Varieties of Clean Energy Transitions in Europe
Varieties of Clean Energy Transitions in Europe
Political-Economic Foundations of Onshore and Offshore Wind Development
Abstract and Keywords
The chapter adopts a novel approach for classifying different types of national political economies and studying their impact on renewable energy transitions. It analyses in an historical perspective the development of one mature renewable energy sector (onshore wind) and one infant renewable energy sector (offshore wind) across three major types of European economies. The chapter shows that the presence of strategic state–market coordination and the decentralized pluralist polity constitute key enabling factors that drive the development of new renewable energy technologies. The commonalities and differences in the political economy of the onshore and offshore wind sectors are also discussed.
There is a broad consensus among scholars and practitioners that a wide range of new renewable energy technologies must be standardized and become cost-effective if energy systems are to be decarbonized and excessive climate change avoided (Verbong and Loorbach 2012). The question remains regarding the motives and capacities of different countries to advance new technologies ‘to the shelf’ and adopt the already advanced technologies ‘from the shelf’ (Sandén and Azar 2005). An extensive body of literature has emerged, particularly within the studies on sustainability transitions (Smith and Raven 2012) and national innovation systems (Suurs and Hekkert 2009), exploring how and why renewable energy innovations develop in a certain context and what factors determine their successful diffusion to other institutional settings. The major shortcoming of the existing literature is that national political-economic institutions and interests and processes which underpin them have often been neglected or discussed in a non-systemic manner. In addressing this gap, a recent trend in studying sustainable energy policies has been to identify common trends across countries and explain them in relation to the particular type of national political-economic ‘logic’. The Varieties of Capitalism framework (VoC) (Hall and Soskice 2001) has been suggested as a promising approach for capturing and investigating the common types of national market economies and how they influence technology and policy choices in energy transitions (Ćetković and Buzogány 2016).
(p.104) This chapter contributes to the literature which adopts the comparative capitalism approach to clean energy transitions in two respects. First, it develops further the theoretical rationale for applying the VoC framework to understand and compare national renewable energy transition pathways. It does so by bringing back the state in the analysis and enriching the VoC framework with the literature on national innovation systems, state–industry relations and the corporatism vs. pluralism debate. In addition, the chapter extends the so-far applied categorization based on the distinction between Liberal Market Economies and Coordinated Market Economies, by including a largely neglected type of what we termed ‘simple Coordinated Market Economies’. Second, the chapter demonstrates the value of the proposed framework by exploring the fate of two related renewable energy technologies which are at the different stage of development: one mature (onshore wind) and one infant renewable energy technology (offshore wind). Both technologies are seen as central for achieving a clean energy transition. This should allow for discerning the relative importance of national vs. sector-specific features in influencing the diffusion of renewable energy technologies.
6.2 Theoretical Framework
Our starting point for analysing and comparing how different national political-economic structures influence renewable energy transitions is comparative research that emphasizes the role of state–market relations as drivers of sectoral innovation and policy change. We draw here mainly on the ‘varieties of capitalism’ perspective that stresses the institutional differences among developed capitalist market economies (Hall and Soskice 2001). These differences concern the question of how the political institutional context helps or hinders firms to solve their cooperation problems. The focus of the approach is on firms and the institutional setting they are embedded into. According to Hall and Soskice, most developed market economies cluster into two distinct types of capitalism, ‘Coordinated market economy’ (CME) and ‘Liberal market economy’ (LME).
The distinctions between the two main VoCs enable the systematic identification of different characteristics and likely problems that occur in LMEs or DMEs when firms innovate and new economic sectors emerge. LMEs favour radical, path-breaking innovation processes and hold comparative advantages in innovation-intensive high-tech industries and services (Hall and Soskice 2001: 40–1). Innovation in CMEs is mainly taking place in traditional industry fields, such as machinery or chemical production. In contrast to LMEs, innovation in CME countries is rather small-scale, incremental, but also more continuous. It is often based on path-dependent cooperation between firms (p.105) and the banking sector as well as science. In general, long-term perspectives dominate over concerns of immediate profitability, a feature that is typical of LMEs. The path-dependent innovation process in CMEs is to a large extent structurally predetermined: industrial relations in CMEs are more oriented towards employee participation, trade unions have a stronger say, and labour law gives less chances for hiring and firing. The innovation path is supported also by the system of vocational training, which emphasizes interactions between industry and research and is able to produce highly skilled workforce.
