"Energy and innovation policies fostering the emergence of regional wind energy industry. Multiple dimensions of the Spanish policy mix”

Cristian Matti, Davide Consoli, Elvira Uyarra

** Currently under review. Please do not quote without authors’ explicit consent **

1 Introduction

The development of renewable energy technologies for tackling climate change offers an interesting opportunity to analyse the process of policy design and the uncertainties associated with its implementation. Clearly, accounting for the peculiarities of the attendant national and regional settings is essential to disentangle the influence of institutional orientation, of innovation capacity and of the social and economic incentives at stake. At the same time, the policy process cannot be understood only by looking at isolated regional governance arenas, or at the struggle between central and local governments (Bulkeley, 2005; Marks & Hooghe, 2004; Morgan, 2004). The analytical device of policy mix affords a more nuanced approach to grasp the synergies and conflicts between instruments, actors and policy goals. It does so by considering the systemic context in which policies emerge, interact and trigger changes (Flanagan et al 2011; Kivimaa & Virkamäki, 2013; Rogge & Reichardt, 2013). To be sure, previous studies offer only a snapshot view of the policy portfolio that influence a sector or a region and neglect the temporal and co-evolutionary nature of the processes involved. Further, there is a tendency to overlook the multi-scalar dimensions underpinning this evolution. On the whole, policy mixes tend to be seen as designed or consciously constructed portfolios of instruments rather than as emergent processes and, as a result, coordination challenges tend to be neglected or portrayed as unproblematic (Flanagan and Uyarra, 2016).

The present paper explores the interplay between multiple levels of policy domains in regional contexts where the promotion of energy technologies was set as a priority. Regions are here spaces of policy implementation and experimentation but also where multi-level policies, actors and institutional settings interact. Therein, interactions between policy rationales, objectives and impacts give way to both conflicts and favourable circumstances for institutional and sectoral development (Uyarra & Flanagan, 2010). Our analysis shows that instruments embedded in different policy domains co-evolve in a multilevel context, and considers the implications in terms of regional governance.

The empirical context of our analysis is the emergence of the renewable energy sector in Spain, a country that is widely considered a success story in this remit. This case illustrates the contingent nature of policy, and how strategies to stimulate the emergence of a new sector are embedded within broader regional development strategies. The main contribution of the paper is not an evaluation of these policies but, rather, a detailed articulation of interwoven processes of learning, interaction and decision-making involved in their design and implementation. In short, the paper addresses the question: how do the composition, stability and flexibility of the policy mix affect sectoral evolution? The analysis is based on case study research applied to complex and multifaceted phenomena (Herman & Egri, 2006) that

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provides sufficient flexibility to investigate a contemporary issue within its natural context, and to individuate differences and similarities between the issue and the context (Yin, 2008).

The paper is organised as follows. Section two offers a critical review of the concept of policy mix and highlights the importance of accounting for the whole array of interactions across the constituent elements. Section three presents the empirical study of Spanish regions based on a review of policy documents and reports as well as EU regulations on renewables energy. This is further enriched by insights obtained through 12 in-depth interviews in total with EU officers, public and private R&D staff, and regional government officers. The purpose of the interviews was to gain insights on energy policy implementation, technological development and regional strategy. The analysis also relies on secondary data sources, such as performance indicators of the wind energy sector (i.e. power capacity and manufacturing sites), patent data and R&D performance with a view to highlight the key milestones of the evolution of the wind energy sector in Spain. Section four frames the analysis against the backdrop of regional contexts, and Section five offers a discussion of the main results. The last section concludes and summarizes.

2 Interplay of energy and innovation policy: unravelling linkages and complementarities between multiple dimensions of policy mix

The central aim of innovation policy is to bridge know-how of science and technology with organizational capabilities to pursue and foster market opportunities. Next to the traditional systemic views of innovation, a greater focus on the range of policies that influences the relationships and processes underpinning innovation has gained currency in recent years (Cunningham et. al., 2016). As a result, innovation policy scholars call for a deeper analysis of the multi-actor, multilevel governance configurations in which policies emerge and develop ( Flanagan et al., 2011; Laranja et al., 2008; Magro & Wilson, 2013). In this vein, Flanagan et al (2011) argue that policy instruments are not necessarily stable in terms of rationales, goals, use and impacts across time, space or policy domains and, thus, stress the need to pay attention to such interactions to better understand their operation and evolution over time (see also Borrás & Edquist, 2013). This argument builds on the work of Bressers & O’Toole (2005) on the interactions among different instruments and action taken at different levels of multilevel governance.

Government support for renewable energy indeed encompasses a variety of policy goals (associated with affordability, security and sustainability of energy supply as well as maximizing opportunities for low carbon growth), several policy domains (environmental, technology, industrial policy) and different levels of government. The relevant literature emphasises the need to achieve a coherent instrument mix to meet the commitments of lower carbon dependency and the array of innovation processes that are expected to achieve this goal (del Río & Bleda, 2012; Horbach et al., 2012; Veugelers, 2012). Along these lines, del Rio (2009) calls for a more systematic analysis on the institutional conditions that support environmental technological change at both national and regional levels. Inspired by innovation system views, many studies have focused on systemic failures or gaps associated with support of renewable sectors and suggested that appropriate mixes of instruments are needed to address these gaps (Bergek et al. 2008). However, these approaches rarely consider the temporal footprint of policy mixes or the multi-scalar influences on system changes (Binz

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et al. 2014; Flanagan et al. 2011; Quitzow 2015). Multi-level governance approaches indeed highlight a transfer of responsibilities upwards to supranational organizations, and downwards towards regional and local levels but also outwards involving interactions of state and non-state actors playing a variety of roles under overlapping authorities (Bulkeley, 2005; Essletzbichler, 2012; Smith, 2007).

