The key role of historic path-dependency and competitor imitation on the electricity sector low-carbon transition

Market players in the energy sector transition are heterogeneous, have bounded rationality and are influenced by their own past failures, as well as imitating the successes of their competitors. However this agent heterogeneity and complex behaviour in investment choices is not taken into account in traditional energy-economy models used to inform energy sector policies. By using BRAIN-Energy, an agent-based model of investment in electricity generation, which enables to study the impact of actors’ heterogeneous characteristics on the transition pathways of the UK, German and Italian electricity sectors, this paper shows how historic path-dependency in investment choices displaces low-carbon in favour of high-carbon investments under a weak regulatory framework. By contrast, imitation can help the diffusion of renewable technologies, through a self-reinforcing positive feedback when government subsidies to low-carbon investments are in place.