By focusing on firms and sector-level innovation, the VoC framework disregards the role of national institutions, which often play a central role in the development and diffusion of new technologies (see Mazzucato 2015). Emphasizing institutional stability rather than change, the VoC framework is criticized for being static and deterministic in character (Hancké 2009). To address this shortcoming, we complement the VoC framework with insights from the literature on national innovation systems on the one hand, and comparative political science literature differentiating state–industry–society relations on the other hand.
The literature on national innovation systems suggests that the linear model of innovation provides an inadequate picture of how technology innovations emerge and become widespread (Bergek et al. 2015). This particularly holds true for new renewable energy technologies. Although the provision of new knowledge through research and development (R&D) spending (‘push mechanism’) is critical for developing and improving renewable energy technologies (Ragwitz and Miola 2005), their market success is contingent on a number of additional factors. These factors are described as ‘pull mechanism’ and serve to facilitate market formation for new technologies. This includes stable and long-term market demand, provision of necessary skills, financing, and supportive legal conditions (Fagerberg 2015). One should also add the necessity of legitimization for new technologies (Jacobsson and Bergek 2004).
The second relevant literature, focusing on neo-corporatism, welfare states, and political systems emphasizes the political conditions for policy stability and strategic coordination (Esping-Andersen 1990; Lijphart 1999). There are important affinities between Lijphart’s classification of political systems as majoritarian vs. consensus-oriented and the VoC framework’s LME vs. CME typology (Schneider and Soskice 2009). Taking into account Colomer’s observation that the number of parties increases policy stability (Colomer 2012), we can summarize that LMEs can be typically found in two party-systems with high levels of policy instability, whereas CMEs usually have multi-party systems and feature higher levels of policy continuity. Thus, institutional and party system factors can help explain the long-term and stable support for certain policy issues or the lack of it.
One possibility to further differentiate the political institutional context has been suggested by Schmidt (2012), who takes a polity-oriented perspective on (p.106) European political systems and argues that the effects of institutional arrangements can be conceptualized as being ‘simple’ and ‘compound’ polities. Whereas in simple polities the state structure is centralized and governing is concentrated in a single authority, compound polities feature multiple authorities. Drawing on these insights, we distinguish between simple and compound varieties of LME and CME (see Ćetković, Buzogány, and Schreurs 2016: 5).
We restrict our focus to West European states across three subtypes of capitalist market economies: Simple LMEs (the UK), Simple CMEs (Denmark, Sweden, Netherlands), and compound CMEs (Germany).1 The case selection of countries is influenced by the fact that they all have significant onshore and offshore wind potential. We make two central assumptions. First, due to the mechanism of strategic coordination and consensus-based policy style, both simple and compound CMEs are more conducive to exploring economic opportunities through strategically advancing new renewable energy technologies than LMEs. Second, emerging renewable energy technologies require sufficiently plural environments in which they can grow and mobilize political support. This implies that compound CMEs are more open than simple CMEs to experimenting with and embracing new energy technologies.
6.3 Empirical Analysis
6.3.1 Onshore Wind
188.8.131.52 Compound CME (Germany)
Wind power has played a central role in renewable energy development in Germany. Initially, the wind energy enthusiasts experimented with small-size turbines for local use while the national government directed support towards large-scale wind power (Bruns et al 2011: 265). Eventually, the government-funded R&D programmes encompassed a variety of wind turbine models, from small to large installations, supplied dominantly by German manufacturers (Jacobsson and Lauber 2006: 263). In 1989, the government began supporting market creation by subsidizing 100 MW of wind power which in 1991 extended to 250 MW (Lauber and Metz 2004: 201). The first Electricity Feed-in Law adopted in 1991 laid the ground for rapid market expansion of wind power by introducing fixed preferential tariffs (Feed-in Tariff—FiT) for renewable electricity producers. This was accompanied by supporting programmes for research, demonstration, and project implementation at the (p.107) national, federal, and local levels (Lauber and Metz 2004). The Renewable Energy Law of 2000 further improved the overall framework guaranteeing fixed technology-specific tariffs for renewable energy producers for the period over 20 years. In 2010, the government adopted the Energy Concept, which stressed renewable energy as a cornerstone of the future energy mix and set the target of 80 per cent renewable energy in the electricity mix by 2050 (BMWI/BMU 2010). The Renewable Energy Law has been amended on several occasions, most recently in 2012 and 2014. Although the fundamentals of the support scheme have largely remained intact, the regulatory adjustments in 2014 entailed important changes designed to ensure better planning and more efficient integration of renewable electricity into the market (Bundestag 2014). The R&D spending on wind energy has been consistently high, both from the public and corporate sources (European Commission 2013: 38–9).