There is also a tendency to treat policy mixes as pre-designed portfolios of instruments, or as a coherent, mutually supportive set of instruments that can be achieved through better coordination (Howlett & Rayner, 2007). However, policy mixes are rarely consciously constructed but rather emerge from institutional, political and cultural decisions that unfold over time (Flanagan et al, 2011). Attempts to improve coherence can lead to unexpected outcomes, and overtime dimensions (and particularly actors) in the policy mix change and influence policy coherence (or lack thereof) in different and often unpredictable ways. As noted by Cunningham et al (2016), systemic roles may change over time as actors learn and, as a result, their response and the processes targeted may change even if the intervention does not.

Taking a policy mix approach implies a need to pay attention to potential interactions, conflicts and tensions between goals, rationales, instruments and implementation approaches of different instrument at different levels and at different times (Flanagan et al., 2011, Magro and Wilson, 2013). Tensions and interactions may occur between instruments from different policy domains, for example the simultaneous implementation of environmental policy and innovation programmes to foster renewable energy technologies, between multiple levels (e.g. European, national and regional) of governance (Laranja et al., 2008) or policy stages, namely between policy design and implementation. Policy instruments are mediated by implementation, which is often the responsibility of sub-national territorial units, which can elicit different responses that can reinforce, offset or diverge entirely from the designs mandated at higher levels (Uyarra & Flanagan, 2010). Indeed, rather than passively receiving and locally implementing policies, local implementation could diverge significantly as a result to differences in regional infrastructure provision, policy path dependencies, and variable capabilities of actors to mobilise networks and resources internally and across scales (Valdaliso et al., 2014; Uyarra & Gee, 2013). Such variations will lead to diversity in implementation and outcomes, ‘deviations’ which, intentional or not, may contribute towards the breaking of path dependencies and the creation of new paths (Streeck and Thelen 2005).

Viewing innovation policies in support of RES-E as increasingly complex multi-level policy mixes raises issues of coordination (Magro et al., 2014)., which requires a thorough examination of critical dimensions of the policy process such as the mix of actors, levels, policy domains and time (Boer & Bressers, 2011). According to Magro et al (2014), it is at the intersection of these multi-domain, multi-instrument, multi-actor, and multi-layer dimensions that coordination failures may occur, including excessive duplication and overlap, policy inconsistencies, conflict and lack of overall coherence (see also Braun, 2008).

The dimensions described provide the general framework to explore and analyse the interaction and conflicts between instruments, actors and policy goals. Figure 1 represents the system of relations between these elements. Governance levels are illustrated here as sequences of contexts (problem–solving) and processes that interact across domains and over time, with particular emphasis on the variety of simultaneous regional processes. By

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identifying the causalities and logics of these interactions we aim to articulate the process by which a variety of inputs coalesce into the policy mix for promoting the wind energy sector in Spain. In particular, we will identify key milestones wherein regions play a fundamental role in coordination and conflict resolution.

Figure 1 Four elements for analysis multilevel governance systems

Source: own elaboration.

The creation of new instruments is analysed by following the chronological sequence of contexts and policy process that create linkages within a policy level or between other policy levels over time. Linkages are connections between instruments belonging to different policy domains such as energy, industry and innovation. At the same time, connections can stem from particular programs, plans or project designed for multilevel domains. In the next subsection we describe in detail the interaction among different instruments in the context of the energy market.

2.1 Policy mix as a dynamic construction to support renewable energy sector

Recent studies provide the context for understanding the linkages between instruments aimed at promoting the introduction of environmental technologies, energy, and of innovation policy (del Río & Bleda, 2012; Horbach et al., 2012; Rogge & Reichardt, 2013; Veugelers, 2012). They identify mechanisms to support the renewable energy sector by combining technology push, market pull and a regulatory push approaches (see also Barradale, 2010; Enzensberger, Wietschel, & Rentz, 2002; Jacobsson & Lauber, 2006a; Meyer, 2007; Nemet, 2009).

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Policy support for the development of electricity production through Renewable Energy Resources (RES-E) has typically involved direct instruments for technological innovation and industry support and indirect instruments to foster market deployment by means of regulation and technical standards (Lewis & Wiser, 2007; Nemet, 2009). The interactions and trade-offs among these instruments shape the implementation for home market deployment and technology development (Lund & Münster, 2006; Nemet & Kammen, 2007; Veugelers, 2012) on the one side and balancing societal demands (i.e. environmental commitments) through the promotion of innovation in new technologies on the other (del Río & Bleda, 2012; Del Río, Carrillo-Hermosilla, & Könnölä, 2010; Horbach et al., 2012; OECD, 2011a, 2011b).

