Promoting Sustainable Electricity in Europe: Challenging the Path Dependence of Dominant Energy Systems

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Author: William M. Lafferty | Audun Ruud

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Promoting Sustainable Electricity in Europe

Promoting Sustainable Electricity in Europe Challenging the Path Dependence of Dominant Energy Systems

Edited by

William M. Lafferty Professor of Political Science and Director of the Programme for Research and Documentation for a Sustainable Society (ProSus), University of Oslo, Norway, and Professor of Strategic Research for Sustainable Development in Europe at the Centre for Clean Technology and Environmental Policy (CSTM), University of Twente, The Netherlands

Audun Ruud Senior Researcher and Deputy Director of the Programme for Research and Documentation for a Sustainable Society (ProSus), Centre for Development and the Environment, University of Oslo, Norway

Edward Elgar Cheltenham, UK • Northampton, MA, USA

© William M. Lafferty and Audun Ruud 2008 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data Promoting sustainable electricity in Europe : challenging the path dependency of dominant energy systems / edited by William M. Lafferty, Audun Ruud. p. cm. Includes bibliographical references and index. 1. Electric utilities—Europe. 2. Energy policy—Europe. 3. Sustainable development—Europe. I. Lafferty, William M., 1939– II. Ruud, Audun. HD9685.E82P76 2008 333.793′209—dc22 2008023880

ISBN 978 1 84720 807 1 (cased) Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Contents vi x xvii

Contributors Abbreviations Preface 1 Introduction: Promoting green electricity in Europe: the challenge of integrating contextual factors William M. Lafferty and Audun Ruud 2 The Netherlands: muddling through in the Dutch delta Maarten J. Arentsen 3 Denmark: path-creation dynamics and winds of change Peter Karnøe and Adam Buchhorn 4 Ireland: putting the wind up the political system Gerard Mullally and Jillian Murphy 5 Spain: greening electricity while growing the economy Carmen Navarro 6 Finland: big is beautiful – promoting bioenergy in regional– industrial contexts Paula Kivimaa 7 Austria: an ‘incidental front-runner’ faces new challenges Barbara Pflüglmayer, Christian Nopp, Volkmar Lauber and Michael Narodoslawsky 8 Sweden: greening the power market in a context of liberalization and nuclear ambivalence Yong Chen and Francis X. Johnson 9 Norway: trying to maintain maximal RES-E in a petroleumdriven economy Jørgen Knudsen, Olav Mosvold Larsen and Audun Ruud 10 Conclusion: Energy path dependence and the promotion of RES-E in Europe William M. Lafferty and Audun Ruud

1 45 73 102 130

159 189

219

250

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Index

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Contributors Maarten J. Arentsen holds a Master’s degree in political science and a PhD in public administration from the University of Twente, the Netherlands. He is Associate Professor of Energy and Environment at The School of Business, Public Administration and Technology of the University of Twente. He develops, conducts and supervises research on energy policy and energy innovation, and has published widely in the area. Adam Buchhorn has an MSc and is currently a PhD scholar in governmental policy measures for green technologies at the Department of Organization, Copenhagen Business School, Denmark. Buchhorn’s main area of interest and research is the construction and organization of markets for green technology, in particular how policy-makers negotiate and set socio-economic value as a key factor in policies for combating climate change. Yong Chen has an MSc in Environmental Management and Policy from Lund University, Sweden. He conducts assessments and analyses on renewable energy systems and environmental policy, with a geographical emphasis on the EU and China. Before joining the Stockholm Environment Institute (SEI) in 2002, he worked for several years within the Chinese Environmental Protection Administration, where he was in charge of bilateral and multilateral assistance in the environmental sector, and participated in negotiations of international environmental treaties. Francis X. Johnson has been a research fellow at the SEI since 1998. Previously he was a senior research associate in the Energy Analysis Program at Lawrence Berkeley National Laboratory, CA, USA. He has had an interdisciplinary education with a concentration on energy–environmental systems analysis and policy. His key areas of interest are policy analysis of climate mitigation strategies, energy efficiency options, bioenergy and implementation of renewable energy systems. Johnson has worked with a number of international organizations, and has served as expert evaluator for the European Commission on international energy projects. Peter Karnøe is Professor in Technological Innovation and Strategy at Copenhagen Business School, Denmark. He has published widely in the area of energy policy and economics, with a focus on the interplay of vi

Contributors

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technological innovation, market development and sustainable businesses. His publications explore the emergence of modern wind power, generative processes associated with path creation, the institutional embeddedness of technological innovation, and field research methodology. Paula Kivimaa is Researcher at the Finnish Environment Institute (SYKE), where she has focused on policy aspects of environmental innovation and technological change in the forest and energy sectors. She completed her PhD thesis on the innovation effects of environmental policies at Helsinki School of Economics in June 2008. Her research interests include the preconditions for and barriers to innovation and technological change in the energy sector, and the integration of policies from the perspective of innovation. She has published articles on environmental innovation, environmental policy and policy integration in international journals. Jørgen Knudsen is Researcher at the Programme for Research and Documentation for a Sustainable Society (ProSus) at the University of Oslo, Norway. He holds a Master’s degree in political science from the University of Oslo, and has worked as a senior executive officer at the Norwegian Ministry of Environment. His current research interests are in governance and policies for renewable energy in the Nordic countries, the EU and the USA. He is also currently involved in regional and European projects on governance for sustainable development, with a particular focus on environmental policy integration (EPI). William M. Lafferty is Professor of Political Science and Director of the Programme for Research and Documentation for a Sustainable Society (ProSus) at the Centre for Development and the Environment (SUM), University of Oslo, Norway. He has been Director of ProSus since 1995, and has led several international and European projects on problems related to governance for sustainable development. He has been Visiting Professor at numerous research institutions in Europe and the USA, and is currently Adjunct Professor at the Centre for Clean Technology and Environmental Policy (CSTM), University of Twente, The Netherlands. Olav Mosvold Larsen has a Cand. Polit. degree in political science from the University of Oslo, Norway, and was Researcher at the Programme for Research and Documentation for a Sustainable Society (ProSus), University of Oslo until 2006. He is currently Senior Adviser for Sustainable Development at Avinor, the public air control body of Norway. His research has focused in particular on eco-innovations, the integration of environmental and innovation policies, and environmental policy integration (EPI) in general.

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Promoting sustainable electricity in Europe

Volkmar Lauber has been Professor of Comparative Politics at the University of Salzburg, Austria since 1982. He studied law and politics at the universities of Vienna, Paris and Harvard, and at the University of North Carolina in Chapel Hill, USA, where he received his PhD in political science in 1977. His main research interest is Austrian environmental policy, and more recently the politics of renewable energy. Gerard Mullally is Lecturer at the Department of Sociology, University College Cork, Ireland. He received his doctorate in 2001 and has been a researcher at the Centre for European Social Research and the Cleaner Production Promotion Unit, Department of Civil & Environmental Engineering, UCC. His research interests include environmental sociology, democracy and sustainable development. He has participated in numerous research networks and projects in Europe, and has most recently completed a project on public participation and local sustainable development for the Environmental Protection Agency in Ireland. Jillian Murphy holds a BSc in earth science and an MSc in environmental resource management from University College Dublin, Ireland. She has worked at the Cleaner Production Promotion Unit, Department of Civil & Environmental Engineering, UCC from 2000 to 2007, on a wide range of projects in areas such as waste management, environmental risk assessment, environmental management and environmental training. She is currently completing an MEngSc degree in sustainable energy, and works with Dynea Ireland Ltd as an environmental officer. Michael Narodoslawsky holds a Diploma in Chemical Engineering and a Doctorate in Technical Sciences from the Technical University Graz, Austria. He is currently head of the Institute for Resource Efficient and Sustainable Systems at this university. Narodoslawsky has published extensively on sustainability indicators and sustainable regional development. He has headed the research association SUSTAIN and was Chairman of the European Network for Urban and Regional Sustainable Development Research (ENSURE) within the framework of the European Association of Social Sciences (EA) until 2005. His current research interests include life-cycle analysis for various technologies and products, as well as the synthesis of process networks in the field of renewable resource utilization. Carmen Navarro is Associate Professor at the Department of Political Science, Autonomous University of Madrid, Spain. She did her undergraduate work at the University Complutense of Madrid and received a PhD at the University of Alcala (Madrid) in 1999. She joined the University Autonomous in 1997. Her main research interests are public policy and public administration, environmental policies and the politics of

Contributors

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local government. She has published several articles on these topics and participates in international research networks analysing the Spanish case. She has been visiting scholar at Georgetown University, Boston College in the USA, and at the Instituts d’Études Politiques of Lille and Bordeaux in France. Christian Nopp (Diplom-engineer DI) studied environmental management at the University of Natural Resources and Applied Life Sciences in Vienna, Austria. From 1997 to 2004 he has worked as an academic assistant at the Department of Energy at Johannes Kepler University, Linz, Austria. He is the author of several books and essays in the field of renewable energy. Barbara Pflüglmayer has Master’s degrees in law and social economics from the Johannes Kepler University, Linz, Austria. She received her doctoral degree in law in 2004, and worked until the same year as academic assistant at the Department of Energy at Johannes Kepler University. She is the author of several books and essays in the field of energy policy. Audun Ruud is Senior Researcher and Deputy Director of ProSus, University of Oslo, Norway. He holds a Dr Polit degree in political science from the University of Oslo and a Master’s of Business Administration from the Norwegian School of Economics and Business Administration (NHH). His research interest is the role of business in promoting sustainable production and consumption, corporate environmental reporting, eco-innovations and energy policy, and governance for sustainable development at large.

Abbreviations AC AE AEE AEE AER AER AP APPA APX ARS ASIF ASPO ATV BGE BOE C C CCGT CCS CDA CEC CER CG CHP CIP CO2 CP CPPU CU D66 DCENR DCMNR

autonomous communities (Spain) Alternative Energy Plan (Denmark) Spanish Wind Energy Association Renewable Energy Consortium (Austria) Dutch Energy Council Alternative Energy Requirement (Ireland) Labour Party (Norway) Spanish Renewable Energy Producers’ Association Amsterdam Power Exchange Advanced Renewable Strategy (Finland) Spanish Association for the Photovoltaic Industry Association for the Study of Peak Oil & Gas (Ireland) Academy of Technical Sciences (Denmark) Bord Gais (Ireland) Spanish Official Gazette Centre Party (Sweden) Conservative Party (Denmark) combined cycle gas turbine carbon capture and storage Christian Democratic Party (the Netherlands) Commission of the European Communities Commission for Energy Regulation (Ireland) central government combined heat and power Competitiveness and Innovation Programme carbon dioxide Centre Party Cleaner Production Promotion Unit (University College Cork, Ireland) Christian Union (the Netherlands) Democrats 66 (the Netherlands) Department of Communications, Energy, and Natural Resources (Ireland) Department of Communications, Marine and Natural Resources (Ireland) x

Abbreviations

DEA DEF DENSY DEPA DES DETI DF DG TREN DHP DKK DTe E EAI EBL EC EEA EEA EEG EFTA EK EMAS EMV EPD EPI ER EREC EREF ESA ESB ESBCS ESBI ESBIE ESBNG ESBPG ET ETS EU EUFORES EURELECTRIC

Danish Energy Authority Danish Power Suppliers’ Association Distributed Energy Systems Technology Programme (Finland) Danish Environmental Protection Agency dominant energy system Department of Enterprise Trade and Investment (Northern Ireland) Danish People’s Party Directorate General for Transport and Energy district heat and power Danish crowns Office of Energy Regulation (Netherlands) Red–Green Alliance (Denmark) Environmental Assessment Institute (Denmark) Norwegian Electricity Industry Association European Commission European Economic Area European Environment Agency Energy Economics Group (Vienna University of Technology) European Free Trade Association Confederation of Finnish Industries Eco-management and Audit Scheme Energy Market Authority (Finland) Certified Environmental Product Declaration environmental policy integration Republican Left of Catalonia European Renewable Energy Council European Renewable Energies Federation EFTA Surveillance Authority Electricity Supply Board (Ireland) ESB Customer Supply ESB International ESB Independent Energy ESB National Grid ESB Power Generation Association of Finnish Energy Industries Emission Trading Scheme European Union European Forum for Renewable Energy Sources Union of the Electricity Industry

xi

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EWEA EZ FBC FEASTA FFIF FIE FIT FNCSD FP FPÖ FrP GCB GHG GL GO GW GWh H IBEC IDAE IEA IEE IFIEC IPCC ISI IU IVO KD KrF kV kW kWh LNG LNVK LVK


European Wind Energy Association Dutch Ministry of Economic Affairs fluidized bed combustion Foundation for the Economics of Sustainability (Ireland) Finnish Forest Industries Federation Friends of the Irish Environment feed-in tariffs Finnish National Commission on Sustainable Development Liberal People’s Party (Sweden) Freedom Party (Austria) Progress Party (Norway) Green Certificate Body (Netherlands) greenhouse gas Green League guarantees of origin gigawatt gigawatt hour Conservative Party (Norway) Irish Business and Employers’ Confederation Spanish Institute for Energy Diversification and Saving International Energy Agency Intelligent Energy Europe Programme Federation of European Industrial Energy Consumers Irish Peatland Conservation Council Fraunhofer Institute for Systems and Innovation Research (Karlsruhe, Germany) United Left (Spain) Imatran Voima (Finland) Christian Democrats (Sweden) Christian People’s Party (Norway) kilovolt kilowatt kilowatt hour liquid natural gas National Council for Norwegian Municipalities Producing Wind Power National Council for Norwegian Municipalities Producing Electricity from Hydropower

Abbreviations

LWA M MAF MNa MoE MoPE MP MSD Mt MTI MW MWh NCP NDP NGO NIMBY NTNU NOx NOM NORWEA NVE OECD OOA OVE ÖKK ÖKOP OPTRES

ÖVP PJ PIL PP ProSus PS PSO PSOE PvdA

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Left-Wing Alliance (Finland) Moderates (Sweden) Ministry of Agriculture and Forestry Netherlands Competition Authority Ministry of Environment Ministry of Petroleum and Energy (Norway) Green Party (Sweden) Ministry of Sustainable Development million ton Ministry of Trade and Industry megawatt megawatt hour National Coalition Party (Finland) National Development Plan (Ireland) non-governmental organization not in my back yard Norwegian University of Science and Technology nitrogen oxide Finnish Society for Nature and Environment Norwegian Wind Energy Association Norwegian Water Resources and Energy Directorate Organisation for Economic Co-operation and Development Organization for Information about Atomic Power (Denmark) Organization for Renewable Energy (Denmark) Kommunalkredit Austria Eco-electricity Programme (Austria) EU project for: Assessment and optimisation of renewable support schemes in the European electricity market Austrian People’s Party petajoule Federation of Process Industries (Norway) Popular Party (Spain) Programme for Research and Documentation for a Sustainable Society Production-Specified Electricity Public Service Obligation Socialist Party (Spain) Dutch Labour Party

xiv

PV PVO R R&D RCN RD&D REC REC RECS REDG REE REFIT REIO REMAC RENET REP RES RES-E S S SD SDP SEI SEK SEM SEMC SEP SEPA SF SLL SMEs SNF SNI SP SPP SPÖ SSESE SSPB SSPRE STAG


photovoltaics Pohjolan Voima (Finnish energy company) Social Liberal Party (Denmark) research and development Research Council of Norway research, development and demonstration renewable energy certificate Renewable Energy Corporation (Norway) Renewable Energy Certificate System Renewable Energy Development Group (Ireland) Red Eléctrica Española Renewable Energy Feed-in Tariff (Ireland) Renewable Energy Information Office (Ireland) Renewable Energy Market Accelerator Renewable Energy Network (Austria) Renewable Energy Partnership (Ireland) renewable energy source Renewable Energy Source-Electricity Social Democrats (Sweden) Social Democratic Party (Denmark) sustainable development Social Democratic Party (Finland) Sustainable Energy Ireland Swedish crowns Single Electricity Market (Ireland) Swedish Environmental Management Council Association of Electricity Producers (the Netherlands) Spanish Electric Power Act Socialist People’s Party (Denmark) Finnish Association for Nature Conservation small and medium-sized enterprises Swedish Society for Nature Conservation Swedish Standard Industrial Classification Centre Party (Norway) Swedish People’s Party (Finland) Social Democrats (Austria) Spanish Strategy for Energy Saving and Efficiency Swedish State Power Board Spanish Strategy for the Promotion of Renewable Energy Short Term Analysis Group (Ireland)

Abbreviations

STEM SUM SV SVEBIO SVIF SWS SYKE TBL TGCs TJ toe TW TWh UNFCCC V V VROM VTT VVD WDC WWF

Swedish National Energy Agency Centre for Development and the Environment (Norway) Socialist Left Party (Norway) Swedish Bioenergy Association Swedish Wind Power Association South Western Services (Ireland) Finnish Environment Institute Federation of Norwegian Manufacturing Industries tradable green certificates terajoule ton of oil equivalent terawatt terawatt hour United Nations Framework Convention on Climate Change Liberal Party (Norway and Denmark) Left Party (Sweden) Ministry of Housing, Spatial Planning and the Environment (the Netherlands) Technical Research Centre of Finland People’s Party for Freedom and Democracy (the Netherlands) Western Development Commission (Ireland) World Wide Fund for Nature

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Preface William M. Lafferty and Audun Ruud Energy is a crucial factor in the sustainable development of societies. It is energy that drives economies, and it is the balance of economies in relation to nature that ultimately determines the degree of sustainability. The present work deals with only one aspect of energy – renewable electricity; in one region – Europe. The book constitutes the final report from the SUSTEN project, an initiative within the Programme for Research and Documentation for a Sustainable Society (ProSus) at the Centre for Development and the Environment (SUM), University of Oslo, Norway. ProSus is a ‘Strategic University Programme’, financed by the Research Council of Norway (RCN), with the intention of promoting strategic– applied research for more effective national policies for sustainable development. The emphasis of the programme is on governance and policy for sustainable development, with an increasing focus in recent years on: national strategies for sustainable development; environmental policy integration (EPI); the promotion of renewable energy systems; and the interaction between business and government in pursuing sustainable production and consumption. The specific task of the SUSTEN project has been to analyse and assess the implementation of the so-called ‘RES-E Directive’ in eight selected European countries. The RES-E Directive is officially designated as: ‘Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market’. The Directive sets ‘indicative targets’ for all EU Member States in terms of the proportion of electricity consumption that is to come from ‘renewable energy sources’ (RES) by the year 2010. It also designates specific areas where Member States are to initiate policies for standardizing ‘certificates of origin’; removing barriers to the integration of RES-E in national electricity grids; and improving administrative procedures for certifying new RES-E plants and installations. The Directive was to be brought into force (‘transposed’) by the EU-15 ‘not later than 27 October 2003’; and the EU Commission has had the task of monitoring and assessing compliance with the legislation. xvii

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The principal idea of the project has been to use the RES-E Directive as a common ‘probe’ and set of standards for assessing the promotion of green electricity in Europe. Given that both the Member States and associated states of the European Union are legally bound (however loosely) to implement the prescriptions of the Directive and to work towards achieving the indicative targets, how have selected states pursued this task, and how has the European Commission conducted its particular role as ‘overseer’ and ‘facilitator’ of the process? Eight countries were selected for the analysis: Finland, Sweden, Norway, Denmark, Ireland, the Netherlands, Austria and Spain. All are Member States of the EU-15, with the exception of Norway, which is an associate state. Norway has also taken on the obligations of the Directive within the cooperative framework of the European Economic Area (EEA), and has conducted its own discussions with the EU Commission as to an indicative target and the other prescriptions. Three aspects of the present report should be highlighted at the outset. First, the SUSTEN project has been conceived and carried out within a specific analytical framework. As the design of the comparative approach was being finalized, it became apparent that the large majority of projects devoted to the promotion and assessment of RES-E in Europe placed major emphasis on either technological development or market penetration. Identifying this orientation as the ‘techno-market approach’, it became a major goal of SUSTEN to supplement the approach through a more ‘context-sensitive’ design. While the principal research orientation of the ‘techno-market approach’ is to maximize generalization and standardization, the principal goal of the contextual approach is to maximize situational understanding and national–regional–local adaptation. As conceptual aids for applying the contextual approach across the different national settings, we rely on the ideas of path dependence and path creation. Second, the reader should be aware that the selection of the eight countries chosen for structured case-study analysis reflects the overall analytic approach. The countries have not been chosen as ‘best examples’ of RESE achievement, or even as representative examples of the spectrum of RES technologies covered by the Directive. They have been chosen on the basis of previous cooperative work with ProSus (providing the project leadership with greater depth of knowledge and insight into the cases), and because they represent more than enough regional, constitutional, cultural and economic variation to support the analytic ambitions of the contextual approach. Most importantly in this regard, the sample represents eight national contexts with highly different ‘dominant energy systems’, a key prerequisite for assessing both the impacts of path dependence and the potential of path creation for the promotion of RES-E.

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Third, as with most comparative (and ‘probing’) projects, SUSTEN has served to focus on at least one major analytic question which wasn’t fully anticipated in the project design: a ‘tension’ between the promotional standards and monitoring effects of the European Commission, and the standards and lessons of effective RES-E promotion that emerge from comparative contextual analysis. This tension – and its implications for promoting green electricity in Europe – has become an important subtheme of the research narrative. It is also an issue that will be followed up in future ProSus studies. As with all projects that involve cross-national research, SUSTEN has required considerable time and effort. The project was initiated in 2004, and progressed through a series of workshops and interactive research dialogue until the autumn of 2007. Numerous people at the participating research institutions have provided significant help in bringing the project to a happy conclusion, and project leadership at ProSus is greatly indebted to them all. Thanks are particularly due to the responsible authors of the national case studies for working so closely and continuously with the project leadership. We would also like to thank the previous coordinators of the project: Maria Gjølberg, Olav Mosvold Larsen (who also served as an important coauthor of the Norwegian chapter) and Karoline Ehrenclou. Their administrative efforts were crucial to the smooth running of the workshops and the constant intercommunication among the project team members. Special thanks are also due to Jørgen Knudsen at ProSus for his valuable comments and assistance with the final manuscript. Finally, our special and most heartfelt thanks to Camilla Skjelsbæk Gramstad, who served as project coordinator and editorial secretary during the final, very demanding, period of manuscript preparation.

1. Introduction: Promoting green electricity in Europe: the challenge of integrating contextual factors William M. Lafferty and Audun Ruud Energy is what makes Europe tick. It is essential, then, for the European Union (EU) to address the major energy challenges facing us today, i.e. climate change, our increasing dependence on imports, the strain on energy resources and access for all users to affordable, secure energy. The EU is putting in place an ambitious energy policy – covering the full range of energy sources from fossil fuels (oil, gas and coal) to nuclear energy and renewables (solar, wind, biomass, geothermal, hydro-electric and tidal) – in a bid to spark a new industrial revolution that will deliver a low-energy economy, whilst making the energy we do consume more secure, competitive and sustainable. (Activities of the European Union: Summaries of legislation, EC 2007)

PROMOTING SUSTAINABLE DEVELOPMENT THROUGH GREEN ELECTRICITY The goal of pursuing sustainable development (SD) in Europe has been given top priority by the decision-making bodies of the European Union. At the highest level of political generalization, the task is viewed as a question of balance between the so-called Gothenburg and Lisbon agendas. While the former enunciates values, principles and policies designed to achieve a radically new form of development – a path where both economic and social aspirations are accommodated to environmental concerns – the latter aims to make Europe a more competitive, flexible and knowledge-based economy. The difference between the two paths was highlighted by the President of the European Commission, José Manuel Barroso, with an analogy to the family. Defending his particular emphasis at the time on the economic aspect of the Lisbon agenda, he stated: ‘If one of my children is sick, I’m ready to drop everything and focus on that one, but that doesn’t mean I love the others any less.’ He went on to imply that the European economy was currently in poor health and needed more immediate attention before efforts could be 1

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made to strengthen the environmental and social agendas (European Environment 2005). Regardless of how one feels about Barroso’s family commitments, there can be little doubt that the competition between the two agendas, and among the three dimensions or ‘pillars’, has become a major line of contention within EU politics. While ostensibly embracing the pursuit of ‘win–win’ solutions and ‘balance’ among the competing sets of values and goals, major business, labour and environmental interests tend to line up on the one or the other side of the ‘sustainability versus economic competitiveness’ divide. This is in itself an interesting aspect of a general decline in ‘right–left’ politics within the EU. The three SD dimensions clearly reflect the market-liberalist, social-democratic and environmentalist values of earlier political movements. The ideological discourse has, however, gradually shifted to subsume the earlier lines of conflict within a broader discussion as to the nature and policy relevance of ‘sustainable development’. Here the values of economic growth, on the one hand, and more consequent environmental protection on the other – with ‘social sustainability’ tending to share aspects of both – increasingly generate policy conflicts across the entire spectrum of sectoral interests. The political rhetoric of the Gothenburg–Lisbon divide has thus increasingly penetrated and ‘coloured’ the rhetoric of EU politics. It is within this overarching political discourse on the nature and demands of ‘sustainability’ that the current study has been designed and carried out. Recognizing the enormous variation in approaches to sustainable development in Europe, the study focuses on a single crucial initiative for achieving SD goals: the promotion of ‘renewable energy sources for electricity’ (RES-E), commonly known as ‘green electricity’. The choice of this particular SD initiative was made for several related reasons. First, we were primarily interested in following up earlier studies of ‘governance for sustainable development’. The common thread in all these studies is ‘What works, where, when and how?’, when governments attempt to realize SD goals and programmes. The focus of the research has progressed from relatively broad comparative analyses of SD implementation at the local–regional (Lafferty and Eckeberrg 1998; Lafferty 2001; Lafferty and Narodoslawsky 2003) and national (Lafferty and Meadowcroft 2000) levels, to more specialized and in-depth studies of specific cases and governing mechanisms (Lafferty and Meadowcroft 1996; Lafferty 2004; Lafferty et al. 2007). The present study continues this line of research by: (1) concentrating on a single initiative – the EU Directive ‘on the promotion of electricity produced from renewable energy sources in the internal energy market’ (OJEC 2001); and (2) investigating empirically how the

Introduction

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initiative is being implemented in selected EU Member States (and one associated state, Norway). Second, whereas we, in our earlier studies, have focused on broader SD strategies and action plans, the idea here is to narrow the scope of the ‘common commitment’ to a very specific task, with clear ‘indicative targets’. We have thus narrowed the empirical focus to an initiative that has a higher degree of national (member-state) obligation than is the case with ‘softer’ commitments to SD within the United Nations system. We thereby reduce the relevance of ‘residual explanation’ due to differing national understandings as to what ‘sustainable development’ really is, and how governments should pursue it. In the present context, national commitments to implement the RES-E Directive (as an integral part of the EU’s overall commitment to the Kyoto Protocol for reducing greenhouse gas (GHG) emissions) provides a strong common reference point for assessing systemic differences. Given eight test cases that differ along significant ‘national’ dimensions – geographical, cultural, political and institutional – what can we learn about the effectiveness of policy implementation if we ‘probe’ each case with a standardized obligatory ‘stimulus’? By choosing the so-called ‘RES-E Directive’ (2001/77/EC of 27 September 2001) as this stimulus, we have selected an SD policy goal that places a strong obligation for compliance on EU Member States and associated states. As we shall see below, the states have negotiated individual ‘indicative targets’ for RES-E, measured as a given share of the overall consumption of electricity in 2010. This means that each of the eight countries chosen here can be assessed as to its progress and results on specific targets, agreed within a common policy framework. While the overall goal of the Directive is to achieve an aggregate target for the EU-15 of 22 per cent RES-E by 2010, the indicative targets for the Member States vary between 5.7 per cent (Luxembourg) to 78.1 per cent (Austria). Given that the Directive also stipulates which RES-E technologies qualify for fulfilling target levels, we have a framework for assessing implementation that is common for the eight cases selected here. Finally, the relationship between the Directive and the discourse on sustainable development is explicitly stated, thus allowing for straightforward comparisons with our earlier, more general, studies. The opening paragraph of the Directive reads as follows: Whereas: (1) The potential for the exploitation of renewable energy sources is underused in the Community at present. The Community recognises the need to promote renewable energy sources as a priority measure given that their exploitation contributes to environmental protection and sustainable development.

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Equally important, however, is the passage immediately following this: In addition this [the promotion of RES-E] can also create local employment, have a positive impact on social cohesion, contribute to security of supply and make it possible to meet Kyoto targets more quickly. (OJEC 2001: L283/33)

In short, the RES-E Directive aims to reconcile the Gothenburg and Lisbon agendas by coincidentally addressing economic concerns (local employment and security of supply), social concerns (employment and social cohesion) and environmental concerns (reducing GHG emissions). The degree to which implementation of the Directive satisfies these concerns, either individually or in interaction, is, of course, open to considerable discussion. Drawing out these nuances will be an important part of the analysis, given that virtually all interest thus far has focused on the indicative targets and other goals of the Directive rather than on a ‘balanced’ achievement of sustainable development. The RES-E Directive The ultimate form and content of the RES-E Directive was negotiated within a context of increasingly difficult demands on electricity production and consumption in Europe. The consumption of electricity was growing for all sectors; the proportion of electricity produced from fossil fuels was increasing; the supply of fossil fuels was increasingly dependent on foreign imports; these imports were simultaneously becoming more expensive and more insecure; and, finally, demands for curbing GHG emissions from existing generating systems were becoming increasingly critical, politically, legally and economically (to meet Kyoto obligations). Something had to be done – and it had to be done within a highly complex policy setting of competing values, goals and interests. Given the relatively limited and relatively standardized technological parameters related to the production and consumption of electricity, as well as the broad and crucial relevance of electricity for both households and jobs, the potential multidimensional pay-off of an electricity-specific initiative was apparent. As documented by Lauber (2002, 2005) and Rowlands (2005), the process for agreeing the Directive can be seen as a classic case of ‘compromise decision-making’ between the EU Commission, the Council of Ministers and the Parliament. The most outstanding issues for negotiation (over a five-year period, from November 1996 to October 2001) were: (1) the definition of ‘renewable’; (2) the type and specific levels of ‘targets’; and (3) the question of ‘harmonizing’ a common promotion scheme for the EU as a whole (Rowlands 2005: 967–72). These issues capture the most

Introduction

5

important goals of the Directive, and, taken together, establish a succinct baseline framework for assessing implementation efforts across the eight case studies. What are ‘renewable energy sources’? While it is relatively easy to identify non-renewable energy sources (since they tend to dominate all existing energy systems, and are extensively documented as to relative finitude), it is much more difficult to reach agreement on what could and should be understood as a ‘renewable’ resource. A potential list of such resources could, of course, be extensive indeed, since numerous future possibilities for alternative electricity generation exist at any one time. In deciding which types of resource to include in the ‘promotion package’ of the Directive, it was thus necessary to stipulate the instrumentalist criteria by which promotion could be carried out and assessed. This is particularly important in an EU context, since the body entrusted with formulating and eventually monitoring the progress of implementation – the European Commission – has a primary responsibility for realizing the overriding goal of the Single Europe Act of 1986: the achievement of a truly functional trans-European market. Any policy initiative that might create distortions of the market – however well intended – is in this context inherently ‘problematic’ for the Commission. Given the multifaceted value structure related to the task of promoting renewable (alternative) energy systems, along with the clear sociocultural ‘embeddedness’ of the existing energy system, this posed a major policy dilemma for the Commission: how to achieve the diverse and potentially conflicting goals of the task through cost-effective market incentives alone. According to Rowlands (2005), this original ‘bias’ in the role of the Commission led to two crucial aspects of the resulting Directive: (1) a focus on those renewable technologies deemed most amenable to economic incentives; and (2) a strong emphasis on ‘tradable green certificates’ (TGCs) as the instrument of choice by the Commission for promoting RES-E on a Community-wide basis. Both aspects were, however, openly confronted, debated and modified over the five-year negotiation period. We return to the question of instruments below, and focus here on the choice of technologies designated as ‘renewable’ within the scope of the Directive. Article 2 (a) of the Directive defines ‘renewable energy sources’ as ‘renewable non-fossil energy sources (wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases)’ (OJEC 2001: L 283/35). The ‘alternative’ status of these sources to fossil fuels is relatively straightforward, and the first five – wind, solar,

6


geothermal, wave, tidal – are also manifestly ‘renewable’. The remaining five, however, apparently generated considerable debate among representatives of the different EU institutions and external participating interests. The first issue that had to be clarified was the status of hydropower. No one disputed, of course, that hydropower was a well-established renewable source of electricity. What did create controversy, however, was, on the one hand, the desirability of further promoting large-scale hydro in Europe with respect to concerns for nature conservation; and, on the other, the very possibility of developing effective market-related promotional instruments on the scale necessary for initiating, funding, constructing and running large hydropower plants. For both of these reasons, there were apparently no serious propositions specifically to designate large-scale hydro as a promotional priority. At the same time, however, those countries with existing significant proportions of hydro-generated electricity were clearly not willing to disregard the enormous investments already made in this particular source of RES-E (see Table 1.1). The ultimate result was a rather fascinating compromise. Whereas largescale hydro would be included in the calculation of baselines for determining targets, there would be nothing in the Directive that would specifically designate further large-scale hydro development as a promotional goal. Equally important, however, is the fact that the Directive does not exclude large-scale hydro either. An earlier proposal to differentiate between ‘largescale’ and ‘small-scale’ as being over or under 10 MW of output thus remains in the ‘aura’ of the Directive – but not in the text. As we shall see in the case studies, the issue has very different connotations for the different Member States (and particularly for Norway), emerging as a key feature of both the substantive conditions for pursuing national targets and of specific barriers to RES-E promotion related to the nature of the ‘dominant energy system’ (DES) in each case. At present, however, it is sufficient to highlight the issue as typical of the numerous ‘unresolved and potentially controversial’ aspects of the Directive. A second major challenge for a consensus on the meaning of ‘renewable’ was related to biomass. The issue here was primarily what should, and should not, be included as a ‘biomass’ source. The definition adopted (Article 2 (b)) stipulates that biomass ‘shall mean the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste’. Without going into detail, we can simply point out that the major debates here focused on the general status of the different waste materials (as to both type and source), as well as on the issue of ‘combustion’ (generating electricity from the incineration of different waste stocks) (Rowlands 2005: 968). More

7 0

9 15 52 14 6 52 66 27 11 0 26 35 37 2 29

Coal (% share)

0

5 1 13 1 2 1 17 28 35 0 8 26 12 2 2

Oil (% share)

Rowlands (2005); Norwegian source: Statistics Norway (2007).

122.4

Norway

Source:

59 83 39 69 520 551 49 22 259 0.4 87 43 206 155 364

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK

Electricity generation (TWh)

0

15 23 24 14 1 10 8 32 34 57 57 19 9 0 39

Natural gas (% share)

Table 1.1 Electricity production profiles for the EU-15 plus Norway, 1999

0

0 59 0 33 76 31 0 0 0 0 4 0 29 47 27

Nuclear (% share)

99.5

68 0 0 18 14 4 9 4 18 24 0 17 11 46 2

Hydro (% share)

0.5

3 1 12 20 1 3 1 9 3 19 6 3 3 2 2

Others (% share)

8


critically for certain countries (particularly Ireland and Finland), it was also ultimately decided to exclude peat as a renewable source. Finally, there is one additional issue that was apparently resolved by fiat at the outset, leaving nary a trace of conflict in the final document: nuclear energy. One might have thought that countries such as France, Belgium and Sweden, with respectively 76, 59 and 47 per cent shares of electricity production from nuclear power (Table 1.1), would have raised a similar issue for nuclear as was raised for large-scale hydro. There is no evidence that this was the case, however, so we must assume it was simply a ‘dead issue’ from the start. As we shall see, however, the nuclear industry is a key actor in the dominant energy systems of these countries, and the role of nuclear vis-àvis climate change and alternative energy has clearly affected the implementation of RES-E in at least one of our case studies: Sweden. The nature and onus of national targets The nature and desirability of targets as a steering device for policy implementation is a key aspect of policy analysis (Cohen 1999; Eden 1996; Hajer 1995; Héretier 2002; Smeets and Wetering 1999; Stavins 2002). While governments and national ministerial bureaucrats tend to shun targets, environmental organizations and supranational bureaucrats tend to embrace them. In the case of the RES-E Directive, the issue was not whether to have targets or not, but rather the type of targets to be established. The White Paper on ‘Energy for the future’ (CEC 1997) – which constituted a general framework and reference point for the preparation of the RES-E Directive – had proposed a target of 12 per cent RES as share of overall energy consumption by 2010. It had also suggested a target of 23.5 per cent RES-E for the same year (Rowlands 2005: 969). In the course of the negotiations on the Directive, the issue of targets quickly focused on three questions: (1) the type of target – ‘binding’ (with designated sanctions) versus ‘indicative’ (with ‘softer’ forms of chastisement); (2) the level and timeline for an overall RES-E target for the EU-15 as a whole; and (3) the target levels for the individual Member States. Briefly, the outcomes on these three questions were as follows. (1) The Directive stipulates only indicative targets. In contrast to other areas of conflict–compromise, however, the different perspectives on the issue were integrated into the language of the Directive itself. In introductory Clause 4 it is noted that the European Parliament had adopted a resolution (on 30 March 2000) which ‘underlined that binding and ambitious renewable energy targets at the national level are essential for obtaining results and achieving Community targets’. Further, in introductory Clause 7 – which stipulates a review of progress on the indicative targets by the Commission in 2010 – it is explicitly stated that ‘If necessary for the

Introduction

9

achievement of the targets, the Commission should submit proposals to the European Parliament and the Council which may include mandatory targets.’ These passages clearly reflect the dominant opinion of the Directorate General for Transport and Energy (DG TREN), the directorate responsible for the implementation of the RES-E Directive. Rowlands (2005: 969) cites an interview with the commissioner then responsible for DG TREN (Loyola de Palacio) as stating that ‘she would have preferred to propose binding targets, but that she had been forced to abandon the plan in the face of stiff resistance from Member States’. Rowlands further indicates (ibid.: 970) that one of the main reasons why nearly all of the Member States opposed binding targets was that the levels actually negotiated for each Member State were perceived to be very ambitious. In short, the targets, though ‘only’ indicative, were clearly intended to imply an onus which is ‘stronger than simply “suggestive” ’ (ibid.: 969). (2) With respect to the overall target for the EU-15, the figure of 22.1 per cent RES-E was maintained from the earlier documents, with the date of achievement set at 2010. It is important to point out that the percentage in question is the proportion of consumption of RES-E as a proportion of ‘gross national electricity production’ (that is, ‘autoproduction, plus imports, minus exports’ (Article 2 (d)). It was also later stipulated that the ten accession countries were to transpose and comply with the Directive, but with lower global and national targets. The overall target for the new Member States (EU-10) was set at 11.1 per cent RES–E consumption by 2010, and indicative targets were negotiated for each new Member State in the Accession Treaty (OJEU 2003). The recalculated global target for the EU-25 was then set at 21 per cent.1 (3) As indicated, each of the EU-15 Member States negotiated indicative targets to be reached by the end of the initial period of implementation, 2010. The targets, as shown in Table 1.2, were appended as an annex to the Directive, with important qualifying footnotes for six of the 15 countries: Italy, Luxembourg, Austria, Portugal, Finland and Sweden. We need not go into detail on the individual targets here, since the relevant issues will be treated in the case studies. It is, however, interesting to note that the footnotes clearly indicate attempts by Member States to introduce the type of nationally specific contextual factors that are the focus of the present study. Harmonization of Community-wide support schemes The final issue that created considerable debate in the adoption process was whether there should be an attempt to standardize support schemes across the 15 Member States and, if so, what scheme or schemes this would involve. As described by Rowlands, the major discussion here focused on

10


Table 1.2 Levels and targets of renewable electricity production/consumption, EU-15 plus Norway, 1997–2010 Renewable electricity Renewable electricity Renewable electricity (TWh), 1997 as a percentage of target as a total electricity, percentage of total 1997 electricity, 2010 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK

39.05 0.86 3.21 19.03 66.00 24.91 3.94 0.84 46.46 0.14 3.45 14.30 37.15 72.03 7.04

70.0 1.1 8.7 24.7 15.0 4.5 8.6 3.6 16.0 2.1 3.5 38.5 19.9 49.1 1.7

78.1 6.0 29.0 31.5 21.0 12.5 20.1 13.2 25.0 5.7 9.0 39.0 29.4 60.0 10.0

Norway

111.4

96.7

90

Community total

338.41

13.9

22.0

Source: Rowlands (2005); Norwegian source: MoPE (2007).

three major instruments: tradable green certificates (TGCs); feed-in tariffs (FITs); and different forms of ‘tendering’ (2005: 971). (See Table 1.4, with textual comments, below.) The Commission was originally strongly committed to the prospect of immediately introducing harmonization through some form of tradable certificates. The rationale was that this system corresponded most closely with the principles of the Single Market, and, in fact, gave the best promise of achieving the adopted targets. Commission representatives apparently argued directly against feed-in tariffs in this context, clearly feeling that the use of feed-in support mechanisms compromised prohibitions against state subsidies. The Commission was, however, met by considerable resistance in both the Parliament and sections of the Council of Ministers, and was gradually forced to alter its stance. Key Member States lined up on both sides of a major divide between TGCs and FITs, with Italy and the UK pushing for

Introduction

11

the former, and Germany, Denmark and Spain strongly supporting the latter. The Parliament was also more partial to FITs, so the result was a standard EU stand-off and compromise. The notion of an immediate harmonization regime was dropped in lieu of a five-year period where the Member States could pursue different paths and solutions in fulfilling the indicative targets. In contrast to the original position of the Commission, however, the Directive included a separate paragraph (Article 4.1) which specifically opened the possibility of governmental support schemes that, though deviating from basic principles of the EU Treaty (Articles 87 and 88, regulating governmental intervention in the market), contributed positively to the objectives of both Article 6 of the Treaty (integrating environmental concerns to promote sustainable development) and Article 174 (on environmental policy). Finally, Article 4.2 of the Directive assigned the Commission the task of monitoring and assessing the different support mechanisms over a five-year period, with the aim of presenting a report no later than October 2005. This report should, ‘if necessary’, be accompanied by a Community-wide ‘framework’ for promoting RES-E. The outcome of the negotiations on this point was in general viewed as a significant step in the direction of raising the status of environmental concerns vis-à-vis freemarket concerns within the EU. Further issues of relevance Beyond the three major areas of contention and compromise covered by Rowlands, there are three other issues in the Directive of direct concern for the present analysis: Article 5 on ‘Guarantee of origin’; Article 6 on ‘Administrative procedures’; and Article 7 on ‘Grid system issues’. Each of these issues has, in one way or another, figured directly in the varying implementation experiences of the cases covered here. Article 5 of the Directive addresses an issue of crucial importance for the tradable certificate model of RES-E promotion: establishing a system for guaranteeing the renewable status of energy produced and marketed as RES-E. The six paragraphs of the article set up specific institutions and procedures for certifying the validity of RES-E both within and across Member States. Paragraph 4 of the article also stipulates that Member States can be compelled to recognize and honour guarantees of origin from other states, as long as the original certification is carried out in an ‘objective, transparent and non-discriminatory’ fashion. It is also interesting to note that the article stipulates that certificates from hydroelectric sources must indicate the capacity of the installation, thus allowing (again indirectly) for a distinction between RES from large-scale and small-scale hydro installations.

12


Article 6 of the Directive is addressed to ‘Administrative procedures’. Here the purpose is one of active intervention to: (1) reduce the ‘regulatory and non-regulatory barriers’ to an increase in RES-E; (2) streamline and expedite procedures for licensing RES-E at the ‘appropriate administrative level’; and (3) ensure that the existing authorization rules are ‘objective, transparent and non-discriminatory, and take fully into account the particularities of the various renewable energy source technologies’ (Article 6.1). The Member States are also instructed to publish evaluation reports (no later than October 2003) that outline the progress made with respect to: coordination between the relevant procedures of the different administrative bodies; the drawing up of possible guidelines for the three initiatives listed above, and the feasibility of introducing a ‘fast-track planning procedure’ for RES-E producers; and the designation of specific authorities to act as mediators in disputes between issuing authorities and applicants (Article 6.2). Finally, Article 7 addresses ‘Grid system issues’. Here the purpose is to anticipate technical, legal and financial barriers to an effective integration of RES-E into existing grid structures. Recognizing at the outset that the existing system clearly favours established interests and actors, the purpose is to ease the way, within foreseeable limits and possibilities, for more rapid and effective grid integration. Specific initiatives are set forth in seven subparagraphs, and Member States are instructed to include a section on progress in this area in the reports stipulated for 2003 under Article 6. Focusing the goals of the RES-E Directive In sum, the RES-E Directive sets forth relatively strong expectations for Member States with respect to: ● ● ● ●

the implementation of effective support schemes to meet the indicative targets for RES-E consumption by 2010; the introduction of a working system for issuing and accepting ‘guarantees of origin’ for RES generation; the general removal of administrative barriers to a more effective authorization of RES-E projects; and the removal of technical, economic and legal barriers to grid access for RES-E.

These four objectives constitute the major standards for any assessment of the implementation of the RES-E Directive. They were presented and discussed at the outset of the SUSTEN project, and served to provide initial empirical focus across the selected eight countries. The aim of the project became, however, more analytically challenging as we delved deeper into

Introduction

13

both the theoretical premises of the EU discourse and the specific types of research that, at that juncture (2003–4), were addressing the implementation problematic. Having made a thorough check of the programmes and projects initiated within both the 6th Framework Programme (DG Research) and the Intelligent Energy Europe Programme (IEE) (which was specifically designed to provide knowledge for improving the promotion of RES), we realized that the dominant view of the implementation challenge for RES-E within the Commission was strongly focused on what we came to refer to as the ‘techno-market approach’. This orientation gradually led us to develop an alternative, supplemental approach: one built on the conviction that the techno-market model, while clearly capturing major aspects of the implementation problematic on a more abstract and rationalistic level, was at the same time neglecting – and even ‘suppressing’ – what we believed to be crucial ‘contextual’ variables within the individual national settings. We also anticipated at the time that the knowledge and insights being produced by the dominant approach would not provide the necessary insights to overcome barriers to the development of the type of consensual, Community-wide promotion scheme that the Commission clearly aimed at, and that is presented in the Directive as the most desirable goal from 2005 onwards. As matters turned out, the summary assessment by the Commission in 2005 led to the conclusion that the situation was premature for the introduction of a Community-wide scheme, and that national aberrations of the techno-market premises were at least one of the reasons for the inertia (CEC 2005). In the following section we elaborate on the reasoning that led us to adopt an alternative, supplementary approach to the dominant techno-market model, and present a brief justification for our choice of the paired concepts ‘path dependence’/‘path creation’ as promising theoretical constructs.

PROMOTING RES-E: THE CHALLENGE OF ‘GROUNDING’ THE TECHNO-MARKET MODEL During the run-up to the adoption of the RES-E Directive, the EU Commission supported a major project on the ‘Renewable Energy Market Accelerator’ (REMAC 2000). The project was carried out in cooperation with the International Energy Agency (IEA) and the government of Switzerland, and it clearly influenced mainstream thinking within the Commission. Dissemination of its assessments of the major RES technologies (wind, biomass, photovoltaics (PV), solar-thermal, geothermal and small-scale hydro) underpinned the Commission’s original position on

14


the draft Directive, and the publication of the project’s final report in 2003 (OECD/IEA 2003) coincided with the deadline for transposing the Directive (October 2003). A ‘foreword’ to the report by the Executive Director of the IEA, Claude Mandil, gives clear expression to the general conviction of the project, as well as identifying its principal addressee: This study presents policy makers, managers and the interested public with relevant information on those renewable energy technologies that have entered the electricity market, but are not yet in the mainstream of the energy sector. Policy makers will play a vitally important role in capturing the future potential of these technologies, as government policies will determine their further technological development, cost reduction and competitiveness. This publication suggests that by focussing market supports on those situations where renewables are closest to [being] competitive, policy makers can accelerate the process of bringing renewables into the mainstream, while reducing the costs of doing so. (OECD/IEA 2003: 3)

As key instruments of this orientation, the report presents a matrix of ‘focal points for policy intervention in renewable energy technologies’, accompanied by a model of a posited ‘virtuous cycle in a supportive policy environment’. The matrix of focal points for intervention is constituted by a cross-classification of two dimensions: (1) a set of four linear steps: basic research, applied research, market introduction and sustained market integration; and (2) a set of ‘opportunities for improvement of technical and economic performance’ (OECD/IEA 2003: Table 1, p. 17). As for the ‘virtuous cycle’, this portrays the dynamic of the approach as a mutually supportive interaction between ‘technology development’ and ‘market deployment’, leading to a progressive ‘industrial development’ of both the quantity and quality of RES technologies (Figure 1.1). It was this general perspective that led us at the outset of the SUSTEN project to speak of the standard ‘techno-market approach’. It was an approach that we found dominant in virtually all of the major research projects focusing on the promotion of RES-E at the time.2 It was also an approach that previous research experience had led us to believe would be at best partial, and at worst counterproductive, as a practical solution for achieving the aims of the Directive. We found, moreover, support for this interpretation within the REMAC project itself. In a forthright recognition of the techno-market bias of the approach, the authors of the final report state: [The] virtuous cycle functions in a different manner for each of the renewable technologies, based on the specific maturity of the technology and how far it has progressed in markets. These differences between the six renewable technologies

15

Model of ‘virtuous cycle in a supportive policy environment’

OECD/IEA (2003).

Figure 1.1

Source:

MARKET DEPLOYMENT

16

Promoting sustainable electricity in Europe are crucial . . . Thus, while policy makers should recognise the broad similarities of renewables, they must also realise that to affect market growth and competitiveness, they need to address specific technologies in the context of local conditions . . . The technology ‘learning curves’ [highlighted in the report] translate the complex relationships among technology, industry and market into a curve of declining costs. However, these curves only interpret the input and output of the learning system; they do not explain the process going on within it. (OECD/IEA 2003: 14–15, emphasis added)

The report thus openly acknowledged a need for ‘grounding’ (contextualizing) the crucial techno-market parameters. Yet we found at the time no major research initiatives designed to provide such knowledge, despite the fact that the EU Commission was itself in the process of politically acknowledging the type of barriers in question. In the preparatory phase of the initial evaluation report mandated by the Directive (2003–4), it was already clear that the Commission was being confronted by the residual factors affecting the techno-market approach. This was made manifest in the report submitted to the Council and Parliament in May 2004, where it was concluded (on the basis of both individual-country reports and an overall assessment) that the prospect of a Community-wide promotional scheme for RES-E by 2006 was not realistic, and that a major reason for this was resistance from both national political authorities and dominant energy actors in the Member States. The language of the Commission report is relatively straightforward. After noting that it was already clear that the EU as a whole would fall about 4 percentage points short of the global target for 2010 (22 per cent), the report states: ‘One of the reasons for this discrepancy appears to be that a number of Member States have not yet introduced active policies in line with the targets that they adopted’ (CEC 2004: 4). Furthermore, it is stressed in the report that: With a framework of Community legislation in place, it is to Member States that responsibility falls for ensuring that the agreed targets and measures are, in fact, implemented on the ground. This will require a wide range of national actions, including efforts to ensure that established firms in the energy supply industries pay a share of the costs of promoting renewable energy. (CEC 2004: 6, emphasis added)

It was in anticipation of just such a result that the SUSTEN research team moved, in its opening phase, towards a more comprehensive contextual approach to the implementation challenge. Building on experience from earlier comparative studies, the goal was to develop a conceptual frame that would coincidentally acknowledge and supplement the technomarket approach. The approach outlined below, developed over a series of

Introduction

17

project workshops, is the result of this effort. It builds on the related ideas of ‘path dependence’ and ‘path creation’.3 Confronting the Inertia of Existing Energy Systems As indicated above, a review of the major R&D projects looking at the promotion of RES-E in Europe indicated a strong bias towards either: (a) improving technological performance (along a number of different parameters), or (b) improving market penetration and learning. With very few exceptions, other types of variables – geographical, historical, institutional, cultural, normative etc. – were treated as ‘residual’ factors which clearly could have an impact on implementation, but which were not systematically included in the analyses. There was very little specific focus on the potential explanatory weight of such factors within the individual settings; nor was there any attempt to assess the influence of the factors across settings. SUSTEN was thus designed to provide systematic knowledge on how the RES-E task was being perceived and pursued within specific national contexts. Given the clear possibility that numerous barriers to increased production and consumption of RES-E lie, not in techno-market factors themselves, but in variables that condition techno-market effects, the project has aimed to bring these variables to light so that they can be approached with more contextually specific instruments and eventually integrated into more robust instrumental models. The approach thus distinguishes between two types of ‘conditioning variables’ with respect to the dominant promotional model: (1) structural variables conditioning energy-system resistance (inertia) to RESE – path dependence; and (2) contextual variables conditioning the actual introduction and integration of RES-E in specific regional–local settings – path creation. The variable categories can then be portrayed as a relatively simple model for improved RES-E implementation (Figure 1.2). By the term ‘structural variable’ is meant a conditioning influence that is traceable to patterns of interdependent material, social, cultural, ideational and normative factors that have become relatively ‘fixed’, and relatively resistant to change, within the collective activity of the community in question. The use of such variables is most common in classic sociology, the best known being Karl Marx’s concept of ‘the means of production’; the complementary ideas of ‘Gemeinschaft/Gesellschaft’ employed by Max Weber and Ferdinand Tönnies; and Emile Durkheim’s ‘division of labour’. The underlying logic of these constructs is that the relationships among the designated categories of the chosen system (whether classes, institutions, ethos or collective actors etc.) are – as a result of the postulated functional interdependences of the model in question – demonstrably manifest in terms of

18


Structural variables conditioning the degree of inertia in dominant energy systems

Path dependence

Technologyrelated variables conditioning the development and systemic integration of RES technologies

Market-related variables conditioning the competitive advantage and ‘learning’ potential of RES in electricity markets

Local–regional variables conditioning integration of RES-E in specific regional–local settings

Path creation

Dominant techno-market model for RES-E promotion + Contextual variables from each national setting

Improved governing strategies for reaching RES-E targets

Figure 1.2

The SUSTEN model for analysing the promotion of RES-E

predictable sets of beliefs, values, attitudes and behaviour on the part of the individual and collective actors within the system. They exert, in other words, a ‘structural’ impact on behaviour that is systematic enough to allow for empirical analysis and prediction, and that creates a demonstrable inertia in the system. Given the focus of analysis here – probing the degree of resistance to the introduction and integration of alternative energy systems – we are primarily interested in those collective actors and interactive patterns that ‘structure’ the ‘energy arena’ into which new RES-E technologies and applications must be introduced, survive and eventually become part of a new structure. The relationship between technology and market thus emerges as strongly embedded in the mediation of particular nature–energy relationships (through cultural ethos, historical decisions, political ideology etc.). To paraphrase the well-worn imagery of Marshall McLuhan (1964), the ‘medium’ within which RES-E is to be integrated (the existing ‘dominant’ energy system) is viewed as a crucial part of the ‘message’ necessary for more successful promotion and integration.4 The individual characteristics of each national energy system are seen as formed by specific structural–institutional ‘journeys’, the ‘paths’ of which are diversely ‘rutted’ and diversely resilient to ‘rerouting’.

Introduction

19

Specifying Path Dependence and Path Creation It was to capture these particular conditioning effects – and the challenge to overcome them – that we chose the terms ‘path dependence’ and ‘path creation’. The choice serves as conceptual shorthand for expressing the degree of ‘inertia’ and ‘embeddedness’ in the different national– regional–local energy systems.5 The simple assumption is that, at the point of substantive inception of RES technologies into the energy system, there exists a ‘dominant energy system’ (DES), the nature of which is strongly influenced by the exigencies of its particular historical development. The DES is thus viewed as a constellation of energy-related actors – investors, resource exploiters, market facilitators, energy producers, energy-system managers, public regulators, adaptors, mediators, end-users etc. – which has emerged within contingent conditions, and which exerts systemic (structural) influence on the potential for change. In addition to capturing the essence of contextual restraint with a relevant general analogy (the image of established ‘paths’ and the potential for alternative future ‘paths’), the concept of path dependence allows us to link up with one of the many discourses associated with what has become a very disparate and controversial idea. We refer to the usage of the concept by ‘evolutionary’ and ‘institutional’ economists in connection with ‘market lock-in’ through ‘increasing returns to adoption’. This particular subdiscourse has its origin in technology–market interactions, and has been employed by Garud and Karnøe (2001, 2003) with specific reference to RES promotion. The concept also allows us to conceptualize the integration of RES-E as a challenge of ‘path creation’, where the barriers inherent in path dependence must be overcome by altering the defining ‘media’ of the dominant energy system. The higher the degree of path dependence in any given DES, the more resistant the system is to promotional initiatives for developing and deploying ‘new’ RES-E technologies. Understanding why and how energy path dependence has developed in each case thus becomes a principal aim of the SUSTEN project. It is important to stress at the outset, however, that the notion of path dependence is used in very different ways, with very different interpretive connotations. This applies to the essential meaning of the concept, as well as to a broad diversity of applications across disciplines. In order to establish a common reference within the SUSTEN project, we employed a relatively simple ‘taxonomy of path dependence’ provided by two of the leading critics of the concept: Liebowitz and Margolis (1995, 1998). In trying to ‘salvage’ the essence of the idea – after seriously undermining the most common usage of the idea by economists, the so-called ‘increasing

20


returns to adoption’ position – Liebowitz and Margolis propose the following differentiation:6 (1) ‘First-degree path dependence’ Defined as a ‘minimal form of path dependence’, this form is present ‘whenever there is an element of persistence or durability in a decision’. It is the notion of crucial decisions – and the implications such decisions have for subsequent changes in choice of path – that is viewed as semantically essential: ‘What we have today depends critically on the conditions that prevailed and decisions taken at some time in the past.’ In contrast to the views below, there is no necessary ‘error’ or ‘inefficiency’ in the system. In this view, ‘Path dependence does not harm; it is simply a recognition of durability’: that is, a recognition of the necessity to come to terms with ‘the brute facts of history’. (2) ‘Second-degree path dependence’ Here, ‘the inferiority of a chosen path is unknowable at the time a choice is made, but we later recognize that some alternative path would have yielded greater wealth’. There is thus ‘a dependence on past conditions that leads to outcomes that are regrettable and costly to change’. This dependence is, however, ‘not . . . inefficient in any meaningful sense, given the assumed limitations on knowledge’. It implies an awareness of the ‘plasticity’ of history, and a contention that some specific alternative path of interest could (in retrospect) have been better staked out. (3) ‘Third-degree path dependence’ This form – the strongest (most volitional) type of path dependence – involves a claim that ‘alleges the existence of remediable inefficiencies’ at the time of decision-making. A crucial decision is made, in other words, where the path chosen is ‘demonstrably’ inefficient (or negative in some other way), but the actors choosing (and following) the path nonetheless fail to coordinate their actions in a ‘better’ manner. It is this type which (in the view of Liebowitz and Margolis, incorrectly) applies to the classic illustrative case of the QWERTY keyboard for typewriters. While the original choice of the keyboard was made to avoid the jamming of typing keys, its use in the path-dependence literature refers to a postulated inertia in the system whereby consumers of typing services are not willing to adopt an existing alternative system (the so-called ‘Dvorak keyboard’), despite ‘proof’ that the alternative system is both more effective (faster) and cost-efficient. Actors continue along the path, because the ‘returns’ they get from ‘adopting/adapting’ are perceived as greater than the postulated increase in efficiency to be gained by a path change.7 Liebowitz and Margolis summarize the differentiations in their typology as follows:

Introduction

21

The three types of path dependence make progressively stronger claims. Firstdegree path dependence is a simple assertion of an intertemporal relationship, with no implied error of prediction or claim of inefficiency. Second-degree path dependence stipulates that intertemporal effects together with imperfect prediction result in actions that are regrettable, though not inefficient. Third-degree path dependence requires not only that the intertemporal effects propagate error, but also that the error was avoidable. (1998: 3)

Translating this understanding to the present problematic (as a ‘working premise’ for discussing the transition dynamics of RES-E promotion and integration), we can say that the three types point towards three levels of problem interpretation. First-degree path dependence captures the essential notion underlying the core idea. The path dependence of the DES is here viewed as simply reflecting the contingent ‘choices’ made as to the major technologies of the system. The type of ‘rationality’ in question reflects a basic pragmatism involving, for example, three factors: (1) the natural-resource base of the technology; (2) the level of efficiency of the technology in exploiting the resource for electricity production; and (3) the market demand for electricity usage. Such an assumption makes no judgement as to the ‘correctness’ of the implied rationality. It is simply an intuitive explanation for why given constellations of resources, technologies and uses develop at a given point of time. The ‘inertia’ in question at this level is thus one of ‘intertemporal continuity’ (habit, routine), and of the ‘structural’ socio-economic relationships that sustain the inertia. In this view the emergent constellation of energy-technology paths gradually becomes identifiable as a ‘dominant energy system’, reflecting a historically determined (‘embedded’) contextual influence which can be fruitfully analysed as to the contingent information of the case. Second-degree path dependence directs our attention to the possibility that the inertia in the DES is not merely a reflection of techno-market adaptation to existing material conditions, but can also be viewed now as ‘problematic’ in one way or another. The original choices leading to dependence are viewed as in some sense ‘regrettable’, though not necessarily as ‘inefficient’ in an economic sense. This perspective would open the way for an interpretation which views the original techno-market ‘bindings’ of the system as reasonable from the point of view of contemporary goals and choices, but potentially sub-optimal for any number of reasons now. The reasons why one would want to change the DES is an open question. It could be for ideological, technical, social or even market-related reasons. One finds in retrospect something ‘wrong’ with the original choices structuring the DES, which opens the way for a discussion as to whether the ‘current regret’ is a reasonable point of departure for change.