The growth of onshore wind installations has witnessed a continuous annual increase ever since the early 1990s (IWES n.d.). Despite regulatory changes, Germany added 3.5 GW of onshore wind power in 2015, the second best annual record after 2014 (BWE 2016). By 2016, Germany had as much as 41.6 GW of the installed onshore wind power (BWE 2016) (see Ćetković, Buzogány, and Schreurs 2016: 8). Not only has the German policy approach been effective in creating a vibrant domestic market for wind energy, but it has also significantly enhanced industrial competitiveness, innovations, job creation, and environmental benefits (Pegels and Lütkenhorst 2014; Boeckle et al. 2010). Based on the data from 2012, the wind industry in Germany employs 117,900 people, out of which 18,000 are in offshore wind (GTAI 2014: 7) (see Ćetković, Buzogány, and Schreurs 2016: 8).
All this signifies remarkable policy stability and overall policy success. It would be wrong to conclude, however, that renewable energy policy in Germany has not faced challenges, opposition, and setbacks. In fact, it was the political contestations and ‘battle over institutions’ (Jacobsson and Lauber 2006) that made the emergence of the wind energy sector possible. The pluralist and federal political landscape allowed the early wind energy advocates to experiment with wind energy technologies, attract the attention of policy-makers at different levels of governance (local, federal, national), and gradually mobilize government support. Once wind energy became more widely embraced and began producing economic gains for both citizens and the industry, its legitimacy became increasingly difficult to dispute. Jacobsson and Lauber (2006) illustrate how the alliance of wind energy supporters from different spheres of politics and society successfully persuaded parliament members to refrain from reducing wind energy subsidies. This was particularly critical in the formative phase of wind energy during the 1990s. As the wind energy industry matured, it was able to benefit from the already present mechanisms of strategic state–market interaction and industrial upgrading in Germany, typical for CMEs. This included long-term technology-specific (p.108) government support, export promotion, vocational training, local and national financing instruments, and close science–industry collaboration (Ćetković and Buzogány 2016). Overall, it can be said that the pluralist political environment has launched wind energy on the political agenda whereas the strategic and locally embedded state–market interactions strengthened the legitimacy of wind energy and turned it into a successful industrial policy.
184.108.40.206 Simple LME (UK)
The UK government began supporting research on wind energy in the mid-1970s. Whereas the basic research and education on wind energy has been assessed as good, there has been limited collaboration and networking among scientific institutions as well as between science and industry (Simmie, Sternberg, and Carpenter 2014). The key obstacle to the growth of the wind energy sector and domestic wind power technologies has been the lack of a credible and long-term pull mechanism from the government that would facilitate market formation.
In 2000, the government announced plans for achieving 10 per cent of electricity from renewable energy by 2010 ‘as long as the cost to consumers is acceptable’ (DTI 2003: 45). In 2009, the EU set the target for the UK of 15 per cent of energy from renewable sources by 2020. The development of both onshore and offshore wind is essential for achieving the national target (DECC 2011: 14). The government support for renewable energy evolved from technology-neutral support schemes, embodied in the Non-Fossil Fuel Obligation (NFFO) of 1989 and Renewables Obligation (RO) of 2002, to the more technology-specific RO model adopted in 2009 and FiT for small renewable energy plants introduced in 2010 (Simmie, Sternberg, and Carpenter 2014). In 2013, the government enacted the Electricity Market Reform, which foresees a gradual replacement of the RO model with the market-based support scheme called Contracts for Difference (CfD) by 2017. Although RO was planned to last until 2017, the government has announced the decision to close RO for onshore wind already in 2016. It has even been suggested that onshore wind will be removed from future auctions under the CfD scheme implying the end of subsidies for onshore wind projects (Howard and Drayson 2015: 8). Other regulatory changes have further reduced the profitability of renewable energy projects, such as the decision in 2015 to remove the exemption from the climate change levy for electricity from renewable sources (HM Revenue and Customs 2015). Long and cumbersome administrative procedures have posed further barriers to onshore wind development (IRENA 2012: 130).
The first commercial onshore wind farm in the UK was built in 1991. The deployment of onshore wind energy was slow during the 1990s. Real progress occurred in the second half of the 2000s due to a more supportive national policy context and the adoption of the EU Renewables Directive in 2009. (p.109) In 2010, R&D investments in wind energy reached the highest level (see Ćetković, Buzogány, and Schreurs 2016: 7). The largest share of R&D spending on wind energy was performed by the state rather than by corporate actors (European Commission 2013: 38–9). 2012 was the record year in terms of the annually installed onshore wind capacity with 1,937 MW of onshore wind power being connected to the grid (RenewableUK 2014: 19). The overall installed capacity in 2015 was 8.5 GW (RenewableUK 2016) (see Ćetković, Buzogány, and Schreurs 2016: 8). The UK domestic wind energy industry has struggled to develop (IRENA 2012: 130). In terms of job creation, the figures from 2015 estimate that the number of workers directly employed in the wind industry in the UK was 15,500 (RenewableUK 2015: 3). The number of registered patents has also been considerably lower than in Germany and Denmark (see Ćetković, Buzogány, and Schreurs 2016: 8).
