How does the Institutional Setting Influence the Delivery of DHC?

Chapter 11. Comparative Analysis

11.2 How does the Institutional Setting Influence the Delivery of DHC?

Overall the comparative analysis findings support the literature review in demonstrating governance network behaviours as an empirical phenomenon in policy delivery. The cases show that government policy tools such as regulation, incentives, and capacity building are not sufficient in and of themselves for delivering DHC and it requires governance networks which include collaborative negotiations between the public and private sectors at a local level within cities to deliver DHC.

Governance networks are demonstrated to be a flexible form of policy implementation: different arrangements of governance networks seem to work and types of actors change across the case studies. There is no one right actor set or structure to negotiations for building DHC systems in an urban context. This flexibility allows for change in network strategies and for the introduction of new actors or new resources so that those with resources to construct DHC systems align with actors who wish to see it constructed and who will benefit. When the benefit of DHC accrues to specific organisations or actors rather than being dispersed across the network or city, the governance network moves from talking to negotiating. This exchange of resources is at the heart of governance networks for DHC and implies that for actors require resources to bargain with if they are to have influence in structuring or driving governance networks for DHC.

The comparative analysis also highlights the importance of support from local elected officials.

All three successful case studies had supportive local councillors or politicians over time. The case studies also demonstrate how the format and quality of exchange and negotiations influences delivery of DHC. Positive coordination negotiations, dense actor networks, and the existence of non-negotiation spaces can be correlated with successful implementation of DHC.

While this section has highlighted how the actors, actor constellations, negotiations, and relational characteristics of governance networks support implementation of DHC, the findings are difficult to extrapolate to all cases of network governance. For example, the relational characteristics which correlate with successful delivery of DHC could be particular to governance networks for urban infrastructure and fail to correlate with other policy goals.

11.2 How does the Institutional Setting Influence the Delivery of DHC?

While Scharpf explicitly developed ACI to link actor and institutionalist approaches, his 1997 book Games Real Actors Play does not give the institutional setting the same level of detailed explanation or focus as he does for the other three influencing variables. For him, the institutional setting is not a theoretically defined set of variables, but instead is a "term to describe the most important influences on the actors, actor constellations, and modes of

167 interaction" (p. 39). For this research, institutions within ACI are understood as rule systems that structure actor behaviour; they can have a more formal character as rules sanctioned by legal framework or public authorities as the ‘administrative systems’ of Newman and Thornley (1996), or a more informal character as norms, conventions, and expectations: the social conventions of Lowndes (1996).

Chapter 3 introduces important institutional influences in the context of planning and DHC systems. This section develops this understanding further by examining the significant formal and informal influences in the case studies. It begins by comparing the effect of actor experience and cost of fuel before turning to compare the influence of institutional context on local government and planning organisations across the five cases.

11.2.1 History and cost of fuel: Effect on actors and negotiations

Two institutional contextual influences discussed in Chapter 3 on the formation of actor preferences and orientations emerged as particularly important through the case study analysis:

the relationship of the proposed DHC system to existing heating or cooling fuels, and previous experience with DHC among the actor set. These influences were identified in the literature described in Chapter 3, and their importance was borne out through case study interviews.

The relationship of the proposed DHC system to existing fuels has two aspects: the source of fuel for the DHC system, and the consumer price of the DHC system versus other options for heating and cooling buildings. In Barcelona, Burlington, Lerwick, and Toronto the source – or a significant source – of heat or coolth for the DHC system exists, but negotiations were needed with the actors who control that fuel to build the infrastructure to connect the source to the DHC pipework, and negotiations were needed over the price the DHC operator would pay to use that fuel. In Barcelona, Lerwick, and Toronto the local government owns or significantly controls access to this fuel, and the negotiations were inter-departmental. While in Burlington, the local government's non-majority stake in the biomass power generator hindered development of a DH system. In London the MUSCO concession negotiations required the private sector energy company to build the power generator and provide the fuel. The need to build a generating plant as part of the DHC system contributed to the complexity of the negotiations and to negative local councillor preferences about the system.

The five cases suggest that the pre-existence of a government fuel source for DHC does not in and of itself define the actor constellation nor drive the success of delivering DHC. However government ownership or control over the fuel source influences government and other actor preferences for DHC and can provide a resource for government to bring to negotiations with the private sector to build and operate a DHC system.

The relationship of the cost of DHC to consumers versus other sources of heat and coolth also appears to affect actor preferences and strategies; however the effect tends to be on the growth of the DHC system rather than the negotiations to build it. In Lerwick and Toronto, DHC organisations are able to offer cheaper and more fixed prices to their customers compared to

168 other fuel options available. This has been attractive to customers and supported system expansion. In Barcelona the municipality supports DHC by regulating the heating to be cheaper than a gas reference case. This encourages private businesses and homes to connect, supporting network expansion. In London and Burlington, the relationship of proposed DHC prices to existing fuels is unclear. This is due in London to multiples changes to the proposed DHC network and in Burlington to the lack of detailed negotiations on the DH system to date.