22


This type of perspective could be relevant to any number of national, regional or local initiatives that aim to change part or all of the DES – but that are not specifically based on counter-claims to a given standard of efficiency.8 In the context of promoting RES-E, for example, different technological options can be advocated as alternative paths to the DES for reasons that do not rest solely, or even principally, on a notion of resourcemarket efficiency. These can be reasons of social organization (to maintain the existence of communities that are not serviceable by the DES); nature conservation (for moral–philosophical reasons); or overarching normative goals (to achieve sustainable development). More specifically, seconddegree path dependence could involve change directed towards achieving stipulated EU goals on security of supply and fulfilling the Kyoto commitments. When reasons such as these are posed, second-degree path dependence indicates that the inertia and conflicts over change will be conducted within the value framework of the critical position: that is, driven by claims that the existing path is ‘regrettable’ – though not necessarily ‘inefficient’ in a market-equilibrium sense. Finally, with third-degree path dependence, we open the way for an important perspective on the history of attempts to introduce RES into the DES. When Liebowitz and Margolis indicate that the key criterion for third-degree dependence is that the ‘error’ in the dependence is not only regrettable now, but was ‘avoidable’ then, they mean that it was avoidable because other, more ‘efficient’, paths were both possible and proposed. Although the logic here becomes very complex (particularly since the authors claim to deny the empirical basis for the best-known cases underlining the ‘increasing returns to adoption’ approach), there would nonetheless seem to be an interesting application of the ‘third degree’ with respect to the SUSTEN problematic. As stated elsewhere by the authors: In third-degree path dependence, sensitive dependence on initial conditions leads to an outcome that is inefficient – but in this case the outcome is also remediable. That is, there exists or existed some feasible arrangement for recognizing and achieving a preferred outcome, but that outcome is not obtained. (Liebowitz and Margolis 1995: 207, original emphasis)

If the core of our approach is accepted as an attempt to profile, critically analyse and eventually supplement the techno-market approach to RES-E promotion, we can – within the logic of third-degree path dependence – raise the question of what kind of ‘efficiency’ is currently underlying the overall promotional effort. Whereas first-degree path dependence points towards barriers related to the inertia and embeddedness of ‘brute history’, and second-degree path dependence points towards an analysis of barriers

Introduction

23

related to the institutional and power configurations that became ‘structured’ at crucial points of alternative energy-path decisions for the system, and that are still functional, the third-degree perspective allows us to assess the competing claims to ‘efficiency’ that currently infuse national debates on the ‘best’ technological RES-E alternative. The last perspective can also be expanded to shed light on the path-dependent effects related to a onesided research-and-policy emphasis on techno-market promotion, in contrast to the more contextually sensitive model proposed here. In this latter connection, we shall want to explore the implications of alternative notions of efficiency: most particularly the differences between ‘mainstream’ ideas of cost–benefit techno-market efficiency, versus both ‘eco-efficiency’ and ‘eco-effectiveness’.9 In sum, the three perspectives together can provide crucial insights into the different institutional and resource-controlling parameters of each national energy system. This is clearly information of direct relevance for achieving RES-E ‘path creation’ in and through specific regional–local settings, but it is also of immediate importance for introducing alternative cost–benefit criteria into the ongoing debate on achieving a more effective ‘general framework’ for the European Economic Area as a whole. Mapping the Interaction between Path-dependent Energy Systems and the Promotion of RES-E On the basis of this general understanding of the meaning and relevance of path dependence/path creation for the instrumentalist goals of the project, the research project then proceeded to develop a common empirical focus for the analysis. Known internally as the ‘research protocol’, the purpose of the exercise was to provide similar information on the implementation of the RES-E Directive within and across the eight national systems chosen. The aim was to provide substantive information on the RES-E ‘storyline’ for each national case (thus guaranteeing ‘idiographic’ insight), so that the information could then be used to analyse the effects of path dependence on the more general techno-market promotion efforts being sponsored by the European Commission (thereby expanding the general robustness of more ‘nomothetic’ generalizations).10 Four key aspects of the implementation problematic Towards this end, the protocol stipulated four types of information: (1) The general profile of the ‘dominant energy system’ (DES) with respect to the introduction of the most ‘advanced’ new RES-E technologies: wind, biomass, photovoltaics, geothermal and small-scale hydro It was

24


up to each team to profile those technologies that were most relevant to the goals of the RES-E, with emphasis on the following aspects: (a) A brief description of the energy types that constitute the DES, and the natural conditions that gave rise to them. (b) A brief history of the crucial decisions and major production factors that have determined the path development of the DES. (c) An overview of the major actors of the DES at the time of RES inception, including: the major providers of DES electricity (whether private, public or mixed private–public actors); the major governmental bodies involved in the regulation and monitoring of the system; the major branch organizations for each technology; and the major consumer organizations or NGOs involved in the working of the system. (d) A brief overview of the major constitutional, legal and administrative prescriptions that underlie and support the DES. (e) A brief assessment of the system with respect to domestic versus imported electricity. (f) A brief overview of the degree to which the major interests in the DES are reflected in partisan politics; that is, which parties are identified with which interests. (g) A brief overview of how the system had ‘processed’ or ‘reacted to’ the development and possible introduction of the four RES technologies into the system. The vantage point here is the history of the alternative technologies up to the issuance of the RES-E Directive in September 2001. What are the major conflicts and alliances that have arisen around the development and phasing-in of the alternative technologies; and how has the ‘inertia’ of the DES affected the specific form and potential of the RES-E alternatives? (2) A description of the governing mechanisms, institutions, strategic actors, programmes and policy instruments promoting RES-E goals and targets In line with nearly all approaches to the problematic in EUfunded research, emphasis should be placed on initiatives directed towards overcoming technology and market barriers. What is being done by whom to increase the proportion of electricity from the major RES technologies, and how have these efforts been influenced (either hindered or promoted and integrated) within the dominant energy system? (3) Viewing the implementation of RES-E as a crucial aspect of ‘technological innovation for sustainable development’, how has RES-E promotion been specifically connected to governmental efforts to achieve innovation for increased economic competitiveness? To what degree, in other

Introduction

25

words, have initiatives to achieve the goals of the RES-E Directive been related to and integrated with initiatives to promote innovation in industry and business? More specifically, are there any programmes or initiatives that specifically relate the RES-E goals to the more general goal of achieving a better integration of economic, social and environmental concerns within the European Community (as prescribed by Article 6 of the EU Treaty)? Such efforts could be identifiable in relation to several EU goals: improving security of energy supply; reducing GHG emissions (the Kyoto targets); promoting new employment opportunities; and promoting innovation for regional and urban development. (4) Provide a brief overview of the four ‘most interesting’ regions/localities that illustrate the problems and potentials of phasing in the four RES technologies into local/regional electricity consumption, and provide a general assessment of the major barriers against, and major possibilities for, ‘path creation’ for RES-E within these areas. Finally, in relation to the second task of providing a more general national ‘storyline’, the teams were also asked to provide their own general assessments of RES-E implementation. These very general guidelines provided the common framework for the project, and it has been up to the project leadership to try to draw out the most relevant lessons for RES-E promotion efforts in Europe. So as to place this task in as timely a frame as possible, and to relate the individualcountry studies to overall developments in Europe, we conclude our introduction with a brief overview of: (1) promotional instruments and barriers to RES-E on a general level; and (2) the status of RES-E implementation as assessed by the EU Commission itself.

BARRIERS, INSTRUMENTS AND RESULTS The EEA Overview of Barriers and Instruments Coincidental with the adoption of the RES-E Directive, the European Environment Agency published a list of ‘Barriers and obstacles to renewable energy deployment’ (Table 1.3). The Agency expanded on the list by addressing the following questions to each of the barriers and obstacles identified (pp. 27–30): ● ●

Political: How strong is political support for the renewable energy? Legislative: How accessible is the energy market to independent electricity producers?

26


Table 1.3

Barriers and obstacles to renewable energy deployment

Barrier

Obstacle

Political

Lack of political motivation to support the market initiatives needed for the development of renewables Lack of an appropriate legal framework and legislation at EU and national levels that support the development of renewables Difficulties with linking electricity or heat from renewables into the existing electricity and heat networks Lack of appropriate financing for long-term financial benefits Renewable energy technologies suffer from distorted competition from conventional energy sources (e.g. coal, nuclear) in terms of final end-user prices Lack of practical support at the regional and local level to stimulate development of renewable energy projects Technological obstacles related to research, development and demonstration Lack of awareness of the potential and possibilities for renewables

Legislative

Financial Fiscal

Administrative Technological Information, education and training Source: EEA (2001: 27).

● ● ● ● ●

Financial: How accessible is funding for investments in renewable energy projects? Fiscal: How favourable is the fiscal infrastructure for renewable energy? Administration: How favourable are the administrative arrangements for obtaining permission to construct a renewable energy project? Technological development: Is there support for the development of strong national capabilities in renewable energy technologies? Information, education and training: Is support given to widely disseminate information on the benefits of renewable energy?

The list of questions, and follow-up discussion by the Agency, provide an important ‘baseline’ for the present analysis. Together with the discussion of ‘promotion strategies’ (Table 1.4), these perspectives establish a standardized understanding of barriers and challenges to the promotion of RES at the outset of the Directive period. Two aspects of the above list are, therefore, worth noting at the outset. First, at face value the list indicates several types of both barriers and potential promotional instruments that are not directly covered by the

Introduction

27

techno-market approach. While ‘technological’, ‘economic’ and ‘fiscal’ factors clearly constitute the essence of the approach, ‘legislative’ and ‘administrative’ aspects are at best indirectly included; and ‘political’ and ‘informational–educational’ aspects are rarely covered by the techo-market rationale. Granted that the approach often addresses ‘market learning’, and that it clearly presupposes political and legislative support for technical development and market incentives to ‘work’ as intended, still the factors in question are rarely if ever addressed in terms of specific instruments for specific barriers and possibilities. The approach simply assumes that the political–legislative conditions will be adjusted to guarantee the ‘workings’ of technical innovation and ‘rational’ market-related behaviour, without going into the prospect of proactive political–legislative activity that might promote change on its own terms. Otherwise both political intervention in the marketplace and legislation/administration as ‘detailed regulation’ are to be deterred. Educational initiatives and informational campaigns can be encouraged, but only in so far as they promote a better understanding of the consequences of market choices. Second, the list can serve as a conceptual ‘foil’ for pointing out that no barrier or remedial instrument functions in a vacuum. The separate logics attaching to each category are ideal constructs that identify how the barriers and instruments ‘work’ within the logic of the category; they do not tell us how the separate inertias and potential transformations work in the real world. They do not account for the interdependence, interaction and even potential self-contradiction among the category phenomena. Even more important in the present context, however, is the fact that the list does not capture the dynamic essence of ‘path dependence/path creation’. While the notion of ‘barriers’ indicates a general type of inertia across all the categories, it does not capture the structural conditioning inherent in historically invested energy constellations (the DES); nor does it give expression to either the resistance of cultural ethos or the potential of countercultural transcendence. These two observations on the Agency list reflect the basic persuasion of the SUSTEN approach, and it is hoped serve to underline the necessity of an alternative, supplemental perspective. The question of which promotional instruments are most effective in removing which barriers to RES-E deployment can in this view only be answered within a research dialogue that reflectively assesses the interactions and trade-offs between, on the one hand, relatively narrow but robust cross-national predictors (scientific and market rationality), and, on the other, relatively broad but necessary contextual frames (historical and cultural conditioning). Promotional strategies that disadvantage either the one or the other endanger the achievement of effective change.

28


The Techno-market Approach Having looked briefly at RES barriers and instruments in general, we turn now to the major promotional instruments that have been applied within the techno-market approach. Numerous research and development projects have been carried out in this area since the adoption of the RESE Directive.11 The purpose of the present section is to provide a relatively simple terminology for the major types of instruments that have been analysed in these studies. Although the options for alternative lists and categorizations are numerous, we have chosen two major references to portray overall efforts at the level of the EU-15: (1) the approach applied in the REMAC 2000 overview at the start of the period (OECD/IEA 2003); and (2) the leading promotional schemes as defined and assessed by the combined research effort of the Energy Economics Group (EEG) at the Vienna University of Technology and the Fraunhofer Institute for Systems and Innovation Research (ISI) in Karlsruhe (CEER 2004; EWEA 2005; Huber et al. 2004; Ragwitz et al. 2005a, 2005b). The REMAC 2000 project As indicated above, the REMAC 2000 project constituted an important reference for the European Commission during the preparation of the RES-E Directive. The original position of the Commission, with a particularly strong emphasis on market-related initiatives, is clearly reflected in the final report (OECD/IEA 2003). The report reviews each of the principal technologies of the Directive (wind, biopower, small hydropower, solar photovoltaics, solar-thermal and geothermal), assessing them in terms of ‘technology status’, ‘prospects’ and ‘issues for further progress’. The assessment according to ‘prospects’ ‘seeks to identify major opportunities in the research and market fields to reduce costs, increase performance and enhance applicability’. It focuses (for each technology) on cost-reduction opportunities (‘technology development and potential improvements’) and market opportunities (‘promising market segments’ and ‘issues favouring market growth’) (ibid.: 30). In dealing with ‘issues for further progress’, the report concentrates on ‘technical issues that comprise crucial aspects for the further development of the technology in order to increase performance and applicability, and to reduce costs’; and ‘non-technical issues that affect market potential, including environmental, financial, legal or social issues’. The report concludes its introductory framework by clearly stating: ‘The information provided in this study should help policy makers design appropriate frameworks for these renewable technologies at their various stages of progression from laboratory to widespread market use’ (ibid.: 30).

Introduction

29

These perspectives succinctly express what we mean by the ‘techno-market approach’. They indicate both a ‘linear model’ of the relationship between technological research and practical application, and a strong bias towards the rationality and effects of ideal market forces (‘getting the prices right’).12 The way in which the report also treats its declared interest in ‘non-technical issues’ only strengthens the profile. This is because, first, the category makes no mention of political, historical, cultural, normative or other ‘structural’ effects; and, second, the application of the category to the different technologies is both very superficial, and, in nearly every case, focused solely on issues that are integrally related to the logic of the techno-market instruments. The only assessment in our view that mentions a major ‘non-technical issue’ is that for wind power. Here the problem of growing local opposition to onshore wind parks is mentioned (NIMBY – ‘not in my back yard’); but the entire section consists of three sentences on this issue alone (ibid.: 169). The Vienna–Karlsruhe initiatives on promotional schemes The second approach to instruments we wish to highlight is that of the influential series of projects carried out by different consortia under the coordination of the Energy Economics Group of the Technical University Vienna, the Fraunhofer Institute in Karlsruhe (ISI), Germany and the Risø National Laboratory in Roskilde, Denmark. Given the numerous and various references to these projects over the years, we refer here only to selected ‘final reports’ that we feel capture the essence of the work on promotional schemes (Haas et al. 2001; Huber et al. 2004; Ragwitz et al. 2005a and 2005b; Resch et al. 2007; Risø and EWEA 2005).13 The framework depicted in Table 1.4 expresses the basic categories of the approach. It has been slightly modified over the years, but not in any significant way. It is also a basic reference point for several other overviews, including an extensive survey of renewable ‘support schemes’ by the Council of European Energy Regulators (CEER 2004). What we first wish to point out here is that the framework, and the logic of the general approach supporting it, is strongly focused on the rationality and potential impact of the ‘schemes’. The work on elaborating these aspects, and on the modelling and simulation of different possible RES-E outcomes for both the individual instruments and different ‘packages’ of instruments, is the chief thrust of the approach. The achievements of the approach along these lines are ‘cutting edge’ and of significant importance for academics and policymakers alike. We return to the major results of the project in our concluding assessment, but want here only to profile the instruments themselves. As defined by the Vienna–Karlsruhe consortium (within the Intelligent Energy Europe Programme), the major promotional schemes/instruments are as follows:

30


Table 1.4 Classification of promotion strategies in EU-sponsored research projects Direct Price-driven

Indirect

Quantity-driven

Regulatory Investment- • Investment • Tendering system • Environmental focused incentives taxes • Tax incentives Generation- • Feed-in tariffs • Tendering system based • Rate-based • Quota obligation incentives based on TGCs Voluntary Investment- • Shareholder • Voluntary focused programmes agreements • Contribution programmes Generation- • Green tariffs based Source: Resch et al. (2007) on the basis of Haas et al. (2001). ●

●

Feed-in tariffs (FITs) are generation-based, price-driven incentives. The price per unit of electricity that a utility or supplier or grid operator is legally obliged to pay for electricity from RES-E producers is determined by the system. Thus a federal (or provincial) government regulates the tariff rate. It usually takes the form of either a fixed amount of money paid for RES-E production, or an additional premium on top of the electricity market price paid to RES-E producers. Besides the level of the tariff, its guaranteed duration represents an important parameter for an appraisal of the actual financial incentive. FITs allow technology-specific promotion as well as an acknowledgement of future cost reductions by applying dynamic decreasing tariffs. Quota obligations based on tradable green certificates (TGCs) are generation-based, quantity-driven instruments. The government defines targets for RES-E deployment and obliges a particular party of the electricity supply chain (for example, a generator, wholesaler or consumer) to fulfil those targets. Once defined, a parallel market for renewable energy certificates is established and their price is set following demand and supply conditions (forced by the obligation). Hence, for RES-E producers, financial support may arise from selling certificates in addition to the revenues from selling electricity on the power market. With respect to technology-specific promotion in

Introduction

●

●

●

31

TGC systems, this is also possible in principle. Yet it should be noted that a market separation for different technologies will lead to much smaller and less liquid markets. Tendering systems are quantity-driven mechanisms. The financial support can either be investment-focused or generation-based. In the first case, a fixed amount of capacity to be installed is announced and contracts are awarded following a predefined bidding process which offers winners a set of favourable investment conditions, including investment grants per installed kW. The generation-based tendering systems work in a similar way. However, instead of providing upfront support, they offer support in the form of a ‘bid price’ per kWh for a guaranteed duration. Investment incentives establish an incentive for the development of RES-E projects as a percentage of total costs, or as a predefined amount in euros per installed kW. The level of these incentives is usually technology-specific. Tax incentives are generation-based, price-driven mechanisms that work through payment exemptions from the electricity taxes applied to all producers. Hence this type of instrument differs from premium feed-in tariffs solely in terms of the cash flow for RES-E producers: it represents a negative cost instead of additional revenue (Resch et al. 2007: 5–6).

These schemes are identified here as the major instruments of the ‘techno-market approach’.14 In one of the other ‘final reports’ from the consortium (Ragwitz et al. 2005b: 6), the research team point out that ‘more and more voluntary approaches have appeared with on-going market liberalization’. These schemes, which are ‘mainly based on the willingness of consumers to pay premium rates for renewable energy’, are, however, judged to have had ‘negligible impact’ on total RES-E deployment, and have apparently not been pursued further within the project. A major conclusion of the consortium’s OPTRES project (Assessment and optimization of renewable support schemes in the European electricity market) is that the debate over promotion schemes has been focused on the comparison of the feed-in tariff system, on the one hand; with a system of quota regulation combined with a tradable green certificate market, on the other. These are portrayed as ‘opposed systems’. The other policy instruments – tender schemes, production tax incentives and investment incentives – are in general not used as principal schemes, but can be applied to supplement one or the other of the most-preferred instruments. Finland is apparently the only EU-15 country to rely mainly on production-tax and investment incentives (Ragwitz et al. 2005b: 6; see also CEER 2004: 27).

32


Results thus Far on Promoting RES-E for the EU-15 as a Whole As a general reference for the case studies and analysis to follow, we can briefly look at the overall results for phasing in RES-E for the original 15 EU Member States.15 The purpose here is simply to put the different RES-E technologies into perspective with respect to: (1) the relative share of each technology within the general scope of the Directive; (2) changes in the shares over the ten-year period encompassing the formulation and transposition of the Directive; and (3) the relative size and rate of change of RES-E vis-à-vis the gross production of electricity. All three dimensions are documented in Table 1.5. As for the identification of the relevant RES, the categories shown in Table 1.5 are based on the general categories provided by Article 2 (a) of the RES-E Directive (see above). Given that the EU Commission does not provide specific figures for the sources in their official assessment from 2004 (see below), we have had to rely on the figures for the EU-15 provided by OECD/IEA (2006). The definitions of the sources are, however, very similar, so there should be no major discrepancies between the raw data provided by OECD/IEA and those employed (but not published) by the Commission. What we see from the table is that the most dominant source of RES-E at the outset of the period is clearly large-scale hydropower. This traditional, ‘old RES’ accounts for almost 91 per cent of all RES-E in the EU15 in 1995. The remaining 9 per cent encompasses wind, biomass, geothermal, photovoltaics and tide–wave–ocean. Of these, the different forms of biomass (solid, gas, municipal waste and liquid), account for a full 6.1 per cent, with the remaining categories all well under 2 per cent. Looking at the changes between 1995 and 2005 (with roughly the last four years of the period under the direct influence of the Directive), we see that the share of hydropower declines both relatively and absolutely. The decline in actual generation is a reflection of both annual variation in precipitation and a longer-term trend of declining plant efficiency due to ‘ageing’. The decline in relative share, however, is primarily a reflection of significant growth in ‘new RES’ generation (particularly during the period 2000–2005), with only the different types of oceanic power showing no major change. The share of electricity generated from large-scale hydro is reduced to approximately 65 per cent, with wind and biomass emerging as relatively equal front-runners (at roughly 16 per cent apiece) among the new renewables. We already note here, however, that the single largest increase in relative share is for photovoltaics, which, though still very minor in the overall picture, shows a 28-fold increase. Finally, it is important to point out that, despite the considerable shifts and relative gains within the RES-E spectrum, the entire gross RES output

33

Introduction

Table 1.5 Gross electricity generation from renewable sources in the EU15, 1995–2005 Renewable energy source Wind Biomass: solid gas municipal waste liquid Geothermal Photovoltaic Tide, wave, ocean Hydro* Total gross RES-E** RES-E as % of total electricity

1995 GWh

2005 GWh

1995 (%)

4 067 21 018 (14 770) (2 350) (3 898) (0) 3 478 41 568 291 660 320 832

68 278 65 498 (38 963) (15 804) (10 264) (467) 5 398 1 169 534 264 746 405 623

1.3 6.5

16.8 16.2

1.1 0.01 0.19 90.9 100

1.3 0.28 0.12 65.3 100

13.9

2005 (%)

14.4

Note: * Total hydro minus ‘pumped storage’. ** From sources listed here (minus industrial waste, non-renewable municipal waste and hydro-pumped storage). Source: OECD/IEA (2006; 47 and 93).

constitutes only 13.9 per cent of total electricity generation in 1995, and that this share increases to only 14.4 per cent in 2005. We are, in other words, looking at very small changes in what is still a relatively marginal phenomenon. Suffice it to say that numerous analyses indicate that the potential of energy-conserving initiatives for the electricity sector is much higher than the total share of both ‘old’ and ‘new’ renewable sources. Assessing progress on RES-E within the Member States of the EU-15 The European Commission is obliged by the RES-E Directive to provide periodic progress reports. Reviews have been presented in 2004 (CEC 2004), 2005 (CEC 2005) and 2007 (CEC 2007). We return to these reports in the concluding chapter, but wish here to provide a general introduction to the case studies by giving a brief overview of the most recent evaluation of RES-E achievements for the individual countries and technologies. Table 1.6 shows the Commission figures for the EU-15 as of 2005, ranked from the most to the least successful in pursuing their indicative targets. With reference to the results shown in Table 1.6, the following points must be taken into consideration. (1) For reasons of ‘most relevant

34


comparison’ with our case studies, we only present data for the EU-15 Member States plus Norway. (2) The baseline (‘reference’) dates and dates for ‘normalized penetration’ are the same for all states presented (1997 and 2005). (3) The figures for ‘normalized penetration’ have been standardized to take into account seasonal variations in rainfall (for large- and smallscale hydro) and wind conditions. (4) The rankings are apparently based on two key criteria: ●

●

‘Mainly’ on the ‘percentage degree of achievement of the target’. This is interpreted as follows: ‘A country will ideally have reached 40 per cent of the target in 2004 and 50 per cent in 2005.’ Further: ‘new elements in the support framework for 2005 and the first half of 2006 are also considered. In addition to official policies, the perspective of investors is also taken into account as it provides a good basis for assessing the viability of the renewable energy market in a country and the healthiness of the market’ (CEC 2007: 5).

Applying these criteria, the report classifies the entire EU-25 into five ranked categories. These are identified as: 1. 2. 3. 4. 5.

Perfect: on track for meeting 2010 target ☺☺ Current developments provide good opportunity to reach 2010 target ☺ With additional efforts: good chance of reaching the 2010 target Strong additional efforts needed to reach the 2010 target Far from commitment

Given that we shall later want to compare the assessments by the Commission with the information and perspectives of the in-depth case studies, we must comment on the criteria applied in the official report. More than anything else, perhaps, the criteria indicate the type of decisions and compromises that must be made whenever the Commission takes on the task of assessing the comparative performance of Member States on directives. This is clearly never a question of totally ‘objective evaluation’, but more a matter of negotiated and relativized ‘grading’. In the present case this is first of all apparent in that the first criterion applied in the report is highly dependent on both the initial baseline for the reference year and the indicated target that was negotiated on this basis. Assuming that the Commission has used the baseline figures from the reference year of 1997, and accepting the fact that they operate with a ten-year time span for achieving the targets, this means that their basis for assessing progress on the ‘percentage degree of achievement of the target’ is the

35

12.9

EU-25

13.7

25.8 10.4 3.6 6.9 53.2 6.1 25.0 17.2 4.1 1.1 38.5 9.1 11.0 15.3 54.9 98.7**

Achieved penetration (2004/2005) %

14.5

27.3 10.8 4.0 6.5 52.0 8.0 25.4 21.6 4.2 1.9 28.8 7.7 14.2 16.0 57.5 99.0**

Normalized penetration* (2005) %

21.0

29.0 12.5 5.7 9.0 55.2 13.2 31.5 29.4 10.0 6.0 39.0 20.1 21.0 25.0 78.1 90.0

Indicative target (2010) %

Gap left to be closed (2005 > 2010) 1.7 1.7 1.7 2.5 3.2 5.2 6.1 7.8 5.8 4.1 10.2 12.4 6.8 9.0 20.6 Target achieved 6.5

Total gap to be closed from ref. point to target 20.3 8.0 3.6 5.5 6.1 9.6 6.8 9.5 8.3 4.9 0.5 11.5 6.0 9.0 8.1 Target achieved 8.1

☺☺ ☺☺ ☺☺ ☺ ☺ ☺ ☺ ☺ Not ranked by CEC

Classification by EU Commission

Source:

Adapted from CEC (2007b: 21–22).

Notes: * Described in the assessment report (CEC 2007b: 5) as ‘a normal rainfall year and a normal wind year are used to avoid the influence of climatic conditions (e.g. drought or high amounts of rainfall)’. ** Norway’s ‘achieved consumption’ is calculated for 2004 on the basis of the official OECD/IEA figures for total RES-E produced as percentage of ‘total consumption’ (OECD/IEA 2006: Table 3, II-443). The figure for ‘normalized penetration’ is based on a time series computed by the Ministry of Petroleum and Energy for the period 1997 to 2006 (MoPE 2007: 3).

8.7 4.5 2.1 3.5 49.1 3.6 24.7 19.9 1.7 1.1 38.5 8.6 15.0 16.0 70.0 96.7

Share of RES-E for reference year (1997) %

Assessment by European Commission of EU-15 member-state progress towards the 2010 targets

Denmark Germany Luxembourg Netherlands Sweden Ireland Finland Spain UK Belgium Portugal Greece France Italy Austria Norway

Table 1.6

36


difference between the reference baseline and the target. We have listed these figures separately in Table 1.6, and they show that the number of percentage points to be negotiated by the Member States varies considerably: from a spread of 0.5 points for Portugal to 20.3 points for Denmark. This means that the annual improvement necessary to reach the 2010 target varies significantly from country to country, and that the only apparent reason for this is the level negotiated for the reference year. As it is further clear that the differences in baselines are not simply a reflection of the level of large-scale hydro (since the country showing the largest ‘gap’ between baseline and target, Denmark, had virtually no largescale hydro at the start of the period), we must assume that the differences between baselines and targets are conditioned by other contextual factors. In the case of Denmark this must reflect the strong progress that the country had already made in 1997 on the promotion of wind power for electricity. But this contextual factor is neither intuitive nor systematically applied across the EU-15 (the difference between Germany with a ‘gap’ of 8.0 percentage points and Spain with a gap of 9.5 points illustrates this), so there must be other considerations that explain the differing magnitudes of the RES-E challenge. Presumably these considerations lie in the second criterion: namely, that some sort of general policy assessment, related to the RES-E specifics of each Member State, underlies the determination of both the reference point and the indicative target. It is apparently this type of policy assessment that is expressed in the second criterion listed above, but which, to our knowledge, has neither been systematically communicated by the Commission nor analysed by independent researchers. Given the considerable latitude of opinion that exists as to what is or isn’t an ‘effective promotional scheme’, and given, further, the very different and conflictual interests that can influence member-state positions on the nature and profile of a national RES-E policy, we must, as a matter of course, assume that both the targets themselves and the business of reporting on them are strongly dependent on contextual factors. This is, therefore, yet another reason why independent in-depth case studies of RES-E deployment can provide important information for the overall assessment of both progress thus far and the way forward. As outlined above, the national teams of the SUSTEN project have been given very general guidelines as to the types of information necessary for an assessment of the effects of path dependence and the potential of path creation. The main thrust of the case studies is, however, descriptive: an attempt to grasp the national ‘storyline’ in a way that brings forth a richer and more nuanced understanding of what may, or may not, lie behind the five-year evaluation of the European Commission.

37

Introduction

Table 1.7 The case studies of the SUSTEN project listed according to degree of fossil-fuel dominance in the generation of electricity (1999, % shares)

Netherlands Denmark Ireland Spain Finland Austria Sweden Norway

Coal

Oil

Natural gas

Nuclear

Hydro

Other

Total share of fossil-fuel generation

26 52 27 37 14 9 2 0.5

8 13 28 12 1 5 2 0

57 24 32 9 14 15 0 0

4 0 0 29 33 0 47 0

0 0 4 11 18 68 46 99

6 12 9 3 20 3 2 0.5

91 89 87 58 29 29 4 0.5

Sources: Table 1.1 above (from Rowlands 2005); IEA (2001).

Realizing the RES-E Directive: a common goal for eight uncommon cases In presenting the results from the eight national case studies, we decided to list them in an order that clearly reflects the enormous differences among the countries with respect to the ‘dominant energy system’. As explained in the preface to the present volume, we could have chosen other countries as cases, or we could have expanded the number of cases. For the reasons outlined, we have done neither. We feel very strongly, however, that this is not an issue of key importance for the study and its results. The major purpose of the study is to document and assess the contextual factors that ‘ground’ and ‘condition’ the technical and market factors influencing the promotion of RES-E. What this requires is an ‘interesting’ sample of European states: a sample that allows for robust generalizations on the research question within the budgetary and administrative restraints of the project. We know that the sample chosen accommodates the latter, and we believe that it promises the former. We hope to hear from both research colleagues and policy practitioners as to the wisdom and relevance of the approach. So as to illustrate the degree of variation across the eight case studies, we present them in an order that reflects the radically different nature of the energy systems within which the RES-E Directive is to be realized as goal-directed ‘change’. Table 1.7 lists the eight cases according to their degree of fossil-fuel dependence at the outset of the period of implementation (1999). We see here that the systems vary from near-total fossil-fuel dominance of electricity generation in the Netherlands (91 per cent), to

38


virtually zero impact for Norway (the miniscule generation from coal is on the Arctic island of Svalbard). In between we find countries at numerous different levels, and with highly different compositions, of fossil-fuel dominance. We also see that the roles of hydropower and nuclear energy differ considerably across the eight cases. While Norway usually generates nearly 100 per cent of all electricity from hydropower, and Austria generates 68 per cent, the Netherlands and Denmark have virtually no indigenous hydro generation. Differing dependences on nuclear power are also distinctive, with Sweden, Finland and Spain all showing significant shares of generation, while the source is totally absent in Denmark, Ireland, Austria and Norway. Clearly, with such markedly different constellations of indigenous energy systems, it would be strange indeed if the various manifestations of these ‘paths’ did not make the promotion of RES-E by a standardized model highly ‘dependent’. The overriding purpose of the current study is to document the effect of these dependences on the implementation of the RES-E Directive, so as to draw lessons for more effective ‘path creation’ within and across the European Economic Area.

NOTES 1.

See the annex to the RES-E Directive as amended by the Treaty of Accession for the EU10 (OJEC 2004). 2. These included the following (with the addresses of their original websites): ManagEnergy: http://www.managenergy.net/; Renewable Energy Partnerships: http:// europa.eu.int/comm/energy/res/renewable_energy_partnerships/index_en.htm; EnerIURE: http://www.jrc.es/cfapp/eneriure/welcome.html; PRETIR: http://www. greenprices.com/eu/doc/pretireureport.pdf; REMAC 2000: http://www.renewable-energypolicy.info/remac/; MITRE: http://mitre.energyprojects.net/; REACT: http:// www. react.novem.org/; ElGreen and Green-X : http://www.green-x.at; ADMIRE-REBUS: http://www.admire-rebus.net/. Links to most of these projects are available at the Intelligent Energy Europe website: http://ec.europa.eu/energy/intelligent/index_en. html. We return to the general perspectives and implications of these projects for policy assessment in the concluding chapter. 3. The choice of the joint concepts was inspired by an earlier work by the Danish member of the SUSTEN team, Peter Karnøe, who, with his colleague, Raghu Garud, had published a collection of path-breaking studies on innovation and change entitled ‘Path dependence and creation’ (Garud and Karnøe 2001). An application of the ideas by the same authors to comparative analyses of wind-turbine technology in Denmark and the USA (Garud and Karnøe 2003) was particularly relevant, matching similar ideas that had been employed by other members of the team. 4. The analogy of ‘medium’ and ‘message’ refers to the work of Marshall McLuhan (1964): the ‘medium’ of communication in many contexts can be so important as to constitute the ‘message’ of the phenomenon in question. We are not saying here that the ‘medium’ of the dominant energy system is the sole, or even the most essential, ‘message’ – but rather that an understanding of how RES-E is communicated and integrated is dependent on an understanding of the ‘medium’ of national, regional and local conditioning factors.

Introduction 5.

6.

7.

8.

9.

10.

11.

12. 13.

39

Use of the term ‘inertia’ is inherent in the path-dependence concept. As conventionally defined within physics (the Concise Oxford Dictionary), inertia connotes ‘a property of matter by which it continues in its existing state of rest or uniform motion in a straight line, unless that state is changed by external force’. The notion of ‘embeddedness’ adds the connotation that the inertia in question is a manifestation of contextual factors that ‘embed’ and ‘ground’ the given ‘path’, and which – given their constituted symbolic–normative nature – are amenable to redefinition, revaluation and change. Unless otherwise stated, all citations here are from Liebowitz and Margolis (1998: 2–4), as posted at Liebowitz’s website. The principal source for the concept in economics is Arthur (1994). See the relevant treatment in Brekke et al. (2005), where special emphasis is placed on the idea of ‘market lock-in’. As used in the SUSTEN project, the concept is most directly related to the work of Garud and Karnøe (2001, 2003). In this view, the concept reflects those factors affecting the potential for innovative change that arise from crucial decisions as to how RES can and should be developed. We are interested in both (1) what makes existing energy constellations/systems more or less resistant to the introduction of the renewable-energy technologies designated by the RES-E Directive, and (2) what consequences arise from making specific alternative ‘path’ choices in the development and application of RES-E. It must be pointed out here that Liebowitz and Margolis are best known for their claim that virtually all of the major empirical references thought to substantiate the economic version of path dependence (‘increasing returns to adoption’, as systematized by Arthur 1994) – including the QWERTY keyboard case – are what they refer to as ‘myths’. In other words, they claim that the empirical basis for the ‘increasing returns to adoption’ version is weak to non-existent. It must also be stated, however, that they do not thereby discount the idea per se. Note that this condition is dependent on the specific economic approach to path dependence within the discourse. The efficiency question is specifically related to the position of Arthur (1994) and others, and its application by Liebowitz and Margolis as a criterion for differentiating between second- and third-degree path dependence reflects this. From a more general perspective, the efficiency issue can be seen as one of many possible ‘regrettable’ ‘imperfect prediction results’. On the general concept of ‘eco-efficiency’, see DeSimone and Popoff (2000) and Bleischwitz and Hennicke (2004). On the difference between ‘eco-efficiency’ and ‘ecoeffectiveness’ (crucial in the context of RES-E promotion), see Ruud (2002, 2004) and Ruud et al. (2007). Whereas ‘eco-efficiency’ sets standards for single-product chains and life-cycle analysis, ‘eco-effectiveness’ aims to assess the total systemic (cumulative and interactive) impact of single-product change. The differentiation between ‘idiographic’ and ‘nomothetic’ approaches in the social sciences is a well-known aspect of the meta-scientific discussion of comparative methodology. Whereas the former attempts to grasp the particularity and individuality of a particular case (‘idios’ = own, private), the latter focuses on deriving ‘lawlike’ generalizations from similarities across the units (‘nomos’ = law). There are numerous websites with documentation of the leading projects. We recommend the following, all with links to other, more specialized, sites: Programme for Intelligent Energy Europe (IEE) under DG TREN: http://ec.europa.eu/energy/ intelligent/index_en.html; The Energy Research Centre of the Netherlands: http:// www.ecn.nl/en/; The Energy Economics Group at the Vienna University of Technology: http://www.erec-renewables.org/default.htm; and The European Renewable Energy Council (EREC): http://www.erec-renewables.org/default.htm. All sites accessed on 26 July 2007. For alternative views of the ‘linear model’ of science see Ziman (1984), Stokes (1997) and Nowotny et al. (2001); and for recent (and highly relevant) critiques of market rationality, see Whitley (2002), Nelson (2005), and (in Norwegian) Tranøy (2006). The major projects coordinated by the Vienna–Karlsruhe consortium are: GreenX (http://www.green-x.at/); FORRES 2010 (http://www.eu.fraunhofer.de/forres/); and

40


OPTRES (http://www.optres.fhg.de/). We return to the cumulative results of these projects in the concluding chapter. 14. For other similar lists of instruments, see Menanteau et al. (2003), Reiche and Bechberger (2004), Held et al. (2006) and Lund (2007). 15. The time frame and data sources used in this section are chosen to correspond with the categories and perspectives used in the other tables of the chapter, as well as in the official assessment of the EU Commission (CEC 2007) discussed in the following section here. A more general and updated assessment of the status of implementation emerges from the individual case studies, and will be summarized for the EU-15 in the concluding chapter.

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EC (2007), Activities of the European Union: Summaries of legislation, Energy website, EUROPA, European Communities: http://europa.eu/scadplus/leg/en/ s 14000.htm, 29 June. Eden, S. (1996), ‘Public participation in environmental policy: considering scientific, non-scientific and counter-scientific contributions’, Public Understanding of Science, 5 (3), 183–204. EEA (2001), ‘Renewable energies: success stories’, in Environmental Issue Report, No. 27, Copenhagen: European Environment Agency. European Environment (2005), ‘Economic policy: Barroso defends his focus on employment in new Lisbon strategy’, European Environment, 3 January, available at the Goliath–Business Knowledge on Demand website: http://goliath.ecnext. com/coms 2/browse_R_E004-200501, 16 November 2007. EWEA (2005), Support Schemes for Renewable Energy: A comparative analysis of payment mechanisms in the EU, Brussels: European Wind Energy Association. Garud, R. and P. Karnøe (eds) (2001), Path Dependence and Creation, Mahwah, NJ and London: Lawrence Erlbaum. Garud, R. and P. Karnøe (2003), ‘Bricolage versus breakthrough: distributed and embedded agency in technology entrepreneurship’, Research Policy, 32, 277–300. Haas, R., T. Faber, L. Green, M. Gual, C. Huber, G. Resch, W. Ruijgrok and J. Twidell (2001), Review Report on Promotion Strategies for Electricity from Renewable Energy Sources in EU Countries, compiled with the cluster ‘Green Electricity’ cofinanced by the 5th Framework Programme of the European Commission, Vienna: Institute of Energy Economics, Vienna University of Technology. Hajer, M.A. (1995), The Politics of Environmental Discourse: Ecological modernisation and the policy process, Oxford: Oxford University Press. Held, A., M. Ragwitz and R. Hans (2006), ‘On the success of policy strategies for the promotion of electricity from renewable energy sources in the EU’, Energy & Environment, 17 (6), 849–68. Héretier, A. (2002), ‘New modes of governing in Europe: policy-making without legislating’, Vienna: Renner-Institut, available at http://www.renner-institut.at/ download/texte/heritier.pdf. Huber, C., T. Faber, R. Haas, G. Resch, J. Green, S. Ölz, S. White, H. Cleijne, W. Ruijgrok, P.E. Morthorst, K. Skytte, M. Gual, P. Del Rio, F. Hernández, A. Tacsir, M. Ragwitz, J. Schleich, W. Orasch, M. Bokemann and C. Lins (2004), Final Report of the Project Green-X (within the 5th Framework Programme of the European Commission, DG Research – ENG2-CT-2002-00607), Green-X report, November, available at http://www.green-x.at. IEA (2001), Energy Policies of IEA Countries, 2001 Review, Paris: International Energy Agency Press. Lafferty, W.M. (ed.) (2001), Sustainable Communities in Europe, London: Earthscan. Lafferty, W.M. (ed.) (2004), Governance for Sustainable Development: The challenge of adapting form to function, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Lafferty, W.M. and K. Eckerberg (eds) (1998), From the Earth Summit to Local Agenda 21: Working towards sustainable development, London: Earthscan. Lafferty, W.M. and J. Meadowcroft (eds) (1996), Democracy and the Environment: Problems and prospects, Cheltenham, UK and Lyme, USA: Edward Elgar. Lafferty, W.M. and J. Meadowcroft (eds) (2000), The Implementation of Sustainable Development in High-Consumption Societies, Oxford: Oxford University Press.

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Lafferty, W.M. and M. Narodoslawsky (eds) (2003), Regional Sustainable Development in Europe: The challenge of multi-level cooperative governance, Oslo and Prague: ProSus. Lafferty, W.M., J. Knudsen and O.M. Larsen (2007), ‘Pursuing sustainable development in Norway: the challenge of living up to Brundtland at home’, European Environment, 17, 177–88. Lauber, V. (2002), ‘Renewable energy at the EU level’, in D. Reiche (ed.), Handbook of Renewable Energies in the European Union: Case studies of all Member States, Frankfurt am Main: Peter Lang, pp. 25–36. Lauber, V. (2005), ‘Renewable energy at the level of the European Union’, in D. Reiche (ed.), Handbook of Renewable Energies in the European Union, Frankfurt am Main: Peter Lang, pp. 19–38. Liebowitz, S.J. and S.E. Margolis (1995), ‘Path dependence, lock-in and history’, Journal of Law, Economics, & Organization, 11 (1), 205–26. Liebowitz, S.J. and S.E. Margolis (1998 [2004]), ‘Path dependence’, in The New Palgrave Dictionary of Economics and the Law, London: Macmillan. Version accessed is posted at website of S.J. Liebowitz: http://www.utdallas.edu/~l iebowit/palgrave/palpd.html. Lund, P.D. (2007), ‘Effectiveness of policy measures in transforming the energy system’, Energy Policy, 35, 627–39. McLuhan, M. (1964), Understanding Media: The extensions of man, New York: McGraw-Hill. Menanteau, P., D. Finon and M.-L. Lamy (2003), ‘Prices versus quantities: choosing policies for promoting the development of renewable energy’, Energy Policy, 31, 799–812. MoPE (2007), ‘Reports in accordance with the Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the internal electricity market’, Report to the EEA Joint Committee, prepared by the Norwegian Ministry of Petroleum and Energy, available at http://www.regjeringen.no/ Upload/OED/Vedlegg/03-01052-41_Reports_in_accordance_with_the_ Directive_20-_0717-EC_522610.pdf. Nelson, R. (ed.) (2005), The Limits of Market Organization, New York: Russell Sage Foundation. Nowotny, H., P. Scott and M. Gibbons (2001), Re-thinking Science: Knowledge and the public in an age of uncertainty, Cambridge: Polity Press. OECD/IEA (2003), Renewables for Power Generation: Status and prospects, Paris: IEA Publications. OECD/IEA (2006), Renewables Information, 2006, Paris: IEA Publications. OJEC (2001), ‘Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market’, Official Journal of the European Communities, L 283/33-40, 27 October. OJEC (2004), ‘Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market’ (OJ L283, 27.10.2001, p. 33), 2001l0077 – EN – 01.05.2004 – 001.001. (As amended by the Treaty of Accession, Official Journal of the European Communities, L 236, 23.09.2003, p. 33. Available at http://eurlex.europa.eu/LexUriServ/site/en/consleg/2001/L/ 02001L0077-20040501-en.pdf). OJEU (2003), ‘Documents concerning the accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the

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Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic to the European Union’, Official Journal of the European Union, Legislation, L 236, Vol. 46, 23 September. Available at http://eur-lex.europa.eu/JOHtml.do?textfield2= 236&year=2003&Submit=Search&serie=L. Ragwitz, M., J. Schleich, C. Huber, G. Resch, T. Faber, M. Voogt, R. Coenraads, H. Cleijne and P. Bodo (2005a), Analysis of the EU Renewable Energy Sources Evolution up to 2020 (FORRES 2020), Final report of the research project FORRES 2020 of the European Commission DG TREN (tender no. TREND/D2/10-2002), Brussels: European Communities. Ragwitz, M., G. Resch, T. Faber, and C. Huber (2005b), Monitoring and Evaluation of Policy Instruments to Support Renewable Electricity in EU Member States, Summary report from a research project funded by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (funding label 203 41112), Karlsruhe: Fraunhofer Institute for Systems and Innovation Research. Reiche, D. and M. Bechberger (2004), ‘Policy differences in the promotion of renewable energies in the EU member states’, Energy Policy, 32, 843–9. Resch, G., T. Faber, R. Haas, C. Huber, M. Ragwitz, A. Held, P.E. Morthorst, S.G. Jensen, R. Coenraads, M. Voogt, G. Reece, I. Konstantinaviciute and B. Heyder (2007), Recommendations for Implementing Effective and Efficient Renewable Energy Policies, Report from the project on ‘Assessment and optimization of renewable energy support schemes in the European electricity market (OPTRES – DG TREN, European Commission – contract no. EIE/04/073/S07.38567), Energy Economics Group (EEG), Institute of Power Systems and Energy Economics, Vienna: Vienna University of Technology. Risø and EWEA (2005), ‘Stable conditions for developing a European-wide framework for expansion of renewable energy technologies’, Re-Xpansion, Work Package 2, Evaluation of Renewable Support Schemes, Final Report, Roskilde: Risø National Laboratory. Rowlands, I.H. (2005), ‘The European directive on renewable electricity: conflicts and compromises’, Energy Policy, 33, 967–72. Ruud, A. (2002), ‘Industry and environmental responsibility: from proactive to reactive public policies’, in W.M. Lafferty, M. Nordskag and H.A. Aakre (eds), Realizing Rio in Norway: Evaluative studies of sustainable development, Oslo: ProSus, University of Oslo, pp. 63–86. Ruud, A. (2004), ‘Partners for progress?: The role of business in transcending business as usual’, in W.M. Lafferty (ed.), Governance for Sustainable Development, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 221–45. Ruud, A., W.M. Lafferty, R. Marstrander and O. Mosvold Larsen (2007), Exploring the Conditions for Adapting Existing Techno-industrial Processes to Ecological Premises: A summary of the CondEcol project, Report 1/2007, Oslo: ProSus, University of Oslo. Smeets, E. and R. Wetering (1999), Environmental Indicators: Typology and overview, Technical Report No. 25, Copenhagen: European Environment Agency. Statistics Norway (2007), ‘Produksjon, import, eksport og forbruk av elektrisk kraft. 1950, 1955 og 1960–2005. GWh’ (Production, import, export and consumption of electric power. 1950, 1955 and 1960–2005. GWh – in Norwegian), available at http://www.ssb.no/emner/10/08/10/elektrisitetaar/tab-2007-05-2412.html.

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Stavins, R.N. (2002), Experience with Market-based Environmental Policy Instruments, The Fondazione Eni Enrico Mattei Nota di Lavoro Series Index, Nota di Lavoro 52:2002, Economic Theory and Applications, available at http://www.feem.it/web/activ/. Stokes, D.E. (1997), Pasteur’s Quadrant: Basic science and technological innovation, Washngton, DC: Brookings Institution Press. Tranøy, B.S. (2006), Markedets Makt Over Sinnene (The Power of the Market over Minds – in Norwegian), Oslo: Aschehoug. Whitley, R. (ed.) (2002), Competing Capitalisms: Institutions and economies, Cheltenham and Northampton, MA, USA: Edward Elgar. Ziman, J. (1984), An Introduction to Science Studies: The philosophical and social aspects of science and technology, Cambridge: Cambridge University Press.

2. The Netherlands: muddling through in the Dutch delta Maarten J. Arentsen INTRODUCTION The Dutch thermal-based electricity system is still a patent example of a ‘central-station’ electricity system developed by Thomas Edison and his successors during the 1920s. It consists of relatively homogeneous, large power plants interconnected by a system of high- and low-voltage cables transmitting the (transformed) electricity directly to consumers. In the last 20 years, however, two developments have changed the profile of the system. First, electricity production and consumption have been associated with a steadily growing focus on sustainable development. Second, liberalization, deregulation and privatization have transformed the organization and outlook of the electricity system. Both developments are a function of political objectives. Sustainable development added a new dimension in the form of environmental concerns, and paved the way for the emergence of renewable energy sources. Parallel to this liberalization of the electricity market have followed EU initiatives to harmonize the European energy market. The Dutch electricity market is now fully liberalized and renewables are part of the resource portfolio of electricity production. ‘Cost-effective’, ‘clean’ and ‘reliable’ are all terms applied to the major goals of today’s national electricity policy, with an open price-based electricity market and continued official support for renewables as major instruments. Although the share is still modest, renewable energy sources for electricity (RES-E) are considered a necessary part of the national electricity resource portfolio. The current chapter tells the story of RES-E implementation in the Netherlands. In the following sections we shall: (1) sketch the transition of the dominant electricity system in the Netherlands and the relevant actors involved; (2) describe the most important support schemes and instruments for the promotion of RES-E; (3) analyse the national innovation context for the promotion of RES-E with respect to specific RES-E technologies; 45

46


(4) describe the most central lessons from the Dutch case; and (5) conclude with a summary assessment of RES-E implementation in the Netherlands.

THE DUTCH ELECTRICITY SYSTEM IN TRANSITION The Dutch electricity system is a fossil-based thermal system. Due to national gas reserves, the resource base of electricity production is dominated by natural gas and coal (see Figure 2.1). Never developed as a serious option, nuclear power was politically banned after the Chernobyl accident in 1986. Currently, only a single nuclear plant is operative in the Netherlands, although some political parties (the Conservative Liberals) have begun to position themselves in favour of the nuclear alternative. Proponents consider nuclear power in combination with CO2 storage as a realistic option to meet Dutch climate change targets. Public opinion is, however, still strongly against nuclear power. In 2006 the share of renewables in electricity production had increased to 6.5 per cent. The Dutch indicative target in accordance with the RES-E Directive is 9 per cent by 2010. The Dutch electricity market is relatively small (representing about 3 per cent of gross electricity production of the EU-25), but nonetheless interesting because of its high density and high connectivity. The national grid system is well developed and among the most reliable in Europe. Due to good cross-border connections with Germany, Belgium and Norway, the national high-voltage grid is well integrated into the European transmission network. These connections are used for back-up, import and export. The Netherlands is a net importer of electricity, both ‘grey’ and ‘green’. Milestones in the Development of the Dominant System Four milestones in particular turned the Dutch electricity system into what it is today. First of all this is related to resource diversification and the increasing use of natural gas. Second, it is related to changes and concentration of the number of actors in the energy market. This is further related to the ongoing liberalization and privatization that have taken place during the last decades. Finally, an increased focus on sustainable development has influenced the features of the current Dutch electricity system. Resource diversification The resource base of the Dutch electricity system has been determined by the coal and gas reserves of the country. The system was dominated by

47

The Netherlands 700 600

Peta joules

500 400 300 200

Coal

Blast furnace gas

Crude oil products

Natural gas

Nuclear

Biomass

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1980

0

1982

100

Input heat Source: CBS (2007).

Figure 2.1

Resource base of the Dutch electricity system, 1980–2006

coal-fuelled generation until the discovery and development of the huge Dutch gas field in the 1960s. The introduction of gas terminated Dutch coal mining, but imported coal continued to be a significant fuel for electricity production. Closing of the mines in favour of the exploitation of Dutch gas was a political decision (Arentsen and Künneke 2003; Correljé 1998). Natural gas was phased in with few restrictions for electricity production in the 1960s, since the general idea at the time was that nuclear energy would take over electricity production somewhere around the year 2000. Natural gas became available, and its relatively low price meant that the cost of Dutch electricity remained quite low. The oil crises of the 1970s led to a change in the country’s energy policy which also affected the resource base of the country’s electricity production. It was decided that coal should again become the major energy resource for electricity production (in addition to nuclear), and electricity companies were forced to change from natural gas back to coal.

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At the beginning of the 1980s coal and nuclear were viewed as the major fuels for base-load, while natural gas was to be reserved for peak-load capacity. Renewables were at this time expected to contribute to the country’s electricity production within a 20-year time span. Despite the declared political preferences for coal and nuclear, natural gas achieved a dominant position in electricity production during the 1980s. The Dutch government used natural gas to hold the electricity price low in an attempt to attract new industries. With the low price of electricity as an enticement, the government succeeded in attracting several companies to the country (among others an expanding aluminium industry in the north of the country). In this way the cheap Dutch gas was used for industrial–political reasons.1 But these considerations also made natural gas widely available for the country’s overall electricity production. Gas is still a major resource for electricity, and is projected to be so until depletion of the gas fields in approximately 2025. Concentration and centralization Developed out of small-scale municipal electricity companies established in the first decades of the twentieth century, the Dutch electricity system was publicly owned by provinces and municipalities. Technological improvements guided the electrification of the country, headed by the Association of Electricity Producers (SEP – Samenwerkende Elektriciteits Producenten), the high-voltage-grid coordinator since 1949. Between 1950 and 1989, electricity generation and distribution were well organized in small-scale monopolies, with clearly defined positions and legally authorized tasks reflecting a public-utility, public-service perspective on electricity supply. This perspective remained dominant until about 1995, when a more market-based system with a stronger emphasis on cost effectiveness and system efficiency was gradually introduced. It was not until 1989 that production became concentrated in four regional companies. Distribution continued, however, to be fragmented among relatively small companies. A general up-scaling occurred only after 1995, when it became clear that a progressive liberalization of the Dutch electricity market was irreversible. This was formally manifested with the new Electricity Act of 1998. Mergers in distribution have now resulted in three relatively large energy companies, all offering both gas and electricity.2 Early in 2007 the two largest companies, Nuon and Essent, announced a merger into one company to compete more effectively in the European energy market.

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Liberalization and privatization As a result of the EU Directive on electricity market liberalization, the Dutch electricity market has gradually changed from a monopoly-based to a market-based system. Within a very short time liberalization has completely changed the institutional outlook of the Dutch electricity system, a system that had hardly changed for decades. In general the Dutch have followed the transition path prescribed by the EU Electricity Directive (2003/54/EC),3 but have taken a more ‘advanced’ position on some points of liberalization. The Netherlands has, for example, been one of the first countries to allow foreign takeovers of Dutch electricity production companies. It has also opened the market faster than requested by the Directive, and initiated an ‘unbundling’ of the actual ownership of transmission and trade, whereas the Directive prescribes only a legal unbundling. In 2006, the government decided for a conditional ownership unbundling. After several years of change, the Dutch electricity market is now a robust pricebased open market, with virtually no major entry barriers in relation to production, trade and supply of electricity. Sustainable development National energy policies have focused on improving energy conversion and energy efficiency in electricity production and consumption since the beginning of the 1970s. Initially, shortage of energy was the major driver of these ambitions, but later environmental and climate change concerns became the main drivers. Since the end of the 1980s, challenges related to electricity production and consumption have been dealt with in the context of sustainable development. Under this heading the electricity system has increasingly been viewed in terms of energy conservation, improved energy efficiency and the promotion of RES. Lately the system has been exposed to the idea of ‘energy transition’, a concept focused on innovation of the energy system as a whole, rather than on innovation of separate system components. The motivating idea behind ‘energy transition’ is to make the integrated energy and electricity system ‘climate neutral’ with respect to CO2 emissions (Rotmans et al. 2000).

