The Transformation of the Germany Electricity System - a Field Perspective

The paper analyzes the role of institutions in the process of the transformation of the German electricity generating system. The transformation will be studied by distinguishing between three phases of institutional development. In phase one lasting from the late 1980s until 1998 the institutional setting of the electricity system was characterized by its decentralized and semi-public character, legitimized by the idea that electricity generation and supply constitutes a natural monopoly. As a “niche development” we observe the growing importance of actors interested in the development of renewable energies, which in those years could not really grow because of institutional and regulatory hurdles.

Phase two is characterized by a double institutional re-alignment. Due to liberalization electricity markets are created which become dominated by the four big utilities. Former decentralized entities are mostly bought out. A wave of merger and acquisitions takes place. In parallel but also somewhat disconnected from these developments, a new regulatory framework for the development of renewable energies had been created. The developing institutions for renewables had little overlap with the main stream electricity system. Different actors, rules and organizations were dominant. This resulted in a very dynamic development of the renewables sector.

Phase three finds its symbolic expression in the Energiewende decision of the Federal Government (2011). The constant growth of renewables and the definite end for nuclear energy necessitated a re-alignment of the electricity sector. Renewables no longer were a niche activity and the incumbent actors were forced to accommodate their business models to the new situation. The interests of incumbents and challengers are directly clashing and the government is working on a new market design. A process which is of yet undecided. The new institutions under construction, however, will neither mirror the “liberal market spirit” of phase two, nor the enabling mood of phase two as far as the renewables were concerned. 

The paper will use the neo-institutionalist theory of strategic action fields as developed by Neil Fligstein and Doug McAdam to analyze the transformation of the electricity system. The theory puts the conflicts between challenger (renewables) and incumbent actors (utilities) center stage for explaining institutional stability and change. The case of electricity generation is insofar “special” as the field (more than others) is constantly the object of government interventions and prone to be influenced by the broader macro-cultural discourse (nuclear energy, climate change).  Institutions in this contexts are both constraining actions but also enabling new activities.