Formation of Technological Capacity and Legitimacy

Lessons learnt from the adoption of wind energy in Portugal

Nuno Bento a, Margarida Fontes a, b

a DINÂMIA’CET, ISCTE – Instituto Universitário de Lisboa, Portugal b LNEG - Laboratório Nacional de Energia e Geologia, Portugal

Conference “STS perspectives on Energy”, 4-5 November, Lisbon

Projecto financiado pela FCT - Fundação para a Ciência e a Tecnologia,

Ref. No : SFRH/BPD/91183/2012

1. Motivation and objectives

2. Conceptual framework

3. Diffusion of wind power in Portugal: a comparative analysis

4. The emergence of a local TIS based on wind technologies

5. Discussion

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3

No proven oil or natural gas resources 45.3% of electricity generation came from renewable energy sources (RES) in 2011: 3rd highest share in EU15, 4th in OECD. Current plans to raise that share to 60% by 2020 Wind energy is the 2nd most important RES after hydropower 2nd highest share of wind energy in total electricity consumption among OECD countries in 2011 (17.2%), only surpassed by Denmark (EWEA, 2013; DGEG, 2013) Industrial cluster increased national incorporation of inputs to 100%

Why wind in Portugal?

Reveal patterns of spatial diffusion of energy innovations Identify the mechanisms through which innovations are transferred to new markets Understand the formation of local technological innovation systems Design technological policies with a stronger empirical and theoretical basis that will foster the diffusion of low carbon innovations

Why this study?

How wind power diffused spatially? What were the main drivers of its rapid development in Portugal? How was developed technological capacity and legitimacy for wind?

Research question:

• The emergence of a new Technological Innovation Systems (TIS): – The structure of a TIS is composed of actors, networks and institutions (Jacobsson & Bergek, 2004, 2006;

Jacobsson & Bergek, 2012)

– the seven key processes of a successful formative phase (cf. Bergek et al., 2008): entrepreneurial experimentation, knowledge development, direction of search, materialization, market formation, resource mobilization and legitimation

• A more empirical literature analyzed the diffusion of several technologies focusing on the effect of scaling (Wilson, 2012, 2009; Grubler, 1998). It shows that: – diffusion typically evolves in a three-phases sequential process (Wilson, 2012): formative phase; up-

scaling; and growth phase

– growth rates accelerate as innovation reaches new regions due to technology and knowledge spillovers (Bento, 2012; Wilson, 2009)

4

5

0

1000

2000

3000

4000

5000

1977 1982 1987 1992 1997 2002 2007 2012

MW

Cumulative capacity of wind power (1977-2012), in MW

Portugal "Core" Dinamarca

Portugal - ajuste logístico Dinamarca - ajuste logístico

Diff.t0 = 7 yrs.

Δt Core = (F1% - F50%)= 14 years

Δt Por = 8 yrs.

K

3.1. Unit and industry scaling (known data (dots) and logistic fits (lines) indexed to K=1.00)

6

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1977 1982 1987 1992 1997 2002 2007

Portugal (1977-2010)

Unit Capacity frontier (Vestas)

Maximum Unit Capacity

Average Unit Capacity

Cumulative Total Unit Numbers

Cumulative Total Industry Capacity

K = 4568 MW K = 3584 units K = 2.3 MW/unit K = 3 MW/unit K = 9 MW/unit K = 10569 GWh

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1977 1982 1987 1992 1997 2002 2007

Ind

ex

(K=1

.00

)

Denmark (1977-2010)

K = 3562 MW K = 7687 units K = 1.7 MW/unit K = 9 MW/unit Cumulative Total

Unit Numbers

Average Unit Capacity

Cumulative Total Industry Capacity

Unit Capacity frontier (Vestas)

Spatial acceleration of unit and industry scaling…

3.2. Production growth (logistic fits indexed to K=1.00)

7

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1980 1990 2000 2010

Growth of Electricity Generation and Share: Denmark vs Portugal

PT - Gross Elec. Prod. of Wind

PT - Share of Wind in

Elec.

DK - Gross. Elec. Prod. of Wind

DK - Share of Wind in Elec.

K (Core) = 10965 GWh K (Core) = 35% K (Por) = 10569 GWh K (Por) = 19%

…and of the share of wind in electricity production.

4.1. Formation of technological capability and legitimacy

4.2. Institutional alignment and growth

4.3. Synthesis of the local TIS formation

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4.1. Formation of technology capability and legitimacy

• The “trigger” for the development of wind in Portugal was science and technology policies both at national and European levels – the government’s interest on renewable energies after the oil shocks created “expectations” about the

development of alternatives that influenced the direction of search – European Community programmes provide resources for R&D and demonstration on wind energy

• Researchers from national laboratories and universities got involved in international projects on the physical mapping of wind profiles and resources in the 1980s. This contributed to create local knowledge on wind modeling and wind technologies

• The experimentation of several imported small wind turbines, particularly in the islands, generated applied knowledge that was helpful in the installation of the first wind farm by Enernova in 1997

• The creation of the renewable energy producers’ association (i.e. APREN) in 1988 was the key point in the emergence of an advocacy coalition. It had many positive externalities for wind growth in the early years, in particular for the implementation of the wind support schemes

The good results from the first trials reinforced the credibility of wind A community of actors and networks was formed (incl. universities, national labs, firms) contributing to

legitimate wind power

9

0

0,2

0,4

0,6

0,8

0

10

20

30

40

1975 1984 1993 2002 2011

Po

rtu

gal

De

nm

ark

Year

Total RD&D budgets on Wind Power in Portugal and Denmark (1974-2012), in Million Euro (2012 prices and exch. rates)

Denmark Portugal

4.1. Formation of technology capability and legitimacy

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Source: IEA, 2013.