THE BASIC CHARACTERISTICS OF THE DOMINANT ENERGY SYSTEM Before 1989 the political control of Dutch energy policy was in the hands of provinces and local municipalities, and they used the electricity companies to pursue a wide range of social and economic goals. In 1989, for the first time in Dutch history, new legislation brought vital aspects of the

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system (prices, resources, investments) under the political control of the central government. Constitutional, Legal and Administrative Prescriptions The Electricity Act of 1989 is a significant turning point. It broke the autonomy, independence and closed nature of the energy system, and brought it under the political control of the central government. The ambition to centralize energy politics was fuelled by two major events: improvement of the efficiency of what was perceived as an overly decentralized and fragmented system; and the failure to establish a domestic nuclear industry.4 The Electricity Act of 1989 provided the legal base for a new blueprint: separating production and distribution of electricity; increasing the scale of production; and positioning the central government in an overall policymaking position. As indicated above, during the period 1989–95, electricity was used as an energy policy instrument for sustainable development. A general agreement to improve energy efficiency and climate change mitigation efforts was concluded between the government and the electricity industry. The agreement marked the beginning of the environmental programme of the Dutch electricity industry. This triggered extensive investments in decentralized combined heat and power (CHP) production capacity which in turn seriously undermined centrally coordinated electricity production and electricity planning in the Netherlands (Arentsen et al. 2001). In 1998 the Electricity Act of 1989 was replaced by new legislation establishing the country’s liberalized electricity market. The new law completely changed the electricity landscape of the country. It opened up the energy system and brought new perspectives, actors and contractual relationships to the Dutch market. Dutch companies began preparing for the new European perspective in electricity supply. By means of mergers and takeovers, the large companies expanded their scale and scope, resulting in the establishment of two large new energy companies in the country, Essent and Nuon. During the years of transition towards liberalization, the position of the public shareholders (municipalities and provinces) became more muddled. Local authorities became confused, with several openly questioning public shareholding and pleading for privatization. Others argued in favour of maintaining a strong position for public shareholders in the liberalized market. Currently, electricity provision in the Netherlands is formally anchored in the national Electricity Act of 1998. The law provides the structure and

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basic rules for the liberalized electricity market. The central government has delegated control over the actual functioning of the market to the electricity market regulator. Electricity no longer provides a type of broadbased social utility function with which it was formerly associated. Electricity has become a commodity offered by commercially operating private and public companies. Energy and Politics For several decades no political party has been in a position to establish a sole majority government. Coalition governance has become the rule of Dutch politics. A ‘social–liberal’ coalition of PvdA (Labour Party), VVD (People’s Party for Freedom and Democracy) and D66 (Democrats 66), in power between 1994 and 2002, is the architect of the liberalized electricity system and of modern Dutch RES-E politics. The architecture was not principally contested by any of the other parties in parliament. All agreed on the goals and support of renewables as suggested in the governmental proposals, with the Green Left and Socialist Party being more ambitious on specific targets than the others. The Dutch political debate has reflected a kind of learning process to establish what sources should be considered as ‘renewable’: the composition of waste and biomass; industrial heat pumps; hydropower etc. Right-leaning parties have been in favour of a wide definition of renewables, staying as close as possible to the incumbent technologies of the dominant electricity system. Left-leaning parties have been in favour of a more restricted definition of renewables. The outcome of the debate has led to a more restricted conception of renewables, excluding industrial heat pumps, non-organic fractions of waste, and hydropower above 15 MW. In 2002 a ‘conservative–liberal’ coalition of the CDA (Christian Democratic Party), VVD and D66 assumed power. This did not affect general political ambitions on renewables, but the support system was compromised. The tax exemption for green electricity consumption was discontinued. The Social Democrats (Labour Party–PvdA) and other left parties contested the tax reform and pleaded for an increase of support, in particular for large offshore wind parks in the North Sea. An increased share of wind energy has been a political ambition for many years in the Netherlands, and a deterioration of the support scheme could harm the increase of wind power. In 2005 the leftist opposition in parliament pleaded for a significant increase in offshore wind parks and encouraged the government to speed up licensing procedures and financial support. The more conservative coalition parties in parliament

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(VVD and CDA), however, did not support the initiative. For financial reasons they rather pushed the government to stimulate biomass as a major option to increase the share of RES in Dutch electricity production. They argued that it is easier and cheaper to integrate biomass into the Dutch electricity system compared to wind power because almost all largescale electricity producers co-fire biomass in their (coal-fired) plants. Photovoltaics (PV) continued to be supported, but the amount of support was far too small to compensate for the non-competitive additional costs. Another political controversy has been the onshore location of wind turbines. Here the positions of all the larger parties have been rather inconsistent. None of them has initiated any action to lower the complex administrative barriers faced by investors in wind turbines. Administrative barriers have blocked investments and frustrated the interests and ambitions of Dutch farmers to invest in wind power. The inertia of local and regional authorities is one part of the problem. With few exceptions, Dutch provincial authorities have been unwilling to license wind turbines on their territory. Despite the centralization of energy politics in accordance with the legislation changes in 1998, the Dutch government did not announce a change of regional regime to overrule provincial and municipal authorities in case of lack of cooperation until 2002. Left-leaning parties are also inconsistent, however, since many of their supporters take part in local actions against, for example, wind farms. In short, across the political spectrum there is widespread rhetorical support for RES, but in practice there is considerable inconsistency and resistance. Support for non-renewable innovation of the Dutch electricity system – particularly a rejuvenation of nuclear power – is politically organized in the VVD, but is also present in the CDA and occasionally among the PvdA. Major Actors before Liberalization At the beginning of the 1990s centralized electricity production was concentrated in four regionally based electricity companies united in the Association of Electricity Producers (SEP). The SEP coordinated and managed electricity production and imports; the technical and economic working of the system; and long-term electricity planning (forecasts of demand and supply, investments in new generation capacity etc.). There were some 30 locally based electricity distribution companies that supplied electricity to industrial and residential consumers. During the 1990s decentralized electricity production was primarily related to gas-fired CHP in industry. From the mid-1990s on, renewables

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began to appear as a factor in local electricity production in the Netherlands, predominantly through wind turbines owned by private parties (farmers), consortia of electricity companies, or associations of consumers. The organization EnergieNed (The Federation of Energy Companies in the Netherlands) was the branch organization of Dutch energy distributors (gas and electricity) acting as a general service organization and lobbyist for its members. It held a relatively powerful position in the policy network next to the SEP (the branch organization of the electricity production companies). The production and distribution functions of the electricity sector had their own supply industry, and domestic industrial spin-offs were viewed as an important objective of electricity policy. Dutch industry was expected in this regard to benefit as much as possible from the national electricity system. Dutch electricity also had its own R&D infrastructure with the large consulting firm KEMA (testing and engineering) and two technical universities specializing in the education and training of new generations of electrical engineers (Delft University of Technology and Technical University Eindhoven). The influence of provinces and municipalities has been relatively restricted since 1989 in favour of the central government. The major Dutch Energy Council (AER – Algemene Energie Raad) emerged as the major governmental advisory board on energy, with board members selected on the basis of key positions in either industry or research. Major Actors after Liberalization Liberalization drastically changed the institutional outlook of the Dutch electricity system. The Dutch high-voltage-grid owner and manager is the public company TenneT (Transmission System Operator). Two of the four major electricity production companies are now foreign-owned. Large European energy companies based in Germany, France and the Nordic countries operate on the Dutch market. Most electricity is still traded on the basis of bilateral contracting, but substantial parts are traded via the Amsterdam Power Exchange (APX), where supply and demand meet on a daily basis. The Office of Energy Regulation (DTe – Directie Toezicht Energie) is the Dutch regulator of the electricity (and gas) market, which is part of the (independent) Netherlands Competition Authority (MNa – Nederlandse Mededingsautoriteit). The organization CertiQ (previously the Green Certificate Body – GCB) was re-established in 2003 as a subsidiary of TenneT with responsibility for issuing and approving guarantees of origin.

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The Ministry of Economic Affairs (EZ) was (and still is) responsible for energy politics and policies in general, and green electricity in particular. The Dutch Energy Council (AER) became one of the most influential energy policy actors before liberalization, and its position and functions have not changed since. Interest mediation did, however, change after liberalization. EnergieNed is no longer restricted to energy distribution, but has become the branch and lobby organization of energy companies operating on the Dutch market. The foundation ‘de Koepel’ is an interest organization of producers of renewable-based technologies and suppliers of renewable electricity. The organization brings together wind, biomass and solar-based technology suppliers and electricity producers, all involved in RES-E. Environmental and other NGOs are also part of the system, especially with respect to the localization of renewable-based production facilities, where the RES-E technologies – particularly wind power – often face considerable local resistance. Finally, several NGOs are involved in information activities on various aspects of RES in general, and the production and consumption of RES-E in particular. In sum, the organization of the Dutch electricity market is much more complex after liberalization. Liberalization has opened up the previously closed electricity system of the Netherlands, making room for numerous new actors and ideas, and, as we shall see below, this new openness has in turn improved the conditions for phasing in RES-E.

PHASING IN RES-E Hofman and Marquart (2001) have convincingly shown the long and massive resistance of the Dutch electricity system to the introduction of RES-E. The dominant system was predominantly large-scale and centralized. Renewables simply did not match the technological and managerial expectations of the electricity industry as to how the system could and should operate. For a long time the focus of the industry was on nuclear power, gas, and coal-based technologies, and government and society had literally to force them to view renewables as a serious alternative for electricity production. Renewables were first considered in the aftermath of the first oil crisis in 1973 as part of a national strategy to reduce external dependence and increase fuel diversification. The first White Paper on energy of 1974 (two more would follow, in 1979 and 1995) assessed the potential contribution of new resources such as nuclear fusion, wind, sun, biomass, wave, hydro and geothermal power to the prevailing mix at the time (Ministry of

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Economic Affairs 1974). The White Paper concluded that these alternatives would not be effectively operational before 1985, and that their contribution would be marginal until about 2000. Only wind and solar-based technologies were expected to be available and operational (on a limited basis) in the period 1985–2000. The first White Paper of 1974 initiated national R&D programmes for wind, solar and PV, and these programmes prevailed as the major RES support schemes until the end of the 1980s. The guiding idea of these programmes was to explore the potential for Dutch electricity production and the improvement of the technical and economic performance of the different alternatives. Industrial political considerations were also part of the programmes, with hopes that the new technologies would contribute to new domestic sub-sectors with strong export potential. Wind, solar, PV and later biomass have been consistently viewed in this industrial–political context. Since 2003, however, renewables have seriously entered Dutch electricity production. In 2006 the share of renewables had reached 6.5 per cent of domestic production. As Figure 2.2 indicates, the larger part stems from wind and biomass combustion. In 2006 co-firing of biomass was still the major renewable option in the Netherlands, but the country is increasingly promoting offshore wind energy. The first offshore wind park in the GWh 8000 7000 6000 5000 4000 3000 2000 1000 0

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Source: CBS (2007).

Figure 2.2 Electricity production in the Netherlands from renewable sources, 1990–2006

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North Sea became operational in 2006 and more will follow in the coming years. The Leading RES Technologies The dominant Dutch electricity industry’s interest in renewables has been weak. It focused instead on large-scale fossil and nuclear power, and this was supported by the Ministry of Economic Affairs. The first White Paper on energy of 1974 announced two more nuclear power stations of 1000 MW each to be operational in the mid-1980s (Verbong et al. 2001: 63). Nuclear as opposed to renewables (wind and solar in particular) became the hot topic of the national energy debate during the 1980s. The preference for large-scale nuclear by the leading and dominant governmental and industrial actors, however, was contested by almost all the rest of Dutch society. Dutch participation in the construction of a nuclear power plant in Kalkar just across the German border became a major focus case. The continued push for the nuclear option from within the electricity industry, and the massive societal resistance to it, initiated a national debate on energy policy and planning. It was not until the accident at Chernobyl in 1986 that the nuclear ambitions of the Dutch electricity system were brought to a halt. Dominant actors finally understood the need for promoting renewable sources for the production of electricity in the Netherlands. Wind In the mid-1970s the Dutch government launched a national R&D programme for wind-turbine development which was supported by a conglomerate of national industries (the national aircraft industry Fokker among others), national research organizations, and two of the three Dutch technical universities.5 The electricity industry was not involved in this first national wind programme. It was openly critical of the decentralized, stand-alone concept of wind-power technology being promoted at the time by all kinds of alternative groups and the anti-nuclear movement, and simply rejected these alternative challenges to its control over national electricity supply. The first national wind programme was followed by a second (during the 1980s), focusing on ‘real-life’ experimentation and operation of Dutch wind-turbine technologies. And, once again, the electricity industry was not involved in the programme. For reasons that remain unclear, the electricity industry nonetheless received money from this programme to establish its own experimental wind park in the windy northern province of Friesland. The trial project was run outside the wind programme, as a

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cooperative initiative between the electricity industry and several minor technology companies. The stand-alone ‘experiment’ was massively hindered by major technical problems (primarily with generators). The result was viewed by the electricity industry as a complete failure – a confirmation of its original scepticism about the potential of wind technology for electricity production. The interest in wind-based electricity among dominant electricity producers continued to be marginal even during the 1990s. This was clearly reflected by the debate on remuneration of wind-based electricity. Dutch distributors refused to compensate for the avoided environmental costs of wind-based electricity, and the issue was brought before the courts (Dinica 2003). The debate frustrated and discouraged private investments in wind turbines, in particular by associations of households and farmers in search of income diversification. These relatively ‘passionate’ investors had not only been confronted by years of conflict with the national and local administrations, but now – just as they approached the finish line – they were confronted by a new hurdle in the form of unwilling local distribution companies. Not all distribution companies took the same position, however. In the context of the voluntary CO2 reduction agreement, eight companies adopted a so-called ‘Wind Plan’. The idea was to establish 250 MW of wind power in the Netherlands within a few years’ time using Dutch-produced turbines. In theory the plan was ideal: it would both increase the share of wind-based electricity in the Netherlands and serve to stimulate the dormant Dutch wind-turbine industry. For reasons that are difficult to assess, however, the plan failed completely. Disagreement among the participants, demands for greater long-term investment security and external pressures from the established electricity interests are all factors mentioned (Verbong et al. 2001: 166). Solar Since the presentation of the first White Paper on energy in 1974, photovoltaics (PV) have progressed from being a ‘non-realistic’ to a ‘mostfavoured’ option for the Netherlands. This change of image is largely the result of passionate efforts by a few Dutch scientists and companies that have strongly believed in the potential of PV. As with wind-based technology, PV has also developed completely outside the scope and control of the dominant actors in the Dutch electricity system. The only role played by established energy concerns in PV development was to arrange grid connections for the decentralized privately owned PV installations that gradually emerged across the country. PV development in the Netherlands was initially overshadowed by

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solar-based boiler systems. PV was not considered a serious option for electricity production. A relatively small group of younger Dutch scientists, working in several prestigious national laboratories, had, however, a strong interest in PV technology. As the careers of these researchers developed, they became increasingly influential in determining the national energy research agenda, and, in this way, managed to obtain funding for PV research. Though marginal in relation to what was taking place in the rest of the world, these efforts were significant in the areas of material optimization, improved efficiency in PV-related devices, and reduction of production costs. By the end of the 1980s the Netherlands hosted four companies producing and selling PV systems, one of which was Shell Solar, a subsidiary of Royal Dutch Shell. Initially PV was considered a promising technology for developing countries that were both blessed with sun and lacked grid infrastructures. When PV systems turned out to be successful in these environments, Dutch energy distribution companies developed a stronger interest in this renewable option. Thus far most initiatives have come from private investors, industry and the public-service sector. The involvement of the electricity industry itself has, as indicated, been marginal (Verbong et al. 2001). Biomass The biomass option has developed as a spin-off of the ‘alternative movement’ that promoted a small-scale ‘ecologization’ of modern life in the Netherlands during the 1970s and early 1980s. The alternative groups experimented with fermentation systems, and shared their experiences with all who were interested. Some of these techniques were gradually picked up by the agricultural sector as a means to deal with rapidly growing manure problems on large-scale Dutch farms. Technical problems, combined with high maintenance costs and low energy prices, have contributed to reduced interest in fermentation as a serious energy option on farms. Since about 2000, however, fermentation has again become popular in the agrarian sector. Better technology has improved the efficiency and reliability of performance, but there has thus far been little interest within the electricity industry for fermentation (biogas) as an alternative source for electricity production. The situation is different, however, for two other biomass options. The first is waste incineration, which is still heavily debated now that this option has achieved a significant share of RES-E. Waste incineration and energy production have traditionally been separated in the Netherlands, but have gradually become more integrated in the context of the debate on climate change and sustainable development. The Ministry of Housing, Spatial

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Planning and the Environment (VROM) was clearly concerned about the environmental hazards related to the process, particularly the release of dioxins. This issue was addressed by the adoption of strong environmental legislation that has led to extremely clean waste incineration sites. Another concern, however, is that waste incineration for energy production also interferes with a key principle of Dutch waste policy, which stipulates that hazardous prevention and recycling should precede incineration and landfill. Despite these objections, waste incineration was becoming increasingly necessary because of the enormous amount of waste being generated. In the second half of the 1990s, several Dutch companies entered the waste management business, and energy production through incineration received a strong push. The business was propelled at the end of the 1990s when waste incineration was ultimately recognized as a renewable energy source. Almost all incineration sites had to increase electricity production (which was less efficient), because of a lack of demand for heating. The second biomass option with strong involvement of the electricity industry is co-firing of biomass in coal plants. Co-firing was initiated by the electricity industry in the mid-1990s, but the public authorities were very critical of co-firing wood products for environmental reasons. The debate reached a compromise by agreeing to co-firing only primary organic material. Any secondary organic material in the form of waste was excluded from this option. The industry has subsequently argued for the co-firing of primary organic materials as a renewable biomass alternative (Raven 2004; Verbong et al. 2001). Hydro The renowned flatness of the Netherlands has not made large-scale hydro an interesting RES-E option. Despite a very limited potential of roughly 80 MW, moderate to small-scale hydro has, however, been seriously considered and scoped by electricity companies since the mid-1970s. The basic assumption was that the kWh price of hydro would be lower than that for gas and coal. In particular the southern (more hilly) part of the country and the Schelde delta were assumed to have potential. Several small-scale hydro plants have been built along the Rhine and Meuse rivers. After the decline in fossil-fuel prices during the 1980s, however, the electricity industry no longer considered hydro as a cost-effective option. The government remained optimistic and pushed for new hydro initiatives, but these were met by strong opposition from the Dutch Ministry of Transport, Public Works and Water Management, fearing negative impacts from flooding and on the overall river ecology.

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Promoting RES-E: Policies and Instruments The above sections have shown that the Dutch electricity industry has only recently become more adaptive to renewable-based technologies, and more willing to account for sustainable development in electricity production. These changes did not occur as an endogenous (obvious) next technological step in electricity production, but had to be imposed top-down by politics. How did this take place in terms of actual programmes and policy instruments? Policy goals The political ambition for RES in Dutch electricity production and consumption has been formulated in the context of the national strategy on sustainable development (VROM 2002) and as part of climate change policies of a projected 6 per cent reduction in GHG emissions between 1990 and 2012. The reduction is to be achieved along two tracks: improvements in energy efficiency6 and the promotion of renewables. The RES track focuses on the energy industry (electricity and gas) and electricity consumers. In a recent evaluation of the national RES policy, the National Accounting Office points to a contradiction in the policy goals for renewables. Whereas the goals have been formulated in terms of increasing RESE in both domestic consumption and domestic production, the two dimensions are only partly related because increases in consumption – as illustrated in Figure 2.3 – were previously achieved through imports rather than increased domestic production.7 The initial Dutch goal for renewables in electricity production and consumption was not seriously affected or changed by the RES-E Directive of 2001. Implementation of the Directive is the sole responsibility of the Ministry of Economic Affairs, which (interestingly enough) is in charge of Dutch energy policy in general and renewables policy in particular. Since the Dutch RES-E target was already considered to be relatively ambitious (given the physical and geographical constraints of the country), it was viewed as crucial in the Netherlands that the negotiations with the EU over the Dutch target did not result in a significant increase in the national objective. As it turned out, this was easy to achieve, and almost as easy to follow up (Arentsen and de Bruijn 2005). The Directive could in fact be nationally implemented through the existing voluntary green certificate system of 2001. The Directive opened the Dutch certificate system to an acceptance of imported renewable electricity, a move considered necessary to attain the indicative target of 9 per cent by 2010. Linking the certificate system to the tax exemption for RES-E, in combination with the opening of the green electricity market, resulted in a

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The Netherlands TWh 140 120 100 80 60 40 20 0 1995

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Source: CBS (2007).

Figure 2.3 Import in addition to domestic production of RES-E in the Netherlands, 1995–2006 steep increase of RES-E consumption. However, this was primarily sourced through imports rather than increased domestic production capacity (see Figure 2.3). Consequently, substantive parts of the Dutch budget for the support of renewable-based electricity production went abroad unintentionally as windfall profits, mostly to the foreign producers of hydro- and biomass-based electricity plants. This financial ‘leak’ was ultimately closed by a legislative amendment in 2003, so that only renewable electricity produced in the Netherlands would qualify for financial support. In spring 2007, the new Dutch government had not yet presented a new support scheme for RES-E production. Promotional mechanisms The policy repertoire for promoting RES-E in the Netherlands is a relatively complex affair. History clearly indicates the complexity of the support mechanisms involved (Arentsen and Dinica 2001). Schemes have been both production and consumption oriented, as well as regulatory, voluntary and fiscal in nature. In the first half of the 1990s the increase of renewables in electricity production was hindered by an intense debate between energy companies and private investors on tariffs. Investors

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wanted to be compensated for avoided environmental costs, whereas energy companies were willing only to compensate for the avoided economic costs. The debate lasted three years and severely slowed the growth of RES-E in the Netherlands. In the second half of the 1990s, energy companies offered green electricity to their customers for above-market prices. Customers could voluntarily subscribe for green labels if they were willing to pay an additional premium. With this voluntary system in mind, Dutch industry initiated a domestic system of green label trading, a kind of forerunner of the green certificate market. The green label system evolved into a form of green certificate market and this in turn became involved in the European Renewable Energy Certificate System (RECS). The RECS was the initiative of electricity companies in different countries to develop a European market for green electricity.8 As a result of all these initiatives, there were at least three different ‘certificate’ models running simultaneously in the Netherlands. This led to a very complex situation that only grew in complexity when it became connected to the energy tax regime and the energy tax exemption for renewable electricity consumption. In 2002 the energy tax became the core instrument of the remuneration and compensation of green electricity production investments. Initially the revenue raised by the tax was used to compensate energy companies for the non-competitive costs of green electricity production. In the context of the RES-E Directive, green electricity consumption was exempted from the energy tax to stimulate domestic consumption. The idea behind the tax exemption was favourable pricing of renewable electricity to tempt consumers to change to this alternative and for producers to invest in renewable-based generation facilities. The tax exemption significantly increased the number of green consumers, but it was supplied by imported green electricity. Contrary to public expectations, Dutch energy companies abstained from investing in domestic production RES-E facilities, choosing instead to increase imports of already competitive green (hydro and biomass) power. Hydropower stations in Europe in particular benefited from this remarkable Dutch support policy. The full opening of the green market in 2001, three years before the opening of the grey electricity market, facilitated the increase in green electricity consumption. Energy companies used this opportunity to attract new green electricity customers from outside their own supply region (Midttun et al. 2005). As mentioned above, the conservative–liberal coalition changed the tax exemption regime for renewables in 2003 by concentrating support only on domestic non-competitive RES-E production. The tax exemption for Dutch consumers ended in 2005 and led to a tariff increase for renewablebased electricity. However, energy companies equalized the price of several

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of their green labels with the price of grey electricity. The change of the tax regime was motivated by general budget considerations separate from preventing the windfall profits of foreign green production facilities. The change in 2003 introduced a system supporting domestic RES-E production, which compensated for the non-competitive part of RES-E generation costs. The non-competitive part of the costs was calculated annually for each of the technological options separately. The compensation for PV-based electricity generation, however, was far too little to compensate for the additional production costs. Consequently, the level of PV-generated electricity did not rise after 2003. Most support was given to biomass and wind as the share of both resources in RES-E production rose significantly between 2003 and 2006. The new support mechanism was so successful that an interim government (in power between July and November 2006) stopped the support of new projects instantly on 18 August 2006. The decision was motivated by saying that new RES-E projects were not further needed for the attainment of the committed goal of 9 per cent by 2010. A new centre–left government formed by the Christian Democratic Party (CDA), Labour Party (PvdA) and Christian Union (CU), coming to power after the November 2006 elections, did not decide upon a new support system for RES-E production, except for small-scale initiatives in agriculture. The decision was widely and heavily criticized, but despite that, support for new projects was not re-established. To support onshore wind turbines, central, regional and local governments signed an agreement in 2001 (‘Blow’) aiming to increase production from onshore wind turbines to 1500 MW by 2020. The agreement established regional targets as well as the responsibilities of the partners to the agreement. Onshore wind-turbine investment suffers from complex administrative procedures that facilitate local resistance to wind turbines, and the agreement aimed to mitigate such local barriers faced by investors. Dutch provinces and municipalities are responsible for physical planning and thus determine the location and licensing of onshore renewable-based production facilities. In other words, provinces and municipalities bear the prime responsibility for policy implementation. Until 2002 there was a lack of multilevel policy coordination between formulation and implementation for RES-E. Provinces and municipalities followed their own political preferences and this resulted in substantive differences between geographical areas. Wind energy is concentrated in the coastal areas of the country, but provinces and municipalities in these areas differ, for example, in allowing private investment in wind turbines. As indicated, the licensing procedures also frustrate investments in renewables, since provinces and municipalities often lack the expertise necessary to respond to the often non-rational local resistance to wind turbines. The situation has led to a

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general under-implementation of the general agreement on wind power between central and regional authorities (‘Blow’). Resistance to promotion of RES-E The position of the major Dutch environmental organizations vis-à-vis renewables is contradictory. On the one hand they tend to favour RES-E as a general position, but on the other they have been strongly engaged in local resistance to onshore wind farms and biomass. The five major environmental organizations (all highly institutionalized and integrated in environmental political decision-making) officially opt for what they view as ‘real’ renewables: wind, solar and wave-based technologies. All favour large-scale offshore wind parks, and all are very critical of RES-E from large-scale biomass and waste. They have only, however, been partly successful in influencing political decision-making in this respect. Both biomass and the organic portion of waste are viewed as RES for electricity production in the Netherlands. At the local level the major environmental NGOs offer knowledge, expertise and support to local environmental groups in their attempts to influence local decision-making. Local groups use legal and administrative procedures to influence or block the licensing of renewable installations. One of the environmental organizations, ‘Natuur en Milieu’, has a separate programme for conducting local environmental assessments of wind turbines. The NGOs also have allies in regional and local political assemblies, and have been successful in delaying and blocking decision-making on licensing procedures. The Dutch legal and administrative system is very open to local resistance of any kind, and offers legal procedures for contesting RES-E licensing decisions that can take up to several years to resolve. Wind-turbine projects in particular have suffered from local resistance, in many cases organized and managed by environmental groups. One of the environmental groups, however, World Wide Fund for Nature (WWF), was the first to grant a green label to one of the Dutch energy companies (Essent) in the mid-1990s. This opened a new avenue of RES-E influence, but the initiative received little public attention and has not been followed up by other NGOs (Hofman 2005). Lobbying for RES-E at the national level by NGOs has been relatively limited because the groups direct most of their attention to decisions of immediate environmental relevance, while the crucial RES-E decisions are being made in relation to energy and the economy (and lately to transport). Environmental groups rarely coordinate their positions or activities either against or for renewables. Offshore wind parks are a clear example. Whereas all major environmental groups favour offshore wind parks,

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local groups and bird organizations often strongly contest the licensing of these parks.

LESSONS FROM THE DUTCH CASE In general the Dutch case can hardly be viewed as ‘best practice’ for the promotion of RES-E. We are talking more about trial and error, problems and failures. It is, of course, always easy to conclude with hindsight that things have not gone as well as they ‘should have’. The purpose here, however, is to highlight the possible positive ‘lessons’ that can be drawn from the contradictions and missed opportunities of the Dutch case. One of the first lessons worth noting is the importance of having an adequate understanding and overview of renewables. By ‘adequate’ I mean empirically grounded knowledge of the innovation potential of the different RES-E technologies, from which realistic assessments of domestic applications can be derived. Dutch physical conditions for most renewables are relatively poor compared to many other European countries, but this was basically unknown at the beginning of the 1970s when the technological potential of renewables became a topic of scientific research. In the course of time it became clear that the potential of wind power, for example, is not just a matter of wind consistency and speed; nor is the potential of PV solely dependent on the quality of light. Looking back, we can see now that the Dutch were overly optimistic about wind – particularly for onshore installations – and that the optimism was quickly undermined by the strong resistance that appeared when the first turbines came into operation. The lesson can also be generalized to the other technologies. Once the RES-E installations were physically present, fewer and fewer communities wanted the turbines, biomass installations and waste incineration plants that had looked appealing in the abstract long-range planning documents. In a country that had learned to live with nuclear power, the NIMBY9 syndrome was suddenly prevalent in the Land of the Windmill! A key point here is that most of the early research on RES was devoted solely to the technical and economic optimization of the technology, and failed to take adequate account of the social and cultural factors conditioning the actual working of the technology in real communities. The result is a situation where optimistic planning and targets for RES-E are suddenly confronted by organizations and communities that focus solely on perceived negative local consequences. The story might have been different, had existing perspectives from the many disciplines dealing with the social, cultural and political conditions for applying technological innovations been better factored into the planning process.

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A second lesson to note is that an ambition to seriously increase renewables can be hindered by the nature of a society’s own natural resources. Natural gas was and still is a blessing for the Dutch society. But the availability of gas, and its massive introduction into the Dutch energy mix, has clearly affected the trajectory for enhancing renewables. Were it not for the overriding goals of sustainable development, the Kyoto Protocol and environmental concerns at large – as well as the specific EU targets on RES-E – gas-based electricity production would be the sole alternative for producing electricity in the Netherlands. Gas is cost-effective and clearly the best fossil fuel in environmental performance. This has hampered the transition to RES-E technologies, which are in general still less cost-effective and more uncertain in terms of return and profitability. How to overcome the trade-off between highly predictable gas resources and highly uncertain renewable resources is a key energy-policy challenge for the Netherlands. The gas option thus represents a clear form for ‘path dependence’ in the Netherlands. Despite the political rhetoric on sustainable development and renewable electricity, the Dutch continue to exploit gas as rationally, beneficially and effectively as possible. The effect is to establish – by default – a political–economic inertia to the detriment of RES-E.10 For a long time, the electricity industry benefited from preferentially priced Dutch natural gas, keeping the electricity prices among the lowest in Europe. The low gas and electricity price was an important instrument in industrial politics too. Thanks to cheap electricity supplies the Dutch could attract energy-intensive industries to the country. This in turn created new forms of techno-economic interdependence. Interestingly enough, liberalization of the energy market has directly contributed to a loosening of the bonds between natural gas and the electricity industry. A third lesson from the Dutch case is that an attempt to promote too broad a spectrum of viable renewable technologies can be counterproductive. In particular, the history of Dutch nuclear and wind shows how difficult it is for a small country, with a relatively small domestic market, to integrate industrial–political considerations with energy politics in general, and electricity promotional schemes in particular. After World War II, the Dutch tried to establish a national nuclear industry, and since the 1970s they have tried to do the same with wind-turbine technology. Both attempts failed. The general idea behind both policies was to create domestic industrial spin-offs by solving a societal problem. In the case of nuclear, one electricity company ruined the idea of a domestic industry by buying a nuclear power plant in Germany.11 In the case of wind-turbine technology the industrial ambitions were frustrated for several reasons, among others lack of cooperation among the electricity companies; the infancy and small

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scale of the domestic wind-turbine market in combination with a failure to develop a profitable export market; and insufficient governmental support (Verbong et al. 2001). A fourth lesson from the Dutch case is that regardless of all other supportive conditions, a stable investment environment is crucial. The history of Dutch renewables shows that if too many parameters are uncertain, investors show little or no interest in capital investment. Too many parameters for risk-taking have been unclear: the nature and duration of political commitments; the content and direction of policy; and the stability of given levels and time frames for support mechanisms. The uncertainties have been both financial (remuneration tariffs) and technical (grid-connecting conditions); but most tellingly political. The Dutch support system for RES-E has suffered from complexity, inconsistency and discontinuity (Dinica 2003), and the results reflect the profile. A fifth lesson from the Dutch case is that it is very difficult to develop a renewable-based domestic production potential without real involvement of the electricity industry. In a liberalized market, where the relationship between government and business is considerably changed, traditional steering instruments of industrial and energy policy lose their established effect. The situation in the Netherlands indicates the unpredictability that liberalization introduces into rational planning and governance of the electricity market. Dutch electricity industry was previously not open for ‘external’ ideas on any aspect of new renewable electricity. Directors of the electricity companies reigned over their local fiefdoms committed to only one rule: ‘Electricité, c’est nous’. As Verbong et al. (2001) show in their history of Dutch renewables, the electricity industry was basically sceptical about renewables, but was nonetheless willing to accept research funding from governmental programmes. In retrospect it seems fair to say that the Dutch electricity industry neglected for too long its social responsibility to engage more strongly in renewables. Both the politicians and public shareholders allowed the industry to continue this neglect. In the political debate on sustaining electricity supply, the Dutch industry opted for ‘realistic’ and cost-effective alternatives, with a very broad understanding of ‘renewables’. The industry tended to stick to incumbent technologies, with a risk-adverse attitude to RES-E, and Dutch governments never really pressed industry to develop more advanced positions. The fifth lesson thus points towards a crucial long-term issue in energy policy. Given an overarching EU goal for the promotion of renewables, as stipulated in the RES-E Directive, and given further a demonstrable lack of initiative to pursue the goal on the part of the electricity industry itself, how

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can governing bodies at both the EU and national levels intervene beyond the application of normal techno-market incentives? This leads directly into a final, sixth lesson: the Dutch tradition in consensual decision-making – moving forward by means of dialogue, consultation and negotiation – has in the past been given credit for significant progress in the general area of sustainable development. The history of renewables seems to indicate, however, that the consensual mode has not managed to move the agenda on RES-E. Further, it appears as though the model has actually served to ‘camouflage’ what now appears as a serious gap between rhetoric and reality. All major actors have been willing to join in the dialogue, but precious little happens when the talking stops. Looking back, we can now see that the world of dialogue and the real world of promoting RES-E failed to mesh until 2003. From 2003 onwards the share of RES-E production, however, has risen significantly (see Figure 2.2). The normative logic of the dialogue appears to have actually compensated vicariously for a lack of practical results in the ‘real world’ of RES-E investments and achievements. This final lesson indicates, in other words, that in areas requiring innovation and change, dialogue and consensus can become counterproductive.

CONCLUSION: MUDDLING THROUGH? The analysis of the Dutch record on promoting RES-E shows a profile of ‘muddling through’ into the twenty-first century. In a comparative European context, the Dutch performance is less than impressive. Much time has been wasted in developing an RES-E profile that clearly could have been much more progressive than the record actually shows (Figure 2.1). In 1989 system efficiency was presented as the appealing perspective without a clear reference to renewables; in 1998 it was liberalization. Then ‘energy transition’ came on the scene to stress the urgency of energy innovation. For a short time the concept acted as an appealing perspective for energy innovation, but did not hold the momentum. Transition, and in a way sustainable development, also tend to become rhetoric cover-ups for mainstream business-as-usual in energy and electricity supply. The proclamation of clean fossil fuel as the central theme of energy innovation is exemplary in this respect. Other indications are the declaration in the Energy Report 2005 of coal and nuclear as options for a sustainable energy provision (Ministry of Economic Affairs 2005). If this is how the gap between rhetoric and reality is filled, then the Dutch are still facing a very long journey on the renewables path.

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Based on current knowledge, the Dutch basically have two feasible renewable options: offshore wind parks and biomass co-firing or incineration. The offshore wind-park track is now coming into the phase of implementation and it seems that the lessons from the past are being taken seriously. Procedures are improved and accelerated, and citizen participation channelled in such a way that objections are taken more seriously. There are several projects in preparation, with one nearly realized. The total potential is estimated at 6000 MW. A recent analysis, however, concluded that compared to costs, the social benefits are restricted. This to a large degree depends on the time frame of realization, price development of fossils, and the intensity of climate change policy (CBP 2005).12 For biomass an appealing perspective is lacking. Maturing the biomass option in the Dutch context could imply connecting parts of agricultural policies with energy policies. The extreme intensity of certain parts of Dutch agriculture has resulted in a serious manure problem. Solving this in one way or another could be linked more strongly to the biomass track in electricity production. But oddly enough this connection has never been promoted as a priority theme of Dutch industrial politics, probably because of the dark side of intensive cattle breeding. In a similar way, waste incineration has also met resistance as an energy option. The biomass option particularly incubates opportunities for energy innovation that affect other industries in addition to the electricity industry. Developing these kinds of connections might open new appealing options for energy and electricity production. History shows the importance of several supportive conditions for the further increase of renewables. First there should be some guiding image or idea about sustainable innovation of Dutch electricity supply. Existing ideas are either short term (9 per cent share in 2010) or too technologically specific (6000 MW offshore wind). There seems to be limited ambition among scientists and engineers to bring in new ideas about sustainable energy provision in the Dutch delta. Second, when it comes to policy implementation there is a real need for multilevel policy coordination. History shows the inefficiency of layers of governance not working with, but against, each other. After 30 years of muddling through in this respect, it is now time for a more productive type of cooperation. Third, the liberalized market demands new incentive types of support mechanisms for renewables. Although everyone is quite optimistic about the potential of the market to carry energy innovation, history has shown that even in the well-protected era of monopoly supply, energy companies were not willing to move on the renewables front if they couldn’t move

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without (financial) risk. In the competition-oriented market economy, this risk-avoiding attitude will be even stronger. Furthermore, in such a market, industry will often focus on short- rather than longer-term innovation. Initiating longer-term innovation in a market setting therefore requires the right support mechanisms offering the relevant incentives to invest in RES-E production capacity. Discussion of support mechanisms brings us to the fourth condition: the innovation of the Dutch consensual political model. History has shown the need to innovate this model to prevent any regression into the muddling course taken in the first 30 years of renewables in the Netherlands. Finally, the Dutch renewables ‘problematic’ shows the huge problems the EU is facing in establishing the internal green market. If the Dutch physical, political and economic problems can even partially apply to other countries, one gets an idea of the challenges the EU is facing. The Dutch story shows the many national obstacles on the track to the internal green market. In the short term, the EU can only facilitate the national paths to the internal market by recalibrating the set of minimal common rules and conditions by formulation of new EU renewable ambitions for the years beyond 2010.

NOTES 1. 2. 3. 4.

5. 6.

7. 8. 9. 10.

Exploitation of Dutch gas has always been relatively cheap due to the location and physical features of the Dutch gas field (extremely high natural pressure). For an elaborate historical account of the institutional and industrial changes in Dutch electricity supply see Arentsen et al. (1997 and 2001). For further details see http://ec.europa.eu/energy/electricity/legislation/legislation_ en.htm. The failure of the Dutch nuclear industrial policy was shown in 1973 when a single Dutch electricity company decided autonomously to buy a German nuclear power plant and thus completely neglected Dutch ambitions in this respect. For further details on Dutch nuclear industrial ambitions see Andriessen (2000). The programme considered small-scale wind parks as parks with at least 20 to 30 wind turbines. According to Verbong et al., this number is an early proof of the large-scale bias of the Dutch central station electricity system (Verbong et al. 2001: 140). The efficiency track focuses on an overall annual improvement of energy efficiency of 1.3 per cent and covers all economic sectors. General agreements between government and industry in combination with financial support are the major instrument for energy efficiency in the industrial and service sectors of the economy. The largest companies in domestic industry have their own benchmark covenant, committing them to become world leaders in energy efficiency. The major efficiency-supporting instruments in the residential sector are norms, standards and regulations. National Account Office (2003–04), pp. 1–46. For further details on the RECS see http://www.recs.org/. NIMBY refers to ‘not in my back yard’. Since 1973, the year of the first oil crisis, Dutch electricity industry considered nuclear power as the only alternative to natural gas. If Chernobyl had not blocked the nuclear

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route, it is likely that more than one nuclear power plant would be operational in the Netherlands today, due to a passionate preference for nuclear in the electricity industry and in the Ministry of Economic Affairs. The failure of the Kalkar adventure of Germany, the Netherlands and Belgium was part of the collapse of the Dutch nuclear industry, as was envy and distrust among the participants (see Andriessen 2000). The analysis itself was heavily criticized for its unrealistic assumptions about price developments of fossil fuels, among other things.

REFERENCES Andriessen, C.D. (2000), De republiek der kerngeleerden (The republic of nuclear experts – in Dutch), Bergen, Netherlands: Beta text. Arentsen, M.J. and T. de Bruijn (2005), ‘National room to manoeuvre: the Dutch position in EU energy policy’, in F. Wijen, K. Zoeteman and J. Pieters (eds), A Handbook of Globalization and Environmental Policy, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 417–35. Arentsen, M.J. and R.W. Künneke (eds) (2003), National Reforms in European Gas, London: Elsevier. Arentsen, M.J. and V. Dinica (2001), Green Electricity in the Netherlands, Oslo, The Norwegian School of Management, Centre for Energy and Environment. Arentsen, M.J., J.W. Fabius and R.W. Künneke (2001), ‘Dutch business strategies under regime transition’, in A. Midttun (ed.), European Energy Industry Business Strategies, London: Elsevier Science. Arentsen, M.J., R.W. Künneke and H. Moll (1997), ‘The Dutch electricity reform. Reorganisation by negotiation’, in A. Midttun (ed.), European Electricity Systems in Transition. A comparative analysis of policy and regulation in Western Europe, Oxford: Elsevier Science. CBS (Centraal Bureau voor de Statistiek) (2006), Duurzame Energie in Nederland 2005 (Sustainable Energy in the Netherlands – in Dutch), Voorburg: CBS. CBS (2007), Energie in cijfers (Energy in numbers – in Dutch), www.energie.nl. CPB (Centraal Planbureau), A. Verrips, H. de Vries, A. Seebregts and M. Lijesen (2005), Windenergie op de Noordzee. Een maatschappelijke kosten-batenanalyse (Wind energy in the North Sea, a cost–benefit analysis – in Dutch), ’sGravenhage: CPB. Correljé, A. (1998), Hollands welvaren. De geschiedenis van een Nederlandse bodemschat (Dutch Prosperity. The history of Dutch natural gas – in Dutch), Hilversum: Teleac/NOT. Dinica, V. (2003), Sustained Diffusion of Renewable Energy, dissertation, Enschede: Twente University Press. Hofman, P.S. (2005), Innovation and Institutional Change: The transition to a sustainable electricity system, doctoral dissertation, Enschede: University of Twente. Hofman, P.S. and E.E. Marquart (2001), Electricity in Flux: Sociotechnical change in the Dutch electricity system 1970–2000, Bilthoven: Dutch National Programme on Global Air Pollution and Climate Change. Ministry of Economic Affairs (1974), Eerste Energienota (First White Paper on Energy – in Dutch), Den Haag. Ministry of Economic Affairs (2005), Now for Later, Energy Report 2005, The Hague.

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Midttun, A., A. Jakobsen, N. Kramer, K. Lagendijk, M. Voogt, (2005), Developing Green Markets: Design challenges and pioneering experience in three European settings – The Netherlands, UK and Sweden, Oslo: BI. National Account Office (2003–4), Green Electricity, Second Chamber of Parliament, 29 (630), 1–46. Raven, R.P.J.M. (2004), ‘Implementation of manure digestion and co-combustion in the Dutch electricity regime: a multi-level analysis of market implementation in the Netherlands’, Energy Policy, 32 (1), 29–39. Rotmans, K. et al. (2000), Transities en transitiemanagement (Transition and transition management – in Dutch), Maastricht: Merit. Verbong, G., A. van Selm, R. Knoppers and R. Raven (2001), Een kwestie van lange adem. De geschiedenis van duurzame energie in Nederland (A Matter of Time. The history of sustainable energy in The Netherlands – in Dutch), Boxtel. VROM (2002), ‘A national strategy for sustainable development: what choices must the government make?’ English version of the summarized ‘A study of National Government policy in the framework of the National Strategy for Sustainable Development’ as sent by the Cabinet to the Chairman of the Lower House of the Dutch Parliament on 17 January 2001, available at http://www.sharedspaces.nl/ Docs/internationaal/2695%20NSDO%20Samenvatting%20ENG.pdf.

3. Denmark: path-creation dynamics and winds of change Peter Karnøe and Adam Buchhorn INTRODUCTION Denmark represents a remarkable success story in the transition from a fossil-fuel-based energy system to an energy system based on a high penetration of renewable energy sources for electricity (RES-E). As shown in Table 3.1, RES-E accounted for 28.5 per cent of national electricity production in 2005 compared to 5.6 per cent in 1994. Biomass and wind-power technology are the primary renewable energy sources. Electricity generated from wind power accounted for 20 per cent in 2006, the largest national share of wind-generated electricity in the world. The wind-power industry is currently a major industrial cluster in Denmark with more than 20 000 high-tech jobs and large shares of innovation and research funds. The company Vestas Wind Systems is a global leader in a multi-billion-dollar export market. The struggle to make RES-E a relevant and interesting alternative to fossil fuels began some 25–30 years ago. Up to the oil crisis of October 1973 Denmark had no official energy policy. Energy supply was 99 per cent dependent on imported oil, and it became a highly prioritized political goal to reduce national dependence on fossil fuels. In 1994 nearly 95 per cent of the Danish electricity production was sourced from fossil fuels (see Table 3.1). Traditionally this was imported, but since the 1980s natural gas has also been extracted from the Danish sector of the North Sea. Natural gas has increased its share due to its environmental properties compared to oil and coal, and Denmark has made huge investments in building a nationwide gas infrastructure serving individual houses and power plants. Simultaneously, numerous actors have played a role in the conflictual developments that have made RES path creation possible. The EU RES-E Directive prescribes an indicative target for Denmark of 29 per cent RES-E by 2010. Denmark is already beyond this target, and this has been achieved without explicit reference to the RES-E Directive in the 73

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Table 3.1


Electricity production by fuel (TJ), 1994–2005: Denmark 1994

1998

2000

2002

2003

2004

2005

Changes, 1994–2005 (%)

Total 144 708 147 998 129 776 14 1418 166 246 145 583 130 640 9.4 electricity production Oil 9 547 17 906 15 964 14 438 8 445 5 881 4 933 6.6–3.8 Natural 8 206 29 260 31 589 34 526 35 149 35 807 31 764 5.7–24.3 gas Coal 119 844 85 151 60 022 65 722 91 102 67 232 55 678 82.8–42.6 Renewable 8 103 14 844 21 068 25 570 30 288 35 459 37 232 5.6–28.5 energy Source: DEA (2005).

most recent energy bill of March 2004. The present chapter highlights some of the processes influencing the remarkable success story of Denmark in transforming its dominant energy system (DES) in favour of renewable energy production for electricity production and consumption.

THE DOMINANT ENERGY SYSTEM IN DENMARK The oil crisis of 1973 shook the existing energy system because it simply could not ‘deliver the goods’. Nuclear power was viewed as the most obvious alternative to fossil fuels but it was increasingly contested by social movements (Petersen 1994). Energy production and supply were controlled by a power sector organized as a public monopoly. The massive jump in the cost of oil led to a series of events. The problem was identified as a need to radically reduce the nation’s dependence on imported oil, and the emerging solution pointed in the direction of a more differentiated, multistrand energy system, with extensive efforts for energy conservation. In 1976 the first in a series of energy plans was published (DEA 1976). The plan stressed the importance of coal, natural gas and nuclear energy, but it also opened a small door for RES. In retrospect, we can say that the multistrand strategy worked, but that the nuclear option disappeared, and RES became much stronger than anticipated. Given the major role that nuclear power has played in other European countries, it is an interesting aspect of ‘path creation’ to see why this option was not pursued in Denmark. Politically, only the two smaller

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left-wing parties were actively against nuclear power, so there was no topdown political mobilization against it. In general it appeared that nuclear power would be the natural next step in a modernization of the Danish energy system, which mirrored Edison’s centralized energy system (McGuire and Granovetter 1993). In order to prepare Denmark for nuclear power the Danish Research Centre for Nuclear Power was opened at Risø near Roskilde in 1958. For policy-makers and industry participants, nuclear power represented a necessary vehicle for more secure energy supply and a technological advancement of Danish industry. These initiatives were undertaken within the power sector in conjunction with the National Atomic Energy Agency (established in 1968). In 1971 the power distribution company ELSAM formally decided to go ahead with the construction of nuclear power plants in Denmark. The director of ELSAM stated: ‘You can discuss as much as you want, but atomic power is what you’re going to get’ (Jørgensen and Karnøe 1995: 63). As it turned out, however, the nuclear option was increasingly contested throughout the 1970s. In 1985 the Danish parliament voted, by a slim margin, to reject the pro-nuclear plans of the minority conservative government. Due to the negative situation following the deep economic crisis in 1979, all political parties, except the ultra-right, accepted the terms of the agreement on energy savings and increased renewable energy under the control of the Ministry of Housing. Investment subsidies were linked to a mandatory approval scheme for wind turbines. The approval had to be made by a knowledgeable testing and research institution, and funds were allocated to the new Test Centre for Small Wind Turbines, located at the Nuclear Research Centre Risø. Finally, there was a grudging acceptance to grant independent energy producers access to the grid by reducing the nearprohibitive connection costs, and forcing utilities to pay for the wind-power electricity. There was also an agreement with the electric utilities to use biomass as fuel in the new Energy Act of 1986, as well as the political demand to build district heat and power (DHP) plants in the wake of the oil and gas discoveries in the North Sea. The first step of the Danish model for stimulating independent voluntary and energy producers, and for making renewable coercive regulation of the DES, was taken. Actors and Key Events Understanding political actors, industrial powers, industry organizations, NGOs and grass-roots movements is important to fully comprehend the historical factors involved in promoting renewable energy sources for electricity during the early 1970s.

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Political parties, coalitions and major lines of energy cleavage The Danish party system can be roughly summarized as four major energyrelated divisions (see Figure 3.1): the ‘Left’ (including the Red–Green Alliance and Socialist People’s Party); the ‘Centre–Left’ (the Social Democratic Party and Social Liberal Party); the ‘Centre–Right’ (the Liberal Party and Conservative Party); and the ‘Right’ (the Danish People’s Party). In a general manner these four groupings constitute opposing coalitions in Danish RES policies, with the ‘Left’ and ‘Centre–Left’ constituting an overall pro-RES block in the parliament, and the ‘Centre–Right’ and ‘Right’ parties tending to support the energy status quo. The Left has always strongly supported RES policies and has had high ambitions to challenge the existing energy sector and use strong policy instruments (for example the energy-policy goals from 1981, market stimulation and coercive regulation). The Social Democrats have been directly involved in all important laws behind the promotion of RES (usually with the support of the Social Liberals), but both parties have been less ambitious than the Left. Nevertheless, this grouping has provided a relatively stable pro-RES block from 1977 to 1991. The second grouping consists of the Liberals, Conservatives and Danish People’s Party, with the first two moderately sceptical about the need for radical new energy policies, and the last, in general, very sceptical about renewable energy promotion and coercive regulation of the energy sector. From 1991 to 1993 they almost stopped RES-E development, and windpower installation halted. After the 1993 election the Social Democrats returned to political power. The new Minister for Energy and Environment, Svend Auken, became the political champion, sponsor and persuasive advocate for renewable energy technologies and sustainable development during his nine-year term of office (1993–2001), also known as the ‘Auken regime’. The energy plan of 1996, ‘Energy 21’, contained more than 100 initiatives designed to reduce CO2 emissions (DEA 1996). As of 1996 the reduction in CO2 was a mere 4 per cent compared to 1988 levels, less than the 7 per cent target introduced in the original agreement from 1993. New efforts were made, therefore, to adjust market incentives for a greater phase-in of biomass in DHP plants. The role of wind-generated electricity also increased dramatically in these years, moving from approximately 5 per cent of overall electricity production to 15 per cent. In 1996, power companies accepted to expand their wind-power capacity by a further 900 MW by 2005. Once again, in 1998, mild political pressure forced the power companies to agree to install a further 750 MW of offshore wind parks by 2008 as so-called demonstration projects, thus allowing for allocation of public funds (DETE 1999). The ‘Auken regime’ clearly made RES the primary

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R S

E SF DF

Right

Less support for RES/more for conventional DES

C V

Centre–Right

Figure 3.1

Major dividing lines of partisan conflict in Denmark: support for RES (2005)

Source: Authors’ original.

Notes: ‘Left’: E (Enhedslisten – the Red–Green Alliance) and SF (Sosialistisk Folkeparti – the Socialist People’s Party) ‘Centre–Left’: R (Det Radikale Venstre – the Social Liberal Party) and S (Sosialdemokratene – The Social Democratic Party) ‘Centre–Right’: C (Det Konservative Folkeparti – the Conservative Party) and V (Venstre – The Liberal Party) ‘Right’: DF (Dansk Folkeparti – the Danish People’s Party).

More support for RES/less support for conventional DES

Centre–Left

Left

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Promoting sustainable electricity in Europe ‘Fogh/Chr. Schmidt regime’ cost efficiency

‘Auken regime’ Co2 46/54

39/61

1993 700

2001

2005

Political support for renewable energy

600

MW

500 400 300 200 100 0 1993

1996

1999

2002

2005

Installed wind capacity

Source: Authors’ original.

Figure 3.2

Support for RES by successive Danish governments 1993–2005

weapon in the political combat against global warming, as Figure 3.2 suggests. After almost a decade of Social Democratic rule, the new centre–right government, composed of the Liberal Party and the Conservatives, with Prime Minister Anders Fogh Rasmussen in charge, took office in 2001, with the parliamentary support of the right-wing Danish People’s Party. The new government started its work with a strong and general attack on the energy and environmental policies of the previous ‘Auken regime’. Many cutbacks and priority shifts were made in both environmental and energy policies. Fiscal support was reduced by advocating so-called market-based solutions (see Figure 3.2). The rationale itself for promoting RES-E was challenged with the establishment of the Environmental Assessment Institute (EAI), under the direction of the controversial political scientist Bjørn Lomborg.1 The EAI was founded to create certainty about how to ‘get the most environmental benefit out of the invested money’, and it questioned on legitimate grounds the notion of climate change. RES-E development came to a complete halt as a result. Due to pressure from the Social Democrats, the Socialist People’s Party and the Social Liberal Party in 2004, the Fogh Rasmussen cabinet entered a new political agreement to promote RES. The construction of the two offshore wind farms that was cancelled after the 2001 election was resumed. It is believed that this shift was based on pragmatic reasons, the continued

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importance of environmental concerns among voters, and the Danish industry’s important export of wind turbines and other energy and environmental technologies. Published in January 2007, the Fogh Rasmussengovernment’s new Energy Strategy 2025 gives new hopes for renewable energy.2 However, even the fact that Denmark will host the Global Climate Conference in 2009 has not speeded up investments, activities and initiatives. Industrial and business organizations The larger firms in Denmark’s main industries supported nuclear power from the 1950s with the industry organization, the Confederation of Danish Industries, taking the lead. They organized a consortium of potential Danish suppliers of nuclear plants in Denmark. It was seen as a hightech challenge that would enhance international competitiveness. During the 1970s and 1980s the Danish industry supported nuclear power and resisted the RES-E alternative (Karnøe and Møller 1985; Nielsen et al. 1998). Wind power was seen as a relic from the past. Resistance was based on the argument that RES-E technologies were too expensive. The industrial sector demanded low electricity prices, and could not accept market subsidies that would stimulate RES-E technologies because this would manipulate the free market. The Confederation of Danish Industries did accept public R&D funding for RES-E technologies, but rejected market subsidies as the way to get them started. In addition it also strongly opposed any fiscal taxes as this would raise costs. Wind-turbine owners were organized in the Danish Wind Turbine Owners’ Association in 1978.3 They were actively involved in shaping the early technical development of wind turbines, such as a double brake system and other systems related to safety-in-operation that would protect their investments (Karnøe 1991). More importantly, they negotiated with the electric utilities, the state authorities and local municipalities (Karnøe 2005) about: ● ● ● ●

rights to use the grid the price paid for electricity how to share the cost of grid connection with the utility how to obtain permissions to install a wind turbine in the landscape.

For over 25 years the association has worked passionately for an energy policy and energy system that gives a strong role to wind power. One of the most important influences has been through the circulation of the monthly journal Naturlig Energi (Natural Energy), which has presented operational experience with specific wind turbines; political, legal, technological and

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economic debates; and analysis of every possible aspect related to windpower development since 1979. In 2006 the Wind Turbine Owners’ Association had 6000 members, but due to cooperative ownership of wind turbines they represent almost 60 000 people. The owners of three out of four wind turbines are members, representing about 4000 wind turbines and 2300 MW installed effect (40 per cent of Danish wind-power capacity). Thus the association has been a key political and economic base for the RES-E path in Denmark. The more wind power is inscribed into physical structures, sunk costs and expected incomes, interests and legitimate claims, the more difficult and expensive it is to get rid of it. However, today big energy companies are increasingly driving wind-power installations. This may contribute to more intense local resistance, as this is not part of the traditional private–local ownership model. NGOs and grass-roots movements NGOs were instrumental in stimulating a public discourse on RES as legitimate claims of ‘alternative routes’ to energy production, including political plans for nuclear power. The most important role of NGOs was to point out the problems of the existing energy system and simultaneously make claims for the merits and superiority of the alternative RES-E path. There were two important types of NGOs in 1974. One was related to the traditional social movement; the other was a more techno-science and expertise-driven NGO, most notably the Wind Committee of the Academy of Technical Sciences (ATV). The president of the ATV was Professor Niels I. Meyer, Professor of Energy Physics at the Technical University. Denmark had a rich tradition of producing electricity from wind energy dating back to 1895 (Karnøe 1991), and important technical developments were made from 1947 to 1967. In two reports (ATV 1975, 1976) the committee concluded that effective R&D work could establish profitable windpower plants in locations with strong winds. The social-movement NGOs evolved from grass-roots reaction to public and political debates regarding the potential role atomic power could have in Denmark. This gave rise to the Organization for Information about Atomic Power (OOA) in 1974 (Jamison and Læssøe 1990). The mission was to inform the public that nuclear power would be the wrong solution due to safety problems and cost overruns, but more importantly because nuclear power implicated wayward social development. The OOA had a vision of another society based on the ‘ ’68-movement’ and Schumacher’s notion of ‘small is beautiful’ from 1973 (Schumacher 1973). The OOA was also concerned with ownership and control of the energy system. Local people should be involved in the decision-making process and the development of energy systems should not be driven by large anonymous actors.