The centralization of political power and insufficient state–market coordination have decisively constrained the market and industrial expansion of onshore wind in the UK. The unitary state structure and majoritarian political system failed to provide policy certainty and offered little space for wind energy stakeholders to win the hearts and minds of decision makers and the local population. Unsurprisingly, the rapid deployment of onshore and offshore wind in the UK between 2010 and 2015 occurred under one of the rare coalition governments composed of the Conservative Party and the Liberal Democrats. Given the lack of policy commitment and long-term strategy at the national level, onshore wind projects were mainly developed at the initiative of foreign investors which often faced resistance by local communities (Simmie, Sternberg, and Carpenter 2014). The weak legitimacy and local acceptance of wind energy technology by local communities were, in turn, used as an argument by political elites to justify the lack of support for onshore wind development (Hackley 2015). The devolution of political power and increasing authority of local and regional governments in energy planning have proven favourable for onshore wind. This is particularly the case for Scotland, which has been the most supportive of wind power as part of its economic and industrial policies (IRENA 2012: 128–9; RenewableUK, 2015: 4). Overall, the absence of credible market formation from the side of the UK government, combined with inadequate provision of skills, knowledge, and finance have constrained the emergence of domestic wind industrial capacities and local value creation.
220.127.116.11 Simple CMEs (Denmark, Sweden, Netherlands)
The policy strategy for promoting wind energy has been most comprehensive in Denmark. The oil crisis hit Denmark particularly hard given that the country was highly dependent on foreign oil and lacked reliable domestic energy resources. Somewhat similar to the German case, in Denmark two (p.110) technological wind energy subsystems have developed in parallel: 1) small-scale wind turbines promoted by farmers, local communities, and wind energy enthusiasts, and 2) large-scale wind turbine demonstration and production supported by the state (Kamp 2008). However, it was the small-scale wind energy that accelerated the legitimacy and technological development of wind energy in Denmark. Private owners of wind turbines mobilized and established in 1978 the Danish Windmill Owners’ Association (Danmarks Vindmølleforening). In the same year, the Windmill Manufacturers Association was created. The members of the two associations collaborated closely in gradually improving the reliability and effectiveness of wind turbines (Garud and Karnøe 2003). In 1979, the government introduced investment subsidies to individuals and cooperatives for installing wind turbines, which enhanced the domestic wind power market (Buen 2006: 3890). In 1981, the long-term goal of installing 60,000 small wind turbines by 2000 was adopted (Buen 2006: 3890). In 1993, Denmark introduced a fixed FiT for renewable energy power producers (IRENA 2012: 56). The onshore wind power installations peaked in 2000 and 2002 followed by several years of stagnation due to the government’s decision to liberalize the electricity market and replace FiT with more market-based instruments (IRENA 2012: 57). In 2009, the new support scheme for renewable energies was adopted and in 2011 the government outlined a strategy to become independent from fossil fuels by 2050 with the interim goal of 30 per cent of energy use supplied by renewable sources by 2020. Wind energy is central for achieving these goals (IRENA 2012: 58–9). At the end of 2015, Denmark had 3.8 GW of the total installed onshore wind power capacity (EWEA 2016a, 2016b). The wind industry (both onshore and offshore) employs nearly 29,000 people and contributes to more than 5 per cent of the country’s exports (Denmark 2015) (see Ćetković, Buzogány, and Schreurs 2016: 8).
The oil crisis and the referendum decision to phase out nuclear energy in 1980 led to increasing public support for R&D in wind energy in Sweden. However, market creation instruments and long-term targets were lacking. This prevented the uptake of the domestic wind energy market (Söderholm et al. 2007: 368). The R&D support was rather narrow focusing only on large-scale wind power facilities (Jacobsson and Bergek 2004: 221). It was only during the mid-1990s and early 2000s that the installed wind power capacity started to grow due to the introduced technology-neutral green certificate scheme (Söderholm et al. 2007: 369). The size of the domestic wind energy market was still considerably smaller than in Germany and Denmark (Söderholm et al. 2007: 370) and lacked domestic suppliers of wind energy components (Jacobsson and Bergek 2004: 223). The initial impact of the support scheme was limited but wind power deployment rates have seen a steady increase in recent years. Several factors contributed to this: the EU renewable energy directive, the expansion of the green electricity scheme to Norway, cost (p.111) reduction of wind energy and more active state role (see Giest 2015). By the end of 2015, Sweden had 6 GW of the total installed wind power (EWEA 2016b), of which 0.2 GW was offshore (EWEA 2016a) (see Ćetković, Buzogány, and Schreurs 2016: 8). Sweden has thus been able to develop its domestic wind market recently but with the limited involvement of the domestic wind industry and consequently small economic benefits in terms of innovations, job creation, and exports.