Direct instruments for technology development are supported through traditional science, technology and Innovation actions such as R&D support for university-industry cooperative projects and funding for specific research infrastructures (Corsatea et al., 2014). Industrial policy includes initiatives in support of market penetration, R&D assessment, market evaluation, technology transfer and diffusion and commercialization of new technologies (Lewis & Wiser, 2007; Lund, 2009). Government interventions target cooperation among firms in different sectors through value chain integration, and specific regulations on local content requirements.

Indirect instruments for the creation of new markets aim to improve the competitive conditions for the commercialization and operation of new technologies. Market creation can be supported by a combination of supply-push and demand pull measures (Rogge & Reichardt, 2013; Del Río et al., 2010; Saidur et al., 2010). The former includes financial stimuli such as feed in tariff (FIT) schemes that seek to internalize externalities and set appropriate prices to facilitate a learning curve in new technologies (Barradale, 2010; Del Rio, 2008), while demand pull measures influence energy demand through targets for energy production (Renewable Portfolio Standard - RPS quotas) or through mechanisms such as government tendering as a form of public procurement (Lewis & Wiser, 2007).

The RES-E policies described above involves a degree of coordination across different domains such as energy policy (i.e. regulation, standards, FIT scheme) and innovation policy in the form of R&D activities and infrastructures, knowledge transfer and promotion of innovation networks (del Río & Bleda, 2012; Jacobsson & Lauber, 2006b; Lund, 2009). This is a policy mix aimed at multiple objectives, and in which different actors implement a variety of instruments over time with different competences as part of a diverse, yet organic, learning process.

Figure 2 depicts the policy domains and the relevant policy instruments of the RES-E sector. Following Magro & Wilson (2013), the science, technology and innovation policy domain is viewed as part of the technology push domain, while industry and energy policy are part of the set of market pull (supply/demand) and regulatory push elements. The key instruments are considered together with the actors in charge of implementation, with special attention towards key segments of value chain, namely: Utilities, Independent Power Producers (IPPs), Developers and wind turbine manufacturer (Matti & Consoli, 2015).1 Interactions and trade-

1 Utilities: traditional players of energy sectors that usually engage activities all along the value chain, including the generation, transmission and distribution of electricity in highly regulated markets.

Independent Power Producers (IPPs): organizations that are extremely adaptive and can either compete by developing, owning or operating wind farms.

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offs among policy instruments are identified taking into account changes in rationales, goals, use and impacts over time, space and policy domains (Flanagan et al., 2011).

Figure 2 Policy domains and main instruments fostering the development of wind energy sector

Source: own elaboration based on (Magro & Wilson, 2013).

Building on this, the remainder of the paper focuses on the four dimensions proposed by Flanagan et al. (2011): policy space, governance space, geographical space and time. In the following sections the dynamic evolution of policy mix as a learning process is explored through an empirical study of energy and research policy related to the wind energy sector in Spain.

3 The emergence of Spanish wind energy sector: stages and multi-level interactions

The Spanish wind energy sector has undergone significant transformation both in terms of expansion of the energy infrastructure2 and emergence of new industries and technologies (Matti & Consoli, 2015). No doubt, this sector has benefited from financial support and regulation that share common values and goals but that have been implemented differently

Developers: firms that engage activities involving the deployment of a wind farm (i.e. purchasing or leasing the land, installing equipment, power sales, turbine supply, construction, and financing agreements) and occasionally operate entire wind farms, or evolve into proper IPPs

. Wind turbine manufacturer: technology developers that integrate different components and participate in development of wind farms

2 Spain is the first country in the world where wind energy is the major source of energy (El País, 2014b) and is the world’s fourth largest wind energy market (GWEC, 2014)

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across regions (Del Rio, 2008; Morata & Font, 1998). As a backdrop to the analysis, let us recall the long-term developments that led to the current status quo.

The two triggering events were Spain’s admission to the European Union (EU) in 1986 and the decentralisation of legislative power to regions started in the second half of the 1980s. The former provides the context to how national climate change commitments fit within the broader EU framework. Interestingly, at the time of admission progress towards the implementation of EU environmental directives in Spain was rather low (Morata & Font, 1998). In addition to this, centrifugal political forces accelerated the decentralization of competences to regions3 in various domains including mining and energy regimes. Against this backdrop political negotiations gave way to an asymmetric distribution of policy competences across regions (Aja, 2000; Escudero, 2002; Prieto & González, 2006). The main effect of decentralization was that while regions and local authorities did not have much input in the formulation of policy, they were responsible for implementation. Moreover the interaction between regional councils and various interest groups (business and industry) generated pressure towards the adaptation to EU and national directives on energy and environmental issues (Borzel, 2000; Bukowski, 2001). In this context, large regions with sufficiently developed competences and resources were able to early on develop policies to support the renewables energy sector in collaboration with other national and international partners (Bache & Jones, 2000; Roller & Sloat, 2002).

The policy portfolio for the promotion of RES-E sector in Spain encompassed both direct and indirect instruments accompanied by regulation and standards on technical specifications. Their implementation followed two directions, namely the use of specific rules and frames for competitive conditions to pursue new market creation and the support of technology development through R&D programs and diffusion and commercialization instruments. These interventions combined ingredients from energy, industry and innovation policies in a multi-level framework that was however constrained by uncertainty regarding the extent and the effectiveness of linkages across actors.

