3.2 Research methodology ........................................................................................ 36 The role of entrepreneurial activities in raising technological innovations in society and the theoretical framework of the research. ........................................................................................ 42 The role of entrepreneurial activities in development of technological innovations in society (A theoretical reasoning) .................................................................................... 42 3.1.1 Theoretical framework of technological innovation studies .............................. 42 IV 3.1.2 Measuring of innovation ..................................................................................... 43 3.1.3 Theories in formulating technological innovation .............................................. 45 3.1.4 Defining the borders of research and the analytical framework ......................... 55 3.1.5 Entrepreneurial system ....................................................................................... 58 Theoretical framework for analyzing the entrepreneurial activities in the Technological Innovation System of Micro-CHP .......................................................... 61 3.2.1 Definition of entrepreneur .................................................................................. 61 3.2.2 Theoretical analysis: Economic Theory of Entrepreneurship ............................ 62 3.2.3 Innovation model of entrepreneurs ..................................................................... 68 Analyzing the general factors and institutional setting on development of entrepreneurial activities of micro CHP in Germany ........................................................................................... 69 Culture