Designing institutions for Emerging Technologies in the energy transition: Towards a heuristic model

In an era marked by significant societal challenges, the pivotal role of emerging technologies, particularly in the energy transition towards the 2050 net-zero greenhouse gas target, has garnered considerable attention (Mazzucato, 2021; Ulnicane, 2022; Diercks et al., 2019). These technologies, characterised by radical novelty, fast growth, and profound impact, inherently carry considerable ambiguity and uncertainty (Rotolo et al., 2015). For instance, the Netherlands views the uptake of large-scale energy storage (LSES) technologies as essential to better balance energy supply and demand. Yet, the nascent nature of these technologies poses uncertainties regarding their operational scale and the benefits and challenges of integration. To effectively harness emerging technologies, it is necessary to make adjustments to institutional design, so as to harness the benefits of these technologies while minimising potential risks (Rip & Kemp, 1998; Mandel, 2009; Chleba & Simmie, 2018). In the literature on institutional design, the term institutional design encompasses both formal mechanisms, such as laws and contracts, and informal mechanisms, such as values and customs, ‘between actors that regulate their relations: tasks, responsibilities, allocation of costs, benefits, and risks’ (Koppenjan and Groenewegen, 2005: 243). While institutions provide stability, they might lack the agility needed for rapidly evolving technologies. In the case of LSES, there are concerns among stakeholders that these technologies could outpace Dutch regulations, potentially stymieing their development. Although there is a substantial body of research on institutional design in relation to technologies, the focus has predominantly been on established ones (Koppenjan & Groenewegen, 2005, De Bruijn & Herder, 2009). The distinct challenges posed by emerging technologies to institutional design due to high uncertainty levels, especially concerning risk management, regulatory structures, and governance, are somewhat underrepresented in the current literature (Isigonis, et al., 2020; Linkov et al., 2018; Marchant, 2020; Mandel, 2009; Withford & Anderson, 2021). It is insufficiently understood how to manage challenges when designing institutions for emerging technologies, despite the growing importance of emerging technologies in e.g., in the Dutch energy system. Therefore, this research seeks to address the following research question: What are the key challenges in the process of designing institutions for emerging large-scale energy technologies and how can they be managed? Employing Koppenjan and Groenewegen’s (2005) framework for analysing institutional design, this paper explores the key challenges posed by emerging technologies when adjusting institutions, focusing on emerging LSES technologies in the Netherlands. Data derived from 31 in-depth interviews and 4 focus groups with LSES stakeholders provides an initial exploration of the current institutional design and its inherent challenges. This is followed by synthesising insights from both the emerging technology governance literature, along with the results of the LSES case study, leading to a heuristic tool for such technologies.