The promotion of wind energy in the Netherlands during the 1970s and 1980s resembled the policy approach taken in Germany and Denmark, characterized by broad R&D support, inclusion of local suppliers, and investment subsidies (Jacobsson and Bergek 2004: 222). The political commitment decreased in the following period and the problems of building permits and spatial planning at the local level hampered market creation (Jacobsson and Bergek 2004: 226). Both large-scale and small-scale wind energy innovation systems existed in the Netherlands (Kamp 2008: 281). The development of large-scale wind turbines was almost entirely science-led with insufficient collaboration with the industry and electricity companies (Kamp 2008: 281). The focus of the Dutch wind policy was on energy utilities as main project developers (Wolsink 1996). The small-scale innovation system proved more successful but investment subsidies for promoting the demand were introduced only in 1986 (Kamp 2008: 283). Eventually, the progress was slow and ultimately hampered by the problems of local resistance, spatial planning, and the lack of willingness of central authorities to streamline administrative procedures (Jacobsson and Bergek 2004; Kamp 2008). All but one wind turbine manufacturer in the Netherlands disappeared from the market by 2000 (Kamp 2008: 283). In 1994, the budget for wind energy was significantly cut (Wolsink 1996: 1084) and reliance on a market-based approach gained prominence in the light of the privatization and deregulation reforms. The government adopted FiTs in 2003 aiming to reduce investment risks and promote the domestic supply of renewable energy (van Rooijen and van Wees 2006: 63). In 2010, the Netherlands had only 3.6 per cent of energy from renewables (Statistics Netherlands 2010), compared to the national target of 14 per cent by 2020. Following several changes to the support scheme, in 2011 a so-called SDE+ scheme was introduced with the sole purpose of meeting national targets in the most cost-efficient manner. In 2013 a society-wide consensus was reached on energy transition but it was acknowledged that national renewable energy targets for 2020 are not achievable (PLB 2014). By 2016, the Netherlands installed 3.4 GW of wind power (EWEA 2016b), of which 0.4 GW was in offshore wind (EWEA 2016a) (see Ćetković, Buzogány, and Schreurs 2016: 8). The Dutch wind energy sector is not of national significance but it is relatively well positioned internationally, particularly in operation and maintenance as well as manufacturing of small wind turbines (IEA WIND 2014: 134).
(p.112) All surveyed simple CME countries, except Denmark, have failed to promote innovations in and capture direct economic benefits from onshore wind. The growth of the domestic market was notable initially, followed by a period of stagnation and relatively recent revival, especially in Sweden. How can the analysis of the national political-economic setting account for this development? In terms of the plurality of their political systems, simple CMEs are positioned between compound CMEs and LMEs. They have a multi-party system but with a unitary state structure and a strong tradition of a consensus-seeking policy style. It is precisely this overly consensus-based decision-making process that has hampered wind energy innovations. Both Sweden and the Netherlands are characterized by powerful national energy actors in hydropower (Sweden) and natural gas (Netherlands) with a rather hierarchical structure and strong state involvement, particularly characteristic for Sweden (Pettersson et al. 2010). It thus does not come as a surprise that early efforts to promote wind energy were crafted along the existing policy paradigm with energy utilities as natural partners. Such strategies not only proved inadequate for promoting diverse wind energy innovations, but were also ill-equipped to ensure market creation due to the reluctance of power utilities to rethink their business models and invest in new and financially risky wind energy. The Danish situation was the exception due to the lack of conventional domestic energy resources and a long tradition of distributed energy generation and cooperatives (van der Vleuten and Raven 2006). This created the space for domestic manufacturers to engage in developing and incrementally expanding the production of wind turbines. All three countries have strong systems of strategic state–industry–science–society coordination, but only in Denmark could the wind energy industry mobilize the necessary support.
