The Power Transition Challenge
Energy systems are among the most complex and critical infrastructures in modern societies. Their transformation requires coordinated change across technological, economic, social, and political dimensions. Yet traditional governance approaches—focused on regulation rather than active system transformation—often prove inadequate for managing such multifaceted transitions.
As climate change accelerates and energy security concerns intensify, governments worldwide are experimenting with new institutional models for steering energy transitions. The fundamental question they face is universal: how to systematically redesign energy systems to address climate change while maintaining economic competitiveness and energy security.
Denmark and India, despite vastly different economic contexts and starting points, have developed innovative institutional approaches that offer valuable insights for energy governance. Denmark’s Danish Energy Agency (DEA) and India’s Energy Efficiency Services Limited (EESL) represent pioneering institutional innovations that have successfully driven energy transitions in their respective contexts.
Denmark's Crisis-Driven Transformation
The 1973 oil crisis plunged Denmark into chaos. Importing over 90% of its energy from the Middle East with no domestic oil production, the country faced rationed fuel, blackouts, and car-free Sundays while its economy contracted sharply. [1]]
Unlike other nations that responded by increasing fossil fuel exploration, Denmark chose radical energy system transformation. The government launched a comprehensive plan to reduce import dependence, decentralize energy production, and promote alternatives—establishing the Danish Energy Agency (DEA) in 1976. [2]
The DEA developed an integrated strategy addressing supply, demand, market structures, and infrastructure simultaneously. This whole-system approach became Denmark’s hallmark. The agency pioneered energy efficiency standards, tax incentives, and renewable subsidies, while actively shaping energy markets to incentivize clean investment.
A key institutional innovation was the DEA’s governance model, which combined ministerial oversight with significant operational autonomy. This independence allowed the agency to develop specialized expertise and maintain policy consistency despite political changes. Its professional civil service staff provided continuity of institutional knowledge, enabling planning beyond electoral cycles.
Another notable innovation was the DEA’s collaborative stakeholder engagement model, implementing policies through regulation and incentives based on close dialogue with industry and key stakeholders, building broader support for transformative policies. [3]
Wind power emerged as particularly promising for Denmark’s coastal geography. The DEA supported its development through research funding and guaranteed feed-in tariffs, enabling local innovation that eventually produced global industry leaders like Vestas and Ørsted. The agency’s promotion of community ownership of wind farms created a novel model where local citizens owned shares in turbines—building public support for the energy transition. [4]
By the early 2000s, Denmark had transformed its energy system, with wind power supplying a substantial portion of electricity. Following Denmark’s Climate Act in 2020, the DEA has been tasked with implementing the nation’s ambitious target to reduce emissions by 70% by 2030 (compared to 1990 levels). [5]
Today, the DEA works beyond national borders, sharing Danish expertise through government-to-government cooperation programs. Recognizing that Denmark accounts for just 0.1% of global emissions, the agency’s Center for Global Cooperation represents an institutional innovation in scaling national expertise globally, collaborating with 24 countries to accelerate the green energy transition, leveraging decades of Danish experience in energy system transformation. [6]
India's Market-Driven Efficiency Revolution
In the early 2000s, India faced multiple energy challenges: rapid economic growth drove soaring electricity demand amid chronic power shortages, state-owned utilities suffered financial distress, and climate commitments required moderating emissions without hindering development.
Unlike Denmark’s crisis-driven response, India’s approach emerged through deliberate institutional design. The government established Energy Efficiency Services Limited (EESL) in 2009 as a joint venture of four major public-sector enterprises under the Ministry of Power. [7] This structure gave EESL the agility of a private enterprise while keeping it aligned with national energy priorities—creating a purpose-built institution for market-based energy efficiency.
With the institutional foundation in place, EESL launched its first major initiative in February 2014. The town of Puducherry was selected for a pilot program that distributed high-quality, energy-efficient LED bulbs to households at a fraction of their market price.
EESL’s approach centered on a novel market aggregation model. Rather than subsidizing LED bulbs directly, it used bulk procurement to drive down costs—placing orders for millions of units that enabled manufacturers to achieve unprecedented economies of scale. This strategy dramatically reduced LED bulb prices while maintaining quality standards through mandatory warranties and strict specifications. [8]
Implementation required navigating complex stakeholder dynamics. State power utilities, which traditionally earned revenue from electricity sales, were initially resistant. EESL addressed this by linking efficiency gains to financial incentives, ensuring that utilities shared in the savings. Consumer skepticism was addressed through public awareness campaigns and establishing trusted distribution networks.
The successful Puducherry pilot expanded nationwide in January 2015 as the UJALA (Unnat Jyoti by Affordable LEDs for All) program. By January 2022, UJALA had distributed over 360 million LED bulbs across India, generating substantial savings on household electricity bills and reducing carbon emissions. [9] The program expanded beyond lighting to create a comprehensive approach to demand-side management that included other energy-efficient appliances.