The case of Spanish regions exemplifies the differed pathways that emerge in the context of implementing policy interventions that articulate different values and objectives (i.e. market deployment, technology development, security of supply, employment) and, at the same time, define short and long-term horizon for industry and technology evolution. On the other hand, the case highlights the role of major changes (i.e. Spain’s entry to the EU, decentralization and transfer of competences to regions). Figure 2 provides a chronology of energy policy and the main dimensions of research policy in Spain (i.e. R&D, EU and national programmes). The regulatory portfolio supporting the creation of the renewable energy sector in Spain, at the European, national and regional/local levels are presented in a timeline to facilitate the identification of cross-level linkages among policy domains.

3 1983 Law of Autonomy Process, 1985 Local Government Act (competences of municipalities) and Law 9/1992 (transferred competences on mining and energy regime from national to regions).

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Figure 3 Multilevel view of renewable energy policies and programmes

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3.1 The energy policy domain: stages and multilevel interaction

3.1.1 1990-2000 Transforming the energy sector

In the early 1990s, European and Spanish institutions pursued the liberalization of energy markets to increase competition while at the same time guaranteeing security of supply. Simultaneously, the first series of short and isolated exploratory R&D programmes in EU and Spain sought to support renewable energy technologies.

The liberalization of energy markets consisted of a series of coordinated actions that allowed the Spanish government to align long-term priorities with the broader EU Directive on energy supply and vertical market segmentation. More specifically, the government created favourable conditions for the co-existence of different regimes for traditional and renewable energy producers, as well as guaranteeing price support for RES-E producers. The latter included a special regime based on a new FIT tariff scheme that received the support of the relevant interest groups (i.e. RES-E producers – utilities)4 (Del Rio, 2008).

Simultaneously, R&D initiatives were integrated within a broader strategy aimed at fostering the development of renewable energy sources. During this period the EU research budget for RES-E increased fourfold (i.e. JOULE, THERMIE, ALTENER and specific target actions in the EU 5th Framework Programme) while in Spain, long-term R&D energy programs (i.e. PIE) were replaced by initiatives (i.e. ESTELA, TEIDE) designed to integrate objectives and commitments defined in the Spanish and EU R&D systems. These initiatives were not necessarily stable in term of rationales, goals, use and impact across time and space in that they did not specify objectives of alignments with energy and industrial policy.

3.1.2 2000-2008. Rise and consolidation of Spanish wind energy sector

The key mechanisms in support of renewable energy market and technology were implemented in the 2000s. These consisted of coordinated targets on renewables energy previously introduced in 2001 (see Fig. 3) by the EU through common norms and targets on member states. EU legislation included national goals for the RES-E sector and a general framework for the exploitation of local and external markets opportunities5, which was revised to increase targets and to accommodate other aspects concerning market structure and new market for emission trading.6

4 Objectives and targets in the National Energy Plan (PEN 1991-2000) were aligned with the EU Directive 96/92/CE. Law 54/1997 and RD 2018/1998 introduced the special regime based on a new FIT tariff scheme. Both actions support RES-E producers to participate in the energy market with the aim of achieving 12% of gross energy consumption coming from renewables by 2010.5 Directive 2001/77/CE outlines: 1) national goals for achieving 12% coverage of electricity demand by renewable energy by 2010; 2) energy production from renewables should be 22.1% of total EU energy production; and 3) member countries should develop their own strategies within the common framework.6 Additional directives dealt with complementary aspects such as regulation of internal energy markets and definition of main activities (i.e. generation, transport, and distribution), actors and networks (2003/54/CE) and the establishment of a trading rights regime for the nascent market of greenhouse gas

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The national government passed laws that sought to remove barriers to the entry of new actors (e.g. system operators, energy trading companies) and foster decentralization. Such a strategy was coherent with the EU’s ethos of increasing competition and avoiding dominance in transport and distribution network operations (Law 17/2007). Specific long-term plans7 aligned with EU regulation (i.e. PANER), fostered new procurement mechanisms, decentralization of energy production and a more significant role for regional developments. This framework ensured coherence over time between target setting at higher (supranational) levels and implementation at regional levels (See Fig 3).

The most significant changes were the reform of the FIT scheme, the introduction of improved mechanisms for tariff adjustments and the removal of the barriers to RES-E generators. These measures reflected the commitment to improve competitive conditions while responding to the demands of RES-E producers (González, 2008). Moreover financial stimuli like tariff schemes were renewed to reduce system costs while at the same time guaranteeing revenues, and thus lower risk, for investors. While the Spanish government could not provide retroactive coherence to existing policies, this was a first clear step towards the correction of the tariff deficit due to the imbalance between existing regulation and the growing share of RES-E sector under the special regime, which had reached 522%. As a result, total wind power capacity rose by 3,820% in the period 1997-20088 (see Fig 4).

Figure 4 Evolution of power capacity in Spanish electricity system: Wind power, ordinary and special regime 1997-2012

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

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emissions (2003/87/CE). Directive 2009/28/CE states that the Spanish target for the share of energy from renewable sources should be 20% of gross final energy consumption by 20207 The plan for the promotion of renewable energy (1999) established targets for RES-E sector and successive reforms (2005 and 2011) by incorporating new technologies in the energy portfolio and alignments with updated EU commitments.8 These results confirm that implementation of the FIT scheme and the targets for RES-E have achieved more than the expected 12% target of RES-E for 2010 and even the 2020 target of 20%.