6.3.2 Offshore Wind
18.104.22.168 Compound CME (Germany)
Offshore wind energy was not the focus of decision makers in Germany for a long time. There was insufficient knowledge about the challenges and costs of offshore wind technology. The initial FiTs and regulations for connecting renewable energy power plants to the grid were not suitable for driving the expansion of offshore wind projects. In 2002, the government published a strategy for the use of offshore wind in Germany (German Government 2002). It set the objective of 2–3 GW of offshore wind capacity to be installed by 2010, followed by 20–25 GW by 2030. These targets soon proved overly ambitious. Gradually, the regulatory and institutional changes were put forward to streamline administrative procedures, connect important actors in the field, and make offshore wind energy projects more attractive for investors. In 2006, (p.113) amendments to the regulatory framework were made to shift the responsibility of providing grid connections from project developers to a Transmission System Operator (TSO) (Fitch-Roy 2015: 7). In 2011, the responsible ministry and state-owned development bank (KfW) launched the ‘KfW Offshore Wind Energy Programme’ to facilitate the financing of offshore wind energy projects (KfW 2015). Following the disputes about the grid connections between project developers and Tennet as the main TSO in 2012, the Federal Minister of Economy played a pivotal role through the so called ‘AG Beschleunigung’ (Acceleration) initiative in bringing together the actors from the industry and the government and resolving open questions. This resulted in the revisions to the Renewable Energy Law in 2012 and 2014 which specified remuneration FiT models for offshore wind parks. The revisions from 2014 also define more realistic long-term targets for offshore wind energy development including 6.5–10 GW by 2020 and 15–25 GW by 2030 (Anzinger and Kostka 2015: 15).
The first commercial offshore wind park in Germany was built only in 2011. However, over the last two years, the German offshore wind market has been the most dynamic in Europe, alongside the UK. In 2015, Germany installed the highest amount of offshore wind power in Europe (2.3 GW) making the total offshore wind power capacity of 3.3 GW (EWEA 2016a). The expansion of the domestic offshore wind market has provided a boost for the already highly internationally competitive national wind energy clusters located in North-West Germany. The estimates from 2012 show that 18,000 people are directly employed in the offshore wind energy sector in Germany (GTAI 2014: 7) (see Ćetković, Buzogány, and Schreurs 2016: 8).
The recent success and the relatively certain long-term prospect of offshore wind energy in Germany represent a continuation of the German renewable energy market and industrial policy, building on the previously secured legitimacy of wind energy technology, established industrial networks and know-how, and the political consensus on the need for energy transition. The strategic state–market–science coordination proved even more important than in onshore wind, given the large scale, technology uncertainty, and high capital costs of offshore wind energy projects.
22.214.171.124 Simple LME (UK)
Early interest and R&D initiatives in offshore wind energy in the UK started in the mid-1990s, but the growth of the offshore wind sector was inhibited by two main factors: 1) liberalization of the electricity market in 1990 which put pressure on energy utilities to reduce costs, and 2) a technology-neutral support scheme for renewable energy sources which provided little incentive for costly and risky technology like offshore wind (Smit, Junginger, and Smits 2007: 6438). The first offshore wind park in the UK was built in 2001 but the rapid deployment of offshore wind only commenced in 2009 with the improvement (p.114) in the regulatory framework and a more active government role (Kern et al. 2014). The RO system was changed to provide more generous support for infant renewable energy technologies (Kern et al. 2014: 638). The Crown Estate was given the mandate to manage the seabed, grant consents for offshore wind projects, and ensure profit maximization for the state. The role of the Crown Estate has been instrumental in improving the conditions for offshore wind energy investments in the UK and facilitating project implementation (Kern et al. 2014). The new support scheme CfD continues to provide necessary support for offshore wind projects. However, the government has made the support for offshore wind conditional on clear targets for cost-reduction. Consequently, the government has not yet set the targets for offshore wind development after 2020, implying high uncertainty for the sector.
Offshore wind is important technology for meeting the UK’s renewable energy targets and promoting economic and industrial development (UK Government 2013). Unlike the locally embedded offshore wind energy sector in Denmark and Germany, offshore wind in the UK has largely been developed in an open-market international fashion under the leadership of foreign companies and weak science–industry collaboration (Smit, Junginger, and Smits 2007; Wieczorek et al. 2013). Since 2009, the government has directed efforts towards promoting innovations, developing manufacturing capacities, and involving domestic companies in the offshore wind supply-chain (Ćetković and Buzogány 2016). However, the majority of components for offshore wind farms in the UK are still produced in neighbouring countries, particularly Germany, Denmark, and the Netherlands (RenewableUK/The Crown Estate 2013; Wieczorek et al. 2013). The estimated number of direct jobs in the offshore wind sector in UK was 6,830 in 2013 (RenewableUK/The Crown Estate 2013: 4). In terms of the installed capacity in 2015 the UK had 5,098 MW of operational offshore wind power, which represents 45.9 per cent of the entire EU market (EWEA 2016a) (see Ćetković, Buzogány, and Schreurs 2016: 8).