EESL demonstrates how purpose-built institutions can bridge the gap between public policy objectives and market mechanisms. Its success stems from several key design elements: a hybrid organizational structure that combines public ownership with commercial flexibility; a sequential development approach; market-making capabilities that actively shaped markets; and stakeholder alignment mechanisms that ensured benefits were shared across the value chain.
Today, EESL continues to lead India’s energy efficiency transformation and has expanded its model internationally. The UJALA model has inspired similar bulk procurement programs both nationally (such as the Super-Efficient Air Conditioning Program launched in 2019) and internationally (including Malaysia’s Efficient Lighting Initiative launched in 2018), demonstrating how innovative institutional arrangements can create replicable solutions to global energy challenges. [10]
Institutional Innovations in Energy Transitions
Despite stark differences in economic context and starting points, both Denmark and India leveraged moments of crisis as opportunities to simultaneously address energy needs and drive economic development. Their institutional innovations—the Danish Energy Agency (DEA) and Energy Efficiency Services Limited (EESL)—reveal three shared strategic approaches that proved pivotal to their success.
- Hybrid Institutional Models for System Change
Both countries recognized that conventional governance structures were insufficient for managing complex energy transitions. Rather than relying solely on regulatory agencies or market forces, they established hybrid institutions that combined state oversight with operational autonomy and market-based agility. The DEA functioned as an independent yet state-backed expert body, ensuring policy continuity across political cycles while actively shaping energy markets. EESL, structured as a government-owned but commercially agile entity, bridged the gap between public policy goals and private-sector efficiency. These purpose-built institutions enabled long-term, adaptive transformation beyond short-term electoral or bureaucratic constraints. - Crisis as a Catalyst for Structural Innovation
Denmark’s oil shock and India’s energy shortages served as triggers for rethinking national energy strategies. Both countries moved beyond passive regulation to actively rewire their energy systems—Denmark by decentralizing energy production and integrating renewables, and India by restructuring demand through large-scale efficiency programs. In both cases, energy transitions were framed not just as a response to scarcity but as an opportunity to build economic resilience, create new industries, and position the country at the forefront of emerging energy markets. - Procurement as a Lever for Market Transformation
Both Denmark and India used procurement not merely as an administrative function but as a strategic tool for accelerating innovation. The DEA’s early investment in wind energy—through feed-in tariffs, research funding, and community ownership models—stimulated a domestic wind industry that grew into a global leader. Similarly, EESL’s bulk procurement model for LED lighting drastically reduced costs, enabling widespread adoption without direct subsidies. Leveraging government purchasing power in this way enabled both institutions to reshape market dynamics, reducing technology costs and unlocking private-sector investment at scale.
These cases demonstrate that successful energy transitions require institutions designed for transformation rather than static regulation. The DEA’s long-term strategic role ensured policy consistency, while EESL’s market-making capabilities harnessed economic incentives for public benefit. Both models show how governments can bridge public and private interests, integrate policy domains, and use institutional innovation to navigate complex transitions. By proactively shaping markets, structuring hybrid governance models, and viewing crisis as an opportunity for systemic change, countries can accelerate their shift toward sustainable, secure, and economically beneficial energy futures.
At UNDP Istanbul Innovation Days
How can crises be leveraged to drive both energy transformation and economic growth? How can countries deploy tactics such as hybrid structures or strategic procurement to promote energy transitions?
At IID, we invite participants through plenaries, discussions, and workshops to explore how institutional innovation can help navigate energy transitions. As Denmark’s Energy Agency and India’s EESL demonstrate, purposeful institutional design can create powerful capabilities for managing complex transformations while balancing multiple objectives—from climate action to energy security and economic development.
Photo Credit: State of Green
[1] https://en.wikipedia.org/wiki/Energy_in_Denmark
[2] https://en.wikipedia.org/wiki/Danish_Energy_Agency
[3] https://orbit.dtu.dk/en/publications/technocracy-in-transition-enhancing-stakeholder-inclusion-in-denm
[4] https://www.greeneconomycoalition.org/news-and-resources/people-power-denmarks-energy-cooperatives
[5] https://ens.dk/en/about-us/about-danish-energy-agency
[6] https://ens.dk/en/global-cooperation
[7] https://eeslindia.org/en/about-us
[8] https://retail.economictimes.indiatimes.com/news/consumer-durables-and-information-technology/consumer-electronics/how-governments-led-bulb-push-is-helping-save-rs-2-71-crore-every-day/49371316
[9] https://www.clasp.ngo/report/net-zero-heroes/case-studies/lighting-a-billion-the-ujala-programs-transformational-impact-in-india/
[10] Ibid