4.2. Institutional alignment and growth

• The obligations imposed by the European directive, on the one hand, and the technology maturity and the experience gained in former projects, on the other hand, opened a “wind of opportunity” to invest in wind in late ‘90s

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4.2. Institutional alignment and growth

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1981

1991

2003

0

500

1000

1500

2000

2500

3000

3500

1980 1985 1990 1995 2000 2005 2010

US$

20

05

/kW

Years

Wind Power: Average costs of installed capacity (1980-2010)

Denmark Portugal

4.2. Institutional alignment and growth

• The obligations imposed by the European directive, on the one hand, and the technology maturity and the experience gained in former projects, on the other hand, opened a “wind of opportunity” to invest in wind in late ‘90s

• The government set up ambitious targets and a new feed-in tariff (FIT) which influenced the direction of search of main actors, particularly the incumbent. This was critical to enable hard market formation

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4.2. Institutional alignment and growth

14

6 27 40 71 104

226

496 681

440

684 696

365 476

58 85 125 196

301

526

1023

1704

2143

2827

3523

3888

4364

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Annual Additions (MW) Cumulative installed capacity (MW)

RCM 63/03 3750MW

by '10

RCM 169/05 5100MW

by '13

RCM 104/06 4500MW

by '10

RCM 1/08 5100MW

by '12

Cumulative and annual installed capacity of wind energy and official goals (in MW)

4.2. Institutional alignment and growth

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1988 1995

4

1999 2001 2005 2008 2013

Decree-Law

189/88

Tariff: 4.7 €

cents/kWh

Price_Guara

ntee: 8years

DL 313/95

Tariff: 4.7 €

cents/kWh

Price_Guara

ntee: 8years

DL 168/99

Tariff: 6.8 €

cents/kWh

Price_Guara

ntee: 12yrs

DL 339-C/01

Tariff: 8.5 €

cents/kWh 1

Price_Guara

ntee:No limit

DL 33-A/05

Tariff: 7.4 €

cents/kWh

Price_Guara

ntee: 15yrs

DL 51/10

Tariff: 7.4 €

cents/kWh 2

Price_Guara

ntee: 15yrs

DL 35/13

Tariff: 7.4 €

cents/kWh 3

Price_Guara

ntee:20-22y

Based on tariffs charged to final

consumers

Based on avoided costs with conventional power plants, avoided C02

emissions and the inflation rate

Evolution of the legal framework on wind energy feed-in tariff

4.2. Institutional alignment and growth

• The obligations imposed by the European directive, on the one hand, and the technology maturity and the experience gained in former projects, on the other hand, opened a “wind of opportunity” to invest in wind in late ‘90s

• The government set up ambitious targets and a new feed-in tariff (FIT) which influenced the direction of search of main actors, particularly the incumbent. This was critical to enable hard market formation

• The FIT attracted new actors (e.g., private financers, financial institutions, engineering industries and electrical equipment companies) who brought more resources to the TIS in the form of capital or complementary knowledge

• In 2005, a public tender sparked a series of investments in the emerging “cluster”. They materialize in several factories of blades, towers and turbines to equip the new wind farms and increase exports (e.g., ENEOP,RiaBlades)

• The obligation to pay 2.5% of the revenues to local municipalities contributed to lower public resistance towards wind power and reinforce the general positive perception

But …the financial crisis raised questions about the legitimacy of the rents in the sector; actors are actively involved in lobbying activities to preserve their benefits …as more and more capacity is added and the best sites onshore are exploited, the focus of the research shifts towards the development of the offshore potential

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4.3. Synthesis of the local TIS formation

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Entrepreneurial experimentation

Positive externalities

Legitimation

Resource mobilization

Knowledge creation

Direction of search

Resource mobilization

Market formation

Knowledge development

Materialization

« FORMATIVE » STAGE

« IMPLEMENTATION » STAGE

Market formation

• The development of wind power in Portugal confirms the acceleration pattern of diffusion in follower markets

• Supply-push and demand-pull policies can be effective to support the development of a local TIS: – Science&technology policies worked as an initial “motor” of change supporting the fulfillment of critical

functions of the innovation system (i.e. legitimation, direction of search, resource mobilization, knowledge development and experimentation)

– The formation of expectations were important to attract key actors whose involvement/advocacy provided

additional resources and legitimacy

– The tender-based feed-in scheme proved effective to foster partnerships with companies from the center to

transfer state-of-the-art technology

• Enhancing absorptive capacity is critical to assimilate knowledge spillovers more rapidly and

integrate them with local competencies -> Open questions: How to integrate capacity-building activities in the TIS framework?

• Public acceptance is fostered when local communities get some benefits from the projects. However, there are raising signs of contestation as more wind turbines are installed with environmental impacts and electricity prices increase to compensate for tariff deficits partly attributed to generous FIT. This may affect the deployment of wind offshore in the future

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Thank you for your attention. Corresponding author: Nuno.Bento@iscte.pt

mailto:Nuno.Bento@iscte.pt