Path dependence; path creation: roles for incumbents in the low carbon transition?

Peter Pearson, Imperial College London, United Kingdom

Several studies have emphasised the path dependent, locked-in states of incumbent high carbon technologies and industries (carbon lock-in), and their potential capacity to delay the development and penetration of low carbon technologies and practices (LCTs) (e.g. Unruh, 2000). Even if LCTs have similar attributes to existing technologies, apart from low carbon, if the existing technologies are already under pressure to improve, then LCTs may face a moving target (Pearson and Foxon, 2012). However, other analyses point towards the possibilities of path creation and creative accumulation by incumbent firms (Bergek et al. 2013). This paper examines these issues, explains why history and incumbents matter in the low carbon energy transition and investigates the roles that might be played by incumbents in actively advancing the transition.

Many studies of large technological systems in energy (e.g. Hughes, 1983), show the positive and negative aspects of path dependency. Arapostathis et al.  (2014),  for example, shows both the advantages – how the development of the UK’s natural gas system benefited from the earlier construction of a ‘backbone’ distribution pipeline system for LNG – and the disadvantages – how previous history constrained the development of the system before WWII to the point of ‘incoherence’ and how this was changed by nationalisation in 1948. The ‘sailing ship’ effect (SSE) or the ‘last gasp effect of obsolescent technologies’ (LGE) – occurs where competition from new technologies stimulates improvements in incumbent technologies/firms. Recent analyses of energy-related industries threatened by technological discontinuities offer insights into:  why incumbent technologies might show a sudden performance leap; how current analyses may overestimate new entrants’ ability to disrupt incumbent firms; and underestimate incumbents’ capacities to see the potential of new technologies and to integrate them with existing capabilities (Bergek et al. 2013)

The paper will argue that while incumbent technologies and firms can exert constraining influences on the success of low carbon technologies and policies, there may also be positive opportunities for system actors and policies to overcome lock in, accumulate new competences and help create new low carbon paths. It is argued that the urgency of a low carbon transition, the short time scales and the existing infrastructures mean that it is essential that incumbents, as well as new firms, engage rapidly with LCTs.

References

Arapostathis, S., Pearson, P.J.G., and Foxon, T. J. (2014). UK natural gas system integration in the making, 1960–2010: Complexity, transitional uncertainties and uncertain transitions. Environmental Innovation and Societal Transitions 11, 87–102.

Bergek, A., et al., (2013), ‘Technological discontinuities and the challenge for incumbent firms: Destruction, disruption or creative accumulation? ‘Research Policy 42(6–7), 1210–1224.

Hughes, T P (1983). Networks of Power: Electrification in Western Society, 1880-1930. Baltimore: Johns Hopkins University Press.

Pearson, P.J.G. & Foxon, T.J. (2012), ‘A low carbon industrial revolution? Insights and challenges from past technological and economic transformations.’ Energy Policy 50, 117-127.

Unruh, G C (2000), ‘Understanding carbon lock-in’. Energy Policy, 28(12), 817–830.