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Source: own elaboration based in data of DEE (2013)

Setting energy as R&D priority was another important step towards a coordinated energy and innovation policy. This was implemented, first, by new legislation on competitive energy markets, efficiency and productivity of energy networks according to the first RES-E targets. Subsequently, the 7th Framework Programme established specific objectives for efficient and scalable technologies to meet EU targets on security of supply and environmental commitments (i.e. CO2 emissions). This was further coupled with the Strategic Energy Technology (SET) Plan aimed at planning, implementation of resources and international cooperation for energy technology.9 On the whole, this mix of actions made a difference in stabilizing and aligning energy policy across the EU.

Spanish innovation policy followed similar steps in search of stability, coherence and alignment, in particular by coupling isolated R&D energy programs within the broader and long-term National Research Plan (NRP). In so doing the government facilitated the integration across level (vertical) and between sectors (horizontal). In parallel to this, regions received R&D support through a variety of channels, such as the European Regional Development Fund (ERDF) based on public-private collaboration for R&D as well as co-funded programmes for applied R&D that facilitated knowledge and technology transfer between firms and universities and technological centres. According to Izquierdo (2011) Spain ranks 2nd behind Germany in overall funding received for R&D energy projects. The relative advantage of Spain in renewables energy technology is confirmed by other studies (Getz et al., 2013; Johnstone et al., 2010; Walz et al., 2008). Fig 5 shows the implementation of multiple funding schemes (measured by R&D projects and patents granted in wind energy related areas).

Figure 5 Total number of Wind energy related R&D projects and Patents granted in Spain 1997-2012

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

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180Patents EPOR&D projects (MA)

9 In the specific field of wind energy, according to the EU, more than 40 projects have been funded since 1998, 16 under the 6th Framework Programme and 10 under FP7.

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Summing up, this phase was characterised by the pursuit of policy coherence by means of European, national and regional initiatives. Initially, the policy mix reflected the EU and national-level commitment to market deployment of RES-E sectors. Policies for the consolidation of industrial development provided mechanisms to improve vertical and horizontal integration through market liberalization and regional development plans (see grey shade in Fig. 3). Further down the line, European and Spanish national innovation policies sought a more coherent and systemic mix of instruments to meet the targets by setting energy as a priority for R&D investment. The resulting policy mix improved the conditions for RES-E development in that it provided financial stimuli, facilitated the growth of infrastructures and stimulated technology development. More recently, the trade-off between environmental targets and budget pressures forced a downward revision of the main instruments (i.e. FIT). Those changes designed for stability, transparency and coherence were a reflection of lessons learned when dealing with unbalanced financial stimuli.

3.1.3 2009 – 2013: Tariff deficit as a new scenario

The most recent phase coincides with the emergence of significant challenges to the sustainability of the renewable energy system. This is mostly due to the conflict between policy goals and changes in the general economic conditions (Matti & Consoli, 2015). Against the backdrop of the recession and the growing budgetary pressures, the central government became concerned with the rising costs of the implementation of the FIT scheme.10 As a result, since 2009 new restrictions applied and several reforms sought to achieve a more sustainable regulatory framework (Iglesias et al., 2011). In an attempt to reduce the tariff deficit in a perhaps unrealistically short timeframe, the government reduced or withdrew altogether economic incentives and redesigned the scheme of taxes and subsidies which led to less favourable conditions for renewable energy system (García Breva, 2013). A clear indication of the extent of these changes is the drastic deceleration of wind power capacity accompanied by a reorganization in the structure and the asset ownership of key actors such as utilities and wind turbine manufacturers (El País, 2012a, 2012b, 2014).

Furthermore, European, national and regional institutions implemented instruments to pursue tighter coordination between energy, industry and innovation policies. Accordingly, targets and incentives were revised to realign priorities and resources at different levels. While the transformation of the energy market influenced the direction of technological development, the establishment of energy policy targets was crucial to stir R&D activities towards the exploitation of market opportunities. In the Spanish wind energy sector, a common legislative framework (FIT scheme and targets) provided better economic conditions facilitated by the fast growth of the infrastructure and the technology development. However, as next section illustrates, the regional response was diverse for what concerns environmental targets, financial costs, the FIT scheme, and the overall direction of industrial development.

10 By 2008, the targets for RES-E had achieved more than the expected 12% target of RES-E for 2010 and even the 2020 target of 20% (Dir. 2009/28/CE).

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4 The regional dimension

The national policy portfolio described above provides the backdrop for the implementation of strategies in support of the renewables energy sector in Spanish regions. However, the context for implementation across regions was markedly different, as a result of heterogeneity in the transfer of competences on energy issues as well as in the levels of autonomy for industrial, environmental and urban planning policies influencing the management of natural resources, land use and environmental impact11.

More specifically, regions with significant autonomy were able to combine energy and industrial policies by means of granting authorizations for new facilities (i.e. increase energy capacity) while including conditions for ‘local content requirements’ when procuring those contracts (Iglesias et al, 2011; Muñoz et al., 2010). This led to different strategies for wind energy development characterised by different multilevel governance arrangements and alignments with key actors in the energy and industrial sectors where some administrations focused on supporting the development of the sector while others focused on renewable energy deployment. The most significant insights on these actions are briefly presented below.