The success of offshore wind market in the UK can be attributed to several factors including the abundant natural potential and the pressure for meeting national renewable energy targets. Perhaps the key explanatory variable is the ‘fit’ between the offshore wind sector and the national political-economic logic. Offshore wind development is associated with the construction of large-scale, concentrated, infrastructural projects. The planning and implementation of such projects resembles in many ways conventional energy projects. Such centralized energy planning is not only familiar to the national government in UK, but it also allows the government to directly monitor and manage the revenues from offshore wind investments (see also Kern et al. 2014). Nonetheless, the still prevailing market-based policy paradigm and the related lack of strategic state–industry–science collaboration have hampered the emergence of a genuine domestic offshore wind industry and failed to provide long-term certainty for sectoral growth.
The first commercial offshore power plant was built in Denmark in 1991. Four years later, the second offshore wind farm was implemented (Bilgili et al. 2011: 907). The development of offshore wind in Denmark was closely tied to the onshore wind industry. Smit, Junginger, and Smits (2007: 6436) argue that during this early period only the established Danish wind manufacturers and project developers took responsibility for developing offshore wind technologies and projects. In the subsequent phase, due to the demonstrated feasibility of offshore wind, the offshore wind innovation system expanded to include government agencies, research centres, and component and service suppliers (Smit, Junginger, and Smits 2007: 6436–7). This led to the first action plan on offshore wind power in Denmark outlined in 1997 in cooperation between responsible ministries and the industry. The supportive policy instruments and the role of the Danish Energy Authority facilitated the construction of two large-scale offshore wind farms in 2002 and 2003 (Smit, Junginger, and Smits 2007: 6437). As noted by Smit, Junginger, and Smits (2007: 6441), the government’s approach fostered interaction and learning across all important actors. The involvement of citizens and cooperatives was also significant and resulted in the implementation of fully of partly locally-owned offshore wind farms (Smit, Junginger, and Smits 2007: 6437). The regulatory changes and the transition towards a more competitive market-based support scheme led to pausing offshore wind deployment in the mid-2000s. In the energy strategy through 2050 adopted in 2011, the role of offshore wind is indicated as crucial (Danish Government 2011). Between 2009 and 2013, several new large-scale wind farms were connected to the grid leading to a total of 1.3 GW in 2015. This makes Denmark the third largest offshore wind market, behind the UK and Germany (EWEA 2016a) (see Ćetković, Buzogány, and Schreurs 2016: 8). The development of offshore wind is supported by considerable domestic investments in R&D, although the greatest share of R&D spending comes from private companies (Megavind 2010).
Sweden was the place where the first offshore wind turbine was constructed in 1990 (Bilgili et al. 2011: 207). Since then, several offshore wind farms have been built, mainly as demonstration projects for acquiring knowledge and testing the technology (Esteban et al. 2011). The policy incentive for constructing commercial offshore wind farms in Sweden has been weak. The government’s focus snot been on promoting wider utilization of offshore wind and cost-reductions in the technology, but rather on enhancing knowledge accumulation and testing through pilot studies. This should provide a basis for implementing offshore wind once the technology becomes more mature and financially affordable (Söderholm and Petersson 2011: 522). The future of nuclear energy in Sweden is questionable and there is a debate whether the country should continue relying on the mature renewable energy technologies ‘of the shelf’ (p.116) (e.g., onshore wind and biomass) for meeting energy needs or engage in actively exploring innovation and industrial opportunities in infant technologies (e.g., offshore wind) (Södeholm and Petersson 2011; 4C Offshore 2015). At the end of 2015, the size of the offshore wind market in Sweden was comparatively small amounting to a total of 0.2 GW (EWEA 2016a) (see Ćetković, Buzogány, and Schreurs 2016: 8).
