Governing the Energy Transition

The energy supply sector is often conceptualized as a complex socio-technical system consisting of constellations of different actors, institutions and material artefacts (Geels 2004; Smith 2007; Reichardt et al. 2016). The energy transition, as a socio-technical sustainability transition, is characterized by long-term changes along multiple dimensions: technological, material, organizational, institutional, political, economic, and socio-cultural (Markard et al. 2012).

Because the modern nation state and the fossil fuel economy have evolved in parallel since the Industrial Revolution in the late eighteenth century, the decline of the fossil fuel era in an increasingly electrified world may have profound implications for the role of the nation state (Global Commission on the Geopolitics of Energy Transformation and IRENA 2019). Current energy markets, institutions, regulations and policies were originally developed to support the production and use of fossil fuels. Since renewable energy systems differ significantly from fossil fuel systems (e.g. production, transmission, and associated greenhouse gas emissions), adaptation of existing institutional structures and policy mechanisms based on incremental changes might be insufficient to promote the energy (system) transformation (Verbruggen and Lauber 2012). Some scholars suggest that socio-technical transitions can be facilitated by processes of governance (rather than government), which involve a higher diversity of actors, knowledge and tools (Shove and Walker 2007). In contrast to what government stands for (i.e. bureaucracy, legislation, financial control, regulation and force), governance represents the ‘increasing importance of multilevel decision-making arenas, the involvement of more stakeholders and thus (…) more “collaborative” policy decisions’ (Jordan et al. 2013: 159). Under the governance school of thought, the national government is one of many actors trying to address the challenges associated with the transition towards sustainable energy futures (Guerra 2018).

Governance includes both traditional command-and-control regulation and ‘new’ or softer modes of governance such as agenda-setting, negotiation, implementation, monitoring, financing, self-regulation, and information-sharing that can be exerted by private actors (sometimes alongside public actors) (Abbott 2012; Bulkeley et al. 2012; Sovacool and Florini 2012; Wurzel et al. 2013). Previous research associates the emergence of these ‘new’ modes of governance with ‘governments’ declining ability to steer and direct societal actors in a hierarchical top-down fashion (…) [and] the increasing importance of multi-level decision-making arenas’ (Wurzel et al. 2013: 3). This phenomenon is often referred to as the ‘governance turn’ (Kohler-Koch and Rittberger 2006). The governance literature is awash with such high general claims of how changes across policy sectors have resulted in shifts in the forms and instruments of governance, the location of governance, governing capabilities, and styles of governance (Van Kersbergen and Van Waarden 2004; Van Leeuwen and Van Tatenhove 2010). Detailed studies which ‘test’ these claims about the changing nature of governance are however rare. This article discusses variations in governance approaches to renewable energy across different world regions, namely the European Union (EU) and the Gulf Cooperation Council (GCC).

Multilevel Governance and Smart Policy Mixes

The increasing complexity and the multi-layered nature of environmental problems such as climate change and the inability of hierarchical government to deal with them in a timely and efficient manner, have led to discussions on ‘smart governance’. Smart governance fosters open and flexible institutions, stakeholder participation, and multilevel collaboration in all governance dimensions, including policy (Scholl and Scholl 2014). Introduced by Gunningham et al. (1998), the concept of ‘smart regulation’ entails that certain combinations of instruments (e.g. international treaties, domestic law, and economic incentives) may work better than isolated instruments. Van Erp et al. (2019) expanded Gunningham et al.’s concept of ‘smart regulation’ to ‘smart mixes’ which include various policy instruments, both public and private and enacted at different levels.

Arguably, a shift from state-centred to ‘smart’ or multilevel governance might result in more complex policy mixes which entail more diverse policy instruments, both regulatory and non-regulatory, created by different actors at different levels (Wurzel et al. 2013). Regulatory policy instruments provide a combination of targets, strategies and plans, mandates and obligations, and regulate projects from inception to operation (and decommissioning). Non-regulatory instruments include economic instruments and voluntary measures. Economic instruments can be split into technology push (e.g. research and development (R&D) grants or capital investment) and market pull incentives (e.g. feed-in tariffs (FITs), feed-in premiums (FIPs)) (Kitzing et al. 2012; Leete et al. 2013). Voluntary measures comprise for example unilateral commitments, voluntary schemes, and voluntary agreements (Jordan et al. 2013). While regulatory and economic instruments are mostly put forward by governmental actors (albeit they can be implemented at different levels of government), voluntary measures are often initiated by sub-national (e.g. local or regional governments) and/or non-state actors (industry, non-governmental organizations, etc.).

Renewable energy technologies show different maturity levels with considerable variations between countries. Therefore, an instrument mix that ‘works’ in one situation (technology or country) might not work in another. Thus, technological maturity as well as contextual factors, including national (and local) socioeconomic, political, cultural, environmental and geographical conditions, are key in determining the effectiveness of a policy mix in supporting renewable energy development and deployment (Lipp 2007; Kerr et al. 2014; Lange et al. 2018).