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A subgroup of the OOA wanted to inform people about realistic and visible alternatives to the nuclear path. The Organization for Renewable Energy (OVE) was established in 1975, inspired by the US visionary in alternative energy Amory Lovins, who worked with ‘soft energy paths’. The notorious 2 MW Tvind turbine, completed in 1978 – the largest in the world at that time – is a remarkable proof of how social visions were inscribed in artefacts and social organization. In contrast to state-run R&D programmes in the USA, Germany, the UK and Sweden, the Danish efforts were promoted by volunteers from all over the country (Karnøe 1991).4 The Tvind turbine became a landmark that also inspired others to experiment. The OOA and OVE made allies with prominent Danish researchers who used their expertise and positions from university institutions to strengthen and legitimize their claims, and in 1976 they jointly published the very important Alternative Energy Plan (AE’76). The report suggested improvements in energy efficiency by advocating more co-generation of power and heat, and it envisioned wind-power parks that could contribute 12 per cent of domestic electricity production by 1995. Even though the projections turned out to be wrong (in terms of the size and number of wind turbines), the energy plan created possibilities that opposed the accounts in the official public reports. The AE’76 demonstrated other future possibilities which assigned new roles and boundaries to actors, technologies and regulations. It became a prominent counter-argument to the government’s official Energy Plan. The AE’76 was based on professional methods, economic and engineering science expertise on energy systems, production and consumption, and demonstrated that it was possible to think differently (Nielsen 2001; Karnøe 1992). These energy plans (the second was published in 1983) served as legitimate claims as they were mobilized as reference points in negotiations among politicians and as a knowledge base for bureaucratic expertise. Consequently, the social movements got material arguments beyond more normative social claims. Both the OOA and OVE were active in the political arena with direct contacts to left-wing parties, including the Social Democrats and the Social Liberal Party. Members of NGOs were formally appointed to energy policy committees, for instance the Renewable Energy Committee under the auspices of the Ministry of Transport and Energy. Through campaigns and the circulation of information brochures, reports and so on they reinforced the social movement for alternative energy through discourses in public schools and regional colleges. Issues such as nuclear versus alternative energy routes became quite significant for political legitimacy during the election campaigns of 1976 and 1985. In hindsight it is important not to underestimate the influence of the social visions and the social movement of OOA and OVE. They co-evolved

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in contrast to the dominant energy system and served to organize the political discourse and practical experiments and demonstrations. RES-E was brought into the dominant Danish discourse on energy problems and solutions, because legitimate reference could be made to techno-science-based alternatives.

THE DES IN TRANSITION: FROM HOSTILE TO RES-E-FRIENDLY In the late 1960s the Danish energy system was locked in centralized and large-scale electricity production (Jørgensen and Strunge 2002). In terms of ownership the DES was characterized as semi-public, but the energy sector operated as a de facto public monopoly. As an organizational field (Powell and DiMaggio 1991), the production units were owned by local municipalities, and the distribution companies were owned by local municipalities and consumer cooperatives in partnership. Their task was to supply electricity. The distribution companies were legally given a monopoly to sell power to consumers in the local municipality; no other actors were allowed. Despite the ownership and formal separation of production and distribution companies, they were actually vertically integrated, and power producers controlled the distributors. The DES in Denmark was organized in two regionally based structures, ELSAM and ELKRAFT, owned and controlled by local distributors and power producers who operated the electrical grid. Further, all local power producers and distributors, as well as Elsam and ELKRAFT, were members of the Danish Power Suppliers’ Association (DEF), which handled internal coordination and managed the grid connections and boundaries to energy systems in Norway, Sweden and Germany. DEF also acted as a political representative. Objects for policy regulation were mainly prices and capacity negotiated in the Power Price Board. Because of the semi-public ownership, electric utilities could not earn any extra profit. Any profits could only be used for reinvestments and improvements to keep the system up to date with new technology and capacities. Clearly, the so-called ‘natural DES’ was a specific techno-economic regime, with its profitability supported by a specific institutional architecture (Callon 1998; Fligstein 2001). As part of the response to the energy crisis, the electric utility companies wanted to defend their system and preserve their public ownership and monopoly control. But the status quo could not be preserved. Following the national wind-turbine research strategy from 1977 (recommended by the ATV Wind Committee in 1976), pressure from the government forced

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electric utilities to begin experimenting with wind power during 1977–89. Even though their large demonstration turbines were not economically or technically effective, they served as a basis for small groups of engineers within the electric utilities who gradually became positive and developed new competences. And things did change. The involvement and competences of the utilities in relation to renewable electricity technologies have changed in almost unimaginable ways. With regard to RES in general and wind power in particular, they have become a new type of actor. In 1983 the Danish Power Suppliers’ Association ridiculed wind power in a brochure claiming that the electricity generated from wind power would not be enough to heat the waterbeds in which the (hippie) windmill owners were sleeping, as stated by Konrad Jensen (2003). In 2005 the two biggest Danish energy producers, Elsam and E2, proudly presented themselves with renewable energy (wind and biomass) as part of their portfolio. In January 2006 the Swedish power company Vattenfall and the Danish DONG competed to become the owner of the newest Danish offshore wind farm with estimated investments of at least €300 million (Børsen 2006). The Current Situation Denmark represents a remarkable transition of DES in terms of fuels and energy technologies. The winning sources of energy during 1980–2005 are natural gas and renewables. In 2005, renewable energy represented 15.5 per cent of energy consumption, while the figure was 10.5 per cent in 2000, 6.5 per cent in 1990 and 3 per cent in 1980. Renewable energy’s percentage of total energy consumption has on average gone up by about 0.5 per cent annually since 1990. The increased share of natural gas from the early 1980s is part of one of the biggest Danish investment projects in energy infrastructure. The stateowned company DONG began production in the late 1970s. The natural gas from the North Sea was an important element in the Danish Energy Plan to use gas in combined heat and power production (CHP). One part of the plan was to transform central electricity plants into CHP, which happened in the larger cities. Another part of the plan was to invest billions to construct a fine-grained natural-gas distribution system that could serve individual houses with energy for heating, as well as smaller decentralized heat and power plants. If we turn to electricity, there have been annual increases in consumption of natural gas and renewable energy in electricity generation since 1980. As Table 3.2 shows, renewable energy accounted for 28.5 per cent of the fuel consumption in electricity production in 2005, with 18.5 per cent wind

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Table 3.2 Electricity from renewables: percentage share of domestic electricity supply, 1994–2005: Denmark 1994 1996 1998 2000 2002 2003 2004 2005 Wind power Hydropower Biomass Straw Wood Wastes, renewables Biogas Solar energy Total RES-E

Change, 1994–2005 (%)

3.4 0.1 1.8 0.2 0.4 1.2

3.4 0.1 2.5 0.6 0.3 1.6

8.1 12.1 13.8 15.8 0.1 0.1 0.1 0.1 3.1 3.9 5.5 7.3 0.8 0.5 1.7 2.1 0.4 0.7 0.8 1.8 1.9 2.7 3.0 3.3

18.5 18.5 0.1 0.1 8.3 9.2 2.4 2.4 2.8 2.9 3.2 3.9

437 36.3 418 877 701 235

0.3 0.0 5.6

0.3 0.0 6.3

0.5 0.6 0.7 0.8 0.0 0.0 0.0 0.0 11.8 16.7 20.1 23.9

0.8 0.8 0.0 0.0 27.7 28.5

193 – 411

Source: DEA (2005).

power and 9.2 per cent biomass. Hydropower, solar energy and biogas have insignificant shares despite numerous attempts to promote these sources politically. For Danish energy producers, most notably DONG,5 large-scale renewable electricity production from wind power has become a naturalized part of their business activities, branding and political legitimization, mainly due to the series of coercive agreements through which government forced the utilities to install and operate wind-power farms. The first farms in 1986 were onshore; from the 1990s they also included offshore wind farms. This has given the utility companies opportunities to develop valuable competences and grow new business opportunities in the international onshore and offshore wind-farm market that they did not ask for at the time the regulation was introduced. With the increased penetration of wind power in the Danish electricity system, conflicts are seen about the value of wind power when ‘back-up’ capacity is needed during times of little or no wind resources. As energy system research shows, the value of wind power and other RES-E technologies depends upon the complementary existing technologies of the energy system. Wind power will always have lower value in a ‘base-load’ (fossil and nuclear power) system than in a flexible energy system (IDA 2007). This is a very delicate issue that is not easily solved, but it affects the prices and value of wind-power investment. Further, in Denmark a de facto convention or rule makes sure that wind-power energy is prioritized in the energy system in the context of base-load central power plants. This is not

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an automatic principle, but it requires political support, technical solutions and enabling software. The specific price-setting mechanism in Nord Pool6 often results in ‘zero price’ for wind energy, because it is valued in relation to a base-load energy system, and RES-E technologies may easily lose. As a consequence, increased penetration of renewable electricity in Denmark and all over Europe – in accordance with the objective of the RES-E Directive – requires political, technical and regulatory changes in order to make renewable energy economically attractive relative to the dominant energy systems and their protective institutional arrangements. Promoting RES-E: Governing Mechanisms and Instruments Various governments in the past three decades have used various policy measures and instruments to support R&D of renewable energy, including demonstration projects, construction funding, and rewarding energy producers with production grants per kWh produced. The introduction of RES-E was ill received by the dominant electricity producers, especially during the 1980s when the financial viability of wind power and biomass was heavily contested. However, as illustrated in Table 3.3 concerning wind, during the 1990s the government declared it a political objective to make RES-E a significant contributor to electricity consumption. On several occasions the electric-power companies were ordered to implement RES for electricity production. The liberalization process from 2001 changed the legitimate criteria for shaping the economies of RES-E vis-à-vis existing fossil-fuel-based energy technologies. Technological innovation has since the mid-1980s been one of the core criteria of energy policies, but liberalization brought in a new logic for evaluating and rationalizing policy regulation, i.e. stressing a rhetoric of competition and ‘cost-efficient’ economic measures. Following this logic, the centre–right Fogh Rasmussen government from 2001 first terminated all the traditional fixed-price support schemes for RES-E technologies and also quickly stopped all demands for new offshore wind-turbine parks established by the utilities. Liberalization resulted in a gradual discontinuation of direct state grants for RES-E industries. The government-mandated subsidy for RES-E was abandoned over time and instead financed by the price of electricity that consumers paid (the so-called Public Service Obligation, or PSO). In 2005 the Danish subsidies and prices for windpower-generated electricity were the lowest in the EU. RES-E in Danish legislation and the importance of the EU RES-E Directive The Danish regulatory approach to RES-E is characterized by mild pressure and coercive regulation of the electric-power companies, most often based on

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Table 3.3 Regimes and support for market penetration of wind power in Denmark Period

Regimes and models for economic support

State subsidy amount (added to price for electricity sold)

Price for wind power electricity sold

1976–79

Emerging rules and conditions

No subsidies

Value of sellers’ own electricity consumption (kWh) to electric utility + payment equivalent to utility fuel savings From 1983 – electric utility pays 70–85% of the normal sales price of electricity (1984 – 10-year agreement with utilities for grid connection and payment) Electric utility pays 70–85% of its normal sales price of electricity

1979–91

1991–20011

2001 +

DEF accepts grid connection of wind turbines (a) Investment subsidy

30% (1979), 10% (1989), stopped in 1990

b) Fixed-price production subsidy

DKK 0.27 per kWh (no maximum payment) – based on energy tax refund

a) cancelled

DKK 0.27 per kWh (DKK 0.17 in production subsidy + DKK 0.10 in CO2 premium)

b) Fixed-price production subsidy (No maximum and (Increased energy problems with taxes made energy too high profits) tax refund too expensive) Variable marketDKK 0.27 per kWh Market price. based price and Settlement prices valid Wind-powerenvironmental for 10 years DKK generated electricity premium for 0.36 per kWh – new is sold directly to a RES maximum for total market – with strong payment from price-level market price and fluctuations from subsidy DKK 0 to 0.30 per kWh

Note: 1 The shift to a market-based price system made it necessary to have some special rules for wind turbines bought and installed between January 2000 and January 2003. From January 2005 the maximum state subsidy is DKK 0.22. This new regime is the lowest payment for wind-power-generated electricity in Europe. Source: Authors’ original.

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initial cross-party political agreements in parliament. These agreements have inter alia regulated the energy sources to be used for energy production. In December 1985 the Ministry of Transport and Energy persuaded the power companies to agree to the goal of installing 100 MW of wind-power capacity by 1990. They agreed to increase the use of renewable energy sources, but to do so in ‘harmony with the conventional expansion and renewal of the electric system’. In other words, the power companies were allowed to expand with conventional energy technologies based on recently discovered deposits of oil and natural gas in the Danish sector of the North Sea. Already in 1990 the government presented a new energy policy, Energiplan 2000, demanding the installation of another 1500 MW of wind power by 2005 in order to reduce CO2 emissions by 20 per cent compared to 1988 levels. Key to this plan is substituting conventional forms of electricity with RES-E, improving resource efficiency (extraction and consumption), and reducing energy consumption. A ban on new coal-fired plants was introduced in 1997. In 1998 the Ministry of Environment enforced a new coercive agreement with the electric-power companies to install 750 MW offshore wind parks by 2008. The original plan was that five demonstration plants with a total output of approximately 750 MW would be established on similar terms. Following the liberalization of the electricity market, however, the Danish government decided that open invitations to submit tenders would be issued for further offshore wind-farm projects, and that production would be on market terms. The EU RES-E Directive prescribes an indicative target for Denmark of 29 per cent RES-E by 2010. In the latest ‘RES-E progress report’ it is estimated that the RES-E contribution will increase to 34 per cent in 2010 – placing Denmark perfectly on track to achieve the RES-E target (EC 2007: 7). Even though Denmark gains positive assessments from the EU Commission, there are no significant references to the RES-E Directive in parliamentary documents or actual regulations, besides the mandatory biannual progress reports to the EU Commission. The most recent energy bill of March 2004 contains no reference, direct or indirect, to the RES-E Directive.7 This lack of explicit implementation efforts has been confirmed by representatives for the Danish Energy Authority (DEA), and by a member of the parliament.8 The MP ascertained that the Directive was never at the centre of any discussion, neither in the Committee for European Affairs nor in the Committee for Energy Policy, and that no specific implementation arrangements were politically prepared. Thus the EU RES-E Directive seems not to have had any substantial impact on the Danish success story. Indeed, the Fogh-government slowed RES-E development dramatically. The most evident reason for this lack of EU influence is the relatively early start of the Danish RES-E development and the advantage of being

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a front-runner. Denmark has always operated with national indicative targets for electricity produced by renewable energy and in many ways it serves as a role model to other EU Member States concerned with the promotion of RES-E. The RES-E as a new energy arena with new actors The RES-E field consists of other important actors than the producers, users and regulators involved in shaping developmental dynamics of the RES-E path. During the 1990s the RES-E issue lost some of its broad social-movement foundation, and it was not a strong political issue in electoral campaigns. However, the supporting NGOs remained vital and are still consulted on policy development. More importantly, they produced counter-knowledge used to criticize official RES strategies if the ambitions were considered inadequate. For example, when the Danish Engineers’ Association published their report ‘The Future Energy System’ in 2002, NGOs were represented in the workshops and meetings where options were discussed and formulated (IDA 2002). Other NGOs with an ‘ecological environmental profile’, such as Greenpeace, the Ecologic Council,9 the World Wide Fund for Nature, as well as the Danish Nature Preservation Foundation (Danmarks Naturfredningsforening) with more than 200 000 members and 221 local organizations in Denmark, have been important and active in this process of transforming the energy system. Still, not all communities are satisfied with the prospect of more RES-E. The growing numbers of wind turbines in Denmark stimulated the creation of a new NGO in 1999 – the Danish Society of Wind Turbine Neighbours. The organization has been very active and operates through the production and circulation of information that criticizes Danish wind-turbine development. The legitimacy of wind power is thus being actively challenged, especially the economic subsidies and resulting higher price for electricity consumers. Other issues, such as bird deaths and noise pollution from wind turbines, are also being stressed. In several respects the organization shares views with members of right-wing political parties that are critical of wind power. The organization merged in 2005 with the interest organization Associated Danish Electricity Consumers, which has a critical view of wind power and public taxes on electricity prices.10 Simultaneously, the wind-turbine industry11 has emerged as a major political and economic actor. In 2006 a record DKK 30 billion (about €4 billion12) was generated from exports. The Danish wind-turbine industry has a 34 per cent global market share, and about 20 000 high-end jobs have been created. Very strong growth in the international market has given the industry a powerful political voice. Some 140 firms are involved in the Danish Wind Industry Association with design and production, suppliers,

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service and maintenance, and specialized engineering services for the industry. Among the members, we find the largest wind-turbine producer in the world – Vestas Wind Systems. Vestas is the largest single-product industrial employer in Denmark today and has surpassed several other traditional Danish industrial firms. The recent appointment of a former lobbyist from the Confederation of Danish Industries (Dansk Industri) as director of the Danish Wind Power Association has provided important knowledge and legitimacy for the industry. The new direction is based on the pride and identity of being a futureoriented high-tech industry with massive exports, thousands of jobs and the prospects for strong growth. In the autumn of 2006 the wind-turbine industry published a joint report with the IT and pharmaceutical industry highlighting the need for society to create educational and research support to these three high-tech and knowledge-intensive industries.13 This illustrates a dramatic shift in identity and self-esteem compared to 1980–97, when the industry image shifted from a relic of the past to just being tolerated. There are also minor industry organizations for biogas and solar cells. The biogas industry organization has recently been strengthened because it has been associated with the interest organization for Danish agriculture, politically a very influential organization. It is putting pressure on the Danish government, and especially the Minister of Environment and Minister of Transportation and Energy, to create new biogas demonstration plants and operational subsidies for biogas production. This could help the climate, the overflow of polluting manure, and potentially create a new industrial cluster. A new important actor in the Danish electricity sector is the Association of Danish Energy Companies, an industry association and umbrella organization for associations and groups of energy companies in Denmark.14 There are four member groupings: (1) ELFOR (grid and supply-obligation companies); (2) Danish electricity trading companies; (3) production forum (generating companies); and (4) transmission forum (transmission companies). The association has been an active partner in the important new forum called Energy Camp, where 50–70 key persons from the Danish energy sector meet and remain in session for 30 hours.15 Energy Camp is an unusual initiative organized by a group of dominant interest organizations: the Danish Industry Association, Danish District Heating, the Danish Association of Engineers, the Danish Wind Industry Association and the Danish Metal Labour Union. They met for the first time in 2004, and then again in 2005 and 2006. The outcome of the 30 hours in 2006 was a common vision of how to meet future challenges for the Danish energy system. The meetings are not focused narrowly on electricity supply, but are linked to the importance of stimulating innovation for new energy

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technologies in the energy sector. This vision is supported by the Ministers of Transportation and Energy, and the Minister of Environment, who in May 2006 made it clear that Danish export of energy and environmental products would increase in the coming years due to the rising demand to mitigate problems associated with global warming.16 Despite differences in the group, it is a remarkably more positive evaluation of renewable energy technologies by key industrial actors compared to 20 years ago. It will be interesting to see if this forum can evolve into a spokesperson for a sustained and even stronger future RES path.

PATH CREATION FOR RES-E: THE ROLE OF RESEARCH, DEVELOPMENT, DEMONSTRATION AND DIALOGUE The identity and role of public institutions in charge of supporting implementation of the national RES-E indicative target was already stabilized as renewable energy became an accepted DES component during the late 1980s. The Brundtland Report in 1987 was followed by a Danish report in 198817 specifying the responsibility of the Danish Energy Authority (DEA) in collaboration with the Danish Environmental Protection Agency (DEPA) to establish the framework and instruments in the field of renewable energy. This remained in line with the political commitments of various red-green governments. The framework integrated various economic and industrial policies, and it enabled a better coordination of environmental and energy concerns. The DEA was established in 1976 when the Danish Nuclear Power Agency was renamed. The DEA has been subordinated to various other ministries, but since February 2005 has operated under the auspices of the Ministry of Transportation and Energy. In 1997 the Danish Energy Authority established the information centre Energioplysningen (Centre for Energy Information) to optimize, coordinate and target information campaigns regarding energy issues related to energy conservation and renewable energy technologies in both the private and the public sectors. In addition to the benefits of coordinating activities, the initiative also secures a coherent set of knowledge and experience in terms of consumers’ information needs. This ensures that future information and guidance can be organized to convey information appropriately for any given set of circumstances at any given time. A special feature of the Danish regulatory set-up has been the ability to foster hybrid forums for a continuous dialogue among the different actors involved, such as the users, NGOs, regulators, researchers and producers (Garud and Karnøe 2003; Karnøe 1992; Lounsbury 2005). Consequently,

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many decisions were made ‘close’ to the involved actors in concrete situations. In the 1980s the Renewable Energy Committee was set up as an important information-sharing forum, and other similar bodies were established among R&D interests within the wind-turbine industry. Different interests, knowledge and needs were thus brought together, and facilitated the formulation of appropriate policies. In 1979 the National Laboratory Risø established a test station for smaller wind turbines. This enabled knowledge exchange within the windpower industry and aided the maturation of the industry and wind-power technology. Risø was authorized to approve wind-turbine designs and coordinate private and public activities. Today Risø operates under the Ministry of Science, Technology and Innovation. Even though the industry has matured, Risø is still involved in researching the potential of wind power and other renewable energy technologies in creating the future energy systems in Denmark. In collaboration with authorities, organizations and business sectors, it works to maintain and expand Denmark’s position as a global centre for the development of wind energy; research into offshore wind parks is among its top priorities. The funding of Danish energy research has changed dramatically over the last five to seven years, in terms of both its level of support and sources for financing. It is not possible to give a detailed qualification and account of the resources spent on demonstration and/or basic or applied research. During the 1990s the government’s intentions to advance RES-E were closely connected with the national energy research programme which subsidizes R&D on energy-related research issues with DKK 100 million (about €13.2 million) annually through the PSO (Public Service Obligation) R&D Programme. Research programmes from 1998 onwards marked a dramatic change regarding the prioritization of different research activities: 40 per cent was now earmarked for R&D related to RES-E. The new centre–right government, however, called a halt to public expenditures in 2001. This resulted in a decline in energy research funding from 2002. Some of this decline is compensated by the new PSO funding, a pool of money that electricity consumers contribute to directly through their electricity bill. The new state-owned company Energinet.dk, in charge of national power-grid lines, has to allocate PSO according to the ‘needs’ in the energy system, but this need must be expressed politically. Since 2005, the new Minister of Environment, Connie Hedegaard, has had a hard time promoting the ambitious environmental agenda she claims to believe in. At the moment, it is difficult to account for how the new PSO funding from 2001 to 2005 was divided between sources (wind, biomass, fuel cells, wave energy), or between different types of R&D activities. Further, the Ministry of Science, Technology and Innovation has started allocating funds for

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RES technologies seen as a potential new industrial cluster. But without the market instruments that were part of the original Danish model for stimulating RES development, it is more difficult for entrepreneurs in, for example, wave energy – a technology still at the testing stage. Local Efforts to Promote RES-E Throughout its history Denmark has often resorted to using full-scale demonstration projects to prove not only the financial and socio-economic viability of RES-E, but also to demonstrate that it works in practice. These projects have shown that the actual RES plans and ambitions are more powerful tools of persuasion than the blueprints and calculations of the DEA bureaucracy and politicians. The offshore demonstration projects that began around 1990 have been critical in promoting international Danish leadership in the wind-power industry. However, the case of Samsø represents a valid example of the local efforts undertaken in Denmark to promote renewable energy production for electricity consumption. The self-sufficient island of Samsø RES-E, especially wind power, is a major source of electricity in many Danish regions, most notably in Jutland. Increasing shares of wind power are produced by offshore wind farms operated as large power plants by electric utilities. There are, however, a number of islands where complete RES-E self-sufficiency is a goal.18 Following a competition between five island communities, in 1997 the Danish Energy Authority selected Samsø as the locality to promote a complete supply of locally sourced energy and electricity. This was to be achieved within ten years. The island of Samsø covers 114 km2 and has 4400 permanent inhabitants as well as large numbers of Danish and foreign tourists. It is primarily an organizational and financing demonstration project to show that by establishing strong, broad, local involvement it is possible to achieve a very high degree of self-sufficiency based on RES-Es. This will in turn benefit the local economy and growth. In that sense the project continues the visions of the OOA/OVE, which believed that such projects should be driven by local people. By involving them in the decision-making instead of having the energy systems driven by large anonymous actors, more sustainable patterns could be achieved. The Samsø project is not a technical demonstration project, but is based on known and well-tested RES technologies such as wind power, biomass and solar heating. At the start of the project in 1998, RES-E contributed only 6–7 per cent of the total electricity consumption of Samsø. By 2000 Samsø was selfsufficient in electricity generated by 11 new wind turbines in three clusters

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with an overall output of 11 MW. Wind-turbine companies own two of the turbines with 450 inhabitants as investors, while the remaining nine turbines are owned by individual farmers. The plan calls for more electricity production in the near future from a joint biogas plant, small farm-based biogas plants and, to a lesser extent, from photovoltaic plants and small domestic wind turbines. In 2003 a wind farm was established at Samsø with ten wind turbines, each producing 2.3 MW. Half of the turbines are owned by the municipality of Samsø and four by large industrial investors. The last is a cooperative turbine sold to the wind-turbine company, with local citizens as investors. The electricity grid on Samsø is linked to the mainland and all surpluses are sold to the public grid on market terms. The grid acts as a ‘storage facility’ and a buffer when the wind turbines do not produce sufficient electricity for local demand. Heat consumption in the villages is covered by four or five district heating plants that are supplied with straw, woodchips and solar heating, in addition to surplus heat from ferry operations. Annual power production from the offshore wind farm corresponds approximately to the consumption of fossil fuel by the transport sector of Samsø, and in that sense makes the island ‘self-sufficient’ in RES for transport.

SUMMARIZING ASSESSMENT: CAN THE DANISH MODEL ‘TRAVEL’? Implementing the RES-E Directive implied ‘rocking the boat’ and challenging the established positions of dominant actors in the EU energy sector. In Denmark, however, the RES path began in the 1970s as a set of fragile proposals such as ‘we could also do this’ or ‘maybe we should try that’. A path-creation process of ‘mindful deviation’ from current energypolicy priorities was initiated by a number of actors (Garud and Karnøe 2001), with social movements as an important actor in a general transformation process (Lounsbury 2005). Multiple actors became involved in a process whereby new RES-E proposals became discursively mobilized and associated with various problems in the context of the energy crisis, capitalistic pollution and control, and the welfare-state crisis. These proposals were both shaped by, and originated from, socio-technical experiments related to specific technologies (such as wind turbines), new ownership forms for wind power, and long-term, scenario-based calculations and projections (for example, official and alternative energy plans). Gradually these proposals were translated and converted into regulations, legitimate resources and accounts, as well as identities and properties of actors and

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coalitions. The emerging RES-E path gradually expanded its existence in distributed action networks. The transition to RES-E was, however, born out of numerous ‘misfits’ and disparate social and material elements (Akrich et al. 2002; Garud and Karnøe 2001), as is often the case with innovations and disruptive technologies (Christensen 1997). Resistance from the DES throughout the 1970–80s was clearly evident (van Est 1999), but gradually the beginnings of RES-E, embodied in the distributed action networks of producers, users, researchers, regulators, artefacts and tools, became translated and woven together into techno-economic and institutional architectures. These then achieved enough momentum to transform the path-dependent DES into a more flexible energy system accommodating ever larger shares of RES-E. From the point of view of governmental regulation, the Danish case can be summarized in five main elements: 1.

2. 3.

4.

5.

For more than two decades before the RES-E Directive, there have been political goals to increase the share of RES-E. The first 10 per cent goal for wind-generated electricity by 2000 was formulated in 1981. Financial subsidies have been provided to support the RES-E industry with testing, demonstration and R&D in different forms. Due to investment subsidies and production grants per kWh generated, RES-E technologies were made competitive compared to conventional forms of energy. Public fiscal schemes made the RES-E industry an economically viable investment for society at large. The regulation of actors’ rights and responsibilities granted new private owners rights to own grid-connected wind turbines and to sell electricity to utilities. Since 1986 the electric utilities have been persuaded to install wind power both on- and offshore, and to use biomass as fuel for CHP production. Finally, energy from wind power is prioritized in the energy system in the context of base-load central power plants.

Given the obvious importance of these factors, it is nonetheless difficult to explain the manner by which these regulations have stimulated and shaped the speed and direction of the RES path of wind power and biomass – not to mention the successful outcome. Clearly the development of these two RES technologies has been very different. Beyond all expectations, wind power has become highly successful in terms of energy penetration and a new, internationally expansive industrial cluster, making Denmark the world-leading ‘hub for global wind-power development’. The Danish innovative regulatory framework stimulated

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different learning-curve effects by facilitating interaction between producers, users, researchers and regulators. One of the fascinating characteristics of the innovation model for wind power is the way the R&D expenditures were linked to market development. The accumulated economic subsidies per kWh have amounted to several hundred million euros. However, market stimulation clearly multiplies the value of public R&D in the RES-E field because of induced learning effects. The governmental subsidy for RES-E was reduced over time and instead financed as a levy on the end-price, paid by the consumers. In addition, the principle for regulating the economics of wind-turbine investment has been changed to market-based means and subsidies – or, more correctly, to a ‘green premium’ for stimulating RES production with uncertain effects on installations and growth of RES-E. Danish RES-E policies created a new niche (Kemp et al. 2001) for the development of RES technologies without aiming to pick one winner in advance. Without underestimating the importance of the innovative regulations concerning the wind-turbine industry and wind power (a combination of R&D and market subsidies), and its importance for stimulating RES development, we must, therefore, qualify the apparent effectiveness of this regulatory approach. A closer scrutiny reveals that the Danish policy process has been one of ‘adaptive appropriateness’ based on real-time feedback. There were ongoing dialogues with involved actors in hybrid arenas, without overly rigid plans that shaped an agenda that consolidated RES progress as well as stimulating industrial development. In the 1980s the main political justification was the multistrand strategy for renewable electricity and support to the emerging wind-turbine industry. The policies in the 1990s ‘Auken regime’ were also justified by the combined effect of CO2reducing RES-E and industrial development. The success of the Danish wind-power industry was not only shaped by national policies. Indeed, it was conditioned by the lucky timing of international developments that could not have been foreseen: the increased US demand for wind turbines in 1981, high dollar currency rates, the robust Danish wind-turbine design, the Chernobyl accident, the increasing demand for wind turbines in the German market and the shift from local environmental concern to CO2-related global warming in 1990s. These relatively accidental factors reinforced the unfolding path at different points in time, and each helped to make the Danish actions successful, even though they were not foreseen or calculated in the original plan. This illustrates a path-dependent unfolding of a path-creation process, which is essentially shaped by micro-actions in a historical process where ‘random’ effects shape the outcome (Callon 1991; Garud and Karnøe 2001). The success of Danish wind power is, thus, not the outcome of a clear-cut rational design, but rather the result of many experimental actions combined

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with lucky timing of random events that through translation were made relevant to the emerging path. These entailed open conflicts of interest, as well as a ‘muddling-through’ process of renegotiating political coalitions in support of policies and regulations that could stimulate RES-E development. In contrast, the case of biogas in Denmark encountered different challenges. The biogas demonstration projects did not enable sufficient accumulation of knowledge and competences. Biogas (and solar heating) had similar R&D and market subsidy conditions as wind power, but did not take off in the same way. In 2005, biogas represented only about 0.8 per cent of national electricity supply (Table 3.2). Many of the more recent initiatives for stimulating RES development and the creation of new industrial clusters will face the same challenges. Some will eventually fail, perhaps not technically, but in a dynamic competitive process there will only be a certain number of dominant players in terms of market share. Thus we should not expect Denmark to have developed a universal magic formula for picking winners and creating a new generation of Vestas-type companies. This makes it very difficult to standardize or predict new policies, as ‘certainty of consequences’ rather than ‘acceptance of failures’ tends to be preferred as the major driver of policies to stimulate emergence of new energy technologies. The Danish Energy Authority and the Danish Environmental Protection Agency took on the role as primary regulators. They also enacted laws that governed the interactions of the involved parties in the development of a new technology. For new and disruptive technologies there is no clear-cut boundary as to when they are qualified as economically viable. Yet Danish regulators stepped in with subsidies and grants to nurture and shape the emerging technology. Regulatory actors in Denmark served the role of ‘steering’ the Danish market from becoming too big too fast, or of withering away in times of trouble. Only by experimentation and probing did they gradually co-evolve technologies, markets and regulations. The various effects were rationalized in ways that slowly built and preserved coalitions and legitimacy (focusing on security in national energy supply, employment, exports, environmental concerns etc.). In the end, however, the longterm commitments to the emergent regimes were only possible because of a supportive red–green political coalition. Although the Danish RES-E achievements are clearly commendable, one should not draw hasty conclusions in terms of replicating this success. Looking back 20–25 years to the late 1970s and early 1980s, things appeared quite different. Very few saw any serious potential in renewable energy, and few had hopes in the small and relatively poorly functioning wind turbines that had emerged from the ‘low-tech, bottom-up’ industry. It

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is in this light interesting to note that the recently published Danish Energy Plan 2025 includes market-stimulation instruments for the further development of RES-E, but in terms of technology development the prospective instruments are locked into R&D demonstration projects and not early market stimulation.19

CONCLUSION A robust RES platform for collective action and regulation has emerged in Denmark during the last 25 years. There is no doubt that this robustness is linked to transformations of actors, interests, meanings, competences and institutionalized regulations, and that it has been co-produced with the emerging material and symbolic basis of the RES path. These transformations are the reason why the Danish energy system can accommodate relatively high and increasing shares of wind and other sources of renewable electricity. The force and robustness of the Danish policy is not the product of one big ‘master step’. Multiple actors have been involved in a dynamic interplay over the last 25–30 years, with no one having decisive control over the transformation process, and no one even clearly envisioning its outcome. Even the most optimistic projections of wind-power penetration and the industrial importance of wind power have been surpassed. These interrelated processes of techno-economic, political and institutional development have generated a momentum and position for RES-E in Denmark that is not easy to reverse (Callon 1991). The growth in RES-E is, however, still highly dependent on supportive promotional schemes, as illustrated by the setback under the Fogh Rasmussen government (see Figure 3.2). The policy decisions made by the Fogh Rasmussen government since 2001 clearly indicate that politics matter in shaping markets for technologies, not only for the RES-E technological development, but also visà-vis the way the economic profitability of existing technologies is affected by the prevailing regulatory schemes. In January 2007 Prime Minister Rasmussen supported the Minister of Environment, Connie Hedegaard, with a statement to the effect that it is the goal of the government that renewable energy should account for at least 30 per cent of total energy consumption in 2025, compared to about 15 per cent today. Due to internal conflicts in the government, however, this issue remains unresolved. Denmark is clearly a success story. But the question remains as to whether it will be able to sustain its success without further promotional policies for RES-E development.

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NOTES 1.

Bjørn Lomborg became notorious for his outspoken and very questionable criticisms of mainstream research on climate change. He resigned as head of the Environmental Assessment Institute (EAI) in 2004, returning to his academic position at the University of Aarhus. He is currently Adjunct Professor at the Copenhagen Business School and Director of the Copenhagen Consensus Centre. 2. For further information see www.ens.dk/sw45926.asp (in Danish). 3. See www.dkvind.dk. 4. The management of the Twind turbine was assisted by engineers and specialists from technical universities. According to Konrad Jensen (2003), this was kept as a secret for many years. 5. For more information on DONG, see www.dongenergy.com. 6. Denmark is part of the Nordic Power Exchange – Nord Pool – along with Finland, Sweden and Norway. The exchange enabled the Nordic countries to exchange energy and thereby secure consumers with access to energy at comparable, reasonable prices despite national fluctuations in energy supply. 7. For further details see http://www.ens.dk/sw27466.asp. 8. Interview with Svend Friis, DEA, and e-mail correspondence with Anne-Grete Holmsgaard, member of the Socialist Party and member of the Parliamentary Committee on Energy Policy. 9. The Ecological Council (Det Økologiske Råd) was founded in 1991. The main objective is to promote sustainable patterns of development where environmental concerns, social justice and human well-being are main focal points. The Ecological Council is different from other Danish NGOs in that it is an academic organization dealing with environmental policy on a scientific basis, but at the same time trying to inform and have a dialogue with both politicians and the general public. For more information see http://www.ecocouncil.dk/english/. 10. In Danish: Sammenslutningen af Danske Elforbrugere: www.energiforbrugeren.dk (in Danish). 11. See www.windpower.org. 12. DKK 100 = €13.41 in October 2007. 13. IT-Branchen, Vindmølleindustrien, Lægemiddelindustriforeningen (2006), Vidensbrancher i vækst (Knowledge-intensive industries growing – in Danish), Copenhagen, Denmark. 14. See www.danishenergyassociation.com/. 15. Participants in the Energy Camp are invited personally and they come mainly from the research community, windmill owners, engineering firms, producers of energy technologies (RES and others), governmental regulators etc. See www.energycamp.dk (in Danish). 16. www.ens.dk/sw34053.asp (in Danish). 17. Regeringens handlingsplan for miljø og udvikling: opfølgning af anbefalinger i rapporten fra Verdenskommissionen om miljø og udvikling og i FN’s Miljøperspektiv til år 2000. (The Goverment’s action plan for environment and development: Follow-up of recommendations in the report from the world comission of enviroment and development and in the UN’s environment perspectives until 2000 – in Danish) Copenhagen, Denmark: Statens Informationstjeneste. 18. For example the island of Ærø, with a population of 7500 people. Initiatives for RES were here started by representatives from the alternative energy movement in the early 1980s, and the development has continued since. See www.arre.dk/energi.html. 19. The Danish Energy Strategy (DEA 2006) expresses the following major priorities for the energy policy: (1) energy supply security – secure long-term self-sufficiency and robustness against unstable and high oil prices; (2) production and consumption of energy must comply with Danish and international commitments to CO2 reductions; (3) increased focus on energy conservation; (4) electricity and other energy must be

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traded in competitive markets; (5) conscious development and assessment of which market configurations may work for RES integration; (6) energy taxes must be used to differentiate different energy technologies via price structures; (7) R&D-based Danish strength in RES technologies must be translated into growth and industrial development; (8) an increased use of demonstration projects to ensure that ‘ready-to-market’ technologies can be tested.

REFERENCES Akrich, M., M. Callon and B. Latour (2002), ‘The key to success in innovation: the art of interessement’, International Journal of Innovation Management, 6 (2), 187–206. ATV – Academy of Technical Sciences (1975), ‘Vindkraft: Oversigtsrapport fra Vindkraftudvalget’ (Wind power: Report from the wind power working group – in Danish), Academy of Technical Sciences. ATV – Academy of Technical Sciences (1976), ‘Vindkraft 2: Forslag til Handlingsprogram’ (Wind power 2: Suggestion for action program – in Danish), Academy of Technical Sciences. Børsen Newspaper (2006), 6 January, p. 11. Callon, M. (1991), ‘Techno-economic networks and irreversibility’, in J. Law (ed.), A Sociology of Monsters: Essays on power, technology and domination, London: Routledge, pp. 132–65. Callon, M. (1998), ‘Introduction – the embeddedness of economic markets in economics’, in M. Callon (ed.), The Laws of the Markets, Oxford: Blackwell Publishers, pp. 1–57. Christensen, C. (1997), The Innovator’s Dilemma, Boston, MA: Harvard Business School Press. DEA (1976), Energy Plan 1976 (EP’76), Handelsministeriet, Copenhagen, Denmark. DEA (1996), Energi 21 – Regeringens energihandlingsplan 1996 (Energy 21 – The government’s energy action plan – in Danish), Danish Energy Authority, Copenhagen, Denmark. DEA (2005), Energy Statistics 2005, Danish Energy Authority, Copenhagen, Denmark. DEA (2006), Strategi for forskning, udvikling og demonstration på energiområdet (Strategy for research, development and demonstration in the energy field – in Danish), Det Rådgivende Energiforskningsudvalg (REFU), April, Danish Energy Authority. DETE (1999), Natur- og Miljøpolitisk Redegørelse 1999 (Nature- and environmental political review 1999 – in Danish), Miljø og Energiministeriet. EC – European Commission (2007), ‘Communication from the Commission to the Council and the European Parliament, Green Paper Follow-up Action, Report on Progress in Renewable Electricity’, COM(2006) 849 final, Brussels, 10 January. Fligstein, N. (2001), The Architecture of Markets, Princeton, NJ: Princeton University Press. Garud, R. and P. Karnøe (2001), ‘Path creation as a process of mindful deviation’, in R. Garud and P. Karnøe (eds), Path Dependence and Creation, Mahwah, NJ and London: Lawrence Erlbaum, pp. 1–40.

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Garud, R. and P. Karnøe (2003), ‘Bricolage versus breakthrough: distributed and embedded agency in technological entrepreneurship’, Research Policy, 32, 277–300. IDA (2002), Visioner for fremtidens energisystemer (The future energy system – in Danish) Copenhagen (Denmark): Dansk Ingeniørforening. IDA (2007), Energirapport 2030 (Energy report 2030 – in Danish), Copenhagen: Dansk Ingeniørforening. Jamison, A. and J. Læssøe (1990), ‘The making of new environmentalism in Denmark’, in A. Jamison, R. Eyerman, J. Cramer and J. Læssøe (eds), The Making of New Environmental Consciousness. A comparative study of the movements in Sweden, Denmark and the Netherlands, Edinburgh: Edinburgh University Press. Jørgensen, U. and P. Karnøe (1995), ‘The Danish wind turbine story: technical solutions to political visions?’ in A. Rip, T.J. Misa and J. Schot (eds), Managing Technology in Society: The approach of constructive technology assessment, London/New York: Pinter Publishers, pp. 57–82. Jørgensen, U. and L. Strunge (2002), ‘Restructuring the power arena in Denmark: shaping markets, technologies and environmental priorities’, in K. Sørensen and R. Williams (eds), Shaping Technology, Guiding Policy: Concepts, spaces and tools, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 286–318. Karnøe, P. (1991), Danish Wind Turbine Industry – A Surprising International Success: On innovations, industrial development and technology policy, Copenhagen: Samfundslitteratur. Karnøe, P. (1992), ‘En kamp for vindmøller: Den Sociale Konstruktion af en konstruktiv Teknologi’ (A battle for wind turbines: The social construction of a constructive technology – in Danish) in T. Agersnap (ed.), Konstruktiv Teknologi. Nyt fra Samfundsvidenskaberne, Copenhagen, Denmark, pp. 139–56. Karnøe, P. (2005), ‘The dynamics of framing in transactional spaces: the co-creation of worth, calculative devices and calculative agencies in the Danish wind power market’, Working Paper, Copenhagen Business School. Karnøe, P. and S. Møller (1985), Magt og Industripolitik – en analyse af udviklingsbetingelser for udvalgte energiteknologier (Power and industrial politics – an analysis of developmental conditions for selected energy technologies – in Danish), Master’s thesis, Department of Political Science, University of Copenhagen. Kemp, R., A. Rip and J. Schot (2001), ‘Constructing transition paths through the management of niches’, in R. Garud and P. Karnøe (eds), Path Dependence and Creation, Mahwah, NJ and London: Lawrence Erlbaum, pp. 269–302. Konrad Jensen, I. (2003), Mænd i Modvind, en Historie om et dansk vindmølleeventyr (Men in headwind, a history of a Danish windmill fairytale – in Danish) Børsens Forlag. Lounsbury, M. (2005), ‘Institutional variation in the evolution of social movements: competing logics and the spread of recycling advocacy groups’, in G.F. Davis, D. McAdam, W.R. Scott and M.N. Zald (eds), Social Movements and Organization Theory, Cambridge: Cambridge University Press, pp. 73–96. McGuire, P. and M. Granovetter (1993), ‘Thomas Edison and the social construction of early electricity industry in America’, in R. Swedberg (ed.), Explorations in Economic Sociology, New York: Russell Sage Foundation, pp. 213–46.

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Nielsen, K.H. (2001), Tilting at Windmills, 2nd edn, PhD dissertation, History of Science Department, Aarhus University, and Department of Organization, Copenhagen Business School. Nielsen, H., K. Nielsen, F. Petersen, H. Siggaard Jensen (1998), Til Samfundets Tarv – Forskningscenter Risøs historie (To the Needs of Society – The history of the research centre Risø – in Danish), Forskningscenter Risø. Petersen, F. (1994), ‘Atomalder uden kernekraft’ (Atomic age without nuclear power – in Danish), in H. Buhl and H. Nielsen (eds), Made in Denmark?, Århus: Klim, pp. 197–215. Powell, W.W. and P.J. DiMaggio (1991), The New Institutionalism in Organizational Analysis, Chicago, IL: University of Chicago Press. Schumacher, E.F. (1973), Small is Beautiful: A study of economics as if people mattered, London: Blond & Briggs. Transport- og Energiministeriet (2005), Energistrategi 2025. Perspektiver frem mod 2025 og Oplæg til handlingsplan for den fremtidige el-infrastruktur (Energy strategy 2025. Perspectives towards 2025 and a proposed action plan for the future electricity infrastructure – in Danish), available at http://www.ens.dk/graphics/ Publikationer/Energipolitik/Energistrategi_2025/index.htm. van Est, R. (1999), Winds of Change: A comparative study of the politics of wind energy innovation in California and Denmark, Amsterdam: International Books.

4. Ireland: putting the wind up the political system Gerard Mullally and Jillian Murphy* INTRODUCTION Ireland is now recognized as one of the most globalized societies in the Western world. The Irish economy underwent a period of unprecedented economic growth in the 1990s, earning the country the label of the ‘Celtic Tiger’. The central role of foreign direct investment, largely from US multinational companies, in the Irish economy has meant that Irish development has tended to be perceived as a European example of ‘dependent development’. A significant element of this dependence, highlighted in the oil crises of the 1970s, was the extent to which Ireland is dependent on the importation of fuel. This dependence created a political context in which proposals to introduce nuclear power into the Irish energy system were both advanced and subsequently rejected following the mobilization of a widespread antinuclear movement (Baker 1990). The opposition to the proposal to construct a nuclear power facility at Carnsore Point, County Wexford is widely regarded as the nursery of Irish environmentalism, and the context in which demand for ‘soft-path’ energy technologies was fostered. The 2007 government White Paper, Delivering a Sustainable Energy Future for Ireland, has recently reasserted the statutory prohibition on the nuclear generation of electricity in Ireland (DCMNR 2007: 25), and identifies a central role for renewable sources for electricity generation (RES-E) to 2020. While much of the EU has adequate or even surplus generation capacity, there will be continuing need for new capacity over the coming decade. Fuel for electricity generation in Ireland now accounts for one-third of total primary energy demand and is met almost entirely from gas and oil plants with some contribution from coal, peat and hydropower. O’Rourke (2002: 558) argues that, in the Irish context, concern over climate change is now matched by reawakened concern over growing energy imports. As shown in Figure 4.1, oil, gas and coal represent the bulk of fuel supply for electricity generation in Ireland. All the coal is accounted for by a single plant, the Moneypoint generating station in County Clare. Ireland’s heavy 102

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Ireland Historical trend

6500

Projection

6000 5500 5000 4500 ktoe

4000 3500 3000 2500 2000 1500 1000 500

Coal Source:

Peat

Oil

Gas

Hydro

20

10

20

20

19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05

0

Renewables

DCMNR (2007: 27).

Figure 4.1

The primary fuel mix of electricity in Ireland, 1990–2020

dependence on imports is expected to continue for the immediate future, with a growing reliance on gas projected for electricity generation to 2030 (Bergin et al. 2005). By 2006, the share of renewables had increased to 4.5 per cent (2.7 per cent from wind, 1.2 per cent hydro and the remainder from landfill gas, biogas and biomass combined heat and power (CHP) (SEI 2007: 5). Ireland’s indicative target in the RES-E Directive is 13.2 per cent. Reiche and Bechberger point out that RES-E is a big challenge for all European countries; ‘even the forerunners have to improve their RES-E performance noticeably’ (2004: 843–4). If this is the case, what are the implications for countries such as Ireland that have only relatively recently engaged with policy initiatives for RES-E and are towards the bottom of the league in terms of performance in Europe more generally (Burgers et al. 2005; EREC 2004)? How does the role of the dominant energy system affect the integration of RES into the Irish electricity regime? What are the historical, political and policy imperatives that have shaped the Irish approach to moving towards sustainable energy development? What could be the contributory factors in creating an Irish sustainable energy regime in the future?

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THE DOMINANT ENERGY SYSTEM Ireland’s small size and peripheral location as an island on the Atlantic fringe of Europe profoundly affects the characteristics of its energy system, creating themes of particular importance for this analysis: high levels of import dependence; low levels of interconnection with larger systems; limited competition among few market actors; and demand pushing the limits of generating capacity (Fitzgerald 2002: 14). The overall contribution of renewable resources to primary energy supply represented approximately 2 per cent over the decade of the 1990s and the Celtic Tiger’s dependence on imported fuel grew from 65 per cent in 1990 to 87 per cent in 2001 and is approximately 90 per cent at present (O’Neill 2003). This places Ireland well above the EU average of 50 per cent, making Ireland one of the most energy-dependent nations in Europe and among the most oil-dependent economies in the world (ibid.). The exceptional nature of this dependence can be seen in Figure 4.2. In the context of this dependence, Ireland is one of many European countries seeking to sharply increase its use of renewables for electricity generation (Blok 2006). The Energy White Paper (DCMNR 2007: 27) commits the government to ‘delivering a significant growth in renewable energy as a contribution to fuel diversity in power generation with a 2020 target of 33 per cent of electricity consumption’ and stresses that ‘wind energy will provide a pivotal contribution to achieving this target’ (ibid.). Total electrical output from wind in 2006 was 1622 GWh, an increase of 46 per cent on the previous year (SEI 2007: 10). By April 2007 the total installed capacity of wind farms was 782 MW, an additional 449 MW with signed connection offers from EirGrid (most of which is due for connection by 2009), 1301 MW of capacity being processed for connection, and a further 2013 MW in applications (ibid.: 11). In this context public support is central to the development of RES-E. In some countries RES-E policies have been in place for many decades; in others such as Ireland support policies are much more recent. The motivation of the Irish government with regard to the promotion of renewable electricity as a key element of more sustainable energy policies is similar to that in other European countries (Blok 2006; Del Río et al. 2005; Rowlands 2005). De Lovinfosse (2005) points out that RES-E came on to the political agenda of most European countries as a ‘paradoxical policy problem’ in the context of the ongoing liberalization of the European electricity market and of the Kyoto commitments to reduce greenhouse gas (GHG) emissions. On the one hand, RES-E has appeared as one important solution to reducing GHG emissions in the electricity sector (ibid.); on the other hand, however, RES-E is not competitive in an electricity market

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Ireland 90

Ireland

EU-15 average

EU-25 average

85 Import dependence, %

80 75 70 65 60 55 50 45 03 20

02 20

01 20

00 20

99 19

98 19

97 19

96 19

95 19

94 19

92

91

93 19

19

19

19

90

40

Source: Central Statistics Office (2006).

Figure 4.2

Import dependence of Ireland, EU-15 and EU-25

compared with conventional technologies, since the market attaches no value to positive externalities such as environmental factors (Del Río et al. 2005: 2012). The Evolution of the Irish Energy Regime: Steering a ‘Path’ between Independence and Dependence In a recent assessment of the background factors relevant to the ‘path dependence’ of the dominant energy system (DES) in Ireland and the nature of electricity markets (DCMNR 2005a), it has been argued that geology and topography have been as important in determining the nature of the electricity market as geographical, demographic and strategic factors (ibid.: 6). Nevertheless, Ireland, north and south, share similar market characteristics: They have in common a paucity of fossil fuels, a geographical position at the end of Western Europe’s gas supply chain from Russia or North Africa, a lack of gas importing capacity in the form of LNG facilities, strong demand growth, a large carbon emissions co-efficient, a concentration of load in two east coast areas but with very extensive rural ‘tails’ resulting in a long line length per customer and a better than EU average renewable potential. (Ibid.: 8)

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While this characterization provides an important insight into the nature of the ‘lock-in’ of certain energy types in the overall energy mix for electricity, there are other factors that relate to the historical, institutional and material properties of the Irish electricity supply. The evolution of a number of key structural variables in the Irish context plays a significant role in understanding the comparatively poor performance of Ireland in relation to RES-E and the potential ‘lock-out’ of certain RES technologies. According to Verbong et al. (2002: 2), there are four key elements of a national electricity system that help to shape its socio-technical path dependence and therefore the prospects for change. These elements are material infrastructure, institutional framework, fuel mix and the national ‘energy and political agenda’ (ibid.). In a European context these elements are conditioned by a number of external or ‘macro’ factors, including: economic development, energy prices, technological development, liberalization, European integration, environmentalism, contingent events (wars, accidents, crises) and the evolution of the European electricity supply system. These elements and conditioning factors are important in understanding the degree of inertia or the potential for change in the system. It is important to point out, however, that, ‘Despite the European Union framework that has been implemented since the adoption of the [renewable energy policy] White Paper in 1997, renewable energy policy in the community is still very much national policy’ (Blok 2006: 254). Smith et al. (2005: 1492) stress that ‘There is a tendency to treat regime transformation as a monolithic process dominated by rational action and neglecting important differences in context.’ In this light the particular history and development of Ireland in the twentieth century is also an important factor in determining the particular evolution of the electricity sector. There was no electricity-grid system to speak of at the foundation of the Irish state in 1922, so that the building of a comprehensive electricity network emerged as a major project for the Free State. The creation of the material infrastructure for the supply system, in the form of generation and distribution networks, and the ‘rural electrification’ scheme became emblematic of the modernization project of the nation (Schoen 2002). The creation of the transmission and distribution system is here akin to the centralization logic of regimes in the rest of Europe (Verbong et al. 2002). The transmission side was established to take output from large-scale hydro and fossil-fuel-fired power stations at high voltage to over a hundred sub-stations around the country, and then to distribute to local customers at lower voltage levels (Douthwaite 2003). Most of the material infrastructure for electricity generation is owned and run by the Electricity Supply Board (ESB). The ESB Power

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Generation owns and operates 18 major power-generating stations with a combined capacity of 4508 MW (IEA 2003). As with most other national electricity companies in Europe, the ESB was a monopoly. But in Ireland it was conceived as a monopoly with ancillary developmentalist functions; that is, as a state institution that, in addition to its primary technical purpose, should engage in ‘investment in human capital’ with concomitant social and educational roles (Garvin 2004: 226). As for the fuel mix, in the early years after independence (the 1920s and 1930s) Ireland’s electricity system was characterized by a lack of indigenous coal at a time when coal was the dominant primary fuel. The generation of electricity was, therefore, initially based on hydropower, and subsequently supplemented by the only other plentiful indigenous power source – peat (DCMNR 2005a: 7). The political preference for hydroelectric power stemmed from the nationalist desire to reduce energy dependence on British coal (Schoen 2002). The generation of electricity in the early 1930s was thus almost 100 per cent renewable, based on the hydropower of the Shannon river at Ardnacrusha in County Clare. The Shannon scheme was followed by further hydroelectric schemes harnessing the power of the rivers Liffey, Erne, Lee and Clady in the 1940s and 1950s. By the early 1960s, 11 medium to small peat-fired stations began production, mainly in the midlands, to exploit Ireland’s peat resource (EREC 2004: 3). The contribution from peat peaked in the mid-1960s, when it provided just less than 40 per cent of Ireland’s total power generation (Bord na Mona 2001). At the end of the 1970s, as a result of what proved to be forecasting errors, a large amount of new generating capacity was built, in particular the Moneypoint coal-fired power station in Clare (Fitzgerald 2003: 4). Ironically, given the reasoning behind the original path taken, coal was here the fuel of choice, in order to reduce the dependence of the economy on oil (ibid.). A recent report by the Economic and Social Research Institute has pointed to a shift towards gas in the coming years to supply Irish electricity – a transition that renders Ireland extremely vulnerable to geopolitical turmoil (Bergin et al. 2005: 3). This transition further exacerbates Ireland’s dependence on imported fuels. Ireland, in common with other cohesion countries such as Greece and Spain, is characterized by rising demand for new generation capacity, whereas markets in countries such as Austria and Sweden are showing signs of stagnation and overcapacity (Reiche and Bechburger 2004: 845). The political agenda for energy in Ireland, both before and during the initial phase of implementing the RES-E Directive, has been dominated by issues of import dependence, security of supply, rising demand and price.

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The Kyoto Protocol has placed additional environmental pressures on Ireland’s energy regime. The options of closing down the ESB’s coalburning installation at Moneypoint on the Shannon estuary, or of converting it to run on natural gas, were mooted since the plant was identified as the single most important source for reducing emissions (McDonald and Nix 2005). At Moneypoint the concerns for energy security took precedence over environmental considerations, since the conversion to gas would copper-fasten the pre-eminence of gas in the fuel mix, making the supply system in general vulnerable to international events (ibid.). In 1990 domestic production accounted for 35 per cent of Ireland’s primary energy requirements. Since the mid-1990s, however, dependence on imports has grown significantly as consumption has increased and indigenous gas production from the Kinsale field has declined (Howley and Ó Gallachóir 2005: 33). Plans to extract and utilize gas from the Corrib field are likely to affect this trend in the future. A high-profile conflict over the gas pipeline from the Corrib field in County Mayo led, however, to a controversial jailing of local opponents (the ‘Rossport 5’), with serious repercussions for the entire Irish energy debate. At present the electricity market is largely confined to the Republic because of the limited nature of interconnection between north and south. The Energy White Paper (DCMNR 2007) has outlined plans for a second north–south electricity interconnector by 2011 which will more than double the existing cross-border electricity transfer capacity to over 680 MW. There are also plans for an east–west electricity interconnector between Ireland and Britain no later than 2012, which will provide an additional 500 MW of capacity. In 1990 renewable energy was responsible for 1.9 per cent of primary energy requirement for electricity, all of which was generated from hydropower. By 2006, the share of renewables had increased to 4.5 per cent (2.7 per cent from wind, 1.2 per cent hydro and the remainder from landfill gas, biogas and biomass CHP (SEI 2007: 5). Ireland is alone among the preaccession countries in having no contribution to the national grid from solar PV (Wilson 2005: 2). On the other hand, however, Ireland is said to have the highest potential wind resource per capita of any European country (Reiche and Bechburger 2004: 844). Most growth in RES-E production over the next 20 years for Ireland is expected from wind (both onshore and offshore), strongly supplemented by biomass CHP, co-firing at three state-owned peat-power stations and a small contribution from ocean energy.