As for experience with owning and managing infrastructure, Toronto is the only case study where actors have previous experience with DHC. Toronto's existing DH system provided a reference point for DLWC and brought at least two supportive influences to the governance network: technical engineering expertise about the potential for a cooling network, and a positive preference for a cooling network among many councillors. A lack of experience or awareness of DHC was explicitly identified by interviewees in the remaining four cases as a barrier to creation of DHC. In Burlington the lack of general awareness about DHC as a feasible solution affected progress; the BURDES group regularly cited the need for further studies and expert advice to convince potential customers and local government that it is a viable, profit-making solution. The Ever-Green Energy consultant in Burlington remarked on the issue of technical complexity and experience with DHC.

It’s part of the challenge. It’s not an interesting subject I'll say. Until you really – people don’t understand the benefits, the why do I care about it. In St Paul we hosted over 700 people for tours. And a lot of them are just people that are not industry experts or professionals in any way – just community development folks or politicians or members of the community that are interested, what is this here in the entertainment district. And time and time again you see the lights go on. We just have a standard talking point. And at some point they say

“This is really brilliant, why don’t other communities do this?"

(InterviewA4, 2012)

The lack of knowledge results in political resistance to new infrastructure, increased 'transaction costs' for the governance network and longer timescales for negotiation. Actors in all four cases bought advice on DHC from consultancies or brought in new individuals to work within local government.

Table 29 summarises how fuels and history shaped the orientation of actors for reference.

Cases which were unsuccessful in establishing DHC systems are shaded in grey.

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Table 29: History and fuel: institutional influences on actor orientations and preferences

11.2.2 Government actors

Chapter 3's discussion of the institutional context of DHC proposes that the formal institutional structures and informal 'house rules' of government actors would influence actor resources and powers as well as patterns of interaction in governance networks for DHC. In each case studied, there are formal limits on local government resources and powers which preclude the local government from building DHC themselves; these demand governance network patterns of behaviour. Those limits vary from operational controls over the remit and powers of local government to fiscal controls over government borrowing and spending. Within a broad context of private ownership of power, gas, and water utilities and public management of waste, the level of local government influence over utilities varies considerably across the cases. The following text discusses how the institutional context affects local governments across the five cases and considers how such context supports or hinders DHC.

Chapter 6 demonstrates how Barcelona's informal tradition of multi-level and cross-agency collaboration for events-based planning supports the creation of DHC in the 22@ district. The consortia approach and the creation of an independent regeneration company pulled together planning, housing, and development powers. Mayoral and political support was still needed to give authority to the arrangement (the mayor is the chairman of 22@ regeneration company) but this is not a formal role which influenced orientations or brought resources. Instead the mayor and his deputy mayors provide glue to the network to ensure collaboration between local government departments and other government organisations involved in the DHC system. For example, a deputy mayor of Barcelona City Council is also the vice president of the regional

170 company which manages waste in the Barcelona area. This facilitated the 22@ regeneration company to negotiate with the waste incineration plant for the use of waste heat for the DHC system, and consequently that the initial fuel source was cheaper in price than gas or electricity.

The informal institutional glue results in the DHC system being more attractive to potential energy company operators.

Burlington's local government structures are very different picture, with a comparatively limited set of capabilities and resources. In the USA, local government is legislatively restricted to a narrowly defined set of capabilities by Dillon's Rule and an the absence of state or national policies supporting DHC results in little access to government funding for Burlington to connect the McNeil power station to a DHC system. Potentially, Burlington's mayor could use his influence over local taxation of land and energy to create incentives to connect, or raise money through a public bond, but these are weaker market influences than an ability to procure a concession for DHC, and they require explicit voter support. Chapter 7 also describes how the mayor's ability to direct local government staff restricts municipal support for DHC. Without mayoral support it would be difficult for Burlington's local government to actively support DHC with money, knowledge or the exercise of procuring a new utility.

Even if the mayor did want to procure a DH system, Burlington's local government has limited resources to support this ambition. It does not have significant ownership of local property or strong connections with the two largest local energy consumers. The city has only partial ownership of the McNeil electricity generating station. And the city's recent attempt to establish a local telecoms company resulted in a negative perception of local government influence in utilities and restricted the fiscal borrowing capabilities of the city.

In Lerwick, Chapter 8 describes how the informal house rules of 'doing it ourselves' and 'wearing many hats' underpinned the resources available to Shetland Council and the positive coordination mode of interaction that supported the DH system. For example, the 'do it ourselves' orientation meant that the council preferred to directly manage waste and own the incineration plant; this provided a fuel for the DH system. Alongside this, the councils' ownership or influence with of many commercial and civic buildings in the area meant large customers were encouraged to connect. A further supportive informal context was the stable and non-party politics of councillors, which underlined the consistent preferences of the council. There are limits though; the council's lack of control or influence over the privately owned electrical power generation and distribution in Lerwick has limited the size of the DH system.

