key factors leading to wind energy development in spain

8/14/2019 Key Factors Leading to Wind Energy Development in Spain

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Summary for Global Winds of Change: The Development of the Wind Energy Industry

Key Factors Leading to Wind Energy

Development in Spain

Carlos Rymer

MPA-Environmental Science and Policy

School of International and Public Affairs

Columbia University

December 10, 2008


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Contents

Introduction ............................................................................................................ 2

Electricity Market Evolution ............................................................................... 3

Research Goals ....................................................................................................... 6

Methodology .......................................................................................................... 7

Findings ................................................................................................................... 8

Conclusions .......................................................................................................... 10

References.11

Appendix ............................................................................................................... 11

DISCLAIMER

This summary contains the results of a semester-long research study conducted for

Professor Bogdan Vasi of the School of International and Public Affairs at Columbia

University. The study was the result of independent research and was intended to

contribute to a book to be published in 2009 titled Global Winds of Change: The

Development of the Wind Energy Industry.


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Introduction

The Kingdom of Spain (Spain) is

located in Western Europe, east of

Portugal and southwest of France. Itstotal land surface is approximately

504,782 square kilometers, which is

roughly twice the size of the state of

Oregon in the northwestern United

States. Its climate is temperate and its

land surface largely flat with scattered

rugged hills and the Pyrenees range to

the north. The population as of mid-

2008 was roughly 40.5 million, with apopulation growth rate of 0.096% (CIA,

2008). The country lacks a reliable

supply of fossil fuels and is subject to

regular intense droughts that reduce its

ability to produce hydropower. In the

past two decades, this has led Spain to

begin developing a renewable energy

sector to eliminate fossil fuel

dependence. The purpose of this

research was to find how the wind

energy industry was influenced by

socioeconomic factors over time.

Spain is considered one of

Europes largest developed economies

with its gross domestic product (GDP)

in 2007 at nearly $1.4 trillion, placing

per capita GDP at roughly $33,600.Investment represented roughly 31.1%

of GDP. In the last few years, it has also

posted annual GDP growth of roughly

3-4%, with a slowdown this year due to

the global financial crisis. Historically,

the Spanish economy has seen boom

and bust periods over its growth. From

1986 to 1990, it experienced an average5% annual GDP growth, but that

declined substantially in the early 1990s

as Europe entered a recession. Growth

picked up again in 1994, with a bit of a

slowdown in the early 2000s. As of 2007,

the labor force was roughly 22.2 million

and unemployment was at 8.3% (CIA,

2008).

Fiscally, the government has been

experiencing budget surpluses in the

last few years, with 2007 posting a $32

billion surplus. In 2007, total public debt

was at 36.2% of GDP and the inflation

rate was a mere 2.8%. The leading

economic sectors in Spain are tourism,

textiles, metals, food and beverages,

chemicals, and automakers (CIA, 2008).Recently, the renewable energy

sector in Spain has been growing

rapidly, becoming a significant

economic sector. Wind energy alone

now provides roughly 45,000 jobs,

comparatively greater than jobs

provided by conventional energies, and

companies like Iberdrola, Gamesa, and

Acciona are expanding their business

globally (IEA, 2008). This summary

provides an overview of how the wind

energy industry in Spain has developed

over time and the factors that influenced

its development.


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Electricity Market Evolution

Overview

Spains electricity market has

been marked with an increasing reliance

on imported oil due to its lack of reliable

fossil fuels, the absence of sufficient

interconnection with neighboring

countries, and low levels of electricity

trade. Spains coal industry suffers

greatly from quality and production

cost problems, making the import of

foreign coal more favorable. In the lastfew years, Spain has made significant

efforts to increase the use of natural gas.

However, barriers to market entry by

natural gas producers and insufficient

infrastructure have not allowed even

faster growth in the use of natural gas to

produce electricity. On the other hand,

renewable energy has grownsubstantially under the governments

1999-2010 Renewables Promotion Plan,

which sets a target of 29.4% of electricity

generation coming from renewable

sources of energy (IEA, 2005).

As part of the European internal

market directives, Spain liberalized its

electricity sector in 1998 with the 1997

Electric Power Act, which translated a

1996 EU market directive into Spanish

law. It was the period in which all the

regulatory and market institutions were

set up to supervise the electricity sector.