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Key Strategic Actors in the Irish Energy System The Department of Communications, Energy, and Natural Resources (DCENR) – previously named DCMNR, the Department of Communications, Marine and Natural Resources – is responsible for energy policy with divisions for natural gas, oil supply, electricity regulation and renewable energy. The DCENR is responsible for administering the Alternative Electricity Requirement (AER), which until recently was the main mechanism financing renewable energy in Ireland, and is the parent body for Sustainable Energy Ireland (SEI), the national energy authority. SEI runs many programmes on both the renewable and energy-efficiency dimensions of sustainable energy (see below), including the Renewable Energy Information Office (REIO). The first major transformation of the current phase of system development was the ending of the state monopoly in line with EU policy on energy-market liberalization. The original ESB was divided into a retail company, ESB Customer Supply (ESBCS); transmission and distribution system operators, EirGrid and ESB Networks; a generation company, ESB Power Generation (ESBPG); a new retail market actor, ESB Independent Energy (ESBIE); and a previously established consulting company, ESB International (ESBI). A similar liberalization of the gas market means that the former state monopoly, Bord Gais (BGE), has now been rebranded as an energy company rather than a gas company, and is active in the electricity market. There are also a small number of other generation companies including Edenderry Power (owner of a new peat-fired station), Viridian Power (owner of a combined cycle gas turbine (CCGT) station) and other smaller units, including several CHP owners. A number of companies and associations have emerged since the early 1990s in the field of renewable energy, with an accompanying sector of suppliers and consultants. One of the biggest of these is Airtricity (originally Eirtricity), founded in 1997 by a former chief executive of the state peat board (Bord na Mona). The company operates wind farms in the Republic of Ireland, Northern Ireland, Scotland, England and Wales (in Europe), and is one of the largest independent wind energy retailers in Ireland. Airtricity currently operates nine wind farms on the island of Ireland, with a total capacity of 215 MW. The company is also engaged in the development of offshore wind farms, with a joint-venture plant in Arklow (25 MW) and another much larger project (500 MW) under way at Greater Gabbard in the UK. Aitricity has been critical of government policy in the area, arguing that national ambitions for renewable energy have tended to vary from ‘modest’ to ‘minimal’, with Ireland

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simply being a follower of European policy-driven requirements (Airtricity 2004: 6). In terms of business representation, the Irish Business and Employers’ Confederation (IBEC) is the principal representative of the economic sector in general. The IBEC has an Energy Policy Committee supported by a Climate Change Working Group, an Energy Providers’ Working Group, an Energy Users’ Working Group, and a CHP/Renewables Working Group. The CHP/ Renewables Group has identified a number of key barriers to the development of renewable energy in Ireland, including: a lack of support by government; the absence of a political champion; a lack of long-term targets; and general ‘political inattention’ (IBEC 2004: 3). A number of non-governmental organizations are also involved in the debate on RES-E. One of the key environmental issues in the 1970s centred on the question of nuclear power. On this issue a number of environmental organizations highlighted the use of RES as an alternative to nuclear energy (Baker 1990). Among these organizations, Earthwatch (Friends of the Earth Ireland) has been a leading proponent of renewable energy. Local opposition to wind farms is, however, increasingly common in Ireland, with more than half of all proposed installations being rejected at the planningpermission stage, with visual intrusion as the most common reason for rejection (WDC 2005). Opposition to RES technologies has not, however, approached the levels of protest seen in the UK, most probably due to the generally lower level of wind penetration in Ireland (SEI 2004). Where RES-E developers in wind and small hydro have run into opposition with conservation organizations such as the Irish Peatland Conservation Council (IPCC) or the Friends of the Irish Environment (FIE), the conflict has tended to focus on contraventions of the EU Habitats Directive rather than opposition to alternative energy per se (ibid.). Since it was formed in 1998, the Foundation for the Economics of Sustainability (FEASTA) has campaigned for increased attention to renewable energy sources. FEASTA principally bases its analysis on the work of the Irish economist Richard Douthwaite (a founding member) and Colin Campbell of the Association for the Study of Peak Oil & Gas (ASPO), based in West Cork. A key element of FEASTA’s position on the future of RES-E in Ireland rests on the contention that the way forward may well reside in a move to distributed local systems of production and consumption rather than sole reliance on the centralized regimes of the past (Douthwaite 2003). There is also a range of non-governmental organizations that have emerged since the 1990s representing different elements of RES in Ireland. These include: the Irish Wind Energy Association, Meitheal na Gaoithe (Community of the Wind); the Geothermal

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Association of Ireland; the Irish Bio-energy Association; and the Irish Hydro Association. The Constitutional, Political and Legislative Context The basic law of the Republic of Ireland is the Constitution, Bunreacht na hÉireann. It is the government’s responsibility to determine priorities in the allocation of resources, and to make key decisions on social and economic policy issues – no matter how extensive a process of prior consultation may have taken place. However, the context in which these constitutionally based powers and responsibilities are exercised is increasingly one of ‘social partnership’ (Department of Social, Community and Family Affairs 2000). The parliament (Oireachtas) is bicameral, with a directly elected lower house (the Dáil – currently 166 seats) and a less significant (appointed) upper house (Seanad Éireann – currently 60 seats). The most recent general election (2007) resulted in a ‘rainbow coalition’ government of Fianna Fáil (the Republican Party), the Green Party, the Progressive Democrats and ‘others’. The configuration of the present Dáil is as follows: Fianna Fáil 78 seats, Fine Gael (the United Ireland Party) 51, Labour Party 2, the Progressive Democrats 2, the Green Party 6, Sinn Fein (Republicans) 4 and ‘others’ 5. In the current administration two significant portfolios with relevance for RES-E, namely the Minister for Communications, Energy and Natural Resources and the Minister for the Environment, are now occupied by Green Party representatives. All of the established political parties broadly endorse a move to increased shares of renewables in the energy system, principally for environmental reasons, but also for reasons of greater energy independence and security of supply. The parties tend, however, to be short on specifics and to reflect rather than lead policy debates on RES-E. The key lines of conflict that have emerged relate to progress and obstacles to established goals rather than substantive differences. The current government position on RES-E largely reflects the goals of the previous administration’s White Paper on energy (DCMNR 2007). Fine Gael, the main opposition party, has been critical of delays by the previous government, Fianna Fáil–Progressive Democrats coalition in implementing promised investment in upgrading and developing the electricity grid. The Labour Party has also been critical of the government’s energy policy, specifically in relation to responding to the Kyoto Protocol, but also with respect to improving energy self-reliance. Sinn Fein is generally critical of the government’s response to Kyoto, but is also pushing for the creation of a Single Energy Market on the island of Ireland.

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In general the lack of competition and sharp differences among the parties may well relate to the following two factors: until recently, the Irish electricity system has been dominated by the state monopolies, and the overall weakness of the environmental discourse in Irish politics (Flynn 2007). There is also another possibility, however. In 2004, in a newspaper article on Ireland’s Kyoto obligations, the then Minister for the Environment was quoted as saying: ‘A politician may be in a position of leadership to try and get the debate going, but unless you get the public to buy into the challenge, you are not going to succeed’ (MacDonald and Nix 2005: 251). MacDonald and Nix infer from this ‘that leaders don’t lead any more: they have a new role, to try and get the debate going’ (ibid.). Beyond the hyperbole of this analysis may be a more serious point that speaks to the analytic perspective of the present volume: a shift from a ‘driving state’ to a ‘steering state’ – from ‘governing’ to ‘governance’. Equally important, however, may be a shift of focus from partisan cleavages (which are notoriously diffuse in Ireland) to the patterns of broader interest intermediation on the deployment of RES-E. In other words, the patterns of consultation, policy concertation and cross-border policy coordination are most probably more significant for the development of RES-E than interparty competition. Further, there is the crucial question of the effect on RES-E development given the liberalization of the Irish electricity market. Before the market was liberalized in 1999, the electricity industry was regulated by a series of Electricity (Supply) Acts (1927–88) and the Energy Act (Miscellaneous Provisions) of 1995. As summarized in 1999: The key characteristic of this regulatory regime was a centralized electricity system with the ESB, a vertically integrated state monopoly, controlling a dominant share (90 per cent) of national electricity production and transmission and a significant portion of the distribution sector. (Goodbody Economic Consultants 2001: para. 4.2.1)

However, the Electricity Act (1999) liberalized the electricity market for green electricity as of February 2000, with plans to open the rest of the market to competition by February 2005. This gave suppliers of green electricity access to a pricing structure in a regulated market which allowed them to charge less than the regulated price in the commercial and services sector. Also in 1999, the Commission for Energy Regulation (CER) was established under the Electricity Regulation Act. One of the CER’s functions is to establish a trading system and to advise the Government on the impacts of generation on sustainability and international environmental commitments. As far as RES-E is concerned, the CER has responsibilities

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towards renewables as part of its secondary duties which stem from renewables, as generators and market players, and the design and operation of the electricity market (Deloitte 2005: 65). Before the 1997 EU White Paper on Renewable Energy (EU 1997), the Irish government established the Irish Energy Centre and a support programme known as the Alternative Energy Requirement (AER). The AER emerged from the objectives of Irish energy policy at the time: to supply a choice of fuels to consumers as efficiently as possible, at internationally competitive prices, taking account of supply security, social, economic and environmental considerations; to consume this energy as efficiently as possible; and to produce as much of Ireland’s national energy requirements from indigenous sources as economically possible. SEI (2004) points out that sustainable energy development requires a balance between security of supply, cost competitiveness and environmental responsibility. Renewable energy development can contribute positively to both security and responsibility, but can encounter problems in relation to integrating support for renewable energy with cost competitiveness. Current Promotional Schemes for RES-E One of the concerns of the Alternative Energy Requirement (AER) was to secure renewable energy for consumers as efficiently as possible at internationally competitive prices. As such, wind power, as one of the most competitive means of production, was the main technology supported. Ireland initiated a programme to increase the promotion of RES-E in 1996 with the publication of ‘Renewable Energy – a Strategy for Ireland’. The strategy set an initial target of 100 MW of new RES capacity through projects supported under the AER and the THERMIE-funded projects. The non-nuclear energy R&D programme THERMIE covers all demonstration activities as well as other activities such as strategy, dissemination, preparatory, accompanying and support measures, concerted actions and technology stimulation for SMEs. By 2000 a total of 140 MW was delivered from these projects. Between 1995 and 2003, the AER tender scheme was the main source of support for RES-E. Since 2003, the AER competition has been supported by a Public Service Obligation (PSO) charge levied on all customers. In 2006, however, the Renewable Energy Feed-in Tariff (REFIT) was introduced, replacing AER with €119 million allocated over 15 years to support 55 new renewable energy plants with a combined capacity of 600 MW. During the first year of operation 98 per cent of the REFIT support was allocated to wind farms (CEC 2007). As shown in Table 4.1, the scheme has been extended to include biomass power generation projects and co-firing with biomass (DCMNR 2007).

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Table 4.1


Level of feed-in tariffs in Ireland, 2006

Category Large-scale wind Small-scale wind Hydro Biomass landfill gas Other biomass

Eurocents per kWh 5.7 5.9 7.2 7.0 7.2

Source: DCMNR (2006c).

Other incentives include a provision in the 1998 Finance Act for tax relief for corporate investors in RES projects, and a business expansion scheme provision that allows individual taxpayers to write off investments in RES projects against personal income.

FOUR CASE STUDIES OF REGIONS/LOCALITIES Regional in the context of current government thinking on energy policy refers to the north/south and east/west dimension of Irish governance networks, that is Northern Ireland and the Republic of Ireland, the two islands of Ireland and Britain or on a wider regional basis, in the context of increased electricity interconnection (DCMNR 2005b: 14). In terms of the development of the Border, Midlands West region, however, without upgrading of the transmission system ‘no substantial new economic activity will be possible there, with the exception of the immediate Galway region’ (Fitzgerald 2003: 6). Since the late 1990s, a number of local energy agencies have been established throughout the Republic of Ireland under the aegis of local authorities and now under the umbrella of the Association of Irish Energy Agencies. Most of these were set up as a joint initiative of particular local authorities and the European Commission under the SAVE II programme and focus on promoting energy efficiency and renewable energy in both the public and private sectors. However, since we are concerned here with the elements of ‘path creation’ that may emerge at the regional–local scale, a number of cases have been chosen to demonstrate both ‘the inertia’ of the DES and the potentials for phasing in RES-E into local–regional electricity consumption. Given the hitherto marginal position of solar and small hydro, the Irish storyline will put emphasis on biomass and wind.

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‘Lock in–Lock out’: Peat in the Midlands In 2002, a new 120 MW power station was opened near Edenderry, County Offaly. This station, owned and operated by Edenderry Power Ltd, burns peat and has a 15-year contract for supply of peat with Bord na Mona, the state-owned peat company. The plant will burn one million tonnes of peat per annum (Bord na Mona 2001). Two political imperatives drove the development of this (and indeed a second) new peat-fired station, with commentators disagreeing on the relative influence of each imperative. One was the desire to reduce dependence on imported fuels (see Bord na Mona 2001), and the second was to bolster employment in the midlands region, particularly in the context of the closure of two older peat-fired generation stations and the associated job losses (see for example Dáil Éireann Debates, Volume 499, 3 February 1999). Since commencing operations, the Edenderry Power plant has shown considerable interest in the prospect of co-firing its peat fuel with a proportion of biomass input. This offers two financial benefits: a reduction in emission-trading burden and a new potential revenue stream if the biomass fuel has a gate fee associated with it (the fuel of specific interest has been meat and bone meal, for which a considerable safe-disposal fee can potentially be charged). However, as well as problems with local objections to what is characterized as a hazardous waste incineration plan, Edenderry Power also face the challenge of the nature of its contract with Bord na Mona, which is a take-or-pay contract that offers no financial benefit to reducing reliance on the fuel (the peat has to be paid for whether taken or not). Policy developments reflected in a new White Paper presented subsequently have recently moved to resolve the problem. Nevertheless, the case is illustrative of the potential clash of policy imperatives: RES and climate change policy (and indeed waste policy) would indicate the desirability of cofiring, but a Bord na Mona contract driven by employment and security of supply imperatives seems to stand in the way. This is in the context of a relatively new peat-fired plant that would be seen as anachronistic when viewed through RES/climate change lenses, whereas the same alternative policy lens led to its construction in the first place. Bord na Mona has recently acquired the Edenderry plant and has been mandated by government to commence a pilot project on co-firing with biomass as a first step in the commitment to realize the target of 30 per cent cofiring at three state-owned peat-generating stations by 2015 (DCMNR 2007: 28).

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Gaining Social Acceptance: Wind Energy on the East Coast The majority of Irish wind farms are located in the western part of the country, despite the fact that electricity demand is strongly concentrated in the Greater Dublin region on the east coast. This is often attributed to the stronger wind resource. While certainly smaller than the west, the wind resource in the east is still very high by most international standards. A second important factor in explaining the pattern is the difficulty often encountered in winning local community acceptance for wind farms. The west–east split in wind-energy supply and electricity demand exacerbates the technical challenges of absorbing more wind power into the Irish grid, already weak in many places and showing difficulty in matching availability and loads across the state. One major wind farm has been located on the east coast: a large bank of offshore turbines just off the coast of Arklow, about 100 km south of Dublin. Interest in offshore wind in Ireland was specifically driven by recognition of the sociopolitical barriers to large wind farms in the more populated parts of the state. These barriers are deemed sufficient to justify the higher costs and risks associated with the less proven offshore technologies. It should be noted that the Arklow wind farm pushed many technical boundaries in terms of turbine size and offshore construction and operation. The project was originally developed by Airtricity, but is operated as a demonstration project by General Electrics (the turbine manufacturers) to help develop their position in this part of the wind market. The Arklow wind farm is one very concrete example of the confluence of RES-E considerations and innovation for sustainable development in Ireland. A second large offshore wind farm is under consideration much closer to the capital city, in Dublin Bay itself. This project is by a company connected to the ESG group, although its current status is uncertain as it has been in project planning phase for several years now. It is thought that public objections are more likely given the more populous location, but this has yet to be tested. Travelling further north along the east coast, Ireland’s first large urban wind turbine was recently brought into service in Dundalk, a large town just south of the border with Northern Ireland. This 850 kW turbine is located on the campus of Dundalk Institute of Technology, which has opened a Centre for Renewable Energy and is positioning itself as a leader in the area (the Institute has received SEI grant support to develop a 1.2 kW domestic-scale wind turbine). On completion of the turbine project emphasis was placed on the fact that there were absolutely no objections lodged against its planning application.

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One other element is worth noting. The Dundalk turbine encountered considerable difficulties with regard to grid connection. In order to connect the turbine to the campus electrical system, the relationship with the national grid (also supplying the campus) had to be negotiated. Due to the lengthy grid-connection application queue and to difficulty in expediting negotiations with CER (Commission for Energy Regulation) for a lowerscale connection, the Institute simply decided to forego the possibility of spilling power to the grid in order to proceed with local operation. This has significant financial implications for the project, and also obviously leads to generation capacity remaining under-utilized at a time of national supply constraint. These events illuminate some important elements of the wind-energy issue, especially the impact of concerns about social acceptability of wind-farm projects, and the impact of grid infrastructure and related institutional issues. Supporting Balanced Regional Development: Community-owned Wind Farms in the West In 2002, the Renewable Energy Partnership (REP) undertook a study to capture and promote the benefits of community-owned wind-energy projects. REP is made up of two community wind groups in the west of Ireland and the Western Development Commission (WDC), a statutory agency for the promotion of economic and social development in the west. The study received financial support from local development agencies, SEI and WDC. The main output of the project is a guide, entitled To Catch the Wind, which seeks to encourage and support communities in undertaking local wind-energy projects (REP 2004). The guide notes that very few windenergy developments in Ireland could be described as community based or owned, and most of its case studies come from other EU states. It makes recommendations for policy development as well as setting out step-by-step guidance for interested local communities. Of interest here is the focus on what would be seen at national policy level as the peripheral benefits of wind energy. The emphasis is on allowing local people to ‘invest in the local production of wealth’ and acquire a good return for this investment (ibid.: 2), as well as the wider environmental and energypolicy benefits. At the same time, it is also put forward as a more effective route to achievement of the main national policy goals through diversity and local action, as well as addressing community acceptance concerns and bringing additional local benefits. A subsequent submission on the review of the electricity sector in Ireland from the Western Development Commission emphasized the particular importance of RES-E for regional development.

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The emphasis was cited in both the National Development Plan 2000–2006 and the National Spatial Strategy 2002–2020 on ‘balanced regional development’ (WDC 2005). Balanced regional development in Irish policy discourse is the synonym for what is otherwise referred to as regional sustainable development. The plans suggest that the CER (Commission for Energy Regulation) unambiguously and explicitly has to take account of ‘balanced regional development’ in relation to any decision regarding planning and development in the sector (ibid.). Cultivating Supply-chain Development: Biomass CHP, County Cork Ireland’s first biomass-fuelled CHP plant commenced operation in 2004 at Grainger’s Sawmills in Bandon, County Cork. Sawmills and other woodprocessing sites are considered ideal locations for biomass CHP since they tend to have ready fuel supply as well as high heat demands; many already operate wood-waste-fuelled boilers. The Bandon CHP unit is a joint venture between the sawmill and an agricultural cooperative, South Western Services (SWS), which is a prominent actor in agricultural services and renewable energy in the region. SWSowned forests supply some of the woodchips that fuel the CHP plant. The plant has demonstrated the practicality of such units, and also the importance of creating a complete supply and demand chain in what is still a nascent market. In the absence of critical mass, many pioneering suppliers of biomass fuel find it hard to secure steady markets, while innovative installers often have difficulties identifying reliable and cost-effective fuel sources. The project also highlights that at this point in market development in Ireland, public financial support remains crucial to project viability. The Grainger’s CHP plant received capital support from SEI and also secured a ten-year power purchase agreement under the AER support mechanism discussed earlier.

POLICIES AND STRUCTURES FOR REALIZING RES-E TARGETS The SETREC-GO Digest Report of RES-E in Ireland (Burgers et al. 2005: 15) points out that ‘Lack of knowledge, experience and confidence with regard to RES-E amongst policy and decision makers is still a problem within the energy supply system.’ Komor and Bazillian (2005: 1874) echo this point, arguing that at present in Ireland there is no robust RES policy in place due to the lack of clarity stemming from the absence of welldefined goals. They suggest that a policy framework for RES should

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address the needs and opportunities in the social, environmental and economic dimensions of sustainable energy (ibid.). Yet, as we shall see in the following section, RES policy development has, from a low initial base, been moving rapidly in recent years. There has been a series of key developments since the publication of the European White Paper on Renewable Energy in 1997 that have placed sustainable energy – and RES-E in particular – in a more central role with regard to the Irish energy debate. A Green Paper on Sustainable Energy was published by the Department of Public Enterprise (the previous title of DCMNR, currently DCENR) in 1999. Significantly, the Green Paper established a target for increasing new electricity capacity from renewable energy sources from 180 MW to 500 MW by 2005, predominantly from wind. The Green Paper also recommended the establishment of a Renewable Energy Strategy Group to address bottlenecks in the realization of wind power arising from planning and grid connection. The Group presented a separate Strategy for Intensifying Wind Energy Deployment in 2001 (RESG 2001). The 1999 Green Paper has since been superseded by Towards a Sustainable Energy Future for Ireland (DCMNR 2006a), and the subsequent White Paper Delivering a Sustainable Energy Future for Ireland (DCMNR 2007), which sets more ambitious targets to 2020. The first National Climate Change Strategy (2000) was announced as a radical blueprint for decoupling economic growth from the growth in GHG emissions. Under the programme, carbon taxes designed to achieve emission reductions were to be phased in (McDonald and Nix 2005: 243). However, plans to introduce a carbon taxation regime as part of a strategy to meet Ireland’s Kyoto obligation were abandoned in 2005 due to competitiveness considerations. In this instance, the ‘Lisbon Agenda’ clearly held sway over the ‘Gothenburg Agenda’, and an emission-trading regime was opted for instead. Nevertheless, the current National Climate Change Strategy 2007–10 states that ‘Electricity generation from renewable sources provides the most effective way of reducing the contribution of power generation to Ireland’s greenhouse gas emissions’ (SEI 2007: 8). Recent Efforts at Promoting RES-E Sustainable Energy Ireland (SEI) is the national agency for the promotion of sustainable energy. It was set up by the Sustainable Energy Act of 2002 under the aegis of the DCMNR as a successor to the Irish Energy Centre. SEI’s remit includes: improving energy efficiency; advancing the development and competitive deployment of RES and CHP; and reducing the environmental impact of energy production and use, particularly with respect to GHG emissions. It also has a role in advising the government on

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policies and measures on sustainable energy; assisting in the implementation of governmental programmes; and stimulating sustainable energy policies and actions by public bodies, the business sector, local communities and individual consumers. It has promotional programmes in all sectors and also manages a large RD&D programme. It also has a regionally based Renewable Energy Information Office (REIO) in Bandon, County Cork. In December 2003, following a request from Eirgrid Plc (the national electric power transmission operator), the Commission for Energy Regulation (CER) ordered a moratorium on grid-connection agreements for wind. The moratorium was lifted in July 2004, but this has created a significant bottleneck in the development of the wind resource. Even after the lifting of the moratorium, no new connection agreements were offered to wind generators until late 2005. A grouping system has been put in place for connections, with the first set of offers made in late 2005. As referred to previously, however, there has been a significant surge both in electrical output and in installed capacity in wind. One of the principal means of determining the policy framework for RES-E has been a series of consultation processes on the options for RES policy and the creation of an all-island energy market, and on the Green Paper on Sustainable Energy (DCMNR 2006a). This is not surprising given that consultation has become a central motiv in Irish governance over the past decade or more. Many of the initiatives that are relevant in this category tend to have cross-cutting relevance, that is, RES and RES-E form part of the reasoning for recent developments in energy policy alongside the influence of the Kyoto process. In response to the introduction of the RES-E Directive, the Irish government launched a consultation process in December 2003 with ‘Options for Future Renewable Energy Policy, Targets and Programmes (incorporating the obligations addressed to the Irish government in the EU Directive (2001/77/EC) on the promotion of electricity produced from renewable resources in the internal electricity market)’. The objectives of the consultation process were specifically linked to the creation of policies, targets and programmes for the development and deployment of renewable energy from 2010 to 2020. Policy development for the initiative is the task of the DCENR and the Renewable Energy Development Group, REDG, a cross-departmental group established by the Minister to oversee the consultation process and its follow-up. The group includes representation from the SEI, the Commission for Energy Regulation, the Electricity Supply Board National Grid, the Economic and Social Research Institute and the Department of Environment, Heritage and Local Government, as well as nominees from industry and a representative of the Northern Ireland Department of

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Enterprise Trade and Investment (DETI). The overall mission of the group is to set out a plan for meeting the 2010 target and to consider issues and targets for beyond 2010. Three other groups were also established to feed into the REDG work: a Short Term Analysis Group (STAG), looking specifically at the 2010 target; a Bioenergy Strategy Group, formed in December 2003; and a CHP Policy Group, formed in March 2004. A separate Ocean Energy Strategy was also developed by SEI and the Marine Institute. The reports of these groups were published in April 2006. Extensive information on the direction of Irish RES policy in general, and plans for meeting the RES-E target in particular, was provided. These reports subsequently informed the 2006 Energy Green Paper and the resulting 2007 White Paper (below), but the most relevant is that of the STAG, formed specifically to examine the possible routes to RES-E compliance. The group, which worked over several months in the second half of 2004, consisted of representatives from SEI, DCMNR, CER, ESBNG (ESB National Grid), ESBCS (ESB Customer Service), experts from University College Cork and University College Dublin and a number of industry representatives. The STAG report (DCMNR 2004b) presents a ‘most likely mix scenario’ to achieve this as consisting of 77 per cent wind, 17 per cent hydro (mostly already in place), 6 per cent biomass, and less than 0.1 per cent from oceanbased energy. The report identified four areas as ‘crucial to RES-E deployment’: ● ● ● ●

Better alignment between the grid connection process and the wider policy and support framework. Further analysis of the costs of RES deployment. Coordination and cooperation among the relevant state bodies. A proactive role on the part of the RES industry (including a call to ‘act responsibly with regard to both support measures and the connection process so as to maximise the penetration of RES in Ireland’).

Feed-in tariffs are highlighted as a preferred mechanism for helping to deliver the 2010 target. The STAG report highlighted the central importance of policy and regulatory issues, noting that 2800 MW of wind capacity was held up because of problems with grid connections and confusion over power purchase agreements and planning permissions. Meanwhile in November 2004 the DCMNR (currently the DCNER), in conjunction with the Department of Enterprise, Trade and Investment (Northern Ireland), presented a joint policy framework for an All-Island Energy Market (DCMNR 2004a). This was followed up in 2005 with a

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policy declaration on Sustainability in Energy Supplies: A ‘2020 Vision’ for Renewable Energy (DCMNR 2005a), and an accompanying consultation document on Renewable Electricity – A ‘2020 Vision’ (DCMNR 2005b). It was here stated that: Both Regulatory Authorities have signed a Memorandum of Understanding in which they commit to working together to develop a Single Electricity Market (SEM) by July 2007. The SEM vision is for ‘wholesale electricity trading arrangements which deliver an efficient level of sustainable prices to all customers, for a supply that is reliable and secure in both the short and long-run on an all-island basis.’ The development of the regulated market to 2020 will have a significant impact on the implementation of RES-E. (Ibid.: 13)

The document also cited the 2004 policy framework which stipulated that the all-island energy market ‘should be capable of meeting the increasing energy requirements of the island in ways that are compatible with national and EU sustainable energy policies and targets’ and that policies ‘should be developed that encourage and facilitate greater contributions from renewables, CHP and energy efficiency’ (ibid.: 8). The stated intention of the consultation document is to ‘signal the highlevel political commitment of both Governments to consult on a long term strategy for sustainable energy by, as a first step, focusing on the renewable electricity dimension’ (ibid.). A summary report of responses to the consultation process was published in November 2005 (Taylor 2005). Fortytwo responses were received from energy suppliers and other energy businesses as well as public agencies, universities and NGOs. There was general agreement among all of the respondents as to the requirement for ‘joined-up’ policy implementation between relevant bodies. Respondents also generally agreed that the opportunities and barriers facing RES-E developers are broadly similar in both jurisdictions, but with some important differences in the regulatory and legislative contexts. There was broad consensus that enhanced interconnection could deliver benefits to the RES-E sector. There was a widely held view among participants that a market-based support mechanism for RES-E would be most appropriate, and that supports should be consistent and compatible across both jurisdictions. Both of these processes, namely Ireland’s response to RES-E and the consultation on the ‘All-Island Energy Market’ informed the publication of the Green Paper Towards a Sustainable Energy Future for Ireland (DCMNR 2006a). The Minister, launching the consultation document in October 2006, signalled his intention that Ireland would become the ‘Renewable Energy Island’ by 2020. In order to diversify the fuel mix, the Green Paper emphasized the use of clean-coal technology in further coal-based

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generation, co-firing with biomass and a significant expansion of renewable energy production. It outlined a target of 15 per cent RES-E by 2010 (the indicative target in the RES-E Directive is 13.2 per cent) and 30 per cent by 2020. It also reasserted the intention to construct an electricity interconnector between Ireland and Wales by 2012 and, on completion, to retain it in public ownership. The Green Paper was the basis of a two-month consultation process in 2006 and led to the publication of the White Paper Delivering a Sustainable Energy Future for Ireland (DCMNR 2007). The White Paper, published in March 2007, devotes an entire section to the outcomes of the consultation process which attracted over 100 submissions and was the subject of an Oireachtas (parliament) debate. While the commitment to a target of 30 per cent RES-E was broadly welcomed, some respondents argued that the target lacked ambition (ibid.: 17), and highlighted the need to diversify the renewable energy base beyond the strong emphasis on wind power. The following key targets for RES-E were outlined in the White Paper: ● ● ● ● ●

15 per cent of Ireland’s gross electricity consumption from renewable resources to be achieved by 2010, 30 per cent biomass co-firing at three State owned peat power generation stations to be achieved by 2015, 33 per cent of Ireland’s gross electricity from renewable sources to be achieved by 2020, 500 MW installed ocean energy capacity to be installed by 2020 and 400 MW CHP with a particular emphasis on biomass fuelled CHP to be achieved by 2010 and 800 MW by 2020. (SEI 2007: 7)

The White Paper is set firmly against the background of the national social partnership agreement ‘Towards 2016’, the new climate change strategy also published in 2007, and a commitment of €8.5 billion investment in energy through the National Development Plan (NDP) 2007–13. The Energy Programme of the NDP has a ‘Sustainable Energy Sub-measure’ that allocates at least 276 million over the period of the plan in support of the targets for renewable energy, energy efficiency and innovation (DCMNR 2007: 12). The White Paper also commits to continue and extend the REFIT scheme to deliver the 2010 target included co-firing and to establish a target for biomass co-firing at Moneypoint coal-power station (ibid.: 7–8). The consultation process also highlighted the importance of energy policy in general, and RES-E in particular, in meeting the government’s objectives in balanced regional development. The renewable energy and bioenergy sectors are seen as having considerable potential for supporting

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regional and rural development, and greater community involvement was also highlighted (ibid.: 15). The government has also provided for interim reviews of the Energy Policy Framework every two years and a fundamental review, informed by public and stakeholder consultation, every five years (ibid.: 7).

CONCLUSIONS Presaging the contemporary debate on ‘path dependence’ and ‘lock-in’, Max Weber long ago pointed (with poignant relevance for RES-E) to the significance of what we have here referred to as ‘socio-technical regimes’ for modern life: This order is now bound to the technical and economic conditions of machine production which today determine the lives of all individuals who are born into this mechanism, not only those connected with economic acquisition, with irresistible force. Perhaps it will determine them until the last ton of fossilized coal is burnt. (Max Weber, cited in Bell 1998: 151)

In discussing the main issues associated with RES-E in Ireland, it is useful to return to the four key elements of path dependence for an electricity system identified by Verbong et al. (2002): material infrastructure, institutional framework, fuel mix and the national energy and political agenda. These headings will be used to outline our major conclusions. The notion of a ‘dominant energy system’ (DES) presumes that much of what is possible is determined by the parameters of the existing system, and Ireland is currently in possession of a national grid and stock of generating stations that are relatively old and in need of considerable upgrading and renewal. The material infrastructure of the electricity system is currently being upgraded through a programme of investment in the National Development Plan. The semi-state energy companies, including BGE (Bord Gais), ESB, Bord na Mona and EirGrid, are set to invest over €7 billion, mainly in the electricity and gas transmission and distribution networks, in new and modernized power generation and in wind-energy projects (DCMNR 2007: 13). In addition to this, the development of north–south and east–west connectors will both reduce the peripherality of the Irish electricity system and lessen the need for substantial new plants. Like most EU states, Ireland has evolved from a state-monopoly model to a regulated liberalized market, with mixed success, and the IEA has expressed concern about the continued dominance of the ESB Power Generation group in the market and its influence on policy and

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market design (IEA 2003: 107). More generally, the institutional context is important in respect of what interests tend to influence policy outcomes. It has been argued that business lobbies and enterprise-focused government departments held sway over the Department of the Environment’s planned carbon tax, leading to its abandonment in 2004 despite little progress towards Kyoto targets (McDonald and Nix 2005). The progression of an ‘all-island’ energy approach and the completion of the Single Electricity Market are likely to be significant factors shaping the future institutional context of RES-E. As we have established, Ireland’s fuel mix is characterized by high dependence on imports of gas, oil and coal. By some standards, the fact that Ireland’s largest power station is fuelled entirely by imported coal is anachronistic, but has been influenced by concerns about security and diversity of supply. Market arrangements and costs imply that any new large-scale generation will be combined cycle gas turbine (CCGT), and indeed the government predicts a significant increase in dependence on gas in the coming decade. The recent commitment to co-fire with biomass at the coal plant in Moneypoint and the three state-owned peat stations goes a long way towards ensuring the realization of the RES-E target. After a slow start, the recent phenomenal growth in wind power and the projected growth over the coming decade mean that wind power has become competitive. If we combine the total installed capacity of wind power with that waiting in the queue for connection, Ireland could in theory go from the bottom to the top of the league in terms of RES-E penetration. However, this will be constrained to a very large extent by the capacity of the material infrastructure of the electricity system. Despite the recognition that the renewable resource base for RES-E needs to be diversified, wind clearly remains at the forefront of government policy. The key pillars of the energy and political agenda have been cost competitiveness, security of supply and environment, but there have always been fluctuations in their relative priority. Five years ago, the environmental dimensions were a focus through Kyoto Protocol (and now also Gothenburg Protocol) related commitments. More recently, cost has been a concern as prices have been rising, but also security of supply is of growing interest, especially in the light of recent threats to gas supply. De Lovinfosse’s (2005: 3) concept of ‘hierarchy of goals’ is important here, where the influence of how RES-E goals are prioritized among other energy issues is highlighted. There are also cycles of priority in associated issues, such as the dominance of the liberalization agenda (led by the EU) in the late 1990s and the more recent emphasis on development of the allisland market. Other policy objectives such as social and regional development and employment have driven policy as much as core energy goals.

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Neither is the Irish policy agenda a single, homogeneous one, and different government departments may have different objectives (as seen for example in the carbon tax debate). In terms of the internal governance of RES-E in Ireland, the role of consultation has been centrally important throughout, despite the significance of semi-state energy companies. This approach has been consolidated in the government’s commitment to the fundamental review of the energy-policy framework (DCMNR 2007). In terms of negotiating a path between dependence and creating more sustainable energy futures, the European-driven projects of liberalization, integration and the creation of a European electricity supply system remain important horizons in the Irish case. In many of the cases of regional and local experimentation with RES-E there tends to be a common denominator, either support from the various EU energy programmes or from the SEI to nurture their development. As yet, RES-E in Ireland remains largely at the level of an emergent nested energy regime within a carbondominated system. However, there are growing indications that it is set to play a more significant role in the future.

NOTE *

We would like thank Aveen Henry and Renee Marin at CPPU, UCC who were involved in the early stages of the current research, and to acknowledge the invaluable assistance of Brian Motherway at SEI without implicating him in the opinions expressed in this chapter.

REFERENCES Airtricity (2004), ‘Response to consultation document options for future renewable energy policy, targets and programmes’ (February), available at http://www. dcmnr.gov.ie/NR/rdonlyres/D5C1EDDD-F974-42AA-8298-918460D27550/0/ No1Airtricity.pdf. Baker, S. (1990), ‘The evolution of the Irish ecology movement’, in R. Wolfgang (ed.), Green Politics One, Edinburgh: Edinburgh University Press, pp. 47–81. Bell, M.M. (1998), An Invitation to Environmental Sociology, Thousand Oaks, London, New Delhi: Pine Forge Press. Bergin, A., J. Fitzgerald, M. Keeney, N. McCarthy, E. O’Malley and S. Scott (2005), Aspects of Irish Energy Policy, Dublin: Economic and Social Research Institute. Blok, K. (2006), ‘Renewable energy policies in the European Union’, Energy Policy, 34, 251–5. Bord na Mona (2001), ‘Peat for Energy’, available at www.bnm.ie/20061124040716_ peat_for_energy.pdf. Burgers, J., V. Ducos, H.C. Schneider and A. McCarthy (2005), SETREC-GO Digest Report of RES-E in Ireland, Delft: SWS Group, updated May 2005.

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CEC (2004), ‘The share of renewable energy in the EU, Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions’, COM (2004) 366 final, Brussels, 26 May. CEC (2007), ‘Ireland renewable energy fact sheet’, available at http://ec.europa.eu/ energy/energy policy facts en.htm. Central Statistics Office (2006), Energy and Energy Statistics in Ireland, Paper for the UN City Group on Energy Statistics, Central Statistics Office Ireland, p. 8. De Lovinfosse, I. (2005), How does EU Policy Induce Domestic Policy Changes? A comparison of renewable electricity policy changes in Europe, ECPR Joint Sessions of Workshops, Granada, 14–19 April. DCMNR (2004a), All-Island Energy Market: A development framework, Dublin and Belfast: Department of Communications, Marine and Natural Resources and Department of Enterprise, Trade and Investment, Northern Ireland. DCMNR (2004b), Renewable Electricity to 2010, Dublin: Department of Communications, Marine and Natural Resources in conjunction with SEI. DCMNR (2005a), All-Island Energy Market: Sustainability in energy supplies, a ‘2020 Vision’ for Renewable Energy, Dublin and Belfast: Department of Communications, Marine and Natural Resources and Department of Enterprise, Trade and Investment, Northern Ireland, July. DCMNR (2005b), All-Island Energy Market: Renewable electricity – a ‘2020 vision’, preliminary consultation document, Dublin and Belfast: Department of Communications, Marine and Natural Resources and Department of Enterprise, Trade and Investment, Northern Ireland. DCMNR (2006a), Towards a Sustainable Energy Future for Ireland: Green Paper, Dublin: Department of Communications, Marine and Natural Resources. DCMNR (2006b), ‘Launch of the Green Paper towards a Sustainable Energy Future for Ireland’, available at http://www.dcmnr.gov.ie/corporate+units/ virtual+press+room/speeches. DCMNR (2006c) ‘Renewable Energy Feed in Tariff’, available at http:// www.dcmnr.gov.ie/Energy/Sustainable+and+Renewable+Energy+Division/. DCMNR (2007), Delivering a Sustainable Energy Future for Ireland: White Paper, Dublin: Department of Communications, Marine and Natural Resources. Del Río, P., F. Hernández and M. Gual (2005), ‘The implications of the Kyoto project mechanisms for the deployment of renewable electricity in Europe’, Energy Policy, 33, 2010–22. Deloitte (2005), Review of the Electricity Sector in Ireland: Final Report, Dublin: Deloitte. Department of Social, Community and Family Affairs (2000), ‘White Paper on a Framework for Supporting Voluntary Activity and for Developing the Relationship between the State and the Community and Voluntary Sector’, available at http://www.welfare.ie/publications/naps/socincl/supporting_whitepaper.pdf. Douthwaithe, R. (2003), ‘Green Electricity: the need to consume and produce locally’, Construct Ireland, available at http://www.constructireland.ie/articles/021douthwaite.php. EREC (European Renewable Energy Council) (2004), Renewable Energy Policy Review, Ireland, Brussels: EREC, May.

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EU (1997), Energy for the Future: Renewable sources for energy – White Paper for a Community Strategy and Action Plan, Commission of the European Communities. Fitzgerald, J. (2002), The Irish Energy Market – Putting the consumer first, ESRI, Working Paper No. 145, August. Fitzgerald, J. (2003), Energy Policy in Ireland, ESRI, Working Paper No. 160, June. Flynn, B. (2007), The Blame Game: Rethinking Ireland’s sustainable development and environmental performance, Dublin and Portland, OR: Irish Academic Press. Garvin, T. (2004), Preventing the Future: Why was Ireland so poor for so long?, Dublin: Gill and Macmillan. Goodbody Economic Consultants (2001), Sustainability of Development: A discussion paper, prepared for the National Competitiveness Council, May. Howley, M. and B. Ó Gallachóir (2005), Energy in Ireland 1990–2003, Trends, issues and indicators, Sustainable Energy Ireland. IEA – International Energy Agency (2003), Energy Policies of IEA Countries – Ireland 2003 Review, Paris: OECD/IEA. IBEC – Irish Business Employers Confederation (2004), Options for Future Renewable Energy Policy, Targets and Programmes, Submission on Behalf of IBEC CHP/Renewable Energy Working Group. Komor, P. and M. Bazilian (2005), ‘Renewable energy policy goals, programmes and technologies’, Energy Policy, 33, 1873–81. McDonald, F. and J. Nix (2005), Chaos at the Crossroads, Kinsale, Ireland: Gandon Books. O’Neill, G. (2003), ‘Ireland’s alarming reliance on oil’, in R. Douthwaite (ed.), Before the Wells Run Dry: Ireland’s transition to renewable energy, Dublin: FEASTA and Lilliput Press, p. 27. O’Rourke, K. (2002), ‘Overview of energy trends, challenges and prospects’, in F. Convery and J. Feehan (eds), Achievement and Challenge: Rio + 10 and Ireland, Dublin: The Environment Institute/University College Dublin, pp. 554–69. Reiche, D. and M. Bechberger (2004), ‘Policy differences in the promotion of renewable energies in the EU Member States’, Energy Policy, 32, 843–9. REP (2004), ‘To catch the wind: the potential for community ownership of wind farms in Ireland’, available at http://www.feasta.org/documents/energy/ ToCatchTheWind.htm. RESG (Renewable Energy Strategy Group) (2001), Strategy for Intensifying Wind Energy Deployment, Dublin: the Stationery Office. Rowlands, I.H. (2005), ‘The European Directive on Renewable Electricity: conflicts and compromises’, Energy Policy, 33, 965–74. Schoen, L. (2002), ‘The Irish Free State and the electricity industry, 1922–1927’, in A. Beilenberg (ed.), The Shannon Scheme and the Electrification of the Irish Free State: An inspirational milestone, Dublin: Lilliput Press, pp. 28–47. SEI (Sustainable Energy Ireland) (2004), Updating the Renewable Energy Resource in Ireland, SEI Final Report, November. SEI (2007), Renewable Energy in Ireland: 2007 Update, Energy Policy Statistical Support Unit, Sustainable Energy Ireland, August. Smith, A., A. Stirling and F. Berkhout (2005), ‘The governance of socio-technical transitions’, Research Policy, 34, 1491–510. Taylor, G. (2005), Negotiated Governance and Public Policy in Ireland, Manchester: Manchester University Press.

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Verbong, G., E. van der Vleuten and M.J.J. Scheepers (2002), ‘Long-term electricity supply systems dynamics – a historic analysis’, ECN/Eindhoven University of Technology, October, ECN-C-02-084, available at http://www.sustelnet. net/documents.html. WDC (2005), ‘Review of the electricity sector in Ireland’, Western Development Commission Submission, available at http://www.wdc.ie/ WDCSubmissiontoReviewoftheElectricitySectorinIreland.html Wilson, A. (2005), ‘Is the government serious about renewable energy?’, The Local Planet – the Paper for Sustainable Living, May.

5. Spain: greening electricity while growing the economy Carmen Navarro* INTRODUCTION Over the past three decades Spain has experienced profound changes related not only to its democratic consolidation, but also to socio-economic modernization. The country has successfully gone through a process of territorial devolution, the building of a welfare state, integration in the European Union (EU) and a remarkable economic development. All this has transformed Spain so significantly that it would be unrecognizable to anyone who knew it 30 years ago. The lifestyle of Spaniards has also been altered. Patterns of behaviour and consumption and demands for well-being and comfort increasingly resemble those of Spain’s northern neighbours. As a consolidated democracy in a modern and changing society, Spain can now be safely compared with the rest of the EU. Its political institutions, administrative machinery and decision-making processes are not significantly different from those of other West European democracies, and its public policies have come to resemble those of other highly industrialized societies. Economically the country has enjoyed a bonanza over recent years in terms of sustained growth, relatively low inflation, and a reduction of unemployment that has allowed it to lessen the traditional gap that had separated it from its EU partners.1 Over a 20-year span, Spain’s per capita income has increased from 71 per cent of the European average in 1986, to more than 90 per cent of the EU-15 in 2005 (Piedrafita et al. 2006). Although Spain still lags a bit behind other members of the EU in certain economic and welfare dimensions, it can no longer be considered on the periphery of Europe. Europe no longer ends at the Pyrenees. With respect to energy, however, Spain still differs from the EU-15 countries in significant ways. With the exception of renewable energy (hydro, wind and solar power) and some low-quality coal, indigenous energy resources are very limited. Energy dependence is much greater than the European average – about 77 per cent in 2004, compared with 50 per cent for the EU-15 – and is on the rise (IDAE 2005). Energy demand per capita 130

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has traditionally been about half of the European average, but consumption is growing rapidly. In this context renewable energy and electricity generated from renewable energy sources (RES-E) have emerged as key factors in Spanish planning. Increases here are crucial, not only to reduce high import dependence, but also to reduce greenhouse gas emissions in relation to the Kyoto Protocol, and to reverse the overall non-sustainability of the present energy configuration. Let us first look at the general profile of the energy system in Spain.

ENERGY IN SPAIN Resources and Primary Consumption One of the most singular traits of the Spanish energy system is the strong dependence on imports. The country lacks indigenous fossil resources, having neither oil nor gas. As a result, approximately three-quarters of the energy supply comes from abroad. With this as a point of departure, several other factors contribute to what has increasingly become an unsustainable energy system. The first factor is a disproportionate weight of hydrocarbons in the energy basket (Table 5.1). Over 98 per cent of the oil consumed is imported. Some exploration for oil is taking place in two offshore areas: the Canary Islands and the Bay of Cadiz (Southern Spain). Even if these efforts persist (against considerable opposition from environmental groups) and are successful, they will only affect the overall balance to a small degree. The situation for gas is remarkably expansive. Spain has experienced the fastest-growing natural-gas market within the EU in recent years (IEA 2005). Between 1993 and 2002 consumption of gas increased 224 per cent, and all current predictions (and strategies) indicate that it will continue to expand. The use of gas to produce electricity is also becoming increasingly prevalent. As outlined in the governmental ‘Strategy for the Electricity and Gas Sectors: 2002–2011’ (Ministerio de Economía 2002), natural gas is the energy source that will see the highest immediate growth. The proportion of gas in total energy consumption rose from 17 per cent in 2004 to nearly 21 per cent in 2006 (IDAE 2007). Here too, however, most of the projected supplies come from abroad. Nearly 98 per cent of Spain’s natural-gas demand is currently met by imports, with 57 per cent from Algeria alone. Some experts have denounced the disproportionate reliance on one country to meet gas demand as too risky. Overall, the gas imports come via two international pipelines: the main channel from Algeria via Morocco and a secondary channel from Norway.

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Table 5.1 Consumption of primary energy by source, Spain, 2006 (per cent) Oil Coal Gas Nuclear RES

49 13 21 11 7

Source: IDAE (2007).

Even though coal represents only 13 per cent of primary energy consumption (see Table 5.1), it is the traditional local energy source in Spain. Similar to other EU members, Spain’s coal industry has struggled for decades to remain competitive vis-à-vis imported coal and other energy sources. The modernization and restructuring of the coal industry have resulted in a decline in production of about one-third between 1993 and 2002. But there has been no significant decline in production costs, which remain too high to be borne without state support. It has also been problematic for the government to phase out coal mining completely because many regions of the country are economically dependent on the industry. Previous attempts to reduce production in the sector have been met by intense strikes and riots. As for nuclear energy, there are currently eight reactors in the country at six different plants. At the end of 2006, the installed capacity of the nuclear plants amounted to approximately 20 per cent of total electricity production. Four nuclear plants have recently been dismantled according to the provisions of Act 40/1994. In this area the current government’s position has been to gradually substitute nuclear power for ‘more secure, cleaner and less costly’ sources of electricity.2 Although the government continues to negotiate the phase-out policy outlined in its electoral programme, the escalation in oil prices and Spain’s poor record on reduction of CO2 emissions stand out as strong arguments for considering a revision and/or postponement of the shutdown. This could, however, affect the delicate political balance of the governing situation, since such a policy (at the time of concluding the study) would be in conflict with the position of the United Left (Izquierda Unida), one of the supporting partners of the ruling Socialist Party in parliament. To complete the overview, renewable energy sources (RES) constituted about 7 per cent of the primary energy basket in 2006. Hydropower dominates renewable electricity production in Spain, providing half of the total RES-E output. As indicated below, however, wind power has

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more recently significantly increased its share of electricity sourced from renewables. The Electricity Sector: Its History and Current Situation For historical reasons ‘renewable electricity’ has always occupied a prominent position in the electricity market in Spain. As early as the 1920s there was a national policy with the goal of extensively exploiting the main rivercourses, and more than 80 per cent of electricity production came from hydropower plants with an installed capacity of 1154 MW. Plans to continue developing the hydroelectric sector were, however, halted – first because of the political instability of the 1930s and later by the Civil War (1936–9). Then, under the Franco dictatorship, Spain adopted a general model of economic development known as ‘autarchy’, a policy based on the conviction that the country had enough indigenous resources to develop its own economy, and that the borders should be closed to foreign goods, services or capital. The government determined, therefore, to rely on indigenous energy sources, primarily hydropower. This was in part due to political and economic isolation, but also reflected the fact that there were few other possibilities for developing energy resources at the time. The return to greater international interaction during the second period of the Franco era (1959–75) opened broad access to oil resources. The construction of hydroelectric plants continued, but the structure of the electricity system changed significantly. The share of electricity generated from hydropower fell from about 84 per cent in 1960 to 50 per cent in 1970. The oil crisis in the early 1970s incurred major changes in planning, although the consequences in terms of electric-power outputs were not perceptible until the following decade. The first years of the post-Franco era were thus characterized by increases in both nuclear and coal-fired plants. Between 1980 and 1986 five nuclear plants were opened, and the potential for further hydroelectric development approached full exploitation. In general, there was relatively little opposition to the development of nuclear power. The first plant had been built in 1968 under the authoritarian regime, when it was all but impossible to oppose the policy. The rest were built in the early 1980s in a period when numerous issues of fundamental importance for the emerging democratic regime dominated the political agenda. Throughout the 1980s, efforts were made to modernize and rationalize the electricity system. The utility Red Eléctrica Española (REE) was created as a public monopoly in charge of the transport and provision of electricity. This is also when consistent policies to support and foster the development of RES-E were presented. These were first introduced

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through the 82/1980 Energy Conservation Law (BOE 1981). It contained three basic goals: to reduce dependence on oil; to promote energy conservation and efficiency; and to promote renewable energy technologies. RES-E initiatives were promoted by three principal legal guarantees: access to the grid; purchase contracts with utilities; and a minimum guaranteed price (to be set annually by the national authorities). In addition, investment subsidies were to be used to improve the economic attractiveness of RES-E plants. It was also at this time that the National Agency for Energy (today’s IDAE (Institute for Energy Diversification and Saving: Instituto para la Diversificación y el Ahorro de Energía), then called Centro de Estudios de la Energía) was created and took the initiative for the construction of the first coastal wind farm near Cadiz in Andalusia (Mazinger Z). The IDAE also supported demonstration projects in both small-scale hydro and wind through direct investments (Dinica 2002). In 1994 a new electricity law was adopted, strengthening the special protection regime for renewable energy (BOE 1994). The guarantee on purchase contracts was expanded to a minimum period of five years. This led to a perception of reduced risk and reasonable profit for the sector, and strengthened an interest in RES-E among a large variety of economic actors. Finally, the legal framework for the sector was consolidated with the adoption of the Electricity Law of 1997 (BOE 1997). This law incorporated the EU’s Electricity Directive and initiated a liberalization process as of 1 January 1998. The Conservative government at the time actively supported the deregulation of the electricity sector, and consumers were able to shop freely for electricity as of 2003 (two years ahead of EU norms). As for renewables, the inclusion in the law of a 12 per cent growth target for RES-E by 2010, and the maintenance of active support programmes, led to an atmosphere of real investor enthusiasm. In 1999 a national strategy for the promotion of RES (SSPRE – Spanish Strategy for the Promotion of Renewable Energy) was approved by the parliament. It set specific targets to be reached for the different RES technologies, and was revised in 2005 to adjust the figures to the actual situation. Although RES-E had shown considerable growth, the 1999 strategy had failed to predict the growth in consumption. Halfway through its designated implementation period, increases in energy and electricity consumption had exceeded all projections. As a consequence, the revised 2005 strategy (SSPRE 2005) updated projections for electricity production and installed capacity, and adjusted the targets for the different technologies to accommodate the indicative target of the RES-E Directive: 29.4 per cent RES-E by 2010. Another important development in the electricity field has been the modernization of the grid, particularly the construction of transmission lines

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Spain

Table 5.2 Shares of electricity consumption by source, Spain, 2006 (per cent) Oil Coal Natural gas Nuclear RES

18.8

Hydro Wind Biomass Biogas Solar PV

7.0 23.0 30.1 19.8 9.7 7.5 0.8 0.7 0.04


to new power plants in Spain, as well as initiating a policy of connection to the grids of neighbouring countries. For the first time since the introduction of the electricity market in Spain, a power surplus of nearly 3000 GW was reached in 2004, with most of the excess being exported to Portugal. The technical interconnectedness with surrounding countries (France, Portugal, Morocco) is also increasing. If successful, this policy will end the structural condition of Spain as an isolated ‘energy island’. In 2006, as a result of the new policies and reforms of the system, the percentage shares for electricity production were roughly as follows: natural gas (30), coal (23), nuclear (20), oil (7) and total RES (19) – of which 9.7 per cent came from hydro plants and 7.5 per cent from wind farms (see Table 5.2). The trend in recent years has been for strong increases in natural gas and RES (principally wind), a slight decrease in nuclear energy, and, depending on levels of precipitation, fluctuating levels of large-scale hydro. The System Faces New Challenges One of the most pressing issues in the current Spanish energy landscape is a rapid rise in consumption, driven mainly by strong growth of the economy. Everything indicates that this trend will continue. Between 2000 and 2004 the annual growth rate in gross energy consumption was approximately 3.2 per cent. This rise has been even more acute in the electricity sector, with an average increase in demand of approximately 5 per cent per annum between 2001 and 2005 (Secretaría General de la Energía 2001–5). An overall growth in demand creates particular problems for Spain. First, it aggravates the structural situation of a strong dependence on oil and gas imports, and risks the goal of security of supply in a world of

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variable fossil prices and political instability in the leading import areas. Second, it increases CO2 emissions, when they have already risen above the level fixed by the Kyoto Protocol. The EU policy implementing the Kyoto Protocol allows Spain to increase its emissions by 15 per cent up to the target period (2008–12) compared to the baseline year 1990. The latest figure shows that Spain had already registered an increase of 48 per cent in 2006 (CCOO, World Watch Spain 2007).3 Finally – and of particular relevance for the RES-E target – all of the efforts and successes achieved through the promotion of RES-E production risk being negated due to increased demand. To understand the relevance of demand expansion we must look at several factors. The principal reason is surging economic activity and growth over the past decades, and particularly in the last eight years. Spaniards are today more affluent than at any time in modern history, and their appetite for income and consumption shows no sign of diminishing. It is interesting to note, for example, that the ‘motorization’ rate per inhabitant is higher in Spain than in the Netherlands, a much richer country, or that purchases of air-conditioning appliances have skyrocketed during recent years. The warm weather that traditionally curtails energy consumption during the winter is now fostering greater consumption in the summer. This is clearly manifested in figures for peak periods in electricity demand. Although air conditioning does not represent a particularly high percentage of total electricity consumption (less in households – more in the tertiary sector), it contributes to create peaks of demand in the warm summer months, putting the electricity system under considerable strain (IDAE 2007), and causing occasional blackouts. A larger share of household income is spent on energy and electricity than ever before, and the implications are relatively clear. Pressures on the energy system give rise to serious concern, with a clear need also to reduce demand growth as a primary goal of the energy-policy agenda. In addition to the economic dynamism driving the system, there are two other factors that also have played an important role in the overall RES-E situation: policies for determining electricity prices and immigration. The current trend in energy consumption might not have been so problematic if electricity prices had evolved in tandem with the economy. But policies to affect prices have not been used to contain the demand; rather the opposite. Electricity is cheap in Spain compared to the majority of countries in Europe. As the economy grew in the last decade, prices went down. After six years of price reduction between 1996 and 2001, electricity prices rose slightly between 2003 and 2005 (although below the inflation rate). In the past decade, 2006 was the first year in which the increase in electricity prices was above the consumer price index (a rate of

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4.5 for electricity prices and 3.7 for inflation). The Spanish government is responsible for controlling consumer prices and has been reluctant to increase them for fear of inflation, an area where Spain already ranks high within the euro zone. Any policy to promote reduced electricity consumption will, therefore, be very difficult to realize within a national scenario where consistent saving and efficiency campaigns have not existed until very recently, and where prices are not an incentive to limit consumption. Nor have there been (until very recently) any major efforts to inform citizens on the unsustainable nature of the current mode of electricity consumption. Odd as it may seem along another dimension, immigration, with a concurrent sharp jump in population, is also a significant factor affecting the expansion of energy consumption. As a consequence of its economic strength, Spain has attracted new residents, most of them coming from lessdeveloped countries. Initially, from 1990 to 1997, this was at a rate of 0.3 per cent of the total population per year; but the rate increased fourfold, to 1.2 per cent per year between 1997 and 2004. The statistics show a national population of 45 million inhabitants in January 2007, with 10 per cent foreign born. All of the approximately 4.5 million new residents are obviously energy consumers, probably not as ‘robust’ users as the indigenous population, but additional users nonetheless. When we look at projections from plans and strategies put forth in the late 1990s, we realize that this factor was not taken into account when predicting consumption. It is not surprising, therefore, that all calculations of current consumption have failed. Native Spaniards bear, of course, a major responsibility for the increased demand, since it has progressed with virtually no popular awareness of the limits of the Spanish energy system, but the failure to factor in the effect of increased immigration has compounded the problem. To complete the explanatory overview of the current electricity production structure and its trends, we must further consider the implications of the predicted effects of climate change for a Southern European country such as Spain, which has traditionally relied on hydropower as a major source of electricity. Although the share of hydro plants in the electricity basket has dropped over the decades, it still accounted (in 2006) for about 10 per cent of the total consumption. Rainfall has, however, been steadily declining over recent years. In 2005 the problem was particularly acute due to a severe drought which forced the government to decree restrictions on the watering of gardens and street cleaning. Even though the 2005–6 drought was of a temporary nature, predictions of global warming show a sustained decreasing trend in precipitation over the medium to long term, and give pessimistic scenarios for the country as a whole (Instituto Nacional de Metereología 2007). The contribution of hydropower to the

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energy system will thus have to be complemented by other sources of electricity. All of these factors contribute to a situation where the need to constrain electricity consumption is increasingly acknowledged as a major challenge to energy-policy planning and implementation. It is in this context that we must review Spanish efforts to implement the RES-E Directive.