Chapter 9 describes how metro-level knowledge and environmental policy influences Southwark's local government and consultants to support DHC, but also describes how the mayoral powers are legally limited to approval of large developments. Both the metropolitan government and the local council do not own or significantly control existing utilities, nor potential fuel sources such as outputs of waste streams. However Southwark owns a large amount of land and housing in the regeneration area, including social housing, whose heat demands were attractive to potential MUSCO operators in concession negotiations. National

171 government controls over capital spending and European regulations about large scale government procurement also constrained local government resources, preferences, and modes of interaction within MUSCO negotiations. Finally, because the negotiations for the creation of the MUSCO spanned eleven years, the council's statutory four year election cycle also acted against a consistent local government approach as councillors and political leadership changed.

With Toronto, the post-amalgamation municipal government had informal support through an environmentally minded mayor and selected councillors who influenced government departments through public campaigns and council instructions. This political support survived across election cycles in the form of two consistently re-elected councillors. Chapter 10 also identifies other formal institutional contexts behind the council as influential on the DLWC system: the city could control local utilities in a way not seen in all other cases; the water company was a division of Toronto's municipal government, the city owned 100% of the local electricity distribution company, and it controlled a existing non-profit DH system.

Local and metropolitan government on their own

Another feature of the cases was the weak influence from actors above the local level: from metropolitan, regional, national to multi-national. There was some multi-level knowledge sharing and mutual support through local and metropolitan government in London and Barcelona.

Lerwick also had EU financial support. The case of Barcelona was the most connected at a metropolitan level, as individual politicians provided a connection between regional waste management and the regeneration company.

But looking beyond the metropolitan government actors, the engagement of multiple scales drops to a low level. London had the Clinton Climate Change Institute, Lerwick had European Union funding, and Barcelona had nominal support from the national government through minor capital investment but on the whole government policy, capacity building, or financial support is absent.

11.2.3 Planning organisations

Chapter 3 suggests that the formal, legal context of planning organisations should have a strong influence on their participation in governance networks. On the whole, the cases support this, but also illustrate that informal influences have an effect. The following text evaluates the influence of the institutional setting on planning organisations across the five cases.

Chapter 6 describes how historical conventions of planning behaviour as well as existing local government, legal, and technical planning actors in Barcelona are instrumental in shaping the capability of the actor set and the mode of interaction towards a successful outcome. The 'urbanisme' tradition of detailed forward planning and plan-making in Barcelona, existing for over 30 years against a backdrop of major events, meant that the city and its advisors had individuals and organisations with the legal mandate and the technical capability to set detailed infrastructure requirements and tightly control the volume and design of real estate being built in

172 the 22@ regeneration district. The existence of Barcelona Regional as a neutral, technical organisation informally linked to the city council also brought crucial knowledge of energy infrastructure and masterplanning capacity to the local municipal planning department and to local politicians.

Alongside the creation of real estate value and infrastructure finance through detailed control of growth, the mandated development control process required discussion about district heating and cooling connections with developers that helped reinforce city investment in the network.

And the urbanisme context of focusing growth and investment activity around large events drove the structure and terms of engagement for the initial DHC system, increasing the capacity of the 22@ public regeneration company. The existence of the Forum of Cultures became a public reason to direct government investment in the initial pipe network and the connection to the Tersa waste facility. As a result, the 22@ company possessed a DHC system that was attractive to a private sector energy company in tendering the concession to extend the network.

The strong market shaping and market regulating features of planning in Barcelona have a significant positive influence on the capacity of planning to support DHC and on the perceptions and responses of other actors.

And the influence of the institutional setting on planning in Barcelona goes beyond this formal structure into significant informal influences. As Chapter 6 describes, Barcelona's history of planners becoming politicians or politicians becoming planners generates local political capacity in the form of masterplanning knowledge which supports large scale regeneration investment.

These informal conventions of strong physical planning enabled the city to publicly promote the policy goal (the DHC network should be built) and through planning policy and development control created resources (likely DHC customers, initial DHC infrastructure) for city government to negotiate with the private sector with to build Districlima.

Burlington has a radically different planning system, roughly characterised as state-defined and focused on zoning of land uses. Chapter 7 describes that the city is required by state law to include energy plans in the municipal development plan; this public mandate creates a form of planning capability for the local planning commission to discuss climate change and energy issues. This is where the concept of district heating has remained in the consciousness of the local government. However the development of planning policy is organisationally divorced from local political leadership and local government strategy and, in comparison with other cases, the planning system brings very little else to the actor set and to the capacity for interaction. Public control of development design and function within the development plan is not as strong as in the other cases, based in a looser land use zoning categorisation. And the lack of strong development control policies mean that even if there was major new development near a DHC

In document Delivering urban energy infrastructure: the capacity of planning and governance networks in the cases of Barcelona, Burlington, Lerwick, London, and Toronto (Page 166-176)