FSR Topic of the Month: Raising public awareness and trust in electricity transmission infrastructure development
Written by Pradyumna Bhagwat
In this week’s instalment, three obstacles to engaging in activities to raise public awareness and trust by project developers are discussed. The first obstacle is the framework offering economic incentives to engage in the above mentioned activities. The second obstacle is the internal TSO procedures, organisation and culture, which may not be adjusted to the complexity of the task at hand. The third main obstacle is the legitimacy of the activities carried out. It should also be noted that these obstacles are not mutually exclusive from one another.
Any activity undertaken by a firm entails costs. The resources allocated to any activity would eventually depend upon the total resources that are at the disposal of the firm (e.g. total budget for a project). Furthermore, the level of engagement of a firm in an activity is dependent upon the benefit that it would derive from this activity.
The same holds true for the stakeholder engagement activities that a TSO carries out. The level of those activities is likely to depend on the incentive that the TSO receives to conduct those activities. These incentives would range from tangible financial benefit arising from the on-time commissioning of projects to more intangible gains such as a better public image for the firm.
The costs of stakeholder activities and the benefits they bring are largely unknown. They might not be monitored by the TSOs, (or at least such data is currently not publicly available). Without such information, both the TSO and the NRA operate blindly and may adopt a prudent, conservative attitude towards possible costly innovations with uncertain returns. Today, TSOs experiment with innovative approaches. However, within the current economic and regulatory framework, moving from pilots to practice can be complicated. For example, the TSO may treat the additional cost of these activities that do not constitute acquiring or building an asset as operating expense (OPEX). However, this additional OPEX may not be accepted by the regulator and thus leave the TSO with just an additional cost. Such a situation may create a disincentive for innovation.
TSO procedures, organisation and culture
Traditionally, TSOs’ tasks were focused on achieving technical excellence in terms of its operations. TSOs’ interactions with external stakeholders was limited to organisations such as the NRAs. Therefore, TSOs have not been very consumer-centric or have had any incentive to change the company’s procedures, organisation and culture.
Due to an ever-rising level of awareness of the impact that transmission infrastructure projects may have on them, consumers and other stakeholders want to be involved more and more in the decision-making process. Even the approaches used for certain activities such as spatial planning and environmental planning that have been used traditionally require the innovative implementation. Therefore, firms have to deal with the stakeholders to ensure public acceptance of their projects during their development. Conducting innovative stakeholder engagement activities necessitate an equally diverse set of competence and skills that can then be either outsourced to external experts or developed within the organisation.
The use of outdated practices on the field can be considered as the first major obstacle that impedes the effective implementation of stakeholder engagement activities. Such situation could arise when a TSO does not have the right background and skills to engage effectively with the public. Thus, to keep up with this change, it is necessary for a TSO to review and appropriately update the company’s procedures, organisation and culture. It should be noted that some TSOs are already engaged in a transformational change of their processes, organisation and culture.
Adger et al. (2005) define legitimacy as “the extent to which decisions are acceptable to participants and non-participants that are affected by those decisions.” TSOs have a clear legal mandate for carrying out the monopoly activities such as operating the grid and ensuring security of supply. In many cases, TSOs also have a social responsibility bestowed upon, which can be part of a legal or moral mandate, to work towards the betterment of the society at large. For instance, a TSO may be tasked with supporting the energy transition to a decarbonised energy system in its role as infrastructure operator. TSOs, like any other organisation, may also call for a moral mandate to engage in activities that are just and fair for society.
However, the recent experience of TSOs with public opposition against new infrastructure developments and the resulting delays suggest that the public is not fully accepting the mandate of the TSO. The lack of legitimacy may partly be attributed to TSOs being unknown to the public. Indeed, since the unbundling of the energy sector, TSOs have a role with few direct interactions with the public and many citizens may not even know the name and the role of their national TSO(s).
To gain legitimacy, the TSO should interact with the stakeholders and explain its role in the supply of energy, connecting electricity producing units with energy consumption centres. Secondly, TSOs should explain their role in the energy transition and how their activities contribute to the required change of the power system. In particular, project developers should inform the people about why infrastructure projects are important enabling elements of the energy transition. Stakeholders who are fully aware of the importance of taking action (such as investing in a new transmission line) may have a more positive attitude towards TSOs, their activity and the related costs such as paying for a community project (such as building playgrounds, streetlights, pedestrian/cycling paths etc.) to compensate strongly affected communities.
To summarise, it is observed that obstacles to effective stakeholder engagement and to the implementation of such measures continue to exist. In the next instalment stakeholder activities that project developers are currently involved in would be discussed.
Full report coming soon!