IMPLEMENTING THE RES-E DIRECTIVE Given the factors outlined above, Spain stands out as a particularly interesting case with respect to the implementation of the RES-E Directive. When the Directive was adopted, Spain was already at a level of 20 per cent RES-E, compared with an EU average of 13 per cent. Most of this electricity came from large hydropower plants. In recent years, the country has remained above the EU average, but now its leadership is due to a remarkable expansion of wind power. With its 11 615 MW of total wind power installed by the end of 2006, the country ranked second in Europe, in both power capacity and relative growth (Spanish Wind Energy Association 2007). This has happened despite the many factors driving electricity consumption, and what appears to be a general lack of ‘sustainability awareness’ in the Spanish populace (Díez Nicolás 2004). To explore the current situation and its perspectives, we begin with a more detailed overview of the status of the most relevant RES-E technologies. As we shall see, each technology has its own characteristics and inherent logic of development. The Leading RES-E Technologies From 1999 to 2004 the total consumption of RES increased by roughly 2.7 million toe (ton of oil equivalent) per year, a remarkable growth – though not enough to achieve the projected targets by 2010. As indicated above, when the Ministry of Industry revised its policy for RES in 2005 so as to achieve overall targets of 12 per cent of total energy and 29.4 per cent of total electricity consumption, it set up new targets for each technology. For the electricity sector, only one technology had developed in a satisfactory way: wind. Small-scale hydro, biomass and solar developed too slowly to reach the targets. Especially for biomass – identified as a particularly important sector for increased production and installed capacity – urgent and substantive changes were required. The assessment made at that point was that wind and hydropower, in that order, were the technologies that had to be given greater weight in the

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Spain

Table 5.3 Evolution of RES-E installed capacity in Spain, 1990–2006 and targets for 2010 Year

Wind MW

Biomass MW

Small hydro (10–50 MW) MW

Small hydro ( 10 MW) MW

Solar PV MW

1990 1998 2000 2002 2003 2004 2005 2006 SSPRE 1999 targets for 2010 Revised SSPRE 2005 targets for 2010

8 835 2 292 4 891 6 234 8 155 9 928 11 615

106 142 150 285 329 341 366 409

2 767 2 858 2 858 2 878 2 878 2 897 2 910 2 938

1 003 1 509 1 588 1 667 1 722 1 770 1 788 1 819

3 9 12 20 27 37 51.9 118

8 974

1 897

3 151

2 230

144

20 155

2 039

3 257

2 199

400


RES-E promotional efforts. Biomass ranked far behind these first two, but with optimistic projections. Other technologies, although predicted to show important progress, could represent only small percentages in the total production numbers. Below we review the leading RES-E technologies, considering their evolution since 1990 and predicted expansion with respect to the promotional policies as presented in Table 5.3. Wind Wind is the major RES success story in Spain. By the end of 2006, installed capacity had reached 11 615 MW, which covered approximately 8 per cent of the country’s electricity demand. Only Germany ranks higher in Europe. This progress is primarily due to the remarkable wind resources the country has, together with very generous framework legislation providing direct investment support and feed-in tariffs. The maturity of the sector has also facilitated a high level of technology competition, and the total cumulative effect has led to higher profitability projections and greater attraction for private investment. There has been a sustained growth of wind power for more than a decade in Spain but the last years have been outstanding for the development of this industry (Table 5.4). It is expected that this trend will continue in coming years. By the end of 2004 – the halfway point of the period established in the first national

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Table 5.4


Growth in wind electricity production, Spain, 2002–6

Year

Wind electricity production, GWh

Annual growth (% change)

2002 2003 2004 2005 2006

9 257 11 720 15 753 20 377 23 372

26 34 34 29 15

Source: Spanish Wind Energy Association (2007).

strategy of 1999 (SSPRE 1999), wind power had already reached 91 per cent of the total target to be achieved by 2010. This led the authorities in the Ministry of Industry to revise wind-power figures and set more ambitious objectives for this technology. From a target of 8974 MW in the original 1999 plan the SSPRE 2005 included a new figure, 20 155 MW installed capacity by 2010. The IDAE estimates that the country’s net potential for this electricity source (including offshore installations) is approximately 40 000 MW. According to the Spanish Wind Energy Association (Asociación Empresarial Eólica – AEE), in terms of employment, the activity involved more than 35 000 jobs in 2006 and this figure is expected to double if the RES national strategy targets are achieved (Spanish Wind Energy Association 2007). However, two pending issues have to be resolved. The first is associated with the management of wind energy given its higher penetration in the electricity grid. The increase of production has been so spectacular that it has created technical problems in a grid that was not prepared to connect so much electric power from so many wind farms so quickly. The infrastructure for the uptake of new RES into the grid is alleged to be insufficient and must be expanded. In this respect, the system operator REE (Red Electrica Española) has acknowledged the claim and increased its investments in infrastructure over the past years. The second relates to offshore wind power, where the country has a huge potential, especially in Galicia and Andalusia. A number of high-potential locations are being surveyed. However, certain offshore installations have been met with opposition from local residents and organizations, so that the overall prospects for offshore are uncertain. Given the impact of the sector vis-à-vis Spain’s commitments under the Kyoto Protocol, the contribution of wind to the supply in the electricity

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market, and the rapid developments in technology, efficiency and profitability, everything points towards a sustained political support for further growth of wind power in Spain. Biomass Biomass is a field with an extraordinary potential in Spain, but with many barriers still hampering its development. There are at present only a few companies in the sector involved in the basic logistics of the electric-powerproducing process. Moreover, a lack of domestic demand in the area means that a considerable portion of the basic resources are actually exported to other countries. This is particularly the case for orujillo (a waste product from the olive oil industry). Spain, especially Andalusia, is very rich in this resource, but the absence of a logistically efficient, consolidated and profitable biomass energy alternative means that this wealth ends up being almost entirely exported to the UK. It is also the case for Spain (as for other EU countries) that the feed-in tariff supports are not enough to bring about a real take-off in this sector. The growth of installed capacity for biomass in coming years will only be possible if the feed-in tariffs attract new investors and the sector develops effective logistic solutions for collection and delivery to plants. The target set in SSPRE 2005 (Table 5.3) is ambitious, but an assessment after six years of implementation has led to a slight adjustment of the targets for 2010 with new and strengthened promotional measures. Small-scale hydro Electricity from small-scale hydro is not a key sector in the overall energy picture of RES-E in Spain. In 2006 the installed capacity was 1819 MW and the annual growth over recent years has been approximately 35 MW. According to the objectives of the SSPRE, electricity from this sector should grow at a steady pace over the next years, to reach 2199 MW by 2010. If the objectives of the plan are to be reached, however, administrative barriers and overly long processes to gain concessions will have to be amended or removed, and prices will have to be adjusted to ensure a stable premium. Solar photovoltaic Even though Spain, for obvious reasons, clearly has a strong potential in this area, development has not been as strong as for wind. The technology has, however, shown steady expansion in recent years, moving from roughly 12 MW in 2000 to 118 MW in 2006. The situation at present is characterized by a combination of factors that resemble the earlier situation for wind: adequate legislation, feed-in tariffs attractive for investors, easily

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accessible investment finance, direct public support, and tax incentives.4 The Spanish PV industry is also among the most developed at the international level. It is an experienced and organized sector with a strong association of private actors (Asociación de la Industria Fotovoltaica, ASIF), and with large companies such as Isofoton that contribute to make the sector highly interesting for the future. In 2006 alone nearly 64 MW were installed, representing a growth of nearly 123 per cent. This surge in PV has led the strategic actors to reconsider the SSPRE objectives. A working group has been created between the IDAE, ASIF and Ministry of Industry, which will revise the figures to be reached in 2010. RES-E from PV is, however, not comparable to wind energy in terms of total power potential. Even though the sector will grow and contribute to the indicative targets of the RES-E Directive, as shown in Table 5.2, it represents a relatively small share of the overall renewable target. Politics and Governmental Initiatives To date two different governments have been in power during the target period of Directive 2001/77/EC. The Popular Party (PP) ruled with a majority at the time of the adoption of the EU RES-E strategy. The Socialist Party (PSOE) won the general elections in March 2004 and replaced the ruling centre–right government that had held power for eight years. The centre–right government had implemented the policy of electricity liberalization, and had launched two major strategies in the energy sector that included specific actions for electricity: the SSPRE (1999) and the Spanish Strategy for Energy Saving and Efficiency 2004–2007 (SSESE 2004). Having had an absolute majority in parliament at the time, the government could adopt these policies with little or no dialogue with the other political forces. Lacking such a majority in parliament now, the sitting Socialist government has been forced to join forces with other parliamentary groups, most importantly the United Left (Izquierda Unida – IU) and the Republican Left of Catalonia (Esquerra Republicana de Cataluña – ER). This informal alliance has potential implications for energy issues since these two parties (especially IU) represent strong pro-environmental (and anti-nuclear) positions, and are thus well positioned to promote a strong RES agenda. It must be acknowledged, however, that energy issues have in general not ranked high on the agenda of the present or previous governments. When the PSOE came to power in April 2004, it devoted its first year to the implementation of several of the major points of its electoral programme: primarily foreign policy, education and ‘civil affairs’.5 Related to

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environmental issues, the Ministry of Environment adopted the first national allocation plan for CO2 emission rights (within the EU ETS) over the period 2005–7. The plan aimed at fulfilling Spain’s commitments under the Kyoto Protocol, hoping to improve the country’s poor emission record thus far. Although energy as such has not been the most salient of items on the political agenda, some issues have periodically arisen within the political game.6 The EU Directive 2001/77/EC was not fully transposed into the Spanish legal system until the Ministry of Industry issued Decree ITC/1522/2007 in May 2007 (BOE 2007). The norm will not, however, come into full legal effect until the question of ‘guarantee of origin’ of RES-E (Article 5 of the Directive) is clarified. As with other Member States, Spain lacks (as of August 2007) an appropriate governing mechanism to ensure the guarantee. Regardless of the delay in transposing this particular aspect of the norm, other policies have been put in place. In addition to the Spanish Electric Power Act (SEPA 54/1997, which establishes a framework for preferential treatment of RES-E), the government began at an early date to translate the Directive’s RES-E objectives into domestic policies. The main instrument has been the previously mentioned series of ‘strategies’, specifically the SSPREs of 1999 and 2005 and the SSESE of 2004, all drafted by the IDAE under the supervision of the relevant ministry (the Ministry of Economy from 2000 to 2004, and the Ministry of Industry from 2004 on) and subsequently approved in the parliament. In general, there are three main national programmes currently being implemented related to the promotion of RES-E: (1) the Spanish Electric Power Act 54/19977 (SEPA); (2) the Spanish Strategy for the Promotion of Renewable Energy 2000–2010 (SSPRE 1999 and SSPRE 2005); and (3) the Spanish Strategy for Energy Saving and Efficiency 2004–2007 (SSESE). In addition to these, the autonomous communities have also adopted strategies and instruments to promote RES-E within their domains, often with very clear objectives and means. All of these initiatives represent a relatively broad and diverse effort to realize the key goals of the Directive: support schemes to meet the indicative targets for RES-E consumption by 2010; the removal of administrative barriers to a more effective authorization of RES-E projects; and the removal of technical, economic and legal barriers to grid access for RES-E. The Spanish Electric Power Act 54/1997 (SEPA) Although it was enacted before the adoption of Directive 2001/77/EC, the legal framework established by the Act involves a special regime for RES-E initiatives below 50 MW. This includes guaranteed grid access and

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a premium for electricity from RES. It provides for two distinct electricity generation regimes: the so-called ‘ordinary regime’ and the ‘special regime’. Under the first, producers are paid for the energy they generate through a system of bidding via the market operator; under the second – which also covers RES-E producers – the price of electricity is set by adding the average market price to a fixed premium set by the government. In an attempt to increase cost efficiency of the scheme, the government introduced a new regime for marketing RES-E in 2004 (Royal Decree 436/2004). Under this system, RES producers can sell their power directly to the market, receiving the average market revenue plus differentiated premiums based on the prevailing market price. Strategies for Promoting Renewable Energy 2000–2010 (SSPRE 1999 and SSPRE 2005) Spain has chosen the instruments of ‘strategic plans’ rather than ‘governing laws’ to translate most of the obligations of the RES-E Directive. Drafted by the IDAE and approved by parliament, the SSPREs and their sub-documents are crucial to the task of analysing the different aspects of RES – and particularly RES-E – by identifying major barriers and outlining effective means to foster deployment. The many actions they define and specify have to be translated into individual instruments, either as legal enactments (for example, the periodic setting of feed-in tariff levels and budgetary dispositions for R&D projects), or through more decentralized political initiatives to abolish existing barriers. Even though the strategies and action plans themselves lack direct enforcement capacity, they serve nonetheless to establish principles, define broad objectives and, above all, provide predictability and confidence for long-term business planning and investment. The initial SSPRE of 1999 set a target of 12 per cent of Spain’s energy demand to be met from renewable sources by 2010. This was in line with the EU target put forth in the European Commission White Paper for RES of 1997, with biomass and wind as the principal designated technologies for achieving the RES-E goals. The revised SSPRE of 2005 was mainly justified by the ‘unexpected’ increase in demand for primary energy and electricity (see above). It also served to adjust the targets for the different technologies, on the basis of an assessment of their performance in the first half of the targeted period. This basically resulted in an increase of the projections for wind and solar energies, and a slight rise for the final figures for biomass (recognizing that this sector had managed to achieve only roughly a quarter of the plan’s original targets). Compared to the initial SSPRE of 1999, the 2005 version of the strategy aimed to almost double the volume of RES-E by 2010.

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The Strategy for Energy Saving and Efficiency 2004–2007 (SSESE 2004) Adopted in November of 2003, this plan addresses several pressing issues of energy policy: the extraordinary growth in demand of the previous years; the strong reliance on external, imported, sources of energy; the overall low efficiency of the sector; and high and increasing GHG emissions. Since growth in electricity consumption has emerged as one of the main obstacles to reaching the RES-E targets, this issue became increasingly crucial for implementation. Continuous annual rises in demand have offset the relatively positive increases in installed RES-E capacity. The proportion of RES-E thus remains the same now as for when the Directive was adopted. The main current targets are a reduction in primary energy consumption by 8 per cent in 2012 compared to the baseline year of 2004, with a focus on greater efficiency in the energy-producing, transport and construction sectors; and a decrease of 42 Mt CO2 emissions per year (roughly 12 per cent of the Kyoto commitment). The strategy estimates a need for €24 100 million of private investment and €2000 million of public funds to reach these goals. The strategy constitutes a meticulous and extensive study of the sectors, but does not in itself present specific implementation alternatives. The 2005 Action Plan to implement the SSESE is the executive tool for implementing the strategy, and it specifies measures to be taken, the sectors to be prioritized, and the public money to be invested (IDEA 2005). RES strategies adopted by the autonomous communities As earlier indicated, Spanish territorial power is strongly decentralized. The 17 autonomous communities have designated responsibility for energy planning and strategies in their domains. These activities are conducted independently, but are also expected to be more or less in accord with the overall national strategy from the Ministry of Industry. The strategies acknowledge a need to promote RES in general and RES-E in particular; to view constraints on consumption as a policy priority; and to work towards the EU targets set in the 77/2001/EC Directive. One interesting aspect of the regional strategies on RES is that when setting their own targets, the regions have been generally more ambitious than the national authority. In their plans and documents they tend to set higher targets than those set in the SSPRE. This has been the case particularly for wind power. If we add up the 17 targets each autonomous community has planned for its own territory, the total figure obtained nearly doubles the projections for the sector made by the central government (20 155 MW targeted in the revised SSPRE of 2005, and 36 916 MW with the additional initiatives of the 17 regional strategies)

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Table 5.5


National and regional targets for wind power by 2010, Spain

Andalusia Aragon Asturias Balearic Islands Canary Islands Cantabria Castilla y León Castilla-la-Mancha Catalonia Extremadura Galicia Madrid Murcia Navarre La Rioja Com. Valenciana Basque Country TOTAL

Installed capacity 2005, MW

Wind power in 2010, MW targets by autonomous community set in the regional strategies1

Wind power in 2010, MW targets by autonomous community set in SSPRE 2005

448 1 407 164 3 129 – 1 817 2 018 144 – 2 369 – 55 899 409 20 144

4 000 4 000 900 75 893 300 6 700 4 450 3 000 225 6 300 50 850 1 530 660 2 359 624

2 200 2 400 450 50 630 300 2 700 2 600 1 000 225 3 400 50 400 1 400 500 1 600 250

10 028

36 916

20 155

Note: 1 Some autonomous communities have not enacted their own programmes on RES and energy: Cantabria, Extremadura, Madrid. In these cases the figure given is the one included in the national strategies. Source: SSPRE (2005).

(Table 5.5). In this respect, discrepancies between the two levels of government illustrate an interesting general feature of the Spanish political system: a relative inefficiency in the coordination of initiatives in the autonomous regions. The capacity to coordinate regional policies vis-à-vis the national authority is still an unresolved issue in the political institutional edifice. But more important for the purposes of the present study is that these discrepancies create systemic uncertainties for investors. To the extent that an increase in RES-E deployment is dependent on an expansion and opening of the grid, doubts have arisen as to how much electric power the transmission authority will be willing and able to achieve. Will it be on the order of the 20 000 MW foreseen by the central government by 2010 in

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its SSPRE, or rather the nearly 40 000 MW envisioned by the autonomous communities? The economic aspect is also relevant here. Wind power has evolved so impressively in Spain due to the confidence that strong economic support has generated among private investors. This support is based on feed-in tariffs set up by the national government, which has the exclusive political power to regulate tariffs. The national strategy commits to funding targets it has itself established, but does not address what will happen if the regions exceed national targets. Will the extra MW be financed as well, and will the feed-in tariff system be maintained in the medium-to-long term? Will the situation contribute to a race among the regions to secure as large a proportion of the national target of 20 000 MW as quickly as possible, and thereby create conditions of uncertainty in the less ambitious regions? The Governance Framework for RES-E Promotion The governance framework for RES-E is characterized by a relatively complex interaction among diverse public and private actors, at both the national and regional–local levels. In the field of renewable energy, competences are shared between the national and the regional levels. The national (or ‘central’) government plays, however, a key role in the development of RES in so far as it is responsible for setting the national legal framework (through, for example the SEPA (Spanish Electric Power Act) and responsibility for implementing EU Directives), and for designing the overall national strategy for the development of RES. More importantly, the central authority controls one of the most effective tools for supporting this type of energy: the political power to fix the level of feed-in tariffs (FITs) for the different RES technologies. The current FITs for the various RES-E are presented in the Appendix. The role of the autonomous communities is, however, significant. They have increasingly proved to be key actors in the development of ecoelectricity. They are responsible for the authorization of industrial installations, including power stations and energy networks in their areas. Through their actions in this field, they can then speed up or slow down the degree of penetration of RES-E in the grid. Their energy departments have the authority over concessions for small-scale RES installations (less than 50 MW), thus providing strong influence on the timetable and growth of market shares. Their political vision has in this respect been a key factor behind the RES-E success stories in several of the autonomous communities, most particularly Galicia, Navarra and Castilla y León. Others – though strongly committed politically to RES-E support – have been more

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concerned with aspects of rigorous planning, environmental sensitivity and social consensus, leading often to temporary delays in installed capacity (Andalusia, Asturias, Cantabria). Within the central administration, a key actor in RES-E promotion has been the Institute for Energy Diversification and Saving (IDAE). Established in 1984, one of its main tasks is to draft, implement and oversee the governmental policy on RES. Given its financial autonomy, it played a crucial role in initiating investments in RES plants. Beside the traditional investments and soft loans used by most European energy agencies, IDAE was innovative and effective through its direct capital participation in companies specializing in RES investments in order to give confidence to investors. By engaging in this type of support, IDAE tried to promote a ‘replicability’ effect to speed up private investments to obtain an economically sustainable RES market (Dinica 2002). Additional to this role in promoting wind power, the agency also designed the SSPRE with specific targets for 2010 and major policy-support principles for each RES technology. Other key actors are the associations representing developers of RES plants. The RES Producers’ Association (Asociación de Productores de Energías Renovables – APPA) was formed in 1987 and is currently the largest association in this area with a membership of more than 200 companies, mostly in wind and small-scale hydro. The APPA played an important role in the gradual improvement of the investment climate for RES-E through effective lobbying and media campaigns. The spectacular growth of wind power has led to the creation of a specific association for the sector, the Wind Energy Association (AEE). The major focus of the AEE is to overcome barriers to grid access and achieve greater stability in the financial support system. A similar organization has also emerged for the solar PV industry, the Association for the Photovoltaic Industry (ASIF). In general, the developers of RES-E installations can be grouped into four major types of strategic actors: electricity companies, industrial corporations, finance institutions, and public agencies and bodies. All four of the major electricity companies (Endesa, Iberdrola, Union Fenosa and Hidroeléctrica del Cantábrico) have established subsidiaries specializing in the development of RES-E. The industrial companies and technological corporations entering the RES sector have very diverse industrial backgrounds (engineering, infrastructure, naval construction, aeronautics, and even ammunitions production). Financial institutions have also become strongly involved, mainly in wind power thus far, but to a lesser degree also in small-scale hydro and biomass. Their involvement has changed over time from the approval of loans for specific projects to the holding of ownership shares in companies specializing in wind-power investments. Public

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agencies, such as regional energy agencies and publicly owned regional development companies, are also very active investors in some regions. There are also a number of established manufacturing firms that have become involved in wind-power development. As for the environmental movement, two nationwide organizations have launched campaigns advocating RES. The Spanish affiliate of the World Wide Fund for Nature (Asociación de Defensa de la Naturaleza – WWFAdena) implements at the national level the parent body’s international campaign on climate change, and works for the spread of ‘smart-energy’ choices. Greenpeace also conducts national campaigns to foster RES-E alternatives. Development of wind energy has, however, also encountered the resistance of some local environmental and occupational groups protesting against the environmental and occupational trade-offs that wind energy implies (impacts on natural species, tourism, fishing etc.). The constellation of RES-E actors here described involves a network of interdependent actors, where progress towards the adopted goals and targets is dependent on synergy among them all. Central government, by structuring the general rules of the game through (for example) feed-in tariffs and the regulation of premiums as illustrated in the Appendix, is the foundation stone for the entire edifice. The autonomous communities, as guardians of what they feel can or cannot be done in their territories, have the key to open or close the door to the promotion of RES-E installations, particularly with respect to the pace of processing applications for concessions. RES commercial interests have gradually developed the potential for a fully competitive sector by creating the technology, innovating on numerous fronts, and building a robust indigenous manufacturing sector. They are in a position to demand stable framework conditions for the sector, with reasonable chances for return on investments. The greater their concentration and specialization in RES-E technologies, the stronger they have proved to be in the bargaining logic of the network. Interestingly enough (as we shall see below), it is often other business interests – those who feel their position threatened by RES-E deployment (for example, fishing and real-estate interests) – that pose the strongest barriers to regional and local deployment.

MEETING REGIONAL RES-E TARGETS: HIGHLIGHTING WIND ENERGY IN GALICIA AND ANDALUSIA As we have seen, among the RES-E technologies designated by the RES-E Directive, wind power has clearly been the front-runner in Spain. This is

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mainly due to the exceptionally positive wind conditions of the Iberian Peninsula, combined with a generous and stable system of feed-in tariffs. Coupled further with a high level of manufacturing maturity in the sector, this has triggered strong technological competition and expectations of reasonable returns on private investment. The development of the wind sector has not, however, been evenly distributed within the country. There has been a significant expansion of wind power in some regions (Galicia, Castilla y León, Castilla-la-Mancha and Aragón), while others (Madrid, Cantabria, Extremadura) have shown no growth in the area at all. In between these two extremes, there are certain autonomous communities that rank high, despite relatively limited territorial scope (Navarra, La Rioja); and others that lag significantly behind, despite extensive space and positive weather conditions (Andalusia, Catalonia). These differences in regional development point towards several possibilities for comparative research. To illustrate, we shall compare two autonomous communities where levels of development have been very different, despite a number of similarities in basic conditions. We first look at Galicia in the north-western part of Spain where the development of wind energy has been truly spectacular. Galicia is the territory with the highest amount of installed wind capacity: 2712 MW by July 2007, a growth from 2369 MW in 2005 (see Table 5.5). The region is thus in a strong position to reach the 3400 MW target that the national strategy has set for the territory for 2010. Galicia represents nearly one quarter of the total installed wind capacity in Spain, with a fourfold increase since 2000. The situation is somewhat different when we look at Andalusia, the second-largest autonomous territory in the country, with more than onefifth (87 268 km2) of the total Spanish land surface. Andalusia also has a very ‘wind-friendly’ geographical position, with widespread exposure to the major wind streams generated by the Straits of Gibraltar. By July 2007 the region had an installed wind capacity of 863 MW. The recent growth is significant, but Andalusia is still far from the 2200 MW target for 2010 set in the national strategy, and even further from the regional target of 4000 MW for the same year.8 A comparison of these two autonomous communities provides important insights into the conditions for promoting RES-E in Spain. As indicated, they are quite similar in basic conditions, so the question arises as to why they have progressed so differently. The assumption referred to by those promoting the development of RES-E is that it depends on two principal factors: the nature of the renewable resource itself, and the financial support available for RES-E generation. If both factors are present – and there are still clear differences in results – we must look for other contextual factors.

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As it turns out, the two principal factors are similar in the two regions. Both have strong wind potential in terms of natural conditions, and both have identical financial support systems. As pointed out above, feed-in tariffs are set nationally for the entire country, with no variation across the autonomous communities. The success of Galicia and slow progress of Andalusia must, therefore, be due to other factors. Galicia9 Starting with Galicia, wind installations here are spread throughout the territory in its four provinces. The sector has gone through a continuous growth since 1995, the year that the regional government enacted a ‘decree’ establishing the conditions for the development of the sector. The decree did not require a detailed wind map for planning and developing the sector, but it did stipulate the economic conditions promoters had to meet with respect to an economic return to the local communities, and a commitment to create employment in the region. Ten wind projects (Planes Eólicos Empresariales), covering broad territorial areas, were originally given concessions; and in 2001 the decree was modified to include the possibility that local governments could also apply for wind projects up to 3 MW, and that they could dedicate 30 per cent of the electricity generated to own consumption. The sites where the plants have been installed are predominantly ‘communal’; that is, owned by all the residents legally registered as living in the municipality. This means that when a wind farm is granted a concession within the municipality, the ‘rental fee’ paid by the developer is distributed equally among the inhabitants. The final amount each receives is small, but is clearly appreciated by the residents – and most probably serves as a small form of ‘compensation’ for the more negative aspects related to the farms (sight ‘pollution’ and noise). The first Galician wind projects were established (in the 1990s) in coastal areas where the wind currents are strongest. Later on the inland mountains were developed from the coast to the interior where the wind was less strong but more continuous. Applications for concessions were processed and granted with impressive administrative efficiency – so much so that some environmental organizations complained of the tempo. Several environmental NGOs regret the intense use of the Galician mountains for windpower installations, and have criticized the regional government for not paying greater attention to ecological values when managing the sector and issuing authorizations. They also argue that the heightened awareness of ecosystem conditions resulting from the local El Prestige disaster in 2002 would force the Socialist government to be more cautious and consultative in the further development of the sector.10

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In addition to these types of concern, Galicia also faces challenges of a more technological and economic nature. On the one hand, the region aims to increase its capacity from the current level of about 2700 MW (as of July 2007) to the 6300 MW envisioned by the regional plan for 2010. Strategies to increase the capacity will have to choose between continuing the spread of wind farms over the territory and replacing existing generators with new and more powerful turbines. The other alternative – development of offshore installations – has very little support in Galicia. The potential for offshore wind is high, but the Galician coast is also one of the richest internationally in terms of both ‘wild’ and farm fishing. Andalusia11 The general situation in Andalusia is very different. Interestingly enough, it was Andalusia that pioneered the development of wind energy in Spain. The first installation was set up in Cadiz in the early 1980s with the support and financial backing of the IDAE (called at that time the National Agency for Energy). The central government supported these initiatives and more plants were set up, primarily in the small area of the Trafalgar Cape–Gibraltar Strait. In the course of the 1990s, however, several types of difficulties appeared. The new turbines killed a number of vultures of the area, and there was an episode where rotor blades fell on a public road. In one sense these difficulties can be seen as problems of an ‘early adaptor’. Andalusia was paying for being a pioneer at a time when the technology was still underdeveloped, and farms were established in areas with poor advance scoping. Regardless, the result was a certain opposition among the local population with respect to the spread of the new technology. The criticism was fronted by some ecologists with access to political power, who managed to influence the relevant public agencies enough to make them deny permits and freeze the development of the sector. From being the leading region in installed capacity, Andalusia fell to the lowest levels of achievement within a few years. By 2002 these problems seemed to have been resolved. A Regional Strategy for Energy was enacted, and for the first time a map for windpower settlements was agreed in dialogue with environmental groups and other social and economic forces. Although the governmental colour of regional political leadership has not changed, the different elites have, and there is now considerable support for enlargement of the wind-power park. As it now stands, the only obvious limitation for future growth of RES-E from wind is the technical capacity for grid connection. More recently, however, an affair regarding offshore plans indicates that barriers still exist, and that the path ahead for the take-off of the sector is

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not as clear as it seemed to be a while back. In 2004 there were requests from important promoters to build 1000 MW of wind capacity off the Trafalgar Cape. Local fishermen and some local environmental groups fiercely opposed the initiative to the point that they managed to paralyse the administrative procedures for the authorization, and to make the regional government open a public hearing (foro eólico) on the application. The results of the hearing were presented in August 2005, and the conclusion was to stop the development of offshore projects until impact studies could demonstrate that both environmental and fishing concerns were adequately protected. The regional government openly declared that it would not support the offshore projects until a broad consensus was reached on the issue. The situation is, therefore, similar to ten years earlier, when a few groups managed to mobilize support against wind energy, and succeeded in hindering regional RES growth. Finally, two additional factors have contributed to the differing wind profiles of Andalusia and Galicia. Both are related to the ‘collective advantage’ enjoyed by wind in Galicia. In Andalusia, wind activity has been both highly concentrated in the single province of Cadiz, and also more directly related to property ownership. The first factor has resulted in a form of ‘bundling’ of wind energy with other developmental issues and earlier conflicts related to these; and the second has demonstrated a clear positive effect related to communal ownership of wind-farm sites (Galicia) versus a need to secure private-owned sites (Andalusia). The wind-power experiences of Galicia and Andalusia illustrate two crucial dimensions that condition the success or failure of RES deployment. One has to do with the level and type of local resistance to the innovation in question – in this case wind power, currently the most effective renewable of all the renewables. The other involves the factors that impinge on the political–administrative routines necessary to process and clear new concessions. In Galicia, an inherent situation of ‘communalism’, both across the different provinces and with respect to the ownership structure of potential sites, has contributed to both widespread acceptance of the wind-energy agenda, and relatively short and positive administrative routines. In Andalusia, on the other hand, the potential for development was more isolated among the provinces, more tied up with specific conflicts related to local development, and more dependent on difficulties related to acquiring private property for development sites. In the latter situation, relatively small groups of opponents have been able to isolate and influence administrative routines in a more negative direction. The lesson would seem to be relatively clear: technological potential and financial support are contextually conditioned.

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CONCLUSION A lack of indigenous energy resources, a high dependence on imported oil, an uncertain future for nuclear energy and a clear escalation in electricity demand – all have jointly influenced Spain in the direction of a national energy strategy based on a diversification of sources, with primary emphasis on natural gas and renewable energies. The policy started with the adoption of the National Strategy for the Promotion of RES in 1999 and the adoption of the Strategy for the Electricity and Gas Sectors in 2001, and has been carried through to the present with a number of revisions and additional policy documents. In many ways, Spain is in an optimal position to promote RES-E, particularly considering its long tradition and experience in the development of large-scale hydropower. In general we can conclude that the Spanish strategy on RES-E is in line with the overall goals and indicative targets of Directive 77/2001/EC. The summary overview of member state progress on the Directive (issued by the Commission in January 2007) is, however, only guardedly optimistic. Spain is placed in the second-most positive category of achievement; that is, those countries where ‘current developments provide a good opportunity to reach 2010 target’. As presented in the concluding chapter here, the summary assessment states that Spain has showed a strong increase in RES-E penetration, mainly due to wind energy. The country is also praised for its creative approach to grid integration of wind power; but the assessment nonetheless concludes that ‘the growth in electricity consumption overshadows the impressive level of renewable deployment’ (CEC 2007: 8). The challenge ahead, therefore, is not necessarily to revise the governing and market mechanisms already in place. The very generous framework legislation for RES-E, with direct investment supports and feed-in tariffs, the maturity of the sector, the high level of technology competition (especially in the wind and solar PV) – all these factors contribute to the development of efficient and stable conditions for wind and solar PV, with a need only for further ‘fine-tuning’. Larger uncertainties remain with respect to electricity generated from biomass, where the predictions are relatively ambitious, although the sector has clearly not experienced ‘take-off’. The most significant challenge, however, is to transform the progress made into clearer actual results with respect to the overall proportion of RES-E achieved. As clearly documented above, the figure was at 20 per cent in 1999 – and remains at 20 per cent in 2007. Stronger extra efforts must, therefore, be put into initiatives for both greater efficiency in the consumption of electricity, and more significant replacements of non-renewable electricity sources – particularly the growing dependence on natural gas. In short, Spain’s obligations as a

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result of the RES-E Directive come at a particularly difficult juncture in national–regional development: the need to reconcile a transition from relative economic deprivation to amazing economic growth in a context of increasing resource scarcity and ecological fragility.

NOTES * 1. 2. 3. 4.

5. 6. 7. 8. 9. 10. 11.

The author is grateful to Irene Vergara for her help in providing the databases and maps relevant to this study. An average growth of GDP of 3.2 per cent per year compared to 1.9 per cent for the euro zone. Source: http://www.realinstitutoelcano.org/materiales/insidespain/ Chislett030206 Newsletter.pdf The General Election Manifesto of the Socialist Party, 2004. In 2005 GHG emissions increased by 52 per cent. The first year to show a decline was 2006; this may indicate a reversal of the trend. More recently, IDAE has created programmes to promote the development of additional plants and other means to utilize this type of energy in Spain. To make this market segment more attractive, IDAE proposed a law in 2003 stating that companies employing or producing PV energy would be granted an income tax rebate of 5 per cent. The proposal also gave a 9 per cent tax break for any construction or installation that incorporates solar energy systems. Currently, IDAE has a budget of €12 million, solely to promote the construction of new PV energy plants. In the Spanish energy market, PV energy has proven to have the solid base and legislative backing needed for further growth and development. Key issues were the withdrawal of Spanish troops from Iraq, concessions on the draft text of the European Constitution to allows its approval, an Act for the Protection of Women (gender violence) and a reform to permit same-sex marriages. For example, the dismantling of nuclear power plants (number and rate) or political responsibilities during blackout episodes. It establishes a special regime for renewable energy sources, guaranteed grid access and a premium for electricity from RES. For further information and updated figures see http://www.aeeolica.org/mapaeolico/ index.html (in Spanish). This section is based on Instituto Energético de Galicia (2000a, 2000b). In November 2002 the single-hulled tanker Prestige, loaded with more than 77 000 tonnes of fuel oil, sank off the Galician coast and caused a major oil spill. It represented one of the worst ecological disasters ever recorded in Spain. This section is based on Sociedad para el Desarrollo Energético de Andalucía (2002 and 2003).

REFERENCES BOE (1981), Boletin Oficial del Estado, Ley 82/1980 de 30 de diciembre de Conservación de la Energía (Spanish Official Gazette on Energy Conservation – in Spanish), Madrid: BOE, 27 January. BOE (1994), Boletin Oficial del Estado, Ley 40/1994 de 30 de diciembre de Ordenación del Sistema Eléctrico Nacional (Spanish Offical Gazette on Spanish Electricity Regulation System – in Spanish), No. 0313, Madrid: BOE, 31 December.

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BOE (1997), Boletin Oficial del Estado, Ley 54/1997 de 27 de noviembre del Sector Eléctrico (Spanish Official Gazette on the Energy Sector – in Spanish), No. 0285, Madrid: BOE, 28 November. BOE (2007), Boletin Oficial del Estado, Orden ITC/1522/2007 de 24 de Mayo, No. 131, Madrid: BOE. CCOO (Comisiones Obreras) / World Watch Spain (2007), Evolución de las Emisiones de Gases de Efecto Invernadero (Evolution of the Emissions of Greenhouse Gases – in Spanish), available at: http://www.elpais.com/elpaismedia/ultimahora/media/200704/17/sociedad/20070417elpepusoc_1Pes.PDF.pdf CEC (2007), Communication from the Commission to the Council and the European Parliament. Green Paper Follow-up Action, Report on Progress in Renewable Electricity, Brussels, 1 January. Díez Nicolás, J. (2004), El dilema de la supervivencia. Los españoles ante el medio ambiente (The survival dilemma. Spaniards faced with the environment – in Spanish), Madrid: Caja de Madrid, Obra Social. Dinica, V. (2002), ‘Renewable energy policies in Spain’, in D. Reiche (ed.), Handbook of Renewable Energies in the European Union – Case studies of all Member States. Bern: Peter Lang. IDAE (2005), Plan de Acción 2005–2007 de la Estrategia de Ahorro y Eficiencia Energética (Action Plan 2005–2007 for the Spanish Strategy for Energy Saving and Efficiency – in Spanish), IDAE. IDAE (2007), Estrategia de Ahorro y Eficiencia Energética en España 2004–2012. Plan de Acción 2008–2012 (Strategy for Energy Saving and Efficiency in Spain 2004–2012. Action Plan 2008–2012 – in Spanish), Madrid: Ministerio de Industria. IEA International Energy Agency (2005), Energy Policies of IEA Countries. Spain 2005 Review, Paris: IEA. Instituto Energético de Galicia (2000a), Libro Blanco de la Energía en Galicia (White Paper on Energy in Galicia – in Spanish), Galicia: INEGA. Instituto Energético de Galicia (2000b), Situación Energética de Galicia en el 2003 (Energy in Galicia – in Spanish), Galicia: INEGA. Instituto Nacional de Metereología (2007), Estudio General de Escenarios Climaticos para España (General Report on Climate Scenarios for Spain – in Spanish), Madrid: Ministerio de Medio Ambiente. Ministerio de Economía (2002), Planificación de los Sectores de Electricidad y Gas. Desarrollo de las Redes de Transporte 2002–2011 (Strategy for Electricity and Gas Sectors. Development of Transportation Networks 2002–2011 – in Spanish), Madrid. Piedrafita, S., F. Steinberg and I. Torreblanca (2006), 20 años de España en la Unión Europea (20 years of Spain in the European Union – in Spanish), Madrid: Real Instituto Elcano. Royal Decree 661/2007 25 May, Spanish Official Gazette, May. SSESE (2004), Estrategia de Ahorro y Eficiencia Energética en España 2004–2012, (Spanish Strategy for Energy Saving and Efficiency – in Spanish), Madrid: IDAE y Ministerio de Economía. Secretaría General de la Energía (2001–5), La Energía en España (Energy in Spain – in Spanish). Sociedad para el Desarrollo Energético de Andalucía (2002), Seguimiento del Plan Energético 2001–2002 (Monitoring of the Energy Plan 2001–2002 – in Spanish), Andalucía: SODEAN.

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Sociedad para el Desarrollo Energético de Andalucía (2003), Plan Energético de Andalucía 2003–2006 (PLEAN 2003–2006) (Energy Plan for Andalusia 2003–2006 – in Spanish), Andalucía: SODEAN. Spanish Wind Energy Association (Asociación Empresarial Eólica) (2007), ‘Eólica 2007’ (Wind power 2007 – in Spanish), available at: http://www.aeeolica.org/ varios/AnuarioAEE_Eolica_2007_esp_b.pdf. SSPRE (1999), Plan de Fomento de las Energías Renovables 2000–2010 (Plan for the Promotion of Renewable Energy 2000–2010 – in Spanish), Madrid: Ministerio de Industria y IDAE, diciembre. SSPRE (2005), Plan de energias renovables en Espana 2005–2010 (Plan for Renewable Energy in Spain – in Spanish), Madrid: Ministerio de Industria, Turismo y Comercio y IDAE, 21 de julio.

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APPENDIX: SPECIAL REGIME FOR RES-E IN SPAIN IN ROYAL DECREE 661/2007 Source

Technology

Power

Solar

PV

P 100 kW First 25 years Thereafter 100 kW First 25 years P 50 Thereafter MW 10 P First 25 years 50 MW Thereafter First 25 years Thereafter First 20 years Thereafter First 20 years Thereafter First 25 years Thereafter First 25 years Thereafter

44.04 35.23 41.75 33.40

P 2 MW

First 15 years Thereafter 2 MWP First 15 years Thereafter P2 MW First 15 years Thereafter 2 MW P First 15 years Thereafter P 2 MW First 15 years Thereafter 2 MW P First 15 years Thereafter First 15 years Thereafter P 500 kW First 15 years Thereafter 500 kW P First 15 years Thereafter

15.89 11.79 14.66 12.35 12.57 8.48 10.75 8.07 12.57 8.48 11.83 8.07 7.99 6.51 13.07 6.51 9.68 6.51

11.53 0.00 10.10 0.00 8.21 0.00 6.19 0.00 8.21 0.00 7.27 0.00 3.78 0.00 9.77 0.00 5.78 0.00

First 15 years Thereafter

5.36 5.36

3.08 0.00

Thermoelectric Wind

Onshore

Geothermal Hydro10 MW Hydro 10 MW and 50 MW Biomass Energy crops

Agriculture residues

Forest residues

Biogas from sludge Biogas from municipal solid waste and other waste Manure

Period

Regulated Premium price c€/kWh c€/kWh

22.98 18.38 26.94 21.55 7.32 6.12 6.89 6.51 7.80 7.02

25.40 20.32 8.49

2.50 1.34 2.10 1.34

6. Finland: big is beautiful – promoting bioenergy in regional–industrial contexts Paula Kivimaa* INTRODUCTION Energy has long been an important topic in Finnish political discussions. Energy-intensive industrial production has strongly shaped the powergeneration sector, while the long distances between settlements and a cold climate have necessitated sufficient energy for transport and heating. Energy policy in Finland has been driven by the dual aims of maintaining a low price of electricity for industry and a diverse energy structure for securing supply. Dominant actors strongly believe in centralized electricity production by nuclear, coal-powered and natural-gas plants, although many smaller power plants utilizing peat and biofuels, primarily for heating, also exist. Sufficient power and heat generation have been paramount for the expansion of the Finnish forest industry during the twentieth century. The structure of the industrial sector and its by-products (suitable for producing bioenergy) have shaped the national energy system and energy policy. In 2005 the shares of renewable energy were 25 per cent and 27 per cent of the total energy and electricity consumption (Statistics Finland 2006). In 2003 Finland had the fourth-highest share of renewable energy and the highest share of biomass in the gross production of electricity among the EU-15 Member States (Statistics Finland 2004: 135). The relatively high share of renewable energy is based on the abundance of bioenergy resources and the technological development in the forest industry. Fortyfive per cent of the consumption of renewable energy (including large-scale hydro) is based on black liquor and other concentrated liquors that are mainly by-products of pulp and paper production processes. Different woodfuels contribute another 28 per cent to the overall proportion of renewable energy (ibid.: 47–8). Public policy has supported bioenergy for more than two decades. The initial reasons were primarily related to security of supply, especially 159

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following the oil crises of the 1970s. As early as 1979 the main goals for Finnish energy policy were a more efficient use of energy and an increasing use of indigenous energy sources, primarily peat and wood (Helynen 2004). Before the 1990s, however, wood was used only in small applications and it had few supporters in the energy and forestry sectors. The most significant developments occurred fairly rapidly over the past decade (Åkerman 2005). During the 1990s the focus on wood energy increased partly due to climate change concerns. Finnish energy policy has adopted a combined perspective on electricity and heating. The policy for sustainable energy is covered by three overarching policy programmes: the National Climate Strategy of 2001 (revised in November 2005 as the National Energy and Climate Strategy); the Action Plan for Renewable Energy Sources of 1999 (revised in 2002); and to a lesser extent the Finnish Government Programme for Sustainable Development of 1998 (revised in 2006). The Council of State (2001: 7) identifies the implementation of the energy-saving programme and the Action Plan as part of the task of reaching the goals of the Climate Strategy. The role of the different programmes for promoting sustainable electricity is discussed below. Finland’s target in the EU RES-E Directive is 31.5 per cent of electricity consumption from renewable energy sources by 2010. The target was mainly determined on the basis of the quantitative national aims for renewable electricity production, depicted in the Action Plan for Renewable Energy of 1999.1 Achieving the national target by 2010 requires an increase in the capacity to produce electricity from biofuels by 50 per cent (Suomi et al. 2004: 35). The national targets are based on specific production quantities, while the EU target is a share of consumption. Increasing electricity consumption – already 12 per cent for the period 1999–2004 (Statistics Finland 2005: 64) – poses a clear challenge for meeting the EU target.

THE NATIONAL ENERGY PROFILE: NUCLEAR, FOSSIL AND BIOENERGY Water bodies in Finland became an important source of electricity at the beginning of industrial production at the turn of the nineteenth and twentieth centuries. In 1955 over 90 per cent of Finland’s electricity was produced by hydropower (VTT 1999: 39). Steam power from wood waste in the pulp and paper mills played a relatively small part during the early twentieth century. In the 1950s hydroelectric plants began to meet increasing opposition from local communities, due mainly to a feeling that the level of compensation

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for disrupted fishing and farming activities was too low (Myllyntaus 1991: 142–3). The Water Act of 1961 made the construction and modification of hydroelectric plants subject to a licence, but achieved little in the way of addressing local concerns. At this juncture nuclear power was perceived as a way of ‘rescuing the rapids from hydropower’, and some Finnish environmentalists supported a speedy introduction of this new technology (ibid.: 143). Due to a limited capacity for harnessing waterways, and an increasing demand for electricity from industry, coal-powered combustion plants (using imported coal) became common during the 1960s and 1970s. Between 1961 and 1977 the production capacity of combustion plants tripled and, during the 1970s and 1980s, the main growth in the electricity sector occurred in large combustion plants (VTT 1999: 39). During the 1970s, fuelled by the two worldwide oil crises, security of supply became a major issue. Petroleum and coal were not major factors in the dominant energy system before the 1950s (Myllyntaus 1991: 178). The Finnish government and industry could relatively freely begin to promote nuclear power and power generated from domestic fuels (peat and wood) to reduce Finland’s dependence on fossil fuels. Technology employed by the forest industry to exploit by-products for internal heat and power generation was transferred and modified to the use of municipal power producers, so that they could substitute coal with other fuels (Midttun and Koefoed 2005). The use of peat, strongly fronted by the government-owned company VAPO, was greatly enhanced. The first nuclear power unit came on line in 1977, and three other nuclear plants have been built since. Combined heat and power (CHP) technology was developed industrially at a relatively early stage, and the oil crises of the 1970s contributed to a rapid expansion of CHP for district heating. In the early 1980s, domestic fuels and coal increasingly replaced heavy fuel oil in the production of district heat for homes and industry (Sulphur Committee 1986: 21). With the completion of a natural-gas line from Russia in the 1980s, gas also became part of the national fuel profile. During the 1990s natural gas replaced much of coal after modifications made in several thermal power plants, and new gas-fired plants were built. The share of natural gas was purposefully increased to diversify the energy structure, to reduce the sulphur dioxide emissions of coal-fired electricity generation and for economic reasons at the level of the firm. A deregulation of the electricity market in 1995 by the introduction of the Electricity Market Act significantly changed the Finnish energy system. The opening of the market was achieved by 1997, and competition was enhanced for both generation and supply. Electricity is now traded

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as a commodity. The spot markets operate through the joint Nordic Electricity Exchange, Nord Pool (with Norway, Sweden and Denmark). Approximately 18 per cent of electricity used in Finland was traded on the spot markets as early as 2001 (Hirvonen et al. 2003: 12). The spot prices are also reflected in the bilateral contracts negotiated between different electricity-market actors. The high share of hydropower is a special characteristic of the Nordic electricity market. In 2002 approximately 58 per cent of electricity generation (200 TWh) was hydropower from Norway, Sweden and Finland (Statistics Finland 2003: 26). In years of low hydro capacity for Sweden or Norway, such as 2003, the demand for power generated by other modes increases. Electricity, often generated by large coal-condensing power plants, is exported from Finland to Sweden – affecting the shares of different electricity sources in total production. Simultaneously, higher long-term market prices may encourage investments in new capacity, including renewable energy, and producers of multi-fuel plants are also able to purchase the more expensive biofuels. In years of abundant hydropower, the price of electricity decreases and makes investments in new capacity less desirable. Large coal-condensing plants are often used at peak load and shut down when the electricity price and demand are low. Capacity in the Nordic market has often exceeded demand and increasing the capacity would have been unlikely had the price level stayed low. The emissiontrading scheme initiated in 2005 was forecasted to create new investment proposals made profitable by the changed market costs (Koljonen et al. 2004: 33, 81). In 2005, Finland’s electricity generation was 67.8 TWh, of which 26 per cent was nuclear power, 14 per cent CHP and 16 per cent hydropower. The total consumption of electricity amounted to 84.8 TWh (Statistics Finland 2006: 66). Fifty-nine per cent of the imported electricity came from Russia that year (93 per cent in 2004), and Finland operated as a net importer in the Nordic electricity market (Statistics Finland 2006). The absolute consumption of renewable energy in Finland increased by 66 per cent between 1970 and 2005, while its share in total energy consumption stayed fairly constant. The increase is mainly attributed to a nearly fourfold increase in the use of industrial woodfuels, and a 150 per cent increase in the use of black liquor and other industrial liquors (Statistics Finland 2006). While the industrial uses of wood have enabled this development, Finland has also conducted a fairly vigorous bioenergy policy, including publicly supported research and technology programmes and energy taxation. Some believe that the development owes its success to the simultaneous occurrence of several different societal and material conditions, including inspiring demonstration projects, energy taxes, a

163

Finland 30 26

25

25 20 20

18

TWh

16 15

13

10 10

17

14

7

11

7

6

5 5

2

1 1

1

0.2 0.1

0

2005

2004

Source: Statistics Finland (2006).

Figure 6.1 Sources of electricity in Finland in 2004 and 2005 (in TWh of gross electricity production)

high-profile discussion of nuclear power, technological innovation and funding from the EU (Åkerman 2005). During 1990–2004 the amount of other fuels, mostly bio-based, increased from 5 TWh to 11 TWh and the share from 8 to 13 per cent. The development of other renewable electricity sources – hydro, wind and solar – has, however, been constrained for various reasons. The share of hydropower has varied between 11 per cent (in 2003) and 20 per cent (in 1993) of electricity consumption, mainly depending on rainfall. Natureconservation legislation limited further increases in hydropower materialized in 1987 through an Act to protect rapids. This regulated the construction of new generation capacity on 53 bodies of water. The protected waterways have been estimated to constitute about half of all unharnessed potential, while the other half is in boundary rivers with neighbouring states (Alakangas and Janka 2002: 8). Wind-power capacity has increased fairly rapidly, mostly in the coastal regions (Figure 6.2). However, the overall capacity and total investments are small compared to other types of power generation, and wind power accounted for only 0.2 per cent of electricity generated in 2005. The share

164


180 160

GWh (production)

140 120 100 80 60 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: Holttinen (2006).

Figure 6.2 Development of wind power in Finland, 1990–2005 of solar power is even smaller, with high connection and transmission costs as the most significant barriers (Kara 2004: 85). Conditions for grid access and distribution costs have also created problems for wind power (Vartiainen et al. 2002: 79). In addition, local groups in some regions strongly oppose wind power for aesthetic and noise reasons. The Finnish energy system is characterized by a multi-fuel base, where (in addition to hydro) only peat and wood are domestically available. There is dependence on importing coal, uranium, natural gas, oil and even electricity. Fairly abundant biomass resources and the technological development of the forest industry have enabled a high share of bioenergy. The electricity network is largely centralized, while for heat there is an extensive district heating system in larger towns. Companies operate in the deregulated Nordic electricity market, which means that the Finnish energy system is also affected by the other Nordic energy systems.

STRATEGIC ACTORS IN THE ENERGY SYSTEM Finland is a unitary state with a fairly decentralized state structure. Many powers have been delegated from ministries to agencies. There is a strong tradition of relatively autonomous municipal governments, protected by

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the Constitution (Pollitt and Bouckaert 2000: 239). Regional councils, as statutory joint municipal authorities, are responsible for regional planning and interests under the principles of local self-government. Electricity transmission and distribution are subject to a licence from the state Energy Market Authority (EMV). Only one operator is allowed for the national transmission network and one for each regional distribution network. Both municipal actors and private companies can produce and supply electricity. Production is subject to different licensing processes, with municipalities deciding on land-use planning and construction permits, and environmental permits are allocated by regional environment centres or national environmental permit authorities for power plants over 50 MW. No licence is required to supply electricity. The rights to use natural resources and import fuels are not limited by the Constitution. Utilization of natural resources is subject only to ownership and environmental legislation. Political Parties and RES Three political parties – the Centre Party (CP), Social Democratic Party (SDP) and National Coalition Party (NCP) – have dominant positions in Finnish politics, each with about 20 per cent of the votes. Also the LeftWing Alliance (LWA), the Green League (GL) and the Swedish People’s Party (SPP) participate actively in political discussions and elections. A vote in parliament on 22 May 2002 – approving the construction of a fifth nuclear reactor in Finland – was a significant political turning point in national energy policy. The new reactor was planned to be in use by 2008, but has been delayed due to difficulties in construction. Party positions on the issue differed markedly in terms of their goals to increase renewable energy, nuclear power or both. The Green League (GL) is the strongest supporter of renewable energy. Its platform is to promote renewable energy through environmental taxation, to promote greater energy efficiency, and to strongly oppose nuclear power (Green League 2004). The GL withdrew its members from the government when the parliament accepted the plan for building the fifth nuclear reactor. The LWA also supports renewable energy and energysaving activities (Left-Wing Alliance 2005). Of the three dominant parties, the National Coalition Party is most in favour of increasing Finland’s nuclear power capacity, which it considers important in reducing CO2 emissions and guaranteeing both security of supply and a low electricity price (National Coalition Party 2002). The NCP also supports RES in order to have a versatile energy mix, and places strong emhasis on R&D for future technologies.

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The Centre Party, representing primarily the interests of the rural districts, was fairly evenly divided on new nuclear power. Energy policy was not featured in its platform before 2006, but its focus on rural development has led to an active support profile for biofuels and peat. As a lead party in the development of a new Energy and Climate Strategy in 2005, the party suggested reduced electricity taxes, a re-examination of the legislation limiting hydropower construction and continued support for bioenergy and peat (Leppä 2005). As for the Social Democratic Party, it failed to muster a consensus in either direction on the nuclear power vote in parliament. The party position on energy policy states that RES needs investment and tax support, but only as part of a diverse energy structure rather than a specific future direction in its own right (SDP 2002). In general there is relatively little variation on energy issues among the dominant parties. Nearly all parties agree on the issues of security of supply and market-regulated energy prices. Renewable energy is primarily viewed as a necessary aspect of creating a diverse energy supply. Table 6.1 lists the eight main parties and summarizes their views on renewable energy. Governmental and Public Organizations The Ministry of Trade and Industry (MTI), from January 2008 the Ministry of Employment and Commerce, carries the main responsibility for energy policy. MTI also has activities related to national technology policy, and it coordinates the National Climate Strategy. The Energy Market Authority (EMV) and the Finnish Funding Agency for Technology and Innovation (Tekes) are supervised by the MTI. The EMV aims to promote healthy and efficient competition in the electricity and natural gas markets, and to secure reasonable and equitable service principles in network operations. Tekes is the main public financing and expert organization for research and technological development. Its primary objective is to promote the competitiveness of Finnish industry and the service sector. It funds several programmes and projects for developing energy technologies. The Technical Research Centre of Finland (VTT), also supervised by the MTI, is the main public research institute conducting research on energy technology, markets and policy. Finland’s environmental administration comprises the Ministry of the Environment (MoE), the Finnish Environment Institute (SYKE), 13 regional environment centres, three environmental permit authorities and part of the Finnish Forest and Park Service (Metsähallitus). The environmental administration covers energy issues in relation to environmental protection, land-use planning, water-resources management and

167

Finland

Table 6.1 Finnish political parties, their position and stand on renewable energy Party

Seats in Position parliament

Centre Party

51

National Coalition Party Social Democratic Party Left-Wing Alliance

50

17

Green League

15

Swedish People’s Party Christian Democrats True Finns

Stand on renewable energy

7

Government Previously no specific stand on (8 seats) RES. Recently emphasis on transport biofuels Government Nuclear important, RES a small (8 seats) addition Opposition RES needed but no specific emphasis Opposition Energy saving a priority but RES also needed Government More change towards RES (2 seats) needed Government Technology development for (2 seats) clean energy Opposition Local importance of RES

5

Opposition

45

9

No comment on RES

Sources: Comments on the National Climate Strategy 2001 and party platform have been the sources for party stands on RES. National Coalition Party (2002), SDP (2002), Green League (2004), Left-Wing Alliance (2005), Leppä (2005).

international climate change negotiations. Some energy-related research is carried out by SYKE. The MoE has, together with the regional councils (representing the municipalities), mapped the most feasible areas for wind-power construction. The work is based on Finland’s ‘National Land-Use Guidelines’ stating that the best areas for wind power should be indicated in regional land-use planning, and that wind power should primarily be concentrated in wind parks (Council of State 2000: 22). Finland’s environmental administration and the Ministry of Agriculture and Forestry (MAF) are linked through water-resources management. The MAF has a department of rural areas and natural resources, the leading water-resources authority, and it guides the regional environment centres and SYKE in water-resources management. The MAF is also involved in the management of natural resources (for example peat and wood), aiming to create and maintain conditions for their sustainable and diversified use, and allocating support for growing bioenergy crops.

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Decisions concerning the licensing of power plants are made by the 13 regional environment centres and the environmental permit authorities, depending on the size of the plant. Some regional centres have specific energy-related expertise. In 1997, 15 regional employment and economic development centres (TE centres) were established, merging the previous regional units of MTI, MAF and the Ministry of Labour. These centres allocate funding from the ministries to renewable energy ventures, support small and medium enterprises, and promote rural economies. Energy Companies and Other Industrial Actors Finnish industry has been an important actor in national energy policy. The relative share of electricity consumption by industry is higher in Finland than in other Nordic countries. During the last three decades the industry’s share of electricity consumption has been over 50 per cent, and the forest sector has been the most significant user with approximately 30 per cent. The goals of industry to achieve low electricity prices and security of supply have driven the growth of nuclear power, and served to maintain coal in the power-supply mix. Simultaneously, advances in technologies used by the forest industry, supported by national R&D activities, have enabled increasing use of bioenergy. The forest industry uses advanced methods to generate electricity and heat from the by-product liquors and wood waste of chemical and mechanical pulp manufacture. In Finland there are approximately 120 electricity producers and vendors operating in relation to 550 power plants. The market is dominated by two major corporations, Fortum (40 per cent) and Pohjolan Voima (PVO) (23 per cent), and the numerous separate producers of the distribution companies (21 per cent). Power plants owned by industry amount to 16 per cent of generation capacity (Energy Market Authority 2007). Fortum is a company with 51 per cent state ownership, and its activities cover generation, the distribution and sale of electricity and heat, the operation and maintenance of power plants and other energy-related services. It was formed in 1998 by the merger of two state-owned companies: the electricity producer Imatran Voima (IVO), established in 1906, and the oil company Neste, established in 1948. Fortum has carried out research and product development in biofuels for transport and heating. In 2006, the share of renewable energy in Fortum was 40 per cent of power generation. Fortum supports the National Climate Strategy, stating that a large share of the GHG emission reductions should be pursued through the use of renewable energy and more efficient use of energy (Niininen 2001). It is an influential actor in Finnish energy policy and an active participant in the

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national research and technology development programmes. In 2005 the petroleum operations were separated from the rest of the company to form ‘Neste Oil’. Pohjolan Voima (PVO), mainly owned by industrial companies and municipalities, produces electricity and heat to its shareholders at cost price. PVO was formed in 1943 by Finnish forest-industry companies to safeguard the energy requirements of the industry and to counterbalance the state’s power company IVO, whose position was feared to become too strong without competition (Hoffman 1993: 7). During the 1950s and 1960s PVO constructed several hydroelectric plants mainly in the Lapland and Oulu regions. In 2006 the electricity generated by PVO in its own power plants and purchased from the market comprised: nuclear power (40 per cent), hard coal (25 per cent), natural gas (5 per cent), hydropower (18 per cent), peat (4 per cent), oil (1 per cent) and wind power (0.5 per cent) (PVO 2008). PVO has a proactive strategy towards RES, owning or part-owning 85 per cent of Finland’s new bioenergy plants and 9 per cent of the wind-power capacity.2 VAPO, 50.1 per cent government owned, started out as a procurer and supplier of firewood for state institutions in 1940. It produces peat and biofuels, operates power plants utilizing local energy sources and develops environmental technology. VAPO is an influential actor in supplying biofuels and has a wind park in North Ostrobothnia. It lobbies strongly for the use of peat in energy production. The energy sources of the municipal power producers differ regionally. In most rural locations, peat and wood have an important role, because they are seen to benefit the local economy. The production of bioenergy has been particularly subsidized in regions of high unemployment (Midttun and Koefoed 2005). In 2004 utilities were the largest owner of the existing wind-power capacity with 54 per cent (Holttinen 2005: 11). Suomen Hyötytuuli Oy, established in 1998 and owned by the energy companies of nine large cities, is the largest utility-owned wind-power company. The Association of Finnish Energy Industries (ET), the Confederation of Finnish Industries (EK) and the Finnish Forest Industries Federation (FFIF) are significant economic interest groups influencing energy policy. ET represents over 200 member companies in power and heat generation, procurement, transmission, distribution and sales covering most of Finland’s electricity sector. It was formed on 1 January 2005 by a merger of formerly separate organizations. Smaller associations supporting wind power, bioenergy and peat also exist. The energy sector’s views on renewable energy are fairly positive, especially regarding bioenergy. Many industrial actors feel, however, that nuclear power and coal are needed to satisfy future electricity demand and low prices.