4.1 Dynamic interactions of policy instruments across policy domains

The policy framework for RES-E support differed significantly across regions and from that mandated from higher levels (see Fig 3). Energy targets were pursued alongside the development of regional instruments in support of industrial development. The latter was pursued by means of a dual strategy based on wind plans, mainly implemented by first-movers, and multi-criteria bidding procedures.

Wind plans are long-term agreements that confer rights for the exploitation of technical areas for wind energy production. Regions with outstanding availability of wind resources such as Galicia, Aragon, Navarra, Castilla y Leon and Castilla La Mancha introduced wind plans by simultaneously implementing industrial strategies and supporting technology development for RES-E. Multi-criteria bidding procedures are more recent and were implemented originally by Andalucía and Comunidad Valenciana and later by the other regions. The instrument involved a similar procedure regarding the proposal for exploitation of wind energy areas but introduced more precise criteria and scores based on specific weights according to factors such as security of supply, industrial investment, technical efficiency environmental aspect and socioeconomic impact (i.e. employment). The weighting of these criteria followed regional priorities, thus differed drastically from region to region (Iglesias et al., 2011).

These two models differed in terms of the nature of governance and the type of coordination issues observed between regional governments, utilities and technology manufacturers. However, they pursued the common goal of increasing power capacity according to a development strategy based on diverse, and sometimes opportunistic,

11 These disparities are based in the long process of decentralisation to local and regional activities started in 80´s. Critical implications in term of management of energy infrastructure was later introduce with the law 9/1992.

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criteria regarding resource availability and environmental impact (Boccard, 2009; de Delás, 2003). Both instruments complemented national policies, particularly the financial stimulus provided by the national FIT scheme. However they also produced tensions, most notably the trade off between the tariff deficit and the creation of a new technological sector (see Fig. 6).

At the same time, regional instruments designed to support manufacturing of components were directed at balancing exploratory search (through R&D activities) and the reconversion of existing know-how in established domains such as mechanical engineering, aeronautics and materials. R&D activities and supporting infrastructure were put in place to improve the competitiveness of domestic industries where key companies in energy and technology sectors acted as systems integrators in the process of adapting existing knowledge and technologies to the needs of wind energy generation. Utilities and big infrastructure companies, according to one expert interviewee, “developed applied research by stimulating research centres and universities to wake up ‘asleep technologies’ not applied before because the lack of favourable economic, regulatory and market conditions”.

Governments in regions such as Madrid, Basque Country and Navarra facilitated this process through heavy investments in R&D and the development of dedicated infrastructures (e.g. specialized technology centres) and other support mechanisms as illustrated by Figure 7.

4.2 Agency, regional governance arrangements and differential implementation strategies

Regional strategies were also shaped by the social and institutional agency of multiple actors, which were in turn enabled and constrained by early policy actions and institutional set ups (Flanagan et al., 2011). Regional governments, utilities and manufacturers of energy technologies took different actions towards home market deployment and industrial development. The balance of power and interests of regional actors led to different regional agreements with main actors of the value chain, public and mix ownership models in energy production as well as specific support for applied R&D and innovations.

The regions of Galicia, Castilla y Leon, the Basque Country and Navarra are paradigmatic cases that illustrate these differential implementation strategies. They are briefly summarised below.

Galicia

The regional strategy for wind energy in Galicia supported market deployment and industrial development by encouraging the entrance of a variety of industrial actors and facilitating linkages in the entire value chain. The regional government promoted alliances between the main companies operating in the region (i.e. utilities) and wind turbine manufacturers through regional agreements (i.e. wind plans and industrial plans). Incentives for local manufacturing of wind turbine components were

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introduced as part of negotiations with key industrial players such as ENDESA (Ferreira & Garcia, 2010) as well as bigger actors like the Danish LM, and Spanish Gamesa and Acciona12 (Muñoz et al., 2010). Other actors operated in this market in capacity of private developers who managed a single wind park or as public/private developers (e.g. co-owned by local governments) in charge of wind parks that generated energy for own consumption. In all cases, the lack of a specific law on alternative land use (i.e. forestry) was a significant driver of wind exploitation through the implementation of both wind plans and singular wind parks (Ferreira & Garcia, 2010).

Initial regional agreements and the developments that followed contributed to the growth of industrial capacity and the market configuration of developer-manufacturer relations, and drove significant growth in wind power capacity, transforming the energy balance composition (IGE, 2014; INEGA, 2014). The local metallurgic industries benefited from the emergence of a new market related to wind turbine frames and the increased presence of new firms and industrial infrastructures around locally manufactured components.

Castilla y Leon

The lessons learnt from other pioneering regions (i.e. Galicia and Navarra) and the pursuit of stability in the regional policy framework were key features of the regional strategy of Castilla y Leon, which not only facilitated collaboration between different actors in the sector but also pursued a much more decentralised strategy, with greater decision making at lower levels.

Similar to other regions, the regional strategy of Castilla y Leon introduced formal agreements with top wind energy manufacturers (Made, Nordex, Enron, Ecotecnia, Neg-Micon, Gamesa, LM Composites) which installed industrial facilities for component manufacture (e.g. blades, towers, machinery) and assembly and logistics centres (CECALE & IDEM, 2002). The regional industrial strategy focused not just on developing wind turbine manufacturing capabilities but also supporting activities (mainly by SMEs) (CECALE & IDEM, 2002) in related industrial sectors such as machinery, naval and aeronautic industries.