As countries pursue efforts to increase the share of renewables in their energy systems (or not), one important question emerges: are policy mixes becoming increasingly complex because of the decentralization of energy governance? The next sections reflect on these issues while focusing on two distinct regions, the EU and the GCC, to analyze and contrast governance approaches to renewable energy, namely the existing policy mixes.

Renewable Energy Governance in the EU

Compared with other world regions, the EU has a distinctive form of multilevel governance uniting 27 member states (post-Brexit). Although energy governance has traditionally been regarded as a matter of national sovereignty, the growing recognition of the transboundary challenges that renewable energy addresses (e.g. climate change) strengthen the need for a collaborative, multilevel governance approach (Van de Graaf and Colgan 2016). In this context, the EU has progressively been gaining energy-related agenda-setting influence along with coordination, funding and (some) regulatory capacities over its member states (Szulecki et al. 2016).

Although it must respect the principles of subsidiarity and proportionality, EU energy policy has significantly contributed to the success of ‘first generation’ renewable energy technologies (solar PV and wind energy) (Long 2014). For instance, the EU Renewable Energy Directive and targets for 2020 and 2030 have been instrumental in driving investment and deployment across countries. Adopted in 2012, the Commission’s Blue Growth Strategy has stimulated advances in offshore renewable energy, particularly offshore wind power as an important source of clean energy, jobs, etc. (European Commission 2017). The European Commission’s updated State Aid Guidelines are driving the EU-wide implementation of auctions as the primary support mechanism for renewables, resulting in remarkable cost reductions and industrialization of the offshore wind sector (IRENA 2019). The European Green Deal as well as the European Offshore Renewable Energy Strategy strengthen the EU’s ambition to lead the development and deployment of renewable energy, especially offshore renewable energy technologies (European Commission 2020). For this, several technology push R&D instruments have been put forward at the EU level through innovation programmes such as FP7 (2007–2013), Horizon 2020 (2014–2020), and Horizon Europe (2021 onwards). These and other supranational incentives typically complement national support instruments (e.g. revenue support in the form of FITs or FIPs) and are often ‘mixed’ with instruments by sub-national and non-state actors.

Across the EU, sub-national and non-state actors are increasingly claiming larger roles in renewable energy governance, contributing to multilevel rather than centralized energy governance. Cities and regions are key actors in the energy transition (Sperling and Arler 2020; REN21 2021). Although they have limited resources when compared to national governments, local and regional bodies perform critical renewable energy governance functions such as planning (including identifying areas for project deployment), putting pressure on central government (e.g. higher targets at sub-national levels), mobilizing finance, enabling supply chain development, investing in infrastructure, and overall supporting companies to develop projects in their jurisdictions. A clear example of this bottom-up governance approach is ocean energy governance in France, where the regions of Normandy and Brittany are proactively supporting the development of ocean energy projects by, inter alia, entering into voluntary agreements/partnerships with foreign developers. Although France remains a highly centralized polity, bottom-up governance trends (in combination with the EU instruments mentioned above) are allowing emerging renewable energy sectors, namely tidal stream power, to slowly progress towards commercialization with very limited support from the national government (Interreg North-West Europe FORESEA 2019; Poupeau 2020). Furthermore, other forms of energy decentralization such as citizen-owned renewable energy projects and the spread of electric mobility in the EU also enable decentralized governance (Leal-Arcas 2020; REN21 2021).

Bottom-up governance, led by sub-national and/or non-state actors, fosters experimentation at lower governance levels as well as learning and exchange between various actors at multiple levels which arguably render the governance system more innovative, resilient, and effective (Goldthau 2014). Bottom-up governance activity in the EU can thus achieve tangible results particularly for emerging renewable energy technologies (promoting industrial standardization, maximizing buy-in from different stakeholders and supporting the establishment of niche markets) as a precursor of (and complement to) state intervention.

Renewable Energy Governance in the GCC

GCC countries compose a particular cluster of Middle Eastern countries due to their shared characteristics such as the abundance of hydrocarbon resources and these countries over reliance on them in their economic structures. For decades, GCC countries were defined by their rentierFootnote 1 identity with significantly low levels of economic diversification. However, in the past decade, there has been unprecedented progress with renewable energy in some countries in this region (Atalay et al. 2016). Still, when analyzing the policy mixes used in the context of energy governance in these states, we see a picture that is quite different than the European case.