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Positions differ with respect to the promotion of renewable energy policy. While many perceive public R&D efforts as important, the use of energy taxation and investment support is more controversial. In general the industry has been non-supportive of promoting sustainable electricity through taxation (for example Sairinen 2000: 207), while support for green electricity certificates is more favoured. The forest-industry cluster has been a major driving force of national economic development and, in environmental policy, the most important policy issues related to the choice of energy forms have had close connections to forestry (Sairinen 2000: 88). While the branch has driven the increase of nuclear power, it has simultaneously actively promoted the expansion of energy production from biofuels (for example Åkerman 2005). The branch has had concerns about the long-term availability and the price of wood (Karesuo 2001), feeling that increased demand for woodbased energy could reduce the raw material available for wood products. The forest sector has stated that the options of electricity production presented in the National Climate Strategy are too one-sided (ibid.), because there are only two future scenarios based on either natural gas or nuclear power. The development of domestic technology has played a role in the types of technology available for energy development in Finland. Ahlström (now part of Foster Wheeler and Andritz) and Tampella (now part of Aker Kvaerner) were two large Finnish technology firms actively developing boiler technology for the combustion of biofuels. In 1979 Ahlström first demonstrated the Pyroflow boiler, the first circulating fluidized bed combustion (CBF) boiler in the world (for example Teppo et al. 2003). It could be used for combusting woodfuels and coal. During the 1970s and 1980s, other technologies under development included recovery boilers that could combust energy from black liquor (a pulp industry by-product) more efficiently and with less emissions. Alternative solutions were developed by both Ahlström and Tampella over the years. The companies have formed R&D networks with universities, consultant companies and pulp producers, creating technologies that have been adopted worldwide. The Finnish initiative, with two major technology developers cooperating on joint projects and research programmes, is unique in a global perspective, and has created a very positive competitive situation within Finland on basic knowhow (Kivimaa and Mickwitz 2004). In contrast, however, only two small companies develop wind turbines in Finland: WinWind and Windside Ltd. In 2004 only 11 per cent of the Finnish wind-power capacity was developed by Finnish companies (Holttinen 2005: 9–10).

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Environmental NGOs Six main non-governmental organizations deal with environmental issues in Finland. Three of them are Nordic or Finnish divisions of international organizations: Greenpeace Nordic, Friends of the Earth Finland and WWF Finland. The Finnish Association for Nature Conservation (SLL), the Finnish Nature League and the Finnish Society for Nature and Environment (NoM) have all started from the premise of nature protection, but have some activities related to renewable energy. All the NGOs seem to agree that the National Climate Strategy is too limited, and that renewable energy should be more forcefully promoted (Finnish Association for Nature Conservation 2001; Greenpeace Nordic 2001; Luukkonen 2001; Savikko 2004; Soini 2001). Some national committees preparing policy recommendations, such as the ‘Second CO2 Committee’, have included representatives from the NGOs during the 1980s and 1990s. Yet in some issues, such as the preparation of energy taxation during the 1990s, the role of the NGOs has been smaller (Sairinen 2000). In sum, many of the key energy actors in Finland have taken a fairly neutral stance on renewable energy. They are in general supportive, but not at the cost of disrupting the existing centralized and diverse energy system. Support for bioenergy research and technological development in particular has excelled through common efforts from industry and public organizations at the central and municipal levels. The views of individual firms vary. While some of the larger energy companies have initiated significant renewable energy ventures, they still support the centralized system through their active support for nuclear energy. The general tendency appears to be a qualified support of renewable energy – as long as it doesn’t cost too much or disrupt the stable and predictable features of the dominant energy system.

GOVERNMENT INITIATIVES, PROGRAMMES AND POLICIES PROMOTING RES-E The Ministry of Trade and Industry (MTI) is responsible for implementing the RES-E Directive in Finland, and has coordinated the national strategies promoting renewable electricity. In its report in compliance with the RES-E Directive, the MTI (2003a) identifies the National Climate Strategy of 2001 and the Action Plan to Promote Renewable Energy Sources of 1999 as incorporating the measures fulfilling Finland’s indicative target.

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The National Climate Strategy and the Action Plan for Renewable Energy The National Climate Strategy of 2001 outlined the national effort to combat climate change and to reach the targets set in the Kyoto Protocol in 1997. The commitment of Finland, within the EU commitment to collectively reduce the emissions of Member States by 8 per cent, is to reduce GHG emissions to the level of 1990 by the period 2008–12, that is 76.5 million tonnes of CO2 equivalent. RES will be essential to meet this target, and thus plays an important role in the strategy. The strategy outlined, however, only two future scenarios, where the principal energy sources are either natural gas or nuclear power. Furthermore, the strategy did not factor in the emission-trading system or other Kyoto mechanisms. The strategy was revised during 2004–5, involving several ministries, and a new National Energy and Climate Strategy for implementing the Kyoto requirements was presented to parliament on 24 November 2005. The strategy aims to meet the Kyoto target by (mainly) continuing domestic investments in bioenergy, and using the Kyoto mechanisms. An assumption is made that the emission trading will significantly improve the competitiveness of RES, and that it is thus not necessary to put forth new promotional measures (Council of State 2005). The Environmental Impact Assessment of the strategy states that the measures are fairly mild and will not lead to significant changes in production or consumption (ibid.: 44). Members of the parliament representing the opposition have criticized the strategy for short-sightedness and lack of concrete measures. The strategies are portrayed, in short, as primarily plans for meeting the Kyoto targets, not as longterm blueprints for an alternative, more energy-efficient society.3 The first Action Plan for Renewable Energy was prepared in 1999, and, when the National Climate Strategy was approved, the plan was integrated into it. It aimed to increase the share of RES, making the new technologies more competitive on the open energy market. The Action Plan was revised in 2003, and now includes new targets based on an evaluation of the first plan (Electrowatt-Ekono 2003) and on the decision-in-principle by the parliament in 2002 to permit the construction of a fifth nuclear reactor. Its target is to increase the use of RES by 30 per cent between 2001 and 2010. A longer-term vision is to raise the usage of RES by twothirds of its 2001 level by 2025. Depending on what fuels will be replaced, it is estimated that the CO2 emissions will be reduced by approximately 4.5 to 5.5 million tonnes (relative to the basic scenario for 2010) (MTI 2003b). The Action Plan suggests a variety of instruments, including the development and commercialization of technology, energy taxation and investment support, and information dissemination, expected to cost the state

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€120 million per year. These are mainly instruments already in use. Also the elimination of administrative obstacles and the use of influence and cooperation within the EU are identified as significant measures. Some of the obstacles have already been removed by acknowledging wind power in regional land-use planning. The new Action Plan for Renewable Energy 2003–6 entered into force in 2005 when the revision of the National Energy and Climate Strategy was completed. Policy Instruments for Promoting RES-E The Act on Certification and Reporting of the Origin of Electricity (19.12.2003/1129) requires electricity sellers and power plant operators to report the origin of electricity. A Council of State Decree (30.12.2003/ 1357) based on the Act gives more detailed conditions on it. These regulations implement some of the requirements of the RES-E Directive in Finland. In 1990 a carbon tax for energy was introduced in Finland, and subsequently changed many times. In 1994 a combined carbon and energy tax was created. In 1997, the tax on electricity production was switched to consumption while the taxation of heat energy continued to be based on the carbon content of the fuel (see for example Määttä 2000; Vehmas et al. 1999). The level of energy taxation has been relatively low, and there have been exemptions regarding certain fuels and sectors. A tax rebate to energyintensive companies has also been a part of the energy-tax system.4 Finally we can mention that the environmental goals of the Finnish energy tax have been criticized for being too vague and unambitious, with the revenues being mainly used for fiscal purposes (for example Määttä 2000). Table 6.2 shows the Finnish electricity tax rates during 1995–2007. During 1990–6 the production of electricity was taxed similarly to heat energy. With technological investments requiring decades for reasonable payback, and contracts for fuel supply potentially lasting many years, the period was simply too short for significant changes to occur. A working group report from the Economic Council (2000: 46–7) states: ‘Because the fuels for electricity production are untaxed in the current system and in 1990 their tax was fairly small, taxation within this form of examination has no effect on separate electricity production.’ The report also estimates that, for heat generation, the energy tax has partly influenced the replacement of coal and heavy fuel oil with natural gas and wood. Thus the carbon-related energy tax on heat production shows that taxation can promote change towards more sustainable energy forms. The Council of State (2005: 29), however, proposed in the new Energy and Climate Strategy a reduction in the electricity tax for industry, and a removal of direct price supports for electricity produced from

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Table 6.2


Finnish electricity tax rates, 1995–2007

Energy tax for: Electricity consumption (domestic) c/kWh Electricity consumption (industrial) c/kWh Electricity production nuclear power c/kWh Electricity production hydropower c/kWh Imported electricity c/kWh Coal €/tonne Peat €/MWh Natural gas c/Nm3 Tall oil c/kg

19951

19972

1998

2002

2003

2007

0.56

0.56

0.69

0.73

0.73

0.24

0.34

0.42

0.44

0.22

33.39 0.82 1.40 4.34

33.39 0.82 1.40 4.34

41.37 1.51 1.73 5.40

43.52 1.59 1.82 5.68

43.52 n/a 1.82 5.68

0.40 0.06 0.37 19.52 0.59 1.88 3.12

Notes: 1 The tax rates for coal, peat, natural gas and tall oil applied to production of both electricity and heat energy; other sources such as wind and biofuels were exempted from the tax. 2 The tax rates for coal, peat, natural gas and tall oil applied to production of heat energy. Electricity was taxed on the consumption side. Subsidies are given for the production of electricity from some renewable sources, inc. wind 0.69 c/kWh, biofuel, hydropower under 1 MW and peat under 40 MW 0.42 c/kWh. Source: www.finlex.fi (Act on Excise Tax on Electricity and Certain Fuels).

industrial by-products, due to the emission-trading system. The electricity tax for industry was cut by half in 2007. The Act on Excise Tax on Electricity and Certain Fuels provides conditions for direct price support for some sustainable electricity forms. The idea is to compensate the switch from taxing electricity production to consumption. While under the production tax the level of the tax was differentiated, the current price support is the same for most renewable energy sources. The allocated support is generally 0.42 cents per produced kWh, with some exceptions for wind and solar (Table 6.3). Until September 2003, a formal relationship existed between the electricity tax and the price support, but the tax has subsequently been raised without an increase in the price support (Vehmas 2005). The Council of State Decree on the general terms for issuing energy subsidies (625/2002) deals with investment subsidies for projects that – inter alia – promote the production or use of renewable energy, promote energy conservation or make the energy production or use more efficient, and reduce

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Table 6.3 Direct price supports for renewable energy and peat in electricity production, 1997 – present Energy source Wind power Hydropower, maximum capacity 1 MW Wood and wood-based fuels Recycled fuels Biogas Woodchips Peat, maximum capacity 40 MW Waste gas from metallurgical processes Reaction heat from chemical processes

Tax support (cents/kWh) 0.69 0.42 0.42 0.25 0.42 0.69 0.42 0.42 0.42

Source: www.finlex.fi (Act on Excise Tax on Electricity and Certain Fuels).

the environmental impacts of energy production or use. The investment support can be allocated up to 40 per cent of the investment costs for renewable energy. Table 6.4 illustrates the energy subsidies allocated by the MTI in 2000 and 2004. Subsidies were almost doubled. The Council of State (2005: 29) suggests (in the new Energy and Climate Strategy), however, removing the energy subsidy from the sectors taking part in emission trading, excluding support to new technology and pilot installations. The state-sponsored energy company Motiva Oy, established in 1993 by MTI, conducts energy audits and coordinates voluntary energy-saving agreements with industries. The agreements apply to approximately 60 per cent of energy use. Roughly 63 per cent of the industrial electricity use, for example, and 91 per cent of electricity production have been audited to document their improvement potential (MTI 2005b). Research and Development Programmes Technological innovation and increased productivity have been key factors in the transformation of Finland into a modern, industrialized economy. Technology has been valued as a means of creating and strengthening more innovative and competitive industrial sectors, and for finding responses to environmental and other societal challenges. The government has extensively supported R&D since the 1970s, emphasizing specific focal points with targeted R&D programmes. Publicly funded energy research has aimed at promoting the energypolicy goals: versatile energy procurement; secure and safe energy supply;

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Table 6.4 Allocation of investment support for renewable energy sources by the Finnish MTI in 2000 and 2004 20001 €m

20042 €m

Use of wood in energy production Production of woodfuels Wind-power plants Small-scale hydropower Biogas Solar applications and heat pumps Production of recycled fuels Assessments for renewable energy and energy saving Energy saving

14.1 1.9 1.4 0.3 0.8 0.1 – 0.01

14.2 3.4 4.3 0.3 2.1 0.2 – 1.6 7.4

TOTAL

18.7

33.5

Sources:

1 MTI

(2003b); 2 MTI (2005a).

efficient energy production and use; and reduced environmental impacts (MTI 1997). Technologies for bioenergy have been developed in programmes specifically designed to improve combustion technology, and in programmes concentrating on energy and environmental technology (Table 6.5). LIEKKI-1 (1988–92) and LIEKKI-2 (1993–98) resulted in several innovative technologies for combusting industrial liquors and for developing and commercializing other biofuels. SIHTI-1 (1990–92) and SIHTI-2 (1992–98) created solutions for abating emissions from energy production. In addition, selected R&D programmes have focused on specific aspects of bioenergy. Previously it was decided that national R&D investments should be limited mainly to bioenergy (Helynen 2004). From the late 1990s, however, public R&D programmes have also included other renewable energy forms. Renewable energy and distributed energy production were among the main subject areas of CLIMTECH (2000–2003). DENSY (Distributed Energy Systems Technology Programme) (2003–7) focused on system integration and commercial services of distributed generation of power, heating and cooling. Public R&D support has traditionally focused on the development of new technologies, with less support for commercialization and business. The ClimBus Programme, launched in 2004, aims to create business opportunities by developing technology and business concepts related to the reduction of GHG emissions. Tekes financial support for renewable energy technologies during 1999–2001 was divided as follows: bioenergy,

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Table 6.5 Major technology programmes related to energy production and energy efficiency in Finland Technology programme

Duration

Topic

LIEKKI KUITU RAINA SIHTI

1988–92 1988–92 1988–92 1990–92

Bioenergy LIEKKI 2

1993–98 1993–98

SIHTI 2

1993–98

Combustion technology Energy-efficient mechanical pulping Energy-efficient paper production Energy and environmental technology Energy from biofuels Combustion and gasification technology Energy and environmental technology Energy in paper and board production New energy forms and technologies Fusion energy Energy saving in metal production District heating Combustion of wood Energy production from waste

Sustainable 1993–98 paper NEMO 2 1993–98 FFusion 1993–98 SULA 2 1993–98 TERMO 1993–98 Tulisija 1997–99 Energy 1998–2001 from waste Wood 1998–2003 energy Climtech FFusion 2 FUSION DENSY ClimBus

1999–2002 1999–2002 2003–2006 2003–2007 2004–2008

Production technology and the quality of forest chips and small-sized trees Technology and climate change Fusion energy Fusion energy Distributed energy systems Business from climate change mitigation

Total expenditure, €m 24 7 10 4 40 38 17 20 17 13 22 2 4 16 42

5 15 15 50 70

Source: Finnish Funding Agency for Technology and Innovation (Tekes): www.tekes.fi.

65.7 per cent; energy from waste, 19.6 per cent; solar energy, 6.5 per cent; wind energy, 4.6 per cent; and hydropower, 3.6 per cent (MTI 2003b: 21). Status of Implementation of the RES-E Directive The gap between current consumption of electricity from RES and the indicative target of 31.5 per cent by 2010 is widening. In 2000 the share of

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renewable electricity was 31 per cent, while in 2004 it was registered at 29 per cent (Statistics Finland 2005). This is due mainly to increases in total electricity consumption, while renewable electricity production has stayed fairly constant. The EU emission-trading system, established in 2005, is expected to increase electricity production from renewables. The development of the CO2 prices and the competitiveness of renewable energy on an increasingly international and costly market will thus affect domestic investment. The Council of State (2005: 18) suggested in its proposal for the Energy and Climate Strategy that the government should purchase emission units for Finland through the Kyoto mechanisms when it is more cost-efficient than supporting domestic ventures. Energy companies have responded to some extent to promotion policies. PVO has initiated a biofuel programme comprising R&D, new power plants and cultivation for bioenergy crops. It has also improved the efficiency of some of its existing hydroelectric plants. Fortum has focused on marketing environmentally labelled electricity to its consumers. Branch organizations have taken part in energy-saving programmes and made energy-saving agreements with the government. Many industrial actors and research organizations have jointly participated in public technologyresearch programmes for renewable energy.

SUSTAINABLE DEVELOPMENT, INNOVATION AND THE INTEGRATION OF GOVERNMENTAL POLICIES ON RES-E Horizontal and Vertical Policy Integration A revised sustainable development (SD) programme, adopted in 2006, is more specific on targets and deadlines than its predecessors from the 1990s. Yet it has also been criticized for lacking specific implementation proposals. Finnish SD documents have identified the importance of increasing energy efficiency and renewable, low-emission energy through agreements with industries and market-based policy instruments as key means towards a transition to an eco-efficient society. The work on sustainable development is coordinated by the Finnish National Commission on Sustainable Development (FNCSD), with a mandate for the period 1993–2007. Its purpose is to promote sustainable development in Finland and act as a guiding body in issues concerning the UN and its Commission for Sustainable Development. The FNCSD is headed by the prime minister and has representatives from all ministries,

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from the parliament and the NGOs. The Secretariat is located in the Ministry of the Environment. The FNCSD oversees the national strategy, but the actual implementation of the SD Programme is left to the sectoral ministries, who are expected to draft more specific legislative provisions (MoE 1998). The administrative sectors are to report on progress and on the impact of the Programme. The task of the FNCSD is to monitor the progress and the different sub-programmes carried out by various organizations. Sustainable development indicators have been developed by the Finnish Environment Institute to assist in the monitoring (MoE 2007). The Council of State ‘decisions-in-principle’ on sustainable development can clearly be used for horizontal integration. Key aspects of national strategies and policies for energy and natural resources are thus formalized for the intra-governmental level through the Council of State Decisions. For vertically integrating sustainable development into energy policies, the activities of the MTI are important. Its strategy is ‘to control climate change and fulfil the objectives of Finland’s Kyoto commitments, and to manage energy systems in a way that promotes energy efficiency and the use of renewable energy sources’ (MTI 2004c). The strategy does not include any goals related to the assessment of environmental impacts of administrative activities, and references to environmental impact assessment of the activities are absent from the MTI’s annual report. Elsewhere the MTI identifies sustainable development as a fundamental part of its tasks based on energy-related use of natural resources and climate change issues, and endorses the need to change current production and consumption patterns (MTI 2004b). The MTI has set up an SD project responsible for the preparation and coordination of SD measures at the Ministry. The MTI also has responsibility for implementing SD objectives through the national strategies for energy and climate change (MoE 2003: 57). In principle the premises for integrating renewable energy and innovation policies exist (since both energy and technology policy are under the mandate of the MTI); but in practice integration is dependent on actual intra-organizational cooperation between the energy and technology departments. National Innovation Policy and RES-E In the early 1980s science and technology policy emerged in Finland as an independent policy field and, through the establishment of the Science and Technology Policy Council in 1987, a separate ‘innovation system’ perspective was adopted. The Council, an advisory body chaired by the prime

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minister with representatives from different sectors including environmental expertise, coordinates Finnish innovation policy and issues strategic reviews every three years. The composition of the Council is not as wide as that of the FNCSD. The Council’s strategies have stressed environmental issues since the 1990s, but energy issues or initiatives for promoting renewable energy are not mentioned. National strategies that highlight innovation in business and industry do not contain specific targets or initiatives related to renewable energy or electricity. The general objectives of technology and innovation policy are to promote economic growth and the competitiveness of the Finnish industry and, further, to promote employment and enhance welfare (MTI 2005c). The MTI is responsible for implementing Finnish technology and innovation policy with Tekes, which coordinates technology research and development programmes and funding of innovative businesses. In the strategy of Tekes, sustainable development is one of the eight thematic areas in which future energy solutions are identified as one development goal. Tekes (2002: 7) states that the principles of sustainable development are essentially included in competitive business operations. The goals for the energy sector are increasingly shaped by climate change policies and the environmental requirements related to a decentralization of the energy system by fostering smaller-scale, sustainable energy production. Tekes carries out internal assessments and commissions external evaluations of its activities. The significance of selected technology programmes for achieving climate change targets was, for example, evaluated in 2003 (Hjelt et al. 2003).

REGIONAL SETTINGS FOR PROMOTING RES-E TECHNOLOGIES Bioenergy is actively promoted in regions where it is perceived to support local economy and rural livelihoods. Central Finland has been identified as a knowledge centre for the paper industry and for energy and environmental technology. It tries to diversify the trade in the region through bioenergy (Lievonen and Lemola 2004: 92). Its provincial programme aims to increase the use of and entrepreneurship in bioenergy, supported by the actions of the Regional Council, the Energy Agency, the Knowledge Centre and the Forest Centre in the region (Väyrynen 2004: 141–7). Bioenergy innovations are developed in the renewable energy training and research programme of the University of Jyväskylä and the regional polytechnic in cooperation with other actors in the province. The regional

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agency of the central government, TE Centre of Central Finland, channels funding from the most significant financiers, the MTI and Tekes, to bioenergy investments. In the technology strategy of the TE Centre, the vision for 2010 identifies Central Finland as the world’s top in bioenergy production, use and know-how (TE Centre 2005: 83). The promotion of wind power is focused in Ostrobothnia, a region covering four provinces. While the regional plan of North Ostrobothnia (validated 17 February 2005) was the first to identify extensive areas for wind power, it is the coastal region of Ostrobothnia that has been most active in promoting wind power in terms of the actors involved. The Regional Council of Ostrobothnia supports entrepreneurship and the construction of wind power; the Energy Agency conducts wind measurements in potential locations; and the Technology and Knowledge Centre ‘Merinova’ has expertise in energy technology, developing blade technology and testing new power-plant models. In the technology strategy of Ostrobothnia and Central Ostrobothnia, the regional TE Centre views alternative energy technologies as cutting-edge projects for active support (Väyrynen 2004: 154–63). The potential for developing RES-E clearly exists, with regional officials and companies apparently willing to invest in new energy ventures. However, small local interest groups oppose wind-power construction, (mainly in the archipelagos), and have sometimes hindered the construction of new wind turbines. Yet in several other locations new wind parks are being constructed.

DISCUSSION AND CONCLUSIONS Finland has been innovative in rapidly increasing bioenergy capacity and in producing bioenergy technologies exported globally. Although the roots of this development lie in the 1970s, the largest increases in production have occurred during the 1990s. Diverse actors have played a joint role in the process. Public-policy-makers have developed instruments, such as R&D support and energy taxation, that have promoted bioenergy. Environmental officials with responsibility for emission reductions, and the Ministry of Trade and Industry with responsibility for climate change and energy strategies, have also contributed. The forestry industry and municipal energy companies, with interests in local economic development and regional resources, have invested heavily in bioenergy technologies that have been actively developed by domestic research networks. The utilization of bioenergy is manifold, including different types of fuels, technologies and sizes of installations. Technologies originating from the availability of wood resources and industry by-products have affected

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the development of public R&D and other policies, which, in turn, have further promoted technological development. Growing concerns on climate change have also contributed to investments in new technologies. From one perspective, however, large-scale biomass energy technologies are not radically innovative. According to Fuchs and Arentsen (2002), biomass illustrates that the electricity system is generally willing to integrate innovations only if they do not deviate too strongly from the dominant technology trajectories. A major trajectory for biomass is in other words a continuation of the dominant energy system through the reliable and easily manageable large-scale power plant. The increased use of bioenergy has thus not radically changed Finland’s energy system or infrastructure. The centralized electricity system created during the 1960s and the 1970s has enabled the use of bioenergy, peat and natural gas, because they complement the system rather than deviate from it. Thus the existing socio-technical regime – dominated by large industrial actors, energy companies and major political parties – has not opposed bioenergy. Wind and solar power are viewed as much more ‘external’ to the Finnish energy system, and the use of bioenergy in smaller-scale applications could also be expanded if a more decentralized system were in place.5 In Western economies, the electricity-generating regime tends to be dominated by rules and practices related to centralized, large-scale power technologies, supported by consumption patterns and institutional arrangements (Smith et al. 2005). For the creation of new energy paths to succeed, entrepreneurs that mindfully depart from existing structures and contribute to a collective systemic effort in the face of inertia and active resistance are crucial (Garud and Karnøe 2001). Despite extensive developments in bioenergy in Finland, many industrial actors and politicians from the largest political parties do not see RES-E on its own as a viable path for the energy system. They favour instead non-renewable energy sources in order to safeguard the price and availability of electricity. The proposal for a revised climate strategy in 2005 looks mainly to cost-effective near-term solutions to cut CO2 emissions – solutions that are clearly not likely to produce innovative results for increased shares of RES-E in the long term. Despite specific initiatives, such as R&D subsidies for renewable energy, policy often tends to be negotiated in terms of the perspectives of the dominant energy system (DES). There are, however, important alternative voices. Finnish policy ‘entrepreneurs’ have enabled new public research programmes for distributed energy and changes in land-use planning where this has previously hindered the diffusion of wind power. A discursive culture (characteristic of Finland), whereby different actors engage in dynamic cooperation to achieve technological progress, could be crucial for the future of RES-E. If specific policy

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instruments can be developed and existing policies can be enforced for supporting those actors interested in creating new energy paths, new social constructions for enhancing RES-E could be realized. Small-scale bioenergy applications could, for example, if widely diffused, pave the way for a more decentralized and flexible power system. Such efforts are, however, limited by the structural inertia inherent in the current DES. After the EU RES-E Directive came into force in 2001, new policy initiatives were introduced. When the Directive was being negotiated, no need for new policy initiatives was seen to arise from the Directive. Thus no new initiatives are directly related to the Directive itself. The RES Action Plan was revised, and new R&D programmes were started. Even more important, land-use planning was modified to better accommodate wind power. Further, an emission-trading scheme (ETS) (based on the EU Directive) was initiated in 2005. This system is likely to even out costs between different forms of electricity in the deregulated market, but its overall effects are still unclear (Kara 2004: 45–7). What is clear is that Finland is moving relatively slowly towards its indicative target of 31.5 per cent by 2010. In 2004 the RES share of electricity consumption was 29 per cent, due to increased electricity consumption rather than stagnating RES-E capacity (Statistics Finland 2005). Bioenergy is the largest source of renewable electricity in Finland. Its strong position is largely dependent on a combination of inherent industrial activity and public-policy initiatives. A large share of bioenergy comes from the forest industry, which is already very efficient in utilizing its byproducts for electricity generation. The potential for increasing bioenergy crops through agriculture has also received greater attention. The National Grain and Oil Seed Strategy for 2006–15 views bioenergy as a significant growth strategy for Finnish agriculture, but focuses mainly on producing biofuels for transport rather than electricity generation.6 Strategies for sustainable development, climate change and innovation have, to a certain degree, included coordinated policy efforts for supporting RES-E. Effective promotional instruments – including subsidies for renewable energy and publicly financed technology programmes – exist, yet the future development of RES-E is nonetheless strongly influenced by innate industrial barriers of competition, the growing international market for carbon-emission quotas, and a powerful nuclear lobby. Low prices in the deregulated electricity market, coupled with the barriers of the existing power system, may slow down the development of distributed electric power based on RES. The future price of electricity will also strongly influence the future development of RES-E in Finland. Greater public intervention through direct promotional schemes and more favourable

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market conditions and incentives will clearly be necessary if the indicative EU target is to be met. On the plus side, an active national techno-innovation focus, building on the existing research and education system, clearly provides opportunities for further RES-E development. Increasing emphasis on security of supply, and the inherent economic dynamics of indigenous biomass resources in this regard, are also positive drivers.

NOTES *

1. 2. 3. 4. 5.

6.

The author thanks the SUSTEN project group, especially William M. Lafferty and Audun Ruud, for inspiring discussions and comments. Many thanks also to Per Mickwitz and Mikael Hildén, who provided comments on this chapter. Simon Lampenius collected preliminary material for the project in summer of 2004. Telephone conversation with an official from the Energy Department, Ministry of Trade and Industry, 25 October 2005. Holttinen (2005: 9–10). A new long term climate and energy strategy has been under preparation during 2008. Energy Tax Act of 1996: ‘If the excise taxes paid by the company for energy products exceed 3.7% of the company’s value added, the company has the right to claim back, for the exceeding proportion, 85% of the excise taxes.’ Assessments regarding wind power potential can be found, for example, in the websites of Finland’s Ministry of Trade and Industry (www.ktm.fi) and of the Finnish Wind Power Association (www.tuulivoimayhdistys.fi). Different figures expressing wind power potential have been presented because some are based on the absolute potential and others on the feasible potential taking into account barriers due to nature conservation, grid access etc. Accessed 19 December 2006: http://www.mmm.fi/en/index/ministry/press_releases/ 060906grain_eng.html.

REFERENCES Åkerman, M. (2005), ‘Risusavotasta maaseudun teknologiaihmeeseen: Puun energiakäyttöä tukevat “käännökset” metsätalouden, energiapolitiikan ja maaseutupolitiikan kentillä’ (From logging sites to countryside technology miracle: Changes supporting the energy use of wood in the fields of forestry, energy policy and agricultural policy – in Finnish), Alue ja Ympäristö, 1/2005. Alakangas, E. and P. Janka (2002), ‘Planning and Environment – Finland’, Report of the ENER–IURE Project: Analysis of the legislation regarding renewable energy sources in the EU Member States, http://www.jrc.es/cfapp/eneriure/ Reports/FIN%20pla.pdf, 22 August 2005. Council of State (2000), Finland’s National Land-use Guidelines, Environment Guide 93, Helsinki: Ministry of the Environment. Council of State (2001), Kansallinen ilmastostrategia (National Climate Strategy – in Finnish), Council of State report to the parliament, 27 March 2001, Helsinki: Ministry of Trade and Industry publications, 2/2001. Council of State (2005), Lähiajan energia- ja ilmastopolitiikan linjauksia – Kansallinen strategia Kioton pöytäkirjan toimeen panemiseksi (Near future definitions of energy

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and climate policy – National Strategy for implementing the Kyoto Protocol – in Finnish), Council of State report to the parliament, 24 November 2005, Helsinki. Economic Council (2000), Ympäristö- ja energiaverotuksen käyttö Suomessa (The use of environmental and energy taxation in Finland – in Finnish), Working Group report, Publications of the Prime Minister’s Office 2003/3, Helsinki. Electrowatt-Ekono (2003), Uusiutuvien energialähteiden edistämisohjelman arviointi (Evaluation of the Action Plan for Renewable Energy Sources – in Finnish), Espoo: Electrowatt-Ekono. Energy Market Authority (2007), ‘Electricity market environment’, http://www. energiamarkkinavirasto.fi/data.asp?articleid=229&pgid=127, 17 September. Finnish Association for Nature Conservation (2001), Comment on the national climate strategy. Fuchs, D.A. and M.J. Arentsen (2002), ‘Green electricity in the market place: the policy challenge’, Energy Policy, 30, 525–38. Garud, R. and P. Karnøe (2001), Path Dependence and Creation, Mahwah, NJ and London: Lawrence Erlbaum. Green League (2004), ‘Vihreät ja energia’ (The Greens and Energy – in Finnish), http://www.vihrealiitto.fi/lennakit/energia.shtml, 28 December. Greenpeace Nordic (2001), Comments on the national climate strategy. Helynen, S. (2004), ‘Bioenergy policy in Finland’, Energy for Sustainable Development, VIII (1), 36–46. Hirvonen R., P. Sulamaa and E. Tamminen (2003), Kilpailu sähkömarkkinoilla: Sähkömarkkinoiden keskeiset piirteet ja toiminta (Competition in the electricity markets: The central aspects and operation of the electricity markets – in Finnish), ETLA Discussion Paper 879, Helsinki: The Research Institute of the Finnish Economy (ETLA). Hjelt, M., P. Luoma, J. Hiltunen and J. Vanhanen (2003), Teknologiaohjelmat ja ilmastonmuutos (Technology programmes and climate change – in Finnish), Helsinki: National Technology Agency of Finland, Tekes. Hoffman, K. (1993), Pohjolan Voima 1943–1993, PVO: Helsinki. Holttinen, H. (2005), Tuulivoiman tuotantotilastot (Wind power statistics – in Finnish), VTT Working Paper 55, Espoo: VTT Research Centre of Finland. Kara, M. (2004), Päästökaupan vaikutus Pohjoismaiseen sähkökauppaan – ehdotus Suomen strategiaksi (The impact of emission trading on Nordic electricity trade – proposal for Finland’s strategy – in Finnish), report prepared for the Ministry of Trade and Industry, Espoo: VTT. Karesuo, A. (2001), Memo on the national climate strategy to the Parliamentary Select Committee for the Environment, Helsinki: Finnish Forest Industries Federation, 3 May. Kivimaa, P. and P. Mickwitz (2004), ‘Driving forces for environmentally sounder innovations: the case of Finnish pulp and paper industry’, in K. Jacob, M. Binder and A. Wieczorek (eds), Governance for Industrial Transformation, Proceedings of the 2003 Berlin Conference on the Human Dimensions of Global Environmental Change, Berlin: Environmental Policy Research Centre, pp. 356–72. Koljonen, T., V. Kekkonen, A. Lehtilä, M. Hongisto and I. Savolainen (2004), ‘Päästökaupan merkitys energiasektorille ja terästeollisuudelle Suomessa’ (The impact of emission trading for the energy sector and steel industry in Finland – in Finnish), Espoo: VTT, http://www.vtt.fi/inf/pdf/tiedotteet/2004/T2259.pdf, 9 December 2005.

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Left-Wing Alliance (2005), ‘Party Program’, http://www.vasemmistoliitto.fi/party_ program/en_GB/program/, 9 December. Leppä, J. (2005), ‘Keskustan ryhmäpuhe energia- ja ilmastostrategian selontekokeskustelussa’ (The Centre Party’s address in the parliamentary discussion of the energy and climate strategy – in Finnish), http://www.keskusta.fi/tietopankki/ ?action=show_document&action_param=1140, 9 December. Lievonen, J. and T. Lemola (2004), Alueellisen innovaatiopolitiikan haasteita (Challenges in regional innovation policy – in Finnish), Helsinki: Ministry of the Interior. Luukkonen, J. (2001), Views of WWF Finland on the national climate strategy, 23 April. Määttä, K. (2000), Energiaveropolitiikka (Energy tax policy – in Finnish), Helsinki: Kauppakaari. Midttun, A. and L. Koefoed (2005), ‘Green innovation in Nordic energy industry’, in M. Weber and J. Hemmelskamp (eds), Towards Environmental Innovation Systems, Berlin: Springer, pp. 115–36. MoE (1998), Hallituksen kestävän kehityksen ohjelma. Valtioneuvoston periaatepäätös ekologisen kestävyyden edistämisestä (Finnish Government Programme for Sustainable Development. Council of State decision-in-principle on the promotion of ecological sustainability – in Finnish), Suomen ympäristö 254, Helsinki: Ministry of the Environment. MoE (2003), Kestävän kehityksen kansallinen kokonaisarvio (The national appraisal of sustainable development – in Finnish), Suomen ympäristö 623, Helsinki: Ministry of the Environment. MoE (2007), ‘Sustainable development indicators’, Helsinki: Ministry of the Environment, http://www.environment.fi/default.asp?contentid=223809&lan= EN –, 22 August. MTI (1997), Suomen energiatalous – taustat ja toimintaympäristö (Finland’s energy economy – background and operating environment – in Finnish), Helsinki: Ministry of Trade and Industry Publications 8/1997. MTI (2003a), Report in compliance with the RES-E Directive on the national objectives concerning electricity produced from renewable energy sources and the implemented as well as the planned measures in Finland which will achieve these objectives, Helsinki: Ministry of Trade and Industry, 24 January. MTI (2003b), Uusiutuvan energian edistämisohjelma 2003–2006: työryhmän ehdotus (Action Plan for Renewable Energy Sources 2003–2006: working group proposal – in Finnish), Helsinki: Ministry of Trade and Industry. MTI (2004a), EU:n päästökaupan, energiaverotuksen ja energiantuotannon tukien yhteensovittaminen (Consolidation of EU emission trading, energy taxation and energy support – in Finnish), Working Group report, Helsinki: Ministry of Trade and Industry Publications 35/2004. MTI (2004b), ‘Sustainable development’, http://www.ktm.fi/index.phtml?menu_ id=957&lang=3&fs=10, 20 January 2005. MTI (2004c), Kauppa- ja teollisuusministeriön strategia (Strategy of the Ministry of Trade and Industry – in Finnish), http://ktm.elinar.fi/ktm_jur/ktmjur.nsf/All/ 7DA08E2CA0503F85C2256E61004AB810/$file/jul1_2004.pdf, 17 September 2007. MTI (2005a), Annual report 2004, Helsinki: Ministry of Trade and Industry. MTI (2005b), Energiansäästöohjelmien kokonaisarviointi (The evaluation of energy saving programmes – in Finnish), Helsinki: Ministry of Trade and Industry.

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MTI (2005c), ‘Technology and innovation policy guidelines for 2004–2007’, http://www.ktm.fi/index.phtml?menu_id=1045&lang=3&fs=10, 24 January. Myllyntaus, T. (1991), Electrifying Finland: The transfer of a new technology into a late industrializing economy, Basingstoke: Macmillan. National Coalition Party (2002), ‘Energiaa turvallisesti tällä vuosituhannella’ (Energy safely in this millennium – in Finnish), Discussion document on energy policy, http://www.kokoomus.fi/tavoitteet/energiapoliittinen_keskusteluasiakirja. php, 28 December 2004. Niininen, H. (2001), Memo on the national climate strategy to the Parliamentary Select Committee for the Environment, Espoo: Fortum Group, 25 April. Pollitt, C. and G. Bouckhaert (2000), Public Management Reform: A comparative analysis, Oxford: Oxford University Press. PVO (2005), www.pvo.fi, 3 January. Sairinen, R. (2000), Regulatory Reform of Finnish Environmental Policy, doctoral dissertation, Espoo: Helsinki University of Technology. Savikko, R. (2004), ‘Comment of the Friends of the Earth Finland on the preparation of the new climate strategy’, 31 December, http://www.maanystavat.fi/ tiedotus_artikkeli.php?aid=503&kid=0, 31 August 2005. SDP (2002), ‘Kannanotto energiapolitiikasta’ (Comment on energy policy – in Finnish), Social Democratic Party’s 39th party convention 6–8 June 2002, Tampere, http://www.sosialidemokraatit.fi/cgi-bin/iisi3.pl?cid=sdp&mid=829& sid=20081, 28 December 2004. Smith, A., A. Stirling and F. Berkhout (2005), ‘The governance of sustainable socio-technical transitions’, Research Policy, 34, 1491–510. Soini, M. (2001), The Nature League comment on the climate strategy, 18 May. Statistics Finland (2003), Energy Statistics 2002, Energy 2003:2, Helsinki: Statistics Finland. Statistics Finland (2004), Energy Statistics 2003, Energy 2004:2, Helsinki: Statistics Finland. Statistics Finland (2005), Energy Statistics 2004, Energy 2005:2, Helsinki: Statistics Finland. Statistics Finland (2006), Energy Statistics Yearbook 2006, Helsinki: Statistics Finland. Sulphur Committee I (1986), Rikkitoimikunnan mietintö (Sulphur Committee Report – in Finnish), Helsinki: Ministry of the Environment. Suomi, U., J. Rautanen and I. Aho (2004), Uusiutuvan energian edistämisohjelma 2003–2006 – toteutustilanne ja näkymät (Action Plan for Renewable Energy 2003–2006 – situation and outlook for implementation – in Finnish), Helsinki: Motiva Oy. TE Centre (2005), ‘Keski-Suomen maakunnallinen teknologiastrategia 2005–2015’ (The provincial technology strategy of Central Finland 2005–2015 – in Finnish), http://www2.te-keskus.fi/new/kes/Julkaisut/Teknologiastrategia/, 9 November. Tekes (2002), The Future is in Knowledge and Competence: Technology strategy – a review of choices, Helsinki: National Technology Agency of Finland Tekes. Teppo, T., H. Siikavirta and L. Linnanen (2003), ‘Environmental innovation commercialization: the case of Finnish bioenergy innovations’, paper presented at GIN 2003 Conference: Innovating for Sustainability, San Francisco 12–15 October. Vartiainen, E., P. Luoma, J. Hiltunen and J. Vanhanen (2002), ‘Hajautettu energiantuotanto: teknologia, markkinat, polttoaineet ja CO2-päästöt’ (Distributed

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energy generation: technology, markets, fuels and CO2-emissions – in Finnish), Helsinki: Gaia Group Oy, www.energia.fi/attachment.asp?Section=4521& Item=1536, 20 December 2006. Väyrynen, E. (2004), Alueellinen toiminta energiatehokkuuden ja uusiutuvan energian edistämisessä (Regional activities in promoting energy-efficiency and renewable energy – in Finnish), Helsinki: Motiva. Vehmas, J. (2005), ‘Energy-related taxation as an environmental policy tool – the Finnish experience 1990–2003’, Energy Policy, 33 (17), 2175–82. Vehmas, J., J. Kaivoja, J. Luukkanen and P. Malaska (1999), ‘Environmental taxes on fuels and electricity – some experiences from the Nordic countries’, Energy Policy, 27 (6), 343–55. VTT (1999), Energia Suomessa: Tekniikka, talous ja ympäristövaikutukset (Energy in Finland: Technology, economy and environmental impacts – in Finnish), Helsinki: VTT Energy & Edita.

7. Austria: an ‘incidental front-runner’ faces new challenges Barbara Pflüglmayer, Christian Nopp, Volkmar Lauber and Michael Narodoslawsky INTRODUCTION For much of its post-war history, Austria has been proud of its large and ambitious hydro projects. A definite technophile, ‘can-do’ attitude has been linked to these projects, with some of them stretching the limits of technological progress. This particular technocratic approach has even had its influence on culture, with the sole Austrian Nobel laureate in literature, Elfriede Jelinek, dedicating one of her plays (Jelinek 2002) to the enthusiastic ‘gung-ho’ attitude of a nation toiling with the destruction of both its infrastructure and moral fibre after World War II. Pride and strategic necessity led to an aggressive construction of hydropower plants, raising the installed capacity from 5000 GWh in 1950 to 42 000 GWh in 1999. With approximately 23 per cent RES in its total energy supply, Austria ranks second only to Sweden in the European Union. This makes Austria ‘more’ sustainable – albeit not really sustainable. Austria still relies on fossil fuels such as oil, gas and coal for the majority of its energy supply, and is strongly dependent on external resources (over 82 per cent for oil and coal, and 76 per cent for gas). The country enjoys, however, the privilege of being a ‘nuclear-free zone’. Debates over nuclear power in the 1970s and the confrontations over large hydropower plants in the 1980s (leading to the first violent clashes in decades and to Austria’s first experience with civil disobedience) dramatically changed the situation. Energy moved from being a solution to the problem to becoming part of the problem. The reaction from the (mostly state-owned) energy sector, as well as from the political establishment, was widespread neglect. Blessed with huge hydropower resources and some fossil resources of its own, Austria failed to develop a farsighted and progressive strategy to seize the opportunity and ‘go green’ on a large scale. The connotations with ‘energy’ in the public debate during much of the 189

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1980s and 1990s became increasingly negative, focusing largely on foreign dependence and environmental degradation. This was more or less the situation at the turn of the millennium when the political system in Austria once again became interested in energy; this time from the viewpoint of deregulation on the one hand and technological innovation on the other. Energy technology – especially RES-E systems in the form of biomass-related approaches on a small and medium scale (organic Rankine cycle, Stirling motors, gasification, biogas) – once again became a point of technological pride in Austria. The key actors in the field (mostly small- and medium-scale enterprises) are now viewed as worldclass engineering companies with a technological edge over their competitors. Parallel to this, agrarian cooperatives, municipalities, and to a certain extent also companies from other sectors, are building small and mediumsized electricity plants. The current situation for the promotion of RES-E is characterized by strong interest from many public actors, especially on the state level, but also in terms of activities on the federal level. Austria still lacks, however, a comprehensive strategy and agenda for innovation in the RES and RES-E fields, but a foundation for further dynamic development has clearly been laid.

DEVELOPMENT OF RES-E IN AUSTRIA FROM THE 1990S TO THE PRESENT Before 2003 diverse support programmes were in effect in each Land (county). Since 2003, however, uniform feed-in tariffs have been set at the federal level. One reason for the initial desire of the Länder to influence energy policy is the difference in the consumption levels, as well as differences in the share of renewable energy used to provide for this consumption. Both vary according to climatic factors, the share of industry and the availability of renewable resources, especially hydropower and biomass. Lower and Upper Austria have the highest rates of gross electricity consumption, but only average values in their share of renewable electricity to provide for it. Carinthia and Vorarlberg (followed by Salzburg and Tyrol) show the highest fraction of renewable energies.1 On the national level, a relatively constant increase in RES can be observed during the 1990s (Figure 7.1). In terms of RES-E technologies, the highest increases have occurred in wind power (Figure 7.2) and biogas (Figure 7.3). Both technologies have been clearly favoured by the feed-in tariffs. In the case of biogas a desire within the agricultural sector to diversify sources of income has certainly played a role.

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90 80 70 60 50 40 30 20 10 0

Wind/PV Ambient heat combustible waste Biofuels Firewood Hydropower

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Austria

Source: Statistik Austria (2007).

Figure 7.1

Development of RES in Austria, 1990–2002

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Figure 7.2

Development of wind power in Austria, 1985–2005

Hydropower has the largest share of RES-E in Austria at about 52 per cent, with the remainder coming mostly from biomass. Photovoltaics, wind and solar-thermal heat play an insignificant role in terms of their contribution to domestic production. Hydropower has, however, more or less reached its apex. There is almost no additional potential for large-scale installations (though there is still room for small-scale hydro). Electricity from biomass has only very recently been realized in Austria (at least outside the pulp and paper industry), despite the fact that Austria has a long and successful tradition in small- and medium-sized biomass heating plants. Actually the focus on the small and medium size may in itself be an explanation for this lack of RES-E from biomass, as this requires (at least with current technologies) larger plant sizes to produce heat and power effectively. The plant ‘Wienstrom’, in cooperation with ‘Bundesforste’ (mentioned below), is a front-runner in this respect.

Promoting sustainable electricity in Europe 500

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20 07

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Number of biogas plants (2007: approved must be started in 2007) Installed electric capacity of all biogas plants Source:

Eder et al. (2005: 61).

Figure 7.3 Number of biogas plants and installed capacity in Austria, 1990–2007 A large-scale combined heat and power plant was opened close to Vienna in October 2006 (claiming to be the largest ‘forest-biomass power station’). With a maximum capacity of 37 MW thermal heat and 24.5 MW electrical power, this steam cycle plant (which utilizes fluidized bed combustion technology) opens a new chapter in the Austrian RES-E story. It is also remarkable as it is a joint venture between a strong municipal utility (‘Wienstrom’, the utility based in Vienna) and the largest Austrian forestry company (‘Bundesforste’, Austria’s state-owned forestry company, managing about 20 per cent of Austria’s forests).2 Lines of Development and Conflict among Political Parties Regarding Energy Policy in Austria3 Energy policy has played a key role in some of the turning points of Austrian party politics. One reason for this has been a strong domestic intermingling of politics and the energy sector in general after World War II. For most of its post-war history, Austria was governed by two major parties: the conservative Austrian People’s Party (Österreichische

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Volkspartei – ÖVP) and the Social Democrats (Sozialdemokratische Partei Österreiches – SPÖ). For much of this period these parties were engaged in a ‘grand coalition’. In addition to being dominated by two major parties, the Austrian political system has been characterized as a ‘neo-corporatist’ system with strong social partners, most of them represented by associations with compulsory membership. Both of these key characteristics of the political system have, however, been declining in recent years. After a spell of one-party rule in the late 1960s and 1970s (starting with a short period of ÖVP rule, followed by a longer period of SPÖ rule) and a period of recurrence of the grand coalition during the 1990s, a ‘small coalition’ between the conservative People’s Party and the populist–rightist Freedom Party (Freiheitlich Partei Österreichs – FPÖ) has led to considerable polarization in the political system. One factor in this polarization has been a fundamental change in the Freedom Party, moving from a liberal–nationalist party (often in coalition with the Social Democrats during the 1980s) to a populist–nationalist party and finally its disintegration. This change is clearly linked to the person of Jörg Haider, currently governor of the federal state of Carinthia. Partly driven by this polarization, but also due to a more general liberalization of the Austrian economy, the strong neo-corporate character of Austrian politics has been declining during much of the new century.4 The political dimension of the energy sector must be seen against this general background. After World War II the aggressive build-up of a modern high-tech energy sector has been a key feature of Austria’s economic and technological policy development. This applies particularly to hydropower (both along the Danube river as well as at Alpine sites) and, to a lesser extent, to the exploitation of fossil-oil and gas fields (mainly in the eastern part of Austria). Both dominating parties favoured large-scale energy projects in the period after World War II. Large hydropower installations, such as the Ybbs-Persenbeug plant on the Danube or the Kaprun storage reservoir in the Alps, were the pride of Austria’s post-war development. They even appeared on the faces of Schilling notes used until the conversion to the euro in 1999. However, in the 1970s energy politics began to become controversial throughout the developed countries, including Austria. The plan to ‘go nuclear’ in Austria was defeated in a referendum in 1978. This thwarted the plans of the (then Socialist) government to start operation in the recently finished plant at Zwentendorf. This represented a severe backlash for the government at the time (much to the joy of the People’s Party, then in opposition), and led to fierce manoeuvring within the electricity sector to revive the nuclear option. These efforts were almost bearing fruit in 1986, when the catastrophe at Chernobyl put a stop to the initiatives,

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leading to the ultimate dismantling of the Zwentendorf plant. Having thus been ‘saved by Chernobyl’, Austria has subsequently pursued a strictly non-nuclear energy policy on the national as well as the international level. Even more decisive in terms of national politics were, however, the events surrounding the plans for a hydropower plant in Hainburg on the Danube in 1984. The government (then led by the Socialist Party in coalition with the ‘pre-Haider’ Freedom Party), with strong support from the labour unions and the business sector, decided to build this plant despite fears that it would degrade biologically diverse wetlands. Several thousand protesters gathered in the ‘Hainburger Au’ (the nature preserve adjoining the river) to hinder construction workers from clearing a site for the hydropower plant. Violent clashes with the police led to a severe political crisis that became the ‘defining moment’ for the nascent Green movement in Austria. One can discern a direct line of development from the ‘occupation of the Hainburger Au’ to the strong role of the Green movement in Austrian politics today. From Hainburg on, reinforced by a similar conflict over a hydropower plant at the River Enns in Lambach several years later, Austria’s political establishment was clearly restrained from large-scale energy projects, whether based on nuclear, fossil or hydropower. With the national level thus bound in the energy arena, the Länder and municipalities began to play a more active role. In this context, alternative energy technologies have been favoured by sections of the conservative People’s Party (especially with respect to biomass projects, due principally to the strong agrarian lobby within the ÖVP), and by the Green Party. Even the Freedom Party began to play a more visible role by critically focusing on ‘big-party influence’ in the energy sector as a whole. Lacking the nuclear option, and running into fierce opposition when pursuing conventional energy projects (such as hydropower plants or a proposed new 380 kV transmission line to traverse the country north to south), Austria’s political establishment has (by default?) given strong vocal support to alternative energy systems. This support has not, however, been translated into a clear and concise national strategy for RES-E. The Position of Major Economic Actors Regarding RES As previously indicated, energy companies were by and large publicly owned and operated in the period following World War II. The major reasons for this were: an emphasis on the strategic importance of energy supply; a general lack of private investment capital following the destruction of the war; and the crucial fact that the public energy companies were surrendered as ‘German capital’ to the Allied Forces after 1945. Politics

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thus played a key role in the administrative running of these companies until quite recently. The strong ties (and common interests) between energy companies and political parties led to a number of privileges (for example tax breaks) and general political support for the companies, in the electricity sector as well as in the oil and gas sectors. The liberalization of energy markets in the late 1990s and early years of the present century has diminished this link between ‘big energy’ and politics. As a rule, these companies are reluctant to enter the field of renewable energy. But when they do enter, they can muster the necessary ‘know-how’ and manpower to lead the most ambitious of projects (such as the previously mentioned CHP plant at Wienstrom in Vienna and similar projects in Linz, Timelkam and Baden/Mödling) to success.5 Complementary to the (largely) public-management aspect of the energy sector, Austria has also traditionally had a very strong position in energy engineering as well as boiler production. The ‘Kaplan turbine’, for example, which is the basic technology for modern run-of-the-river power stations, is an Austrian invention. Companies such as VOEST-Alpine (now VA Tec), Waagner Biró (now AEE), Simmering Graz Pauker (SGP), Maschinenfabrik Andritz and ELIN (now part of Siemens) have provided the entire range of energy technologies, from boilers to turbines to generators. The necessity to rebuild the country after World War II and to lay the foundation for a modern industrialized nation required the realization of daring projects in this field. Austria’s industry rose to the challenge, eventually making Austria a net exporter of electricity technology. At the beginning of the 1970s, most of these large companies were either directly state owned (like VOEST-Alpine), or in the hands of banks with strong ties to the political establishment (a situation often referred to as ‘cold state ownership’). After the political disasters of Zwentendorf and Hainburg, the path towards ever-larger projects in the nuclear and hydropower sectors came to an abrupt end. Austria’s industry was without a home market for large-scale energy technologies. During the late 1970s and 1980s, Austria’s energy technology companies underwent a period of restructuring and consolidation in the face of more competitive markets for steel and machinery. The goal was to create strong Austrian-based engineering companies able to compete internationally. As Austrian companies were by and large burdened with high labour costs, this led to a dramatic reorientation of the sector. The major companies turned towards innovation in environmental technology as a new and potentially more lucrative trend. Many of these companies became specialists in a variety of fields, from flue gas desulphurization to NOx reduction, mostly on the basis of existing US and Japanese technologies. A further result of

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this development was a strong move to outsource manufacturing capacities to neighbouring countries, especially in former Yugoslavia, the Czech Republic and Slovakia. This switch was, from the point of the companies, absolutely logical. They maintained their customer base (large electric utilities) and could bring to bear their know-how in energy technologies. Their involvement in alternative energy systems was, however, relatively minor. Although some of them (notably Waagner Biró and VA Tec) were for some time active in the development of alternative energy technologies, their main focus remained on large-scale conventional energy technologies, but now with the goal of supplying necessary end-of-pipe environmental protection technologies. The larger companies left in this field (now in most cases newly privatized companies or parts of international conglomerates) still play a prominent political role as major job providers. Their interest in using their political clout to advance RES is, however, very limited. This has resulted in a type of vacuum with respect to pressure from the business sector in support of alternative energy projects. The conventional large-scale technology providers have not been interested in small-scale solutions, and the utilities have also been reluctant to build diverse and small-scale RES-E installations. Into this vacuum a new set of players has entered: small and mediumsized enterprises (SMEs) providing equipment for ‘alternative’ RES-E technologies such as biogas and biomass co-generation. From the late 1980s on, a number of Austrian SMEs have become front-runners in biomass utilization technology, especially at the lower end of the capacity range (heating systems for homes and district heating installations). These companies, together with agricultural associations and the Association of Biomass Producers, have emerged as a considerable lobby for RES-E. It is notable that in the Austrian case the pathway towards new RES-E technologies actually coincides with the refocusing of the existing industrial base for energy technologies, and involves a complete new set of economic players. Influence of NGOs in the RES-E Discourse Interestingly enough, environmental groups, while playing a major role in the development of energy policy in Austria in general, have had little positive impact on RES-E development. Particularly the anti-nuclear groups, but also groups opposed to hydropower plants, played a defining role in shaping energy policy. Their main interest was, however, in measures for energy efficiency. They were less active in advocating alternative RES-E provision systems.

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There are, however, some NGO actors that exert considerable influence on the energy sector in general, and on RES-E development in particular. Various associations, especially the Austrian Biomass Association and the Small Hydropower Association, play an important role in actor mobilization, coordination and lobbying for RES-E. In numerous local areas, private consortia, made up mainly of farmers and often linked to municipalities, are the driving force behind a number of RES projects for both district heating and, increasingly, RES-E installations such as biogas plants. Among other NGOs in this field, one stands out: the Renewable Energy Consortium (AEE – ARGE Erneuerbare Energie). This group of private actors, motivated mainly by environmental concerns but also by a desire to better utilize endogenous resources, have pioneered do-it-yourself energy technologies in private homes. Austria holds the top rank within the European Union with respect to thermal heat panels (based on installed area per capita). A significant level of technological development has been achieved, increasing overall capacity by 37 per cent in 2005, with 43 per cent of the total production going to exports.6 This success story is partly due to the efforts of the AEE and its highly innovative dissemination and development efforts. The AEE is also increasingly active in the RES-E field, particularly with respect to decentralized small-scale solutions involving (primarily) PV and biomass. Milestones along the Austrian Energy Path In sum, the development of Austria’s energy system and its relation to the political system and society is characterized by a unique developmental path; and the trajectory has clear implications for further development and the constellation of actors that will influence this development. The most significant ‘milestones’ along the way can be summarized as follows. There has been a strong link between the dominant technological developments for hydropower and the goal of rebuilding Austria after World War II. This link has firmly embedded the Austrian DES in the political landscape of Austria in general. During this initial phase large-scale hydropower installations were undisputed, and even a source of considerable pride related to the prowess of Austrian engineers. Another milestone was the ‘nuclear disaster’ of Zwentendorf. This event left Austria with, on the one hand, a nearly finished ‘ruin’ of a nuclear power plant and a firmly anti-nuclear stance at a very early point of development; and, on the other hand, a strongly polarized political system in the area of energy policy. Then there was the ‘Hainburg confrontation’, a milestone that further aggravated the energy polarization in the political system, since from this

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point on the conflict also involved the status of large-scale hydropower projects. Given that this also triggered the founding of the Austrian Green Party, it represents a rare case of direct energy-issue impact on the whole political landscape. In addition it led to a period of political ambivalence with respect to the further development of energy policy. Finally we can mention the particular nature of Austria’s very pronounced ‘grass-roots movement’ concerning RES technology, a characteristic that has contributed to technological progress in small-scale RES systems, leading further to an unusual bias in Austrian society towards decentralized, small-scale renewable energy and electricity solutions.