The main differential trait of the strategy of Castilla y Leon was the significant role played by provinces in the implementation process (González Mantero, 2008) which was coordinated by the regional energy agency (EREN). The result of this strategy was significant growth in wind power capacity in the period 1998-2013 and the expansion of the wind energy related industry to a leading position nationally by the end of the period (Matti & Consoli, 2015).

Basque country

The initiatives to foster wind energy in Basque Country were based on early programmes (1984) that included renewable energy as a long-term investment priority and comprised active policy intervention for the support of energy market deployment 12 Gamesa was part of joint venture with the Danish company Vestas from 1994 to 2003; Acciona developed its own technology in collaboration with other companies and increased its industrial capacity by acquiring Ecotecnia in 2003.

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and technology development. In 1996 the Basque government created a state-owned company -Eolicas de Euskadi- with the participation of Iberdrola, which became full owner in 2007 when the regional government decided to reorient the policy to industrial development. This policy shift reflected the acknowledgement that while “a public-private joint venture improved public acceptance, […] the government eventually realized that private operators were able to meet the necessary investments” (interview with Regional policy officer 2).

Further, the Basque government actively supported technological development mainly through R&D grants (e.g Etorgai, Etortek and Gaitek) and the co-development with the private sector of leading research centers (i.e. TECNALIA). The most recent efforts have been aimed at supporting internationalization of production and searching for transformations in the wind energy value chain in order to remain competitive in the global market. This change can be related to a strategic response to the slowdown of the local onshore market, a rising external offshore market and an evolution to modular and relational technologies (Parrilli et al, 2012).

The case of Basque country draws attention to the complementarities and synergies between policy instruments at different policy domains and the broader regional setting contributing to the development of the industry. After several attempts to deploy the wind energy market, the Basque country lags behind in wind energy capacity deployment but is instead a leader in wind technology development as measured in terms of innovation, industrial capacity and performance in external markets. This achievement is the result of continuous support in the form of diverse R&D instruments and internationalization strategies.

Navarra

The regional government of Navarra supported the renewable energy sector early on by the introduction of long-terms plans (1995) of which wind energy was one of the priority sectors. Several actions were designed from both supply and demand including citizen’s participation and communication campaign to get public support at the location of wind farms as well as the provision of tax exemption as and additional financial incentive to the national scheme (Borobia et al, 2006).

Simultaneously, the government strategy involved both wind energy market development and technology development. The Government of Navarra developed the company Energía Hidroeléctrica de Navarra (EHN) in 1989 which facilitated RES-E deployment. EHN operated successfully as wind developer until 2014 when was fully owned by Acciona. On the other hand, the government also invested in the creation of industrial capacity through Gamesa Eolica, a joint venture launched between the Gamesa Group, Vestas and the Government of Navarra (De Miguel Ichaso, 2000)13. The company became the major technology provider in the Spanish market and an international player in wind technology manufacturing.

13 The original share of the company was Gamesa Group (51%), Vestas (40%) and the Government of Navarra (9%). Finally, Gamesa group acquired the participation of Vestas in 2004

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The National Renewable Energy Centre (CENER) and the National Centre for training on Renewables Energy (CENIFER) are located in Navarra. The regional government has cooperated with both to run training programs and implement ‘Research wind farms’ where manufacturers test their machines and run applied R&D for different companies. Navarra is also the location of Acciona R&D labs where new developments in different components of the value chain are developed (e.g. Operation & Maintenance procedures, design, manufacture of wind turbines and installation). Both elements have provided Navarra the status of National Technological Centre and provide opportunities for international cooperation projects (Borobia et a., 2006).

Navarra (like Galicia) was one of the first regions to exploit the potential of natural conditions and the favourable policy context to develop a combined energy market deployment and technology strategy. It holds the highest rate of wind specialization as part of the regional energy balance and a complete value chain mobilized by a key player in the industry (Acciona) as a system integrator. At the same time technological development based on strong R&D support from public and private organizations has been another equally important ingredient to make this Navarra the most specialised region for wind energy in Spain.

To sum up, the examples above illustrate the shifting roles of regional governments in the development of wind energy and the distinctive learning processes involved. The regional governments of Galicia and Castilla and Leon provided favourable institutional framework for the collaboration across key actors in value chain (i.e. utilities and wind technology manufacturers). Other policy initiatives, for example in the Basque country and Navarra, supported market deployment at early stage through joint ventures with private sector and subsequently took strategic steps toward technology development.

As a result of these differential implementation strategies, central actors in the value chain such as utilities and wind turbine manufactures played different roles in each region according to the context, supporting mechanisms and the level of commitment provided by regional authorities. This became clear in term of the public-private join ventures and the R&D support in term of applied research programmes and infrastructures.

In both scenarios, the governance configurations and the availability of mechanisms to coordinate actions between the regional government and the private sector became important to support the direction of market deployment and industrial development. Systemic roles played by government and industries have changed over time as actors interacted to pursue different goals. These interactions entailed the balancing of natural resource use, provision of financial stimuli and fostering the translation of established know-how from established sectors towards new domains of use.