The Ministry of Industry, Tourism, and

Trade, as well as the National Energy

Commission and the autonomousentities in the country, were given

regulatory and rule-making power over

the electricity market. This liberalization

has allowed the private sector play a

crucial role in the electricity sector,

allowing not only diversification, but

increased efficiency in the entire grid

(IEA, 2005).

In 1995, total electricity

consumption was sourced from the

following mix: 41% from coal, 33% for

nuclear, 14% for hydro, 9% for oil, 2%

for natural gas, and 1% for renewable

energies (including wind) (IEA, 2005).

By 2007, this had changed to 25% for

coal, 24% for oil, 20% for nuclear, 10%for wind energy, 9% for hydro, and 11%

for other sources (EIA, 2008; see pie

charts in Appendix). During the same

period, energy consumption grew at an

average of just over 5% annually, going

from roughly 175TWh1 in 1995 to

261TWh in 2007 (IEA, 2005; 2008).

Figure 3 in the appendix shows thegrowth in electricity demand by source

over the last three decades.

1 One TWh is one trillion watt-hours of energy.


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FIGURE 1. Energy Institutions

Source: IEA, 2005

Wind Energy Growth

Since 1998, Spain has been

strongly supporting wind energy

development with financial incentives.

As part of the liberalization of the

electricity sector, Spain created a

Special Regime under which certain

sources of energy, largely renewable

sources of energy, would receive fiscal

incentives through a feed-in tariff

scheme. This regime includes wind

energy, which receives

a fixed tariff for every

kilowatt-hour of

electricity produced

and sent to the grid.

This scheme is similar

to the feed-in tariff inplace in other countries

like Germany and

Denmark. As a result,

the wind energy

industry began to grow

Key Institutions

OECC: The Spanish OfficClimate Change is under

General Secretary

Pollution Prevention

Climate Change. It acts a

coordinating body with o

ministries and public

private entities in the are

climate change.

Ministry of Indus

Tourism, and Trade: T

ministry is the main autho

for all energy matters in Spand with its Secretary

Energy arm. It works w

other ministries in crea

plans, rules, and regula

for mining, nuclear ener

fossil fuels, and all o

sources and activities rela

to energy production

consumption.

ational Ene

Commission: Attached to Ministry of Industry, Touri

and Trade, it is respons

with providing substan

advice to the ministry in

oil, gas, and electric sect

particularly relate

regulation.

CIEMAT: The Center

Energy, Environmental,

Technological Research

responsible for research development of n

technologies, includ

cooperation with internatio

programs. Its areas of f

are combustible renewab

nuclear technology, and

solar power.


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rapidly in Spain, leading to the creation

of large wind energy developers and

manufacturers like Iberdrola, Gamesa,

and Acciona, as well as roughly 45,000

new jobs (IEA, 2008).

In 1998, wind supplied about 1%

of total electricity consumption, with

less than 2,000MW of installed capacity.

By the end of 2007, wind supplied 10%

of all electricity consumption with

15,145MW installed capacity, reflecting

the strong growth in the wind energy

sector in spite of the annual 4-5%

demand growth in that same period. In

2007 alone, 3,522MW of wind capacity

was added to the national grid, making

a record and confirming that the

Spanish wind energy industry is

growing exponentially. In addition, this

domestic growth accounts for only 50%

of Spanish wind energy activity, as

roughly 50% of production is dedicated

for export (IEA, 2008). The figure below

shows the strong growth in installed

capacity and the Spanish governments

objectives to 2010.

FIGURE 2. Growth of Wind Energy Capacity

Source: EIA, 2008

Policy Framework

The key policy that is driving

strong growth in the wind energy

industry is the feed-in tariff, instituted

through the 1998 Royal Decree on


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Special Regime (RD 2818) and the 1997

Electric Power Act (Law 54). Under the

feed-in tariff, producers are guaranteed

a premium above their market price for

every unit of electricity produced. This

scheme creates an attractive investment

climate by providing a monetary

incentive to grow rapidly. The feed-in

tariff levels have been set by royal

decrees since their institution, being

modified in 2004 to allow for variability

depending on project size (Del Rio and

Gaul, 2007).

Under the Plan for Renewable

Energies (PER), which covers the period

2005-2010, 12% of all electricity must

come from wind energy by 2010. This

means that by 2010, there must be

20,155MW of installed capacity. With

the growth rate from 2007, this level will

be reached by 2009. As a result of local

plans to create more jobs and spur

development, 39,000MW will have to be

installed between 2010 and 2020,

holding great prospects for wind energy

growth in Spain. The private sector itself

has set a goal of 40,000MW by 2020.