The debate about offshore wind potential has a long tradition in the Netherlands, mainly in the context of diversifying the existing offshore oil and gas sectors (Verhees et al. 2015). Cooperation between government agencies, electricity companies, local manufacturers, and research centres was an important part of this process (Verhees et al. 2015). However, within the national wind energy research programmes during the 1980s, little funding was devoted to offshore wind, the focus being on more mature and less costly onshore wind installations (Verhees et al. 2015: 819). The implementation problems in onshore wind projects during the early 1990s renewed the interest in offshore wind. The new Wind Energy Programme in the period 1992–5, for the first time specified a goal of 200 MW of offshore wind capacity by 2010 (Verhees et al. 2015: 819). The Netherlands implemented the second commercial offshore wind power plant in the world in 1994 (Bilgili et al. 2011: 907). Although a clear legal framework was not in place, the government, based on a parliamentary consent and long-term energy planning, granted subsidies for two large offshore wind projects in 2001. They were connected to the grid in 2006 and 2008 (Verhees et al. 2015: 821). In 2002, an ambitious government target of 6000 MW in offshore wind power by 2020 was declared. Nevertheless, progress in developing offshore wind energy policy and a legal framework was slow (Verhees et al. 2015: 823). The potential of offshore wind for innovation and industrial development has been widely recognized, but the government has struggled to balance cost-efficiency with the active promotion of innovations and market creation. Since 2010, offshore wind has been defined as one of the priority economic sectors (Verhees et al. 2015: 825) and R&D funding for wind energy has almost entirely been directed to offshore wind (IEA WIND 2014:135). In 2015, the Netherlands had 426.5 MW in offshore wind power, or 3.9 per cent of the entire EU market (EWEA 2016a). The number of direct jobs in the offshore wind industry is higher than the small domestic market would suggest. In 2013, 1900 full-time employed people were registered in the offshore wind sector and this number increased to 2150 in 2014 (Ecofys 2014) (see Ćetković, Buzogány, and Schreurs 2016: 8).
All three countries have engaged early in exploring offshore wind energy potential relying on the state–industry–science cooperation. Similar to the situation in the onshore wind sector, a shift in the policy paradigm that would allow for enhancing the domestic market for offshore wind has been difficult to achieve. Where supportive policy conditions were present, Denmark and to (p.117) a lesser extent the Netherlands, the offshore wind sector grew deeply embedded in the network of domestic energy utilities, suppliers, and research centres.
The analysis of onshore wind development has largely supported the theoretical assumption on the political-economic conditions for energy innovations. It has been demonstrated that the rise and growth of the German onshore wind energy sector can be attributed to the effective match between strategic state–industry–science–society coordination and the sufficiently plural and decentralized political environment. It is in this context that a variety of bottom-up wind energy solutions could thrive and mobilize long-term support at different levels of government. Although characterized as simple CME, Denmark proved capable of being a pioneer and one of the leading nations in the wind energy industry. This was the result of the inherited tradition of decentralized energy distribution. Some studies suggest that the Danish economy has evolved into a more decentralized coordinated market economy (Campbell and Pedersen 2007). This further supports the argument about the facilitating role of coordinated but decentral structures for energy innovations. It also suggests that that there are variations in the level of decentralization and plurality among similar forms of capitalism and that the distinction between simple and compound polities should be refined. Other simple CMEs initially supported onshore wind development in a dominantly centralized large-scale manner but the willingness to promote domestic demand ceased quickly due to the resistance from established utilities, liberalization reforms, and the fact that Germany and Denmark were faster in capturing the largest economic benefits in the onshore wind industry. The latter emphasizes the importance of economic interests as drivers of energy transition and illustrates the barrier of the centralized consensus-seeking neo-corporatist relations for new energy technologies. Sweden has recently adopted onshore wind on a broader scale, as a result of the enhanced state role and international climate and energy commitments. Finally, the case of onshore wind in the UK provides evidence of how unitary market-led political economies tend to be laggards in providing stable support for new more decentralized energy technologies. Interestingly, and in support of the general argument, the political devolution in UK and the entrepreneurial role of the Scottish Government have facilitated onshore wind deployment, which draws attention to the dynamic character and institutional changes of national political economies.
The chapter has revealed similarities but also some differences between onshore and offshore wind development. Although the offshore wind sector (p.118) does not represent simple diversification from onshore wind (Jacobsson and Karltorp 2013), the countries with the strong onshore wind industry and the secured legitimization of wind technology (Germany and Denmark) have also been among the leaders in the domestic offshore market and industrial competitiveness. Somewhat surprisingly, the UK has emerged recently as the most dynamic offshore wind market. This can be explained by the large-scale top-down character of offshore wind coupled with vast natural resources, industrial objectives, and the pressure for meeting national renewable energy targets. However, the long-term prospects for the offshore wind market have proved less stable than in Germany and Denmark. Furthermore, due to strategic coordination, CME countries have generated more locally embedded offshore wind sectors, than is the case in the UK (see Wieczorek et al. 2013). Another interesting finding is the increasing focus on promoting offshore wind market and innovations in the countries that were laggards in onshore wind (the UK but also the Netherlands). This reflects the motives to capture market share in the emerging offshore wind sector and further underlines the critical role of industrial and economic motives behind clean energy policies.
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