5 Discussion

The study of the Spanish wind energy sector provides insights on the emergence of a sector driven by the design and implementation of policies at different levels. While the financial stimulus provided by the national FIT scheme and the long-term perspective encouraged market deployment, regional-level industry instruments

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supported local technology. As a result, some regions (i.e. Galicia, Castilla y Leon and Navarra) combined the favourable economic context (i.e. FIT scheme) and the regional industrial initiatives to facilitate the combination of market deployment with industrial development through cross-sector agreements.

The coupling of regional responses to national and supra-national mandates and regional development strategies, together with different forms of interaction of multiple agencies in search of market opportunities, led to the emergence of a complex policy mix. This lends support to the claim that, rather than being the outcome of a deliberate strategy, policy mixes emerge as a result of sequential interaction between instruments and differential implementation strategies. The heterogeneity and unpredictable growth in infrastructure (i.e. power capacity) is ascribable to lack of coordination between central and peripheral levels which, ultimately, depends on regions’ autonomy in implementing industry and energy policies. The final outcome is the trade off between the tariff deficit and the creation of a new sector (see Fig. 6).

Figure 6 Linkages between main instruments within Energy and industrial policy domains

Thus, pioneering regions such as Galicia and Castilla y Leon moved on stable paths owing to regional agreements between key actors in the value chain. Therein policy instruments such as mandatory purchase of regional components have been effective because they shaped relations in a way that ensured a balance between exploratory search (through R&D activities) and the reconversion of existing know-how knowledge in established domains such as mechanical engineering, aeronautics and materials. This induced key actors to take on different roles in different regional contexts. The role of utilities like Iberdrola and large technological companies like Acciona and Gamesa changed over time as a response to the emergence of different incentives towards market exploitation, technology development or the reconversion of existing expertise (i.e. energy, construction, machinery). In contrast to the latter, stands the impressive performance of regions like Madrid, the Basque Country and Navarra which

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was based on heavy investments in R&D and the development of system connecting infrastructures (i.e. specialized technological centres) and support mechanisms as illustrated by Fig. 7.

Figure 7 Linkages between main instruments within energy, Industry and STI policy domains

The regional context became an experimentation arena for policies to foster competitive conditions but differences in regional industrial settings and infrastructure as well as in the local dynamics of knowledge creation and application challenged the development of a common agenda and of a coherent action plan. As we have seen, as a result of regional strategies wind power capacity in the regions increased significantly in the period 1998-2013. However, long-term policies require a more strategic approach that “foster the new generation of technologies rather than create market volume” (EU energy policy officer).

Differences in strategies by autonomous regions led to a coordination conflict between regional and central government regarding the scope and the balance for granting permits for new wind farms (Patiño, 2009; Seco & Navas, 2010). The confrontation of regional (increase power capacity) and central (correct financial disequilibrium) objectives eventually forced central government to take successive reforms in the FIT scheme to rebalance the tariff deficit. The strategies rather than being a planned portfolio of policy instruments, were an unexpected result of problem-focused regional governance and experimentation (Essletzbichler, 2012; Smith, 2007).

6 Conclusion and policy implications

The present paper has adopted a multi-level governance perspective to analyse the policy mix underlying the evolution of the wind energy sector in Spain. The focus on

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the policy mix highlights complex interactions between instruments, including trade-offs and complementarities between rationales, goals and approaches to policy implementation. More specifically, the paper has sought to explain the interactions of different policy instruments by exploring the dynamics in the policy process among four dimensions: policy space, governance space, geographical space and time. In doing so, it has highlighted the systemic role of regional government and actors within value chains. In our analysis the region is the space in which the interplay (between policy rationales, objectives and impacts) across governance levels and policy domains in the environmental sectors is played out.

In the case of wind energy developed in Spain policy mixes were the result of a dynamic and unpredictable build-up process in which regions responded to higher-level commitments by orchestrating a wide set of energy, industrial and innovation policy instruments. While European and national levels provided a dynamic long-term perspective in term of targets (market deployment) combined with financial support (FIT scheme), the regional government faced the challenge of implementing policy on the ground by fixing regional priorities and developing cross-sectoral strategies accordingly.

Quite crucially, the development of the sector has brought to the fore an unexpected trade-off between addressing the financial deficit due to energy policies (i.e. FIT) and the development of industrial and technological capacity. Thus, the unfolding of different trajectories across regions reflects the attempt to coordinate or balance these goals across different context-specific levels and policy domains. This highlights the transient and emergent nature of policy mixes as actors learn and adapt to interventions, triggering new measures in an on-going stream of policy developments. As the Spanish wind energy sector demonstrates, the tensions that arise in the process can only be partially addressed by the introduction of coordination mechanisms, as they inevitably contribute further to the complexity they seek to manage.

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8 Annex

Table 1 Description of areas and positions of interviewees

Category Position

EU officer

DG research and InnovationInnovation policy Development UnitClimate KIC – Regional area

Research and Innovation

Researcher in energy fieldResearcher in wind energyResearcher in fluids mechanicsInnovation manager - Main utility company

Regional level

Regional policy officer 1: GaliciaRegional policy officer 2: Basque countryRegional policy officer 3: Castilla y LeonEnergy policy officer GaliciaR&D manager – Basque Country

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