Currently, total installed capacity is

92GW, and it grew 10% in 2007 alone(IEA, 2008). With the feed-in tariff in

place for the next decade and increasing

confidence in wind energy, these goals

are attainable.

Research Goals

This research study was intendedto contribute to the book Global Winds

of Change: The Development of the

Wind Energy Industry, by Professor

Bogdan Vasi at the School of

International and Public Affairs atColumbia University. The book

discusses the various factors that have

led to the growth of the global wind

energy industry, from climate change

concerns to demands by non-

governmental organizations to

innovation and entrepreneurship. The

book is an in-depth look at what is

fueling the industrys growth and what

are the key lessons learned from nations

leading in wind energy.

In this context, this study focused

on one piece of the global picture: Spain.

Goals

1.

Analyze the business and politicalenvironment of the Spanish wind energy

industry.

2. Determine what factors played animportant role in the growth of the

Spanish wind energy industry.


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The goals of the study were to analyze

the Spanish wind energy industry and

gather new information regarding what

has contributed to its growth. Spain was

selected because of its leadership status

globally in wind energy development.

The new information gathered

regarding the growth of the wind

energy industry in Spain was intended

to relate to socioeconomic factors,

including the significance of pressure

groups, the demand for jobs in Spain,

and the requirements by the European

Commission to meet certain goals for

renewable energies.

Methodology

As mentioned above, the studys

goals were to analyze the Spanish windenergy industry and identify factors that

determined its growth over the last

decade. To achieve this, two methods

were used:

1) Secondary research2) Interviews

Secondary Research

The first part of the study

involved secondary research, which is

the collection and synthesis of primary

research. The main source of primary

documents was Lexus-Nexus , an online

database of articles. In addition, Web of

Science, a database for academic articles,

was used to find scholarly informationregarding the wind energy industry in

Spain. Finally, reports from non-

governmental organizations were used

as well to gather information about the

industry.

In total, hundreds of articles were

collected and compiled to identify keycontacts in the Spanish wind energy

industry and find useful information

regarding social actions in favor of wind

energy and developments in the private

sector. In addition, several scholarly

articles and reports were found, which

contribute to this summary and will

provide useful statistics for the book.

Interviews

The second part of the study

involved interviews. The contacts

identified for interviews were found

through personal contacts in Spain and

actual secondary documents.

Interviewees were mostly from the non-

governmental sector, but some were in

the public sector and private sectors. All

interviews were transcribed and focused

on what factors were significant in

helping the Spanish wind energy


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industry develop to its current state.

Table 1 below shows the names and

affiliations of those interviewed.

TABLE 1. Interviewees

Name Affiliation

Jose Garcia Greenpeace-Spain

Miguel Mendonca World Future Council

Begona UrielNavarre Department of Innovation,

Enterprise, and Employment

Findings

The study revealed mixed results

from what was expected. In general, the

research team assumed that social

factors would play a very large role in

creating the political and

entrepreneurial climate needed to

advance the Spanish wind energy

industry to its present state. However,

there were other factors that played key

roles as well. Most of the key findings

relevant to the studys goals were

actually found through interviews.

Secondary research was helpful in

finding key data and information

regarding the existing policy

framework.

Secondary Research

In summary, the Lexus-Nexus

articles, dating from 1989 to 2008,

provided information regarding actions

by unions and environmental groups, as

well as actions by private actors. The

actions covered by the articles involved

anti-nuclear, anti-coal, and climate-

related groups. These included labor

unions and large environmental

organizations like Greenpeace. They all

had a strong stance against nuclear

energy and fossil fuels, and also wanted

Key Actors

Acciona Asociacion Empresarial Eolica Association of Producers of Renewable

Energy (APPA)

Centro acional de Energias Renovables Ecologistas en Accion Ecotecnica Ecyr Enel Union Fenosa Renovables Gamesa General Electric Greenpeace Iberdrola Siemens Vestas World Wildlife Fund


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strong government action on climate

change. However, no single action was

dedicated to promoting wind energy.

Some articles were related to local

opposition to wind farms, while some

focused on record wind energy

production during very windy days.