Although there is empirical evidence for an increase of renewables in the GCC energy mix, there is variation among the six GCC countries: Qatar and the United Arab Emirates are pioneers and leaders regarding renewable energy development in the region while Saudi Arabia, Bahrain, Oman and Kuwait continue to lag behind (Atalay et al. 2016). One of the common features of GCC renewable energy leaders are the economic policy instruments which are put forward at multiple levels and represent key drivers of renewable energy activity. Through foreign direct investments, joint ventures and various multinational business partnerships, the leader states in the region not only diversify the financial support for renewable energy projects, but they also participate in cross-border policy transfers through which policy knowledge flows to their national governance schemes from partner countries which have relatively more developed and mature renewable energy governance (Atalay et al. 2016: 210). In the United Arab Emirates and Qatar, therefore, the funding and execution of renewable energy projects take place in a decentralized manner, although there is still a highly centralized political and regulatory system where conventional energy or petroleum ministries play a major role in (renewable) energy policymaking and implementation (Atalay et al. 2017).

Multilevel governance, although present in the GCC, takes a different form than multilevel governance in the EU. The learning and exchange between governing actors take place only at the supranational level and not at lower levels of governance. In addition, a different smart policy mix stands out in the case of GCC. Voluntary agreements are not typically found in the existing policy mixes for renewable energy governance in the region. Instead, a smart mix in GCC countries typically involves national regulatory instruments and economic instruments enacted at different levels. Notwithstanding, some economic instruments can be considered hybrid instruments (e.g. business partnerships) since they may be voluntary.

The absence of a bottom-up governance dimension in the renewable energy paradigm of the GCC does not mean ineffective policy results. Different contextual factors such as the political system, historical background and experience, technology maturity or demographic structure call for a tailored mix of smart governance instruments. A detailed assessment of governance indicators of GCC states with respect to the renewable energy sector suggests that effective policy outputs and good governance do not necessarily stem from a strong policy input base with a variety of collaborative administrative schemes, strong democratic foundations, or multilevel participation in the decision-making processes (Atalay 2018). In other words, a strong policy input side in the governance scheme does not explain successful outcomes by itself, there may be various other factors at play (e.g. the existence of influential political elites).

It remains to be seen whether bottom-up governance can emerge in the GCC states in the future. The present-day conditions, however, show that they are currently in a progressive state regarding renewable energy uptake, even with very low degrees of decentralization in energy governance.

Discussion and Key Findings

This paper shows that the decentralization of energy governance, partly stimulated by the transition to (relatively) decentralized renewable energy resources, is marked by increasingly complex policy mixes. One of the main drivers of complex policy mixes is the growing involvement of actors operating ‘above’ and/or ‘below’ the national government in renewable energy governance. Supranational governance actors and instruments are increasingly prominent in the context of renewable energy in both EU and GCC countries. The EU plays a key role in promoting the harmonization of governance approaches to renewables and continues to encourage higher ambition for the sectors. Bottom-up modes of governance, relying on non-state and regional and local actors, complement the already multilevel nature of ORE governance across the EU. In GCC countries, cross-border cooperation has been critical to stimulate the uptake of renewable energy.

Generally, decentralized governance structures have been particularly successful in advancing the renewable energy sectors in EU countries. Although the common presumption may be that a multilevel governance approach, characterized by a smart mix of regulatory, economic and voluntary policy instruments enacted at supranational, national and sub-national levels, is a requirement for good energy governance, different regions with different contextual conditions show distinct policy needs. The efficiency and effectiveness of a smart policy mix depend on contextual factors since there is not one single policy instrument combination prescription with universal applicability. The analyses of oil-rich, rentier states of the GCC show that the diversification of economic instruments supporting renewable energy deployment, namely growing foreign direct investments, joint ventures and multinational business partnerships, create an avenue for multilevel governance. Through these multilevel channels, these states could transfer successful business practices and enable top-down policy learning. Their heavily centralized, monarchical state system and the lack of bottom-governance thus do not necessarily paint a gloomy picture for the future of renewable energy uptake in the GCC. Still, there are differences in the governance structures of different countries, both in the EU and the GCC, including the composition and characteristics of policy mixes, which might explain variations in terms of their progress with the energy transition.

Future research should analyze the interactions between instruments within a mix since these can create either an enabling or a hostile environment for renewable energy. One question that deserves further analysis is whether the existing policy mixes address the main challenges faced by renewable energy technologies in different contexts (e.g. cost-competitiveness, public acceptance, competition for space, environmental uncertainties). Integration, defined as the smooth coexistence of different (types of) policy instruments in a manner that minimizes conflict and, if possible, promotes synergies and complementarities, has been identified as a key feature of effective policy mixes (Howlett et al. 2017). However, instruments within a mix are often implemented at different levels and might address different actors’ goals and agendas (greenhouse gas emissions reduction, economic growth, energy independence, etc.) which may lead to poor integration. Poor integration between instruments can have detrimental impacts on the effectiveness and efficiency of policy mixes which ultimately compromises good governance for the energy transition.