Innovation

version: 1.1 updated: March 2026

lead-authors: Klaus Kubeczko contributors: [Names] reviewers: [Names] sensitivity: low

The concept of innovation in energy systems has evolved from a narrow focus on firms and market growth toward a broader view of innovation as a socio-technical process. In the context of smart grid transitions, it involves the intentional creation and institutionalisation of new technological, social, and organisational solutions. This transformation requires navigating established socio-technical regimes where social and institutional changes are as fundamental as the hardware itself.

Why this matters

The historical view of innovation has shifted from a “vice” (pejorative and political) to a “virtue” used as an instrument for achieving social goals [3]. For smart grids, understanding innovation dynamics is critical because the “categorical imperative” often penalises developments that do not fit established cognitive and regulatory frameworks [2]. Moving beyond pro-innovation bias allows policymakers to address the enabling factors for technological diffusion and the “exnovation” of unsustainable legacy structures that hinder system transformation.

ISGAN definition

Innovation is the multi-dimensional process of creating and institutionalising new technological, social, or organisational solutions—including products, processes, and services—that respond to grand societal challenges and create public value. In smart grid transitions, this encompasses “mission-oriented” initiatives that aim to reshape socio-technical regimes through niche development, the alignment of legal and infrastructure frameworks, and the pursuit of directional objectives [1, 7].

Based on category theory, innovations are classified by how they interact with existing social and regulatory categories [2]:

Innovation Category Framework Source: Frenken & Punt, 2023

Innovation Type	Description
Incremental	Readily categorised and institutionalised in an existing category; valued for minor improvements.
Breakthrough	Readily categorised in an existing category; valued for major improvements.
Disruptive	Eventually institutionalised in an existing category by stretching its boundaries; makes practice more accessible.
Radical	Institutionalised in a new category rather than an existing one; valued for its novelty.

Perspectives

The study of innovation focuses on how new solutions emerge in niches, navigate socio-technical regimes, and eventually influence the broader landscape.

Actors

Contemporary innovation is driven by a wide array of actors beyond traditional entrepreneurs and corporate R&D. These include “mission-oriented” actors—public and private entities collaborating to achieve societal value (e.g., grid stability, decarbonisation) rather than just market success. These actors must navigate the “categorical imperative,” ensuring that new solutions are eventually accepted and valued within social practices and regulatory standards [2].

Technology

Technological innovation in smart grids is increasingly “granular,” characterized by the proliferation of small-scale, low-unit-cost technologies like solar PV and lithium batteries. Unlike large-scale infrastructure, granular technologies often exhibit steeper learning curves, faster diffusion, and provide more equitable access [4]. This granularity enables rapid experimentation and performance improvements, though it requires innovation policies aligned with market demand to achieve system-wide transition.

Case: Granular vs. Large-scale Learning

The “Low Energy Demand” (LED) scenario demonstrates that rapid innovation in granular end-use technologies can meet climate targets through widespread diffusion and rapid cost reductions. This approach reduces reliance on unproven large-scale supply-side technologies by leveraging the rapid learning rates of mass-produced components [4].

Institutional

Institutions shape innovation through laws, standards, and governance. A core challenge is how society categorises and institutionalises novelty. Institutional innovation also includes exnovation: the deliberate, structured ending of unsustainable practices, technologies, or socio-technical regimes to make room for transformative solutions [5, 6].

References

Aigner, E., et al. (2022). Kapitel IV: Technical Summary. In APCC Special Report: Strukturen Für Ein Klimafreundliches Leben. Springer Spektrum. https://doi.org/10.1007/978-3-662-66497-1

Frenken, K., & Punt, M. B. (2023). A New View on Radical Innovation. In 14th International Sustainability Transitions Conference (IST 2023). SocArXiv. https://doi.org/10.31235/osf.io/6cr5t

Godin, B. (2015). Innovation Contested: The Idea of Innovation Over the Centuries. Routledge.

Grubler, A., et al. (2018). A low energy demand scenario for meeting the 1.5 °C target and sustainable development goals without negative emission technologies. Nature Energy, 3(6), 515–527. https://doi.org/10.1038/s41560-018-0172-6

Kubeczko, K. (2022). Transformative Readiness - Unpacking the technological and non-technological aspects of sustainability transitions. Presented at the 13th International Sustainability Transitions Conference (IST 2022).

Novy, A., et al. (2022). Kapitel 2: Perspectives for analyzing and shaping structures for a climate-friendly life. In APCC Special Report: Structures for a Climate-Friendly Life. Springer Spektrum. https://doi.org/10.1007/978-3-662-66497-1

OECD. (n.d.). What is mission-oriented innovation? Observatory of Public Sector Innovation (OPSI). https://oecd-opsi.org/work-areas/mission-oriented-innovation/