In terms of business climate, the

Lexus-Nexus articles focused on the

expansion of Spanish wind energy

manufacturers and developers globally.

In particular, there was strong mention

of Iberdrola, Gamesa, and Acciona.

Gamesa was mentioned as a leading

global manufacturer of wind turbines,

selling their high-quality turbines all

around the world. On the other hand,

Iberdrola and Acciona were mentioned

as leading wind energy developers, not

only developing new projects in Spain

and abroad, but also buying up already

existing wind farms. In particular,

Iberdrola was given greater coverage

because of its entrance into the United

States market, where it is buying up

wind farms and planning large new

wind farms.

Interviews

The interviews revealed factorsthat played a significant role in the

development of policy. The key factors

that led to strong policy regarding wind

energy development were, in order of

relative importance, the following:

1. Reliance on fossil fuels and the economic impact of higher oil prices and a costly coalindustry.

2. The need for job creation and economic development in regions with high rates ofunemployment.

3. Educational and strategic campaigns organized by non-governmental organizations insupport of renewable energy and climate change action.

4. Increasing concerns related to climate change at the European Community level,signaled by the adoption of the Kyoto Protocol.

5. Lobby efforts by non-governmental organizations and the private sector in support ofpolicy frameworks favorable to renewable energies.


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Conclusions

The study revealed that Spains

wind energy industry is very dynamic

as a result of a political framework thatnot only created a favorable business

climate, but also supports research and

development, education, and exports.

The wind energy industry is growing

rapidly and will continue to lead the

world in years to come. In addition,

Spains wind energy manufacturers and

developers are poised to continuespreading around the world, exporting

technology and business knowledge key

to global wind energy development.

With a robust wind energy industry,

Spain is positioned to compete with

other wind energy leaders and

capitalize on emerging technologies like

offshore wind.

In terms of key factors

influencing the Spanish wind energy

industrys growth, the study found that

socioeconomic factors, such as job

creation and energy independence, are

significant and can match the influence

of lobby efforts and environmental

groups. In addition, being part of aregion that is behind renewable energies

in general also influences policy

outcome in support of wind energy. In

Spain, opposition to coal and nuclear

energy, as well as increasing reliance on

imported oil, greatly contributed to

regional and national policies that

promote wind energy. Lobby efforts byprivate companies and environmental

groups also influenced specific policy

outcomes, and the need for jobs in

regions suffering from unemployment

made wind energy a popular choice for

economic development.

In conclusion, the study suggests

that countries with little fossil fuel

resources, heavy reliance on imported

energy, available labor force, and

enough financial resources to promote

new energy technologies may be

capable of developing wind energy

industries like Spains. In order for such

countries to successfully create wind

energy manufacturing and developmentcapacity, there must be strong popular

support, interested business actors, and

a politically sound government that can

work to design policies that will enable

the creation and growth of a wind

energy industry. Actors in nations with

similar characteristics as Spains can

play their part to lead to policyoutcomes that incentivize wind energy

production, provide training for new

jobs, and support research and

development.


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References

Central Intelligence Agency. (2008). Spain. Retrieved November 30, 2008.

https://www.cia.gov/library/publications/the-world-factbook/geos/sp.html.

Del Rio, Pablo and Gual, Miguel A. (2007). An integrated assessment of the feed-in tariff

system in Spain. Energy Policy, 35: 994-1012.

Executive Committee for the Implementing Agreement for Co-operation in the

Research, Development, and Deployment of Wind Energy Systems. (2008). IEA Wind

Energy Annual Report 2007. International Energy Agency.

International Energy Agency. (2005). Energy Policies of EIA Countries: Spain 2005 Review.

Organisation for Economic Co-operation and Development.

Ragwitz, Mario and Huber, Claus. (2005). Feed-In Systems in Germany and Spain and acomparison. Energy Economics Group.

Appendix

FIGURE 3. Map of Wind Installation Distribution

Source: EIA, 2008


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FIGURE 4

FIGURE 5. Electricity Mix for 1995 and 2007

Source: EIA, 2005; 2008

41%

33%

14%

9%

2% 1%

1995

Coal

Nuclear

Hydro

Oil

Natural Gas

Wind

Others

25%

20%

9%

24%

1%

10%

11%

2007


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FIGURE 6. Tariff Levels for Wind Energy

Sources:Country Submission

key factors leading to wind energy development in spain

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