IMPLEMENTING RES-E IN AUSTRIA The subsequent presentation looks among other aspects at certain key tensions that have arisen between the goals of an efficient internal energy market on the one hand and environmental protection on the other. This is necessary since it is not only political arguments that hinder certain lines of RES deployment. There are also legislative measures that actually work against RES development. The Austrian case indicates, for example, that the national mode of implementing the European Water Framework Directive (EC 2000) can actually lead to reduced rates of small-scale hydropowered electricity production. The Regulatory Situation before Liberalization Before liberalization of the electricity market in Austria, which became effective with the enactment of the Federal Electricity Act of 1998 (ElWOG 1998), the regulatory situation was characterized by relatively few legislative measures compared to the flood of regulations that emerged afterwards. The Electricity Industry Act of 1975 (ElWG 1975)7 – a ‘framework act’ for the electricity sector as a whole – imposed a general obligation to provide and maintain public utility services by the state-owned electricity enterprises. Consumer prices were regulated by the means of fixed prices (Preisgesetz 1976).8 The first Austrian feed-in tariffs to promote RES-E were set by means of ministerial decrees at the federal level, such as the decree concerning deliveries of eco-electricity across provincial borders.9 According to another federal decree,10 governors of federal states (Länder) – who also act as executive implementers of delegated federal responsibilities in Austria – were empowered to adopt individual decrees concerning prices of renewable electricity. Some Länder, such as Upper Austria, chose instead to

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adopt non-binding agreements, whereby public utilities agree to pay the socalled ‘cross-border tariff’. This is regulated by the above-mentioned federal decrees concerning renewable electricity sold across state borders, and for renewable electricity produced within the state. With the adoption of the Federal Electricity Act of 1998 – which aims at the liberalization of the electricity market pursuant to corresponding European legislation (EC 1996)11 – price regulation had to be abandoned in favour of a free market. Although the promotion of RES-E was still a goal, price regulation was no longer a possible instrument to pursue it. Since then feed-in tariffs for eco-electricity have been legislated in connection with electricity issues. The Federal Electricity Act 1998 Although several programmes for the promotion of RES-E at the state level had previously been adopted, it was not until the adoption of the Federal Electricity Act of 1998 (ElWOG 1998) that a consistent law at the federal national level was created in this field. For the first time this Act stipulated an obligation for distribution network operators to accept the delivery of electricity produced from renewable sources such as biomass, biogas, landfill gas, sewage-treatment-plant gas, geothermal, wind and solar sources. Operators were required to achieve a target of at least 3 per cent of their distributed electricity from these renewable sources by 2005. The feed-in tariffs to be applied by the distributors differed not only between various renewable energy sources, but also among the nine Austrian Länder. The additional costs were financed by a surcharge on the network tariff which had to be laid down in separate decrees for each Land, and were to be collected by the distributors. Furthermore, the Länder were provided with an opportunity to simplify the bureaucratic approval process concerning installations producing RES-E, or eco-electricity as it is referred to in Austria. In general, however, this law was designed to implement a European Council Directive (EC 1996) concerning common rules for the internal electricity market, primarily aiming at a reduction of prices by creating a competitive market. The organization of the power grid had to be outsourced, and as an elementary requirement, network tariffs were supposed to still need price regulation in future – unlike the production and trading of electricity. With the amendment of the Federal Electricity Act in 2000, the targets concerning the share of RES-E on grid-related electricity consumption have been extended. By 2007 they should reach a minimum quota of 4 per cent. The financial means for the granted feed-in tariffs were nonetheless raised by the above-mentioned surcharges, which differed strongly among the individual Länder.

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The support scheme, however, became more complex. Support for smallscale hydro was, for example, organized in a completely different way. Electricity traders had the obligation to prove to sell at least an 8 per cent share of small-scale hydroelectricity, based on a certificate system. Another market-based approach to the promotion of RES-E was established by ‘labelling’. This implied that any operator selling electricity to consumers had to specify the mix of primary energy sources used to produce the electricity billed to a customer. With this provision, consumers could choose to purchase the type of electricity they preferred even if it proved to be more expensive. In general the full liberalization of the electricity market which had been imposed with this amendment of the Federal Electricity Act did not result in large numbers of consumers changing their electricity supplier (as had been expected). The highly criticized level of regulation (Hauer 2003) and especially the different feed-in tariffs and surcharges in each Land, led to significant differences in the promotion of RES-E within Austria. The Eco-Electricity Act 2002 The purpose of the federal Eco-Electricity Act 2002 (Ökostromgesetz 2002) was to standardize the different promotion schemes within Austria. It was specifically launched as a measure to implement the European RESE Directive (EC 2001a). It thus also states that the indicative target of 78.1 per cent of electricity consumption from RES by the year 2010, as stipulated in the Annex to the Directive, is to apply for Austria. This number includes of course the already large share of conventional hydropower in Austria. As illustrated in the Appendix, the Eco-Electricity Act provides for standardized feed-in tariffs across Austria for each of the renewable energy sources. It also integrated the promotion scheme for small-scale hydro plants. The Länder were granted some say in the tariff-setting procedure as compensation for undisputed adoption of future decrees at the federal level. The average costs of the most cost-efficient installations for each renewable energy source were to be taken into consideration in the nationwide setting of tariffs. The act envisions a progressive rise in ‘alternative’ (that is, ‘new’) eco-electricity production reaching a level of 4 per cent ‘new’ RES-E by 2008. Not every individual distributor was obliged to buy the proffered eco-electricity. An ‘Ökobilanzgruppenverantwortlicher’ took over this responsibility.12 This particular eco-electricity distributor was financed by selling the eco-electricity to other traders at a price of 4.5 cent/kWh and in addition by levying a surcharge imposed on the consumer price, which is fixed by federal decree.

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Above all the Eco-Electricity Act lowered investment risk because the feed-in tariffs, once granted, were to be paid for 13 years. The tariffs and the promotion scheme were very attractive – particularly for wind-power installations. The amendment to the Eco-Electricity Act In 2006, the Austrian parliament adopted an amendment to the EcoElectricity Act 2002 (Ökostromgesetz-Novelle 2006). Due to the subsidy scheme (see the Appendix), the target of 4 per cent ‘new’ RES-E (meaning all RES-E other than conventional large-scale hydro) was already reached in 2005, three years earlier than the original target date of 2008. While successful on this level, the subsidy scheme turned out to be expensive for the consumers, who had to bear the additional costs of the subsidies. Moreover inefficient plants (for example biogas plants without heat utilization) were also subsidized. The intention of the amendment to the present EcoElectricity Act was to reduce the costs of the support scheme. Giving support to only the most cost-efficient plants should enable planning for future subsidies and increase the efficiency of public financial support on a €-to-MW-installed basis. The comments to the amendment also mention marketing of eco-electricity as a given goal. According to the scheme of the Eco-Electricity Act 2002, the required funding level depended on the number of participating RES-E installations to which feed-in tariffs were granted. With the amendment of 2006 the total amount of subsidies available for ‘new’ RES-E systems is fixed. From 2007 to 2011 the annual financial support available for implementing new ecoelectricity plants based on wind, biomass, biogas and photovoltaic technologies is fixed at an absolute level of €17 million. After 2011 this figure will be re-evaluated and set by decree by the Minister of Economic Affairs. Thirty per cent of the grant will be reserved for plants based on biomass; 30 per cent will go to biogas-based plants; and another 30 per cent will go to wind-power installations. The remaining 10 per cent will be dedicated to photovoltaic and other types of installations. For installations on the basis of biogas or solid biomass, 60 per cent efficiency for the utilization of the energy content of the primary energy carrier is required. This means that these installations are forced to utilize the heat generated by the production of electricity, either for district heating systems or for commercial purposes. The amendment does not impose any limitations on the energy produced by small-scale hydro plants. The newly created Eco-Electricity Arbitration Centre (Ökostromabwicklungsstelle) will be obliged to conclude contracts with particular installations. Following the ‘first come, first served’ principle, these contracts will be concluded upon successful application. The prices paid to the

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installations for their electricity will be set according to the costs of production of the most efficient installations using the same primary energy source. A yearly revision of prices will be determined (by decree) by the Ministry of Economic Affairs. The feed-in tariffs are guaranteed in full for ten years after the implementation of a new plant. In the eleventh year, only 75 per cent, and in the twelfth year only 50 per cent of the price is guaranteed. The amendment introduces support for combined heat and power (CHP) plants, and a new subsidy for medium-sized hydropower plants, both of which are eligible for investment subsidies of up to 10 per cent of the total investment costs. The subsidies for CHP plants are inversely proportioned to the capacity of the plant, starting with €100/kWp13 for plants of less than 100 MWp to €40/kWp for plants of more than 400 MWp. For hydropower plants the subsidy is €400 per kW installed capacity. Dispensation of these investment grants is assigned to a special banking institution, the Kommunalkredit International Bank Ltd (ÖKK – Kommunalkredit Austria). Between 2006 and 2012, €60 million will be spent on the support of CHP plants, with 30 per cent of this amount reserved for industrial co-generation. Medium-sized hydro plants will be subsidized by a total amount of €50 million over the same period. Until 2010 this new subsidy scheme aims to achieve a level of 10 per cent of the annual electricity supply produced by wind, biomass and photovoltaic technologies. On top of this, the amendment aims to raise the share of electricity provided by small-scale hydro (less than 10 MW) to 9 per cent of the total electricity consumption in Austria. Two-thirds of the necessary funding will be provided by selling ecoelectricity at a fixed price (4.5 cent/kWh in 2006, to be re-evaluated for the following years). A little more than a third will be supplied via a surcharge levied on distributors according to the number of net access points (Zählpunkte). In addition to the subsidization scheme itself, purchase of eco-electricity is also restructured. The above-mentioned Eco-Electricity Arbitration Centre takes over the tasks performed by the previously designated ‘Eco-Balance Group Manager’ (the ‘Ökobilanzgruppenverantwortlicher’ referred to in the previous section and explained in endnote 12). Other Initiatives for Promoting RES in General In addition to the legislation which has been adopted to implement the RES-E Directive in Austria, there are numerous other regulations and initiatives for the promotion of RES in general. Not all of these have legal force, or have been able to realize their full potential yet, but they

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nonetheless hold promise for moving the development of RES in a positive direction. There is a certain degree of interdependence between RES-E legislation and legislation related to the security of energy supply and energy efficiency. The necessity of saving energy in order to secure future energy supply has not only been a major reason for political and legal interventions, but is still one of the most important arguments in the debate on the promotion of RES-E. Due to this link, initiatives will be mentioned which aim primarily at the security of energy supply, but also have important impacts on RES-E issues. The Federal Act on the Promotion of Environmental Protection The Federal Act on the Promotion of Environmental Protection (Umweltförderungsgesetz 1993) comprises various types of subsidies relating to environmental protection, ranging from the clean-up of former waste deposits to the promotion of energy-efficiency measures. In a decree setting detailed guidelines for the subsidies granted, special emphasis is placed, inter alia, on energy production from renewable sources as well as energy recovery from biogenic waste. As these measures are related to RES in general, they also imply certain subsidies for eco-electricity such as investment grants concerning installation or reconstruction of small hydropower plants or photovoltaic installations. The implementation of this promotion scheme, which principally involves investment subsidies, is on the whole assigned to the already mentioned Kommunalkredit Austria (ÖKK). Contracting initiatives Third-party financing for energy-efficiency investments or energy audits of enterprises with high energy consumption are not yet specifically regulated by law. The closest case to such legislation may be the Environment Management Act (Umweltmanagementgesetz 2001)14 as accompanying national legislation to the European EMAS regulation (EC 2001b). Contracting initiatives are part of several programmes, partly launched by the government. As for eco-electricity, a specific type of contracting has to be mentioned: ‘installation contracting’. This type of initiative aims at the construction and support of a particular installation such as a biomass co-generation plant or a photovoltaic unit. The ‘contractor’ has to provide the necessary know-how and financial means for building and operating the installation, but gains the sales revenue for the duration of the contract. When the contract expires, the contracting agent, respectively the customer of the contractor, can choose between buying the installation and extending the contract. In certain Länder (Upper Austria, for example) such projects are supported by public funding.

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Tax incentives In 1996 a tax on electricity was adopted which does not differentiate between electricity from renewable and from other sources. Up to now taxation has not been used to create incentives for increasing the share of eco-electricity in Austria, despite the fact that numerous discussions of ecological tax reform in Austria have indicated that it bears strong potential. Potential Conflicts between the Internal Energy Market and Environmental Goals In this area, there seem to be four major areas of conflict: (1) The existing Austrian energy legislation determines the obligation to accept proffered eco-electricity, which necessarily includes grid access. However, despite the legal possibility to simplify the bureaucratic approval process for new installations, administrative approval remains in general very complex and often implies various time-consuming licence procedures which in the end might deter investors from realizing RES-E projects. (2) Financial support to reach the indicative targets that were set for Member States by the RES-E Directive is not in full compliance with the idea of a free-market economy stipulated by the European Council (EC 2003). European legislation on competition and especially the Community guidelines on state aid for environmental protection (EC 2001c) must, therefore, be analysed with respect to developing such support schemes. The Austrian Eco-Electricity Act also imposes guarantees of origin for eco-electricity which can be traded within Europe, and which is designed to enable producers to gain higher prices for eco-electricity on the free market. As such guarantees of origin are by themselves inadequate to reach the RES-E indicative targets, some kind of financial support for renewable electricity production seems to be necessary anyway. (3) It is not only the simultaneous quest for a free-market economy that restricts the promotion of eco-electricity, however. Certain environmental protection issues also work against the RES-E objectives. The EU Water Framework Directive (EC 2000), for example, demands very high standards for not only the chemical quality but also the hydromorphological characteristics of water basins. Given the situation in Austria, the extent to which RES-E from hydropower is further developed (particularly smallscale hydro) directly depends on the way the Water Framework Directive is ultimately implemented.15 A similar problem related to wind power must also be mentioned. Opposition to wind-power installations is increasingly being based on environmental arguments, such as the allegation that birds are killed by the

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rotor blades or that the installations disfigure characteristic landscapes. Further, biomass utilization in Austria (especially small and medium-scale installations) is increasingly coming under scrutiny concerning their particulate emissions (which are suspected of causing lung cancer). These examples illustrate that different forms of ‘pro-environment’ resistance become more forceful as RES-E technologies become more imposing technologically and more widespread geographically. The nature and scope of this emerging conflict will clearly have impacts on the ability to reach RESE targets in the future. (4) Finally, although it is explicitly mentioned in the preamble to the RESE Directive that the so-called ‘waste treatment hierarchy’16 should not be affected, it cannot be denied that the promotion of the use of the biodegradable fraction of waste which is defined as biomass in Article 2 of the Directive could have negative impacts on existing attempts to prevent waste at the outset. As far as the Austrian Eco-Electricity Act is concerned, no feed-in tariffs for electricity produced from waste liquor, meat-and-bone meal and sewage sludge are granted. The use of highly biodegradable waste in so-called ‘hybrid installations’ is, however, included in the share of actual renewable sources employed (see the Appendix). Too Much of a Good Thing? Discussing the Requirements of the RES-E Directive Renewable electricity production in Austria was in fact growing much faster than originally presumed due to promotion through the EcoElectricity Act 2002. This not only caused a shortage in the appropriation of funds (leading to the amendment of the Act in 2006). In the course of the debate on the amendment, the vagueness of the qualifying Austrian statement to the Annex of the RES-E Directive (‘footnote 3’), has raised the crucial question as to whether renewable electricity production must in fact increase in order to reach the indicative target of 78.1 per cent in 2010. This target can only be reached by intensifying the volume of electricity consumed from ‘new’ RES such as biogas, CHP from biomass, photovoltaic installations and small-scale hydro as no more large-scale hydropower plant seems to be feasible in Austria and wind potential is limited by topography. By and large, these technologies are high-cost technologies compared to those that are at the disposal of other EU Member States. The Eco-Electricity Act 2002 declares the reference value of 78.1 per cent as the indicative target for Austria, without, however, any explanation as to how this target is to be interpreted. The footnote in the RES-E Directive states: ‘78.1 per cent would be a realistic figure, on the assumption that in 2010 gross national electricity consumption will be 56.1 TWh’.

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The vagueness of this statement – as to both intent and meaning – has provided grounds for arguments to back-pedal on efforts to promote RES-E. The official interpretation presumes that the footnote is a legal part of the Directive, and draws the conclusion that the target should be calculated on the stipulated figure of an assumed gross national electricity consumption of 56.1 TWh in 2010. As this roughly corresponds to the amount of electricity consumption already reached in 1997 – as commonly predicted it would imply that the effective percentage of renewable energy would de facto decrease and Austria may still fulfil its obligation thanks to footnote 3. This interpretation appears, however, to be at odds with the interpretation of the European Commission. In a letter written in response to an enquiry from an Austrian lawyer, François Lamoureux, Director General for Energy and Transport, considers the footnote to be legally irrelevant.17 In this case the indicative target will be missed because the actual electricity consumption in 2010 will most probably be much higher than 56.1 TWh (Steinmüller 2004). The crucial difference between the two interpretations is that further public financial support would be necessary to reach the target in the second case. With the high-cost alternatives still available to Austria after efficient large-scale hydropower and wind power are almost exhausted, this could generate serious economic disadvantages as it would draw public funds away from other important areas (such as education or research). Higher prices for electricity paid by consumers and industry may also reduce purchasing power and put Austrian competitiveness in jeopardy. In fact both interpretations are unbalanced. In the first case, the insistence on a previously stipulated level of consumption means that Austria may not have to take into account the actual growth of energy consumption, while the other Member States must calculate their indicative targets based on the actual gross national electricity consumption in 2010. This obviously provides Austria with an advantage. Austria, however, would be unjustifiably adversely affected compared to other Member States if the footnote in question were seen as completely irrelevant. Assuming that demand for electricity will grow until 2010, increasing RES-E from 70 per cent to about 78 per cent of consumption does not mean an actual growth of 8 per cent, since the increase in consumption must also be taken into account.18 In Austria an increase in RESE production of about 23 per cent (compared to the baseline year 1997) would be necessary to reach the overall target of 78.1 per cent in 2010. Compared to countries such as Belgium, for example, which are starting from almost zero and may use comparatively ‘cheap’ technologies, Austria would be put at a disadvantage as a result of its positive RES-E situation

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at the outset, having exhausted the ‘cheap, low-hanging fruits’. On top of that, Austria’s RES-E baseline is defined by a strong hydropower capacity that may even decrease as the result of the European Water Framework Directive. Keeping the already high portion of RES-E in Austria in the face of rising consumption means having to invest heavily in ‘new’ (and costly!) RES-E technologies. This fails to comply with the principle of equality that is basic to the Austrian Constitution as well as to European law. One possible solution to the problem, which would minimize the distortion of the burdens put on both front-runners and latecomers, could be the following: the target is considered as achieved when eco-electricity production has at least grown to an extent according to the increase of percentage stated in the Directive for each country19 calculated on the basis of the actual gross national electricity consumption in 2010. This means that on top of the (absolute) amount of RES-E generated in the reference year, every country has to generate more energy from renewable sources, which is obviously the goal of the Directive. This interpretation also guarantees that the general increase in electricity consumption will not play to the disadvantage of countries with high initial shares of RES-E.

PROMOTING THE DEVELOPMENT OF RES AT THE SUB-NATIONAL (LÄNDER) LEVEL As already mentioned, the constitutional allocation of responsibilities in Austria is in principle differentiated between federal and Länder competences. In general, electricity matters are assigned to federal legislation with respect to general governing principles, but implementation is delegated to the Länder. The promotion scheme governed by the Eco-Electricity Act 2002, however, constitutes federal law – based upon a special constitutional statutory provision in its first section. The Länder are, nonetheless, responsible for the implementation of promotion schemes concerning ecoelectricity, for example through investment subsidies (see the Appendix). Furthermore, they also have the possibility to implement promotion schemes based on the so-called ‘Privatwirtschaftsverwaltung’ – which involves administrative measures through private actors. In this area, in particular, they can launch various programmes concerning eco-electricity funded by public Länder funds. The importance of this sub-national ‘leeway’ in influencing the path of development is considerable. Although the general path for developing and phasing in new RES technologies is defined by European policy and the formal requirements for member-state implementation, the most immediate impact is generated by decisions much further down the ‘hierarchical ladder’.

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This appears to be especially true for RES-E technologies, as they clearly depend on the natural endowment of the region where they are to be developed. In addition, the structure and speed of their implementation depend on the dominant socio-economic environment. Austria is a particularly interesting case in this regard. Despite its small size, Austria has a wide variety of environmental and economic settings which clearly require different technological pathways to increase the RES-E share significantly. In the following we use Upper Austria as a case to briefly illustrate how a particular region has exploited this situation across a broad spectrum of possibilities. Upper Austria’s Energy Plan ‘Energy 21’ The present energy plan for Upper Austria, launched in 2000 as ‘Energy 21’, is defined as the second phase of the broader ‘Upper Austrian Energy Plan’ which was adopted in 1994. With respect to eco-electricity, ‘Energy 21’ has set a target of 3 per cent electricity produced from renewable sources by 2005. The implementation report on Energy 21 for 2003 (Dell 2004), highlighted several initiatives, such as: ● ● ● ● ●

the imposition of tighter energy efficiency standards in housing legislation; energy consulting; the organization of an annual energy congress with a broad international profile, including a separate ‘energy globe20 contest’; the management of so-called ‘eco-energy clusters’; and different promotion programmes concerning advanced energy technology and eco-electricity technology.

These measures are to be carried out mainly by the Energiesparverband (energy savings organization), which was founded by Upper Austrian state authorities in order to establish an institution responsible for energy information. The ‘energy future’ of Upper Austria, 2003–9 An intergovernmental agreement between the conservative Volkspartei and the Green Party (a coalition in power after the 2003 elections in Upper Austria) lays down further guidelines for the ‘Energy 21’ plan. As for ecoelectricity, this agreement exceeds the targets set in both the ‘Energy 21’ plan and the European RES-E Directive, aiming at a share of 8 per cent by 2010. Towards this end the agreement also lists a number of relatively specific initiatives ranging from strengthening R&D for RES-E to more aggressive information campaigns directed at specific target groups.

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The Eco-electricity Program ÖKOP21 The aim and purpose of ÖKOP is to foster the development of RES-Etechnologies and to increase their efficiency.22 Within the framework of ÖKOP the state of Upper Austria supports the costs incurred by the preparation and development of innovative RES-E projects. These measures are supplementary to the feed-in tariffs regulated by federal decree.23 The grants allocated within the ÖKOP framework are designated as de minimis subsidies.24 Subject to support are: innovative projects; techniques; research activities; and specific products that support implementation of RES-E technologies. The subsidies can be applied to material costs, personnel costs and costs related to consulting, education, engineering and information dissemination. Grants for investment costs are limited to 25 per cent of the project costs. The project must be located in Upper Austria. The ECP (Energy Contracting Programme) in Upper Austria. According to the Upper Austrian Energy Contracting Programme, public funding can be received upon application, provided that either an upgrading of the energy status of buildings or the promotion of electricity from renewable sources is to be implemented by the means of open tenders and contracts. As mentioned earlier, energy contracting focuses primarily on energy-efficiency measures at present, but also provides a good opportunity for supporting eco-electricity production. One example is a photovoltaic installation (50 kWp installed) on the roof of a church in Linz. The project has been realized as a contracting project, co-financed under the Upper Austrian ECP and the ÖKOP.

INNOVATION FOR RENEWABLE ENERGY The Austrian Strategy for Sustainable Development from 2002 has, as one of its four fields of action, the aim of ‘developing Austria into a dynamic economic area’.25 In a sub-title to this field, the strategy also hints at a possible mechanism for achieving this goal: ‘success through innovation and networking’. Although the strategy clearly highlights the importance of innovation and (elsewhere) points to the task of altering the energy system in a more sustainable direction, the strategy itself does not provide for an integration of these two policy fields. More important than the strategy itself, however, is the process to implement it. The Committee for Sustainable Development, an interministerial body of responsible civil servants, plays a key role by developing action plans and specific programmes for implementation. It is through this process that a certain degree of

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‘environmental policy integration’ is achieved, also with respect to linking RES and innovation. The situation for RES-E in Austria is, however, considerably more complicated. On the one hand most action plans preceded the formulation of the sustainable development strategy. This has led to a situation where most initiatives to promote RES (and RES-E in particular) are not directly affected by the implementation of the strategy for sustainable development. On the other hand, energy policies (as well as related policy fields such as housing and land-use planning) fall to a large extent within the competence of the Länder. This leads to a variety of approaches to the implementation of RES in Austria, with various plans and instruments (for example, the funding of solar panels, biomass heating plants, biodiesel plants etc.) being dealt with on the level of the particular Land, with, in many cases, funding provided by the European Structural Funds. In general the federal states tend to promote RES not only as a means to bring the energy system more in line with standards for sustainable development, but also as an initiative to support innovation in a sector that has considerable economic potential. This leads to quite ambitious programmes and action plans, as exemplified in the case of Upper Austria. R&D programmes for RES-E Research in Austria is pursued and funded by a number of actors. The main driving force is certainly the federal level, where the Austrian Council for Research and Technology (a body with a strong industrial bias) has a leading role. With support from this body, a concerted effort for research for sustainable development has taken root over the last few years. Part of this effort is a programme called Nachhaltig Wirtschaften (roughly, ‘sustainable economic development’).26 One sub-section of this programme, ‘energy systems of tomorrow’ (Energiesysteme der Zukunft), is devoted to RES development. This programme promotes cooperative research with the intention of bringing companies into the research effort from the outset. In addition to this initiative, the federal research funding institutions have supported various long-term projects in the RES field. The two most notable are the Austrian Bioenergy Centre (a centre of excellence bringing together the strengths of different research institutes in the field); and the Renewable Energy Network Austria (RENET), a demonstration project with a strong industrial basis. Both projects provide cutting-edge research on an international level concerning various aspects of RES, with a special focus on biomass-based technologies and a strong RES-E component in their current agenda. Both concentrate on small- and medium-scale

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technologies, ranging from the kW level for Stirling motors to the range of 10 to 50 MW biomass gasification units.27 In addition to the federal level, the Länder also support technological development and applied research. Most of them have state energy representatives (Landesenergiebeauftragte) who coordinate research efforts as part of their overall mandate. Both biodiesel- and biogas-based RES-E systems are currently priority areas for most state research programmes. Horizontal and Vertical Integration of Innovation Horizontal integration of efforts to implement sustainable development in Austria is mainly realized via the interministerial Committee for Sustainable Development. The Committee provides an effective platform for sustainable development (SD) information flow and for coordinating different policy sectors and actors on the national level. One can hardly maintain, however, that SD has attained policy pre-eminence in Austria. The current state of implementation of the SD strategy – with a relatively large share of ‘soft’ measures and voluntary actions – clearly reflects this situation. Attempts to implement the strategy horizontally are, however, relatively advanced in relation to other policy domains. The work of the SD Committee has generated a considerable number of coordinated measures in various policy fields (from environmental policy to education and public awareness to development initiatives). Research policy in particular is a success story for the SD follow-up in Austria. Funding, technological norms, and the licensing and dispersion of innovative technologies are, however, less successfully integrated. Vertical integration is an entirely different story. Many relevant policy fields that are connected to innovation in general, and to the development and implementation of RES in particular, remain in the domain of the Länder. Even if integration on the national level were more advanced, this would still be translated into nine different (state) approaches on the ground. Although the number of ‘ministers’ on the state level (Landesräte) is considerably lower than on the federal level, this does not mean that policy fields are automatically more ‘fused’ on this level. The administrative units on the state level usually mirror the sectoral structure of the federal level, so that the challenge of SD/RES integration must succeed within and across four different domains: ●

horizontal integration on the national level (well in progress for research for SD, but not for other factors promoting innovation);

212 ●

●

●


vertical integration between the different levels of governance (where a start has been made by including state SD commissioners of the Länder in the National Committee for Sustainable Development); horizontal integration at the state level (currently a very heterogeneous picture with respect to both sustainable development and innovation for RES-E); and vertical integration between governmental bodies at the state level and key strategic actors for the policy domain in question (relatively well established for RES and RES-E in many of the Länder).

One can, however, raise the question as to whether a lack of more formal national-state integration is in fact a negative feature in Austria. In a way the development and deployment of RES-E is substantively more important for the Länder than for the federal government. Whereas the latter views these technologies as primarily a way to reduce externally imposed emission quotas (thereby also meeting externally imposed ‘targets’), the Länder tend to view the same technologies within a context of competitive regional advantage for companies and jobs. As the latter view is – for better or worse – usually more ‘pressing’ in a daily political context, RES issues tend to be treated in a more ‘hands-on’ manner at the regional level. This is one of the reasons why most of the Länder have devoted considerable resources (often utilizing European Structural Funds) to the promotion of RES and RES-E. A large share of the ‘overshooting’ of allocated quotas for green electricity (ultimately leading to the amendment of the EcoElectricity Act) may be attributed to tacit support for such projects at the federal level. One could, therefore, use the Austrian case to argue for a certain level of competition between different governing levels as a driving force for innovation in this area!

CONCLUSION The Austrian case is notable in both a general and particular respect. It is important to acknowledge that Austria has already employed one major RES-E source to its limit, and possibly beyond: large-scale hydropower. This has led to a situation where the political discussion on energy over the last 30 years has also involved a heated confrontation over the installation of even more hydropower, with important consequences for the general political situation in Austria. The rise of the Green Party, for example, was certainly influenced by this confrontation. The goal of reaching even more ambitious RES-E targets is thus a particular challenge in Austria. Having seemingly exhausted the hydropower

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potential (at least with respect to large-scale installations), Austria must revert to other, more costly RES-E technologies to meet its EU targets. This means that, despite a comparatively high level of green electricity, the RES-E Directive definitely requires major changes in the way electricity is produced in Austria. Energy technology has played the role of ‘lead industry’, with a number of internationally successful companies and leading-edge projects marking the era of rebuilding after World War II. Over the past half-century Austrians have come to view the energy sector as a field of particular national achievement, both scientifically and with respect to engineering prowess. This general pride in Austrian energy technology has in recent years increasingly become associated with the challenge of developing viable alternative energy sources. Finally, it is important to draw attention to the potential lessons of the Austrian constitutional and political system. With respect to the innovation that is necessary to achieve RES-E goals, we have seen that the federal system poses particular challenges to the need for vertical integration. Whereas the government on the national level tends to view RES within the context of meeting international and EU standards for environmental performance, the state/Länder governments tend to promote RES as a key aspect of regional economic development and security of supply for regional industries. Since these two tendencies clearly could be mutually reinforcing, one might conclude that the Austrian Constitution is, in fact, a fortunate ‘medium’ for moving Austria beyond its dominant hydropower RES-E base. On a more specific level, there are several factors that condition the development of RES innovation and implementation. We can first mention the fact that Austria has already developed a vibrant biomass utilization sector. Austrian companies (and research institutions) are here among the most advanced in the world. This is true for both RES in general and RES-E, particularly with respect to technologies such as gasification, Stirling motors and biogas utilization. Given that most of these initiatives are aimed at relatively small and medium-sized technologies (from below 1 to 100 MW thermal energy), the innovative potential here is strongest for development in similar agrarian regions in Europe and the developing countries. Technological development in other relevant RES-E sectors – wind power, fuel cells, photovoltaics – is less advanced in Austria. Given the strong growth in electricity consumption and a near exhaustion of large-scale hydropower potential, Austria runs the risk of losing ground concerning its RES-E share. RES-E production continues to grow – but not as fast as electricity consumption. Austria thus risks becoming even more dependent on imported fossil resources, as it lost its status in 2001 as a net (‘green’) electricity exporter.

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A comprehensive approach to innovation will thus be crucial. This will not only involve a need for significant research investment and (continued) horizontal integration, but also a focus on more hands-on operational factors at the level of business–technology norms and modes of business– government interaction within and across interactive and interdependent political domains. Parallel to the structural issues of politics, industry and energy resource base, however, is an issue related to the ‘culture’ of technological innovation. Innovation for RES-E in Austria is not only a question of making these technologies more efficient and relatively less expensive in the market. It is also a question of making them more attractive and normatively appealing for the best minds and the most ‘venturous’ entrepreneurs. This may lead to a situation where the potential for ‘path creation’ beyond the dominant energy system in Austria is strongly influenced by a selfsustaining culture of RES-E innovation.

NOTES 1.

Source (in German): http://www.statistik.at/web_de/static/bilanz_der_erneuerbaren_ energietraeger_022718.pdf. 2. More information on this project is accessible (in German) at http://www.wienstrom.at. 3. The current description of relevant issues of the Austrian political system with regard to renewable energy systems (RES) mainly follows the arguments of Lauber (2002), who offers a comprehensive overview of the Austrian situation. 4. Recently the ‘old Freedom Party’ has split into the ‘Bewegung Zukunft Österreich’, headed by Jörg Haider and forming the coalition with the People’s Party and the ‘Freedom Party’ positioned at the national right of the political spectrum. The influence on political issues (as well as continuity) of this development remains to be seen. 5. More information on planned power station investment in Austria is accessible (in German) at http://www.veoe.at/fileadmin/310106_Kraftwerksprojekte_PK_ Investitionen.doc. 6. The total production in 2005 was 660 410 m2 of thermal collectors. More information on the development of the sector in Austria is available (in German) at http://www. austriasolar.at/Sonne-und-Energie/Marktstatistik/. 7. This law was later repealed by the Elektrizitätswirtschafts- und -organizationsgesetz (ElWOG 1998). 8. This law was later repealed by the Preisgesetz 1992, BGBl (1992/145). 9. Decree of the Minister of Economic Affairs from 29 April 1992, announced in the Official Journal of the Wiener Zeitung No. 102, dated 1 May 1992, repealed by a similar decree from 14 July 1995, announced officially in the Official Journal of the Wiener Zeitung No. 170, dated 25 July 1995. 10. Decree of the Minister of Economic Affairs from 5 June 1992, announced in the Official Journal of the Wiener Zeitung No. 131, dated 6 June 1992. 11. This Directive was repealed by Directive 2003/54/EC. 12. This translates roughly as ‘eco-balance administrator of the group’. In practical terms this particular distributor acts as eco-electricity administrator for all distributors in the group. 13. The subscript p stands for ‘peak capacity’ or bottleneck capacity, meaning the highest power capacity achievable with a power generation plant, defined by the weakest component in the plant (the ‘bottleneck’).

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14. 15.

This law was amended by BGBl I 2004/99. Although the first step of implementing the Water Framework Directive in Austria has been taken with the amendment of the Water Management Act at the end of 2003, the determination of numerous details has been left to the future adoption of executive order laws, and especially the final river basin management plan, to be completed only in 2009. 16. Waste prevention as first priority, followed by an increasing extent of reuse, recycling, composting and recovering energy from waste and finally minimizing waste for disposal as required by many official European documents. 17. Letter of 15 November 2005 from François Lamoureux, Directorate General for Energy and Transport of the European Commission, to Ms Dörte Fouquet, Lawyer with the Kuhbier Law Firm, Brussels Bureau, concerning Complaint 2004/5105 SG (2004)A/12697 on transposition of Directive 2001/77/EC in Austria on behalf of the European Renewable Energies Foundation. 18. Actual level of consumption in 2006 was 67.4 TWh. 19. Resulting from the difference between the reference value given in the Annex to the RESE Directive and the percentage in 1997. As already mentioned, in Austria this percentage must increase by about 8.1 per cent. 20. The Energy globe award started in Upper Austria and has developed into a truly international contest over the years. It has gained a momentum of its own and has also initiated a development in Upper Austria in the way that issues of renewable energies have gained a much broader public awareness. For more information see: www.energyglobe. info. 21. The source for this section is OÖ Energiesparverband: http://www.esv.or.at/esv/ fileadmin/esv_files/Info_und_Service/OKOP-Infobl_kl.pdf, 2 November 2004 respectively http://www.esv.or.at/esv/index.php?id=697, 2 November 2004. 22. The ÖKOP was announced in the Official Journal of the Linzer Zeitung, dated 19 January 2002. The guidelines to ÖKOP entered into force on 1 March 2003. 23. Federal decree concerning feed-in tariffs for eco-electricity, BGBl II 2002/508. 24. De minimis subsidies are, according to Commission Regulation No. 69/2001, subsidies under €100 000 granted to undertakings over a period of three years. These subsidies are not considered ‘state aid’, and hence are not subject to Commission approval. 25. A complete English version of the Austrian Strategy for Sustainable Development may be downloaded from http://www.nachhaltigkeit.at/strategie/pdf/strategie020709_en.pdf. 26. For more information, visit the website of the programme: http://www.nachhaltigwirtschaften.at/english/index.html. 27. Information on the Austrian Bioenergy Centre is available from the website: http://www.abc-energy.at/. Information on RENET may be found at http://www. renet.at/. Both centres are scheduled to be merged under a COMET project, a new funding scheme for Competence Centres for Excellent Technologies.

REFERENCES Dell, G. (2004), Umsetzung des OÖ Energiekonzeptes (Implementation of the energy concept for Upper Austria – in German), Linz, Austria: Energiesparverein Oberösterreich. EC (1996), ‘Directive 1996/92/EC of the European Parliament and the Council concerning common rules for the internal market in electricity’, Brussels: European Commission. EC (2000), ‘Directive 2000/60/EC of the European Parliament and the Council establishing a framework in the field of water policy’, Brussels: European Commission.

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EC (2001a), ‘Directive 2001/77/EC of the European Parliament and the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market’, Brussels: European Commission. EC (2001b), ‘Regulation No 761/2001 of the European Parliament and of the Council allowing voluntary participation by organizations in a Community ecomanagement and audit scheme (EMAS)’, Brussels: European Commission. EC (2001c), ‘Information from the Commission – Community guidelines on State aid for environmental protection’, OJ C 37 (3), Brussels: European Commission. EC (2003), ‘Directive 2003/54/EC of the European Parliament and the Council concerning internal rules for the common market in electricity and repealing directive 96/92/EC’, Brussels: European Commission. Eder, M., W. Schneeberger and C. Walla (2005), ‘Efforts to increase energy from biomass in Austria’, in M. Svatos (ed.), Bioenergy in Agriculture, Prague: Czech University of Agriculture, pp. 55–67. ElWG (1975), Elektrizitätswirtschaftsgesetz (Electricity Act – in German), BGBl 1975 (260), Vienna: Austrian Parliament. ElWOG (1998), Elektrizitätswirtschafts- und -organizationsgesetz (Electricity Organization Act – in German), BGBl I 1998 (143) with amendments by BGBl I 2000 (121) § 32 (5), BGBl I 2002 (149) Art 2, BGBl I 2002 (149) and BGBl I 2004 (63), Vienna: Austrian Parliament. Hauer, A. (2003), Sind Änderungen im ElWOG notwendig? Aktuelle Fragen des Energierechts 2002 (Are changes in the Electricity Organization Act necessary? Current questions of the Energy Law 2002 – in German), Linz, Austria: Energy Institute at the Johannes Kepler University Linz, pp. 47–59. IG Windkraft (2007), http://www.igwindkraft.at/index.php?mdoc_id=1005374, 25 October. Jelinek, E. (2002), In den Alpen – Drei Dramen (In the Alps – Three Dramas), Berlin: Verlag Berlin. Lauber, V. (2002), ‘Austria’, in D. Reiche (ed.), Handbook of Renewable Energies in the European Union, Frankfurt, Germany: Peter Lang, pp. 37–48. Ökostromgesetz (2002), Ökostromgesetz (Eco-Electricity Act – in German), BGBl I 2002 (149), Vienna: Austrian Parliament. Ökostromgesetz-Novelle (2006), Bundesgesetz, mit dem das Ökostromgesetz, das Elektrizitäswirtschaftsund -ordnungsgesetz und das Elektrizitätsbehördengesetz geändert werden (Amendment to the EcoElectricity Act – in German), BGBl I 2006 (105), Vienna: Austrian Parliament. Preisgesetz (1976), Preisgesetz (Price Act – in German), BGBl 1976 (260), Vienna: Austrian Parliament. Statistik Austria (2007), ‘Development of RES in Austria’, http://www.statistik.at/ web_de/static/bilanz_der_erneuerbaren_energietraeger_022718.pdf, 25 October. Steinmüller, H. (2004), Ökostrom in Österreich (Eco-Electricity in Austria – in German), Linz, Austria: Energy Institute at the Johannes Kepler University Linz. Umweltförderungsgesetz (1993), Umweltförderungsgesetz (Environmental Subsidies Act – in German), BGBl 1993 (185), Vienna: Austrian Parliament. Umweltmanagementgesetz (2001), Umweltmanagementgesetz (Environmental Management Act – in German), BGBl I 2001 (96), Vienna: Austrian Parliament.

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APPENDIX: UNIFIED FEED-IN TARIFFS DUE TO AUSTRIAN ECO-ELECTRICITY ACT 2002 Technology 1. 2.

3.

4.

5.

6. 7.

Wind power Biomass (a) solid biomass (e.g. woodchips, straw)1 up to 2 MW 2 MW up to 5 MW 5 MW up to 10 MW up to 10 MW (b) waste with high renewable percentage SN 17, Tab. 2, e.g. bark, sawdust SN 17, Tab. 1, e.g. chipboard waste Other sources of energy out of Tables 1 and 2 of the Eco-electricity Act Mixed combustion (c) co-firing in caloric plants solid biomass (woodchips, straw) SN 17, Tab. 2, e.g. bark, sawdust SN 17, Tab. 1, e.g. chipboard waste Other sources of energy out of Tables 1 and 2 of the Eco-electricity Act Mixed combustion Liquid biomass up to 200 kW more than 200 kW Biogas out of agricultural products (e.g. corn, manure) up to 100 kW 100 kW up to 500 kW 500 kW up to 1 MW more than 1 MW Biogas by co-fermentation with waste products Landfill and gas from purification plants up to 1 MW over 1 MW Geothermal plants Small hydropower (a) existing old sites first 1 000 000 kWh next 4 000 000 kWh

Tariffs in eurocent/kWh or % 7.8

16 15 13 10.2 20% 35% 2.7 Proportional 6.5 5 4 3 Proportional 13 10

16.5 14.5 12.5 10.3 25 % 6 3 7

5.68 4.36

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Promoting sustainable electricity in Europe Technology

8.

Tariffs in eurocent/kWh or %

next 10 000 000 kWh next 10 000 000 kWh over 25 000 000 kWh (b) by 15% increasing production first 1 000 000 kWh next 4 000 000 kWh next 10 000 000 kWh next 10 000 000 kWh over 25 000 000 kWh (c) New building resp. min. 50% increase in production first 1 000 000 kWh next 4 000 000 kWh next 10 000 000 kWh next 10 000 000 kWh over 25 000 000 kWh Photovoltaics2 up to 20 kWp over 20 kWp

Notes: 1 Feed-in tariff decreased due to yearly feed-in of electricity. 2 Up to a maximum installed capacity of 15 MW (federal level). Source: http://www.e-control.at/ (4.10.2004).

3.63 3.28 3.15 5.96 4.58 3.81 3.44 3.31 6.25 5.01 4.17 3.94 3.78 60 47

8. Sweden: greening the power market in a context of liberalization and nuclear ambivalence Yong Chen and Francis X. Johnson* INTRODUCTION Sweden has earned a reputation as an environmentally progressive nation, both internationally and in its domestic policies and institutions. Consequently, in analyses of renewable energy policy such as the present initiative, one expects to find a strong commitment to renewable energy and energy efficiency. At the same time, Sweden has also created a highly successful industrial model by pursuing certain key export sectors, some of which are quite energy-intensive, such as machinery, chemicals and steel. These export-oriented industries have continued to play an important role in the Swedish economy, and have helped to balance a dependence on agricultural and consumer goods imports. As a small, open economy, Sweden has had to use its resource base efficiently and strategically. On 21 March 2002, the Swedish government presented an Energy Policy Bill (Regeringens Proposition 2002). An absolute target for the promotion of electricity from renewable energy sources was chosen because the fluctuations in water availability for hydropower made the relative (percentage) targets set in the RES-E Directive much higher than if a normalized climatic year had been used as the basis. Based on forecasts of electricity consumption in 2010, adding 10 TWh on top of the 2002 production levels, the government expected that 52 per cent of total electricity consumption in 2010 would be sourced from renewable sources. This is below the indicative target of 60 per cent originally assigned to Sweden under the RES-E Directive. Negotiations were initiated, and Sweden’s indicative target was lowered in 2005 to 55.2 per cent. The lower level was based on a compromise between the original European Commission-proposed value and the target proposed by the Swedish government in light of normalized climatic assumptions for hydro capacity (STEM 2004b). 219

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The rapid economic growth of the 1950s and 1960s, and a lack of domestic fossil-fuel resources, were among the key factors that led Sweden to embrace nuclear as a complement to hydro for large-scale central power. The energy crises of the 1970s and the nuclear accidents at Three Mile Island and Chernobyl shook the foundations of the prevailing energy paradigm in Sweden. Although some small-scale renewables have begun to make inroads during the past two decades, nuclear and hydro continue to dominate the power sector. It was against this backdrop that many of the support schemes for renewable energy were consolidated into a single policy instrument: the Renewable Energy Certificate (REC) scheme that took effect in 2003. This consolidation of support around the REC scheme in Sweden has been partly a response to industry pressures on the government to provide more stable investment signals, as well as a response to the need for streamlining and harmonizing energy policies after Sweden’s entry into the EU in 1995, and the EU energy market liberalization that began a few years later.

BRIEF EVOLUTION OF THE SWEDISH ENERGY SYSTEM As with many other European countries, the availability of cheap imported fossil fuels in the post-war era enabled the energy and transport infrastructure to expand and meet the needs of the growing Swedish economy, particularly for key export industries. The rapid growth in energy imports ended with the oil crises of the 1970s. During the 1970s, nuclear power became the second major component in the electric power sector alongside large-scale hydropower, and this basic structure has remained largely intact. A brief description is given below of the main characteristics and historical evolution of the Swedish energy system, including energy demand, electric power supply and electricity trade. Energy Demand Total primary energy supply in Sweden increased by 35 per cent between 1970 and 2004, while the shares across major end-use sectors (industry, transport, housing and services) have shifted only slightly. Energy efficiency in buildings in Sweden has long been high by world standards. Wellinsulated and high-quality construction available at reasonable costs had earned Swedish housing a global reputation for energy efficiency by the 1970s (Schipper et al. 1985). Energy savings in the housing sector have been offset somewhat by higher energy demand in the service sector due to rapid

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Sweden 160 140 120

Energy distribution

TWh

100

Housing & services

80

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60

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40 20

2006

2004

2000

2002

1998

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1988

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1984

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1982

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1976

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1974

1972

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0

Sources: STEM (2006); SCB (2007).

Figure 8.1

Final electricity use in Sweden by sector, 1970–2006

economic growth. Transport-sector energy consumption has remained stubbornly high. As with many EU countries, the transport sector has accounted for an increasing share of energy consumption, from 13 per cent in 1970 to 17 per cent in 2006. The situation changes when looking at final1 energy demand for electricity, which has shifted from industry to the housing and service sectors, as shown in Figure 8.1. During the period from 1970 to 2006, the share of final electricity demand for housing/service sectors increased from 35 per cent to 49 per cent, while the share for industry decreased from 52 per cent to 39 per cent. Swedish dependence on electricity is the highest in the EU and among the highest in the world. Only Norway, Iceland and Canada have a higher level of electricity consumption per capita (IEA 2004). Given the lack of a gas infrastructure, the high dependence on electricity in Sweden implies greater importance – relative to other EU states – for renewables in the power sector. Electric Power Sector The mix of supply sources in the power sector has evolved on the basis of the domestic resource base, the needs of a growing economy, and shifts in political priorities in favour of environmental goals. For over two decades, the overwhelming majority of all electricity generated in Sweden has come from nuclear and hydropower, each of which contributes about 45 per cent. Apart from the seasonal variation in hydro availability, the dominance of these two sources has been remarkably unambiguous and consistent during the past two decades, as shown in Figure 8.2.

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160 140 120 Thermal & other Industrial & CHP Nuclear Hydro

TWh

100 80 60 40 20 0 1972–76 1977–81 1982–86 1987–91 1992–96 1997–01 2002–06

Sources: STEM (2006); SCB (2007).

Figure 8.2 Electricity production in Sweden: five-year averages, 1972–2006

The remaining 10 per cent or so of electricity generated is produced from industrial back-pressure plants, thermal plants, combined heat and power plants (CHP) running on either fossil fuels or biomass, and a small amount of wind – less than 1 per cent (STEM 2005). A brief description of the key sources and their development is provided below. Hydropower As early as the 1880s, Swedes started harnessing hydropower for local small-scale use, mainly for lighting and minor industrial activities (Hjalmarsson 1996). Large-scale hydropower appeared in the early 1900s, when the Swedish government invested in long-distance electricity transmission lines. For the ensuing decades, there was little opposition to rapid exploitation of hydro resources, given the desire for cheap electricity to fuel the rapid industrial expansion along with Sweden’s lack of fossil-fuel resources. Since the late 1950s, hydropower expansion has been decreasing and by the 1980s nearly came to a halt, due to public opposition. The unprecedented environmental campaign in the 1960s resulted in significant political actions such as creation of the Environment Protection Board. Four major unexploited Swedish rivers, Torneälven, Kalixälven, Piteälven and Vindelälven, including their source rivers and tributaries, as well as special reaches of other smaller rivers, have been placed under protection.2 A 1969 parliamentary decision was later followed by legislation in 1987 and specifications within the Environmental Code (SFS 1998: 808).

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Nuclear Power The development of nuclear power in Sweden was driven by business interests and by the state-owned electricity oligopolists. They were also reacting to competition from the introduction of district heating systems in the 1950s, which were owned and managed by municipal energy utilities. The energyintensive industries (for example paper and pulp, chemical, iron and steel) were concerned about their export competitiveness. Nuclear power could provide cheap electricity provided the capital costs could be written off and overgeneration capacity installed (Kåberger 2002). For the Swedish State Power Board (SSPB), nuclear power offered a means of retaining control over the power market. At the time, nuclear power had a ‘clean’ image and was seen as less controversial than hydro or thermal fossil sources. Political opposition to nuclear power was already emerging by the time the first commercial nuclear reactor went into operation in 1972. In 1979, the Social Democrats in opposition called for a national public referendum on the nuclear issue. Based on the outcome, which showed that a majority of the public were opposed to nuclear, a parliamentary bill was drafted, proposing that the 12 Swedish nuclear reactors, including five still under construction, should be phased out by 2010 and no new plants be built.3 Ten years after the national referendum, the public attitude towards nuclear power had swung, as reflected in a 1990 public poll, in which more than half of the Swedes expressed a desire to keep nuclear power beyond 2010 (Westerstahl and Johansson 1990). By the end of the 1990s, public support reached 82 per cent (Holmberg 1999). Despite the positive public attitude and opposition from industry leaders, the first unit at the Barsebäck4 nuclear plant was closed down in November 1999 and the second in May 2005. Bioenergy Due to Sweden’s significant forest resources and its world-class programme of research and development on biomass, bioenergy is by far the most important non-hydro source of renewable energy, already accounting for about 20 per cent of total primary energy supply. Combined heat and power (CHP) plants produce electric power as well as heat distributed through steam pipes or hot-water pipes. CHP has become quite important in Sweden, and district heating has increased its market share tremendously since the 1970s. About 90 per cent of newly built apartments and 40 per cent of newly built homes have district heating compared to 60 per cent and 20 per cent, respectively, in 1975 (SCB 2006). Much of the change occurred from 1975 to 1990, when the effects of the oil crises became widely felt (Schipper et al. 1993). Still, bioenergy as a source for electricity production is limited.

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The biomass gasification/gas-turbine pilot plant at Värnamo in southern Sweden was the first of its kind in the world to operate successfully for an extended period of time. The project showed that the technology was costcompetitive with traditional sources when operated as combined heat and power. Its competitiveness, however, declined significantly when operated for electricity production only. Wind power Wind power emerged on the political agenda in 1975 when the first Swedish energy policy5 laid out the alternatives for renewable energy sources and energy conservation. At that stage, major electricity producers in Sweden did not see wind as a threat to their conventional portfolios, and were more concerned about the technical competitiveness of system designs (Möberg 1979). Given the relative technological immaturity, early government initiatives focused on RD&D (Åstrand and Neij 2006). The large power companies, Vattenfall and Sydkraft, were somewhat reluctant to make significant investments in wind, due to uncertainty about future electricity demand. The success of Danish wind-turbine development also began to overshadow Swedish RD&D efforts. The hesitancy of key electricity producers’ response to governmental promotion of wind power also reflected a sceptical attitude towards the policy instruments to be applied. With stronger public signals on promoting RES-E and growing interest for green electricity among consumers, however, their attitudes began to change in the 1990s. Investors saw opportunities to be rewarded for taking risks early, such as by grabbing the best wind locations (Åstrand and Neij 2006). Vattenfall undertook its first commercial wind project in 1995. By 2000 it was already the single largest wind-power producer in Sweden. Offshore wind projects have received considerable attention in recent years, partly as a means of avoiding land-use conflicts with localities. A major offshore wind farm is under construction by Vattenfall in the Baltic Sea between Sweden and Germany.6 Other renewable sources for electricity Although Sweden has a relatively big production output of photovoltaic (PV) modules, PV electricity plays a negligible role in Sweden as a source for domestic production of electricity. On average, 95 per cent of the produced PV modules are exported, mostly to Germany (Malm and Stolt 2004). Swedish efforts are rather focused on technical innovation so as to gain competitive advantages in manufacturing chains. There is a significant market for ground-source heat pumps and passive energy methods used in heating, but other sources, such as geothermal or tidal power, have limited application for production of electricity in Sweden.

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Electricity Trade and the Nordic Power Market Physical trade7 in electricity is an important component of the power sectors in the Nordic countries, due to the seasonal and annual fluctuations in availability of hydropower. Sweden and Norway have considerable hydro capacity and very little thermal capacity, whereas Denmark and Finland both have a significant amount of thermal capacity. During dry years as well as during autumn and winter each year, Sweden and Norway increase their imports. Conversely, in wet years and during spring and summer, they increase their exports since demand is lower and water supply is higher. Although hydro capacity has not changed significantly for many years, the profile of the electricity trade has changed significantly since the mid-1990s, when there was a significant amount of overcapacity, and so Sweden was generally a net exporter. In 1996, alongside liberalization of the domestic market, the Norwegian electricity exchange was made available to Swedish traders on equal terms. The Swedish network authority purchased 50 per cent of the shares and the new company was named Nord Pool – the Nordic Power Exchange – the world’s first international commodity exchange for electric power. Finland integrated its exchange (EL-EX) with Nord Pool in 1998, while Denmark completed its integration in 2000. The number of Nord Pool actors from outside the Nordic region (such as Germany, Russia and Poland) has also been increasing in recent years. The Nord Pool physical market (trading volume) has grown to one-third of total Nordic generation, while Nord Pool financial markets (forwards, options, futures) have increased to several times the physical trade.8 Sweden also trades electricity through direct transmission lines with Germany and Poland, as well as indirectly with Russia via the Finnish network. The import of coal-based electricity from countries such as Denmark and Poland risks a rollback in environmental gains in the region, and is among the arguments cited by nuclear proponents. With the implementation of the open electricity market Directive in the EU (EC 2003a), such trade in electricity may well become a general feature of the energy system in Sweden. Net exports began to decrease in the late 1990s as the Nordic market became integrated through Nord Pool. Swedish domestic supply constraints tightened up. The pattern changed again during 2000–4 as more trade opened up outside the Nordic region. Net imports reached nearly 10 per cent of total consumption in 2003. Imports have tended to come from coal and gas plants in Denmark and Germany. Consequently, although the expansion in trade adds flexibility, it also raises reliability and environmental concerns.

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GOVERNANCE OF THE SWEDISH ELECTRICITY SYSTEM The institutions that guide the operation of today’s Swedish electricity market evolved significantly during the mid-1990s with deregulation, integration of the Nordic electric power market, and Sweden’s entry into the EU. The fact that all three processes were well under way at approximately the same time has helped to improve the overall efficiency of the resulting system as well as reducing the costs of the transition period itself. Many of the larger business and government actors that emerged after deregulation were effectively restructured forms of previous actors, based on the new rules separating generation, transmission and distribution. Trade groups and government agencies were reorganized to reflect the new institutional set-up. The sections below provide an overview of the main institutions – political, social and economic – that support governance structures and/or facilitate the implementation of energy policies and programmes. Legislation, Regulation and Ownership During the pre-deregulation era, the Swedish system consisted of a patchwork of municipal operators and vertically integrated electric power companies, led by Vattenfall, a state-owned company dominating the Swedish power sector since the 1970s. The close relationship between the public and private sector elements of the system resulted in a form of self-regulation, which has been described as one of ‘club regulation’ with Vattenfall as ‘club chairman’ (Hjalmarsson 1996). In 1990, Vattenfall owned 55 per cent of generation, the high-voltage transmission grid, and 11 per cent of the distribution network. Municipalities or cooperatives supplied 66 per cent of the electricity, and owned 20 per cent of the generation assets. Private companies supplied 23 per cent and owned the remaining 25 per cent of the generation assets (Damsgaard and Green 2005). The Swedish electricity market was liberalized in 1996, with a clear separation made among the industry components: generation, transmission, distribution and/or supply. Both wholesale and retail markets became competitive, with buyers able to choose suppliers freely. The New Electricity Act (Ellagen) came into force on 1 January 1998 and clarified the ‘rules of the game’ for the new electricity market, including terms of service and/or delivery, international trade, consumer protection, network services and transmission access (Regeringens Proposition 1997). Market liberalization in Sweden and the EU led to some key changes in ownership structure. First, as required by law, the major players in the electricity industry divided up their operations into separate companies for

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generation, transmission, supply and/or distribution. These separate businesses can, however, be part of the same operating group of companies. Second, foreign ownership in the Swedish electricity sector has increased, and Swedish companies likewise have taken advantage of opportunities to invest in the electricity sector abroad. Third, many different players entered the sector, ranging from small traders to the large utilities that were restructured and/or privatized. Finally, new intersections emerged between electricity providers and other businesses, including oil and gas companies, as well as telecommunications and consulting (Hodes and Johnson 2001). The state, domestic corporations, foreign companies and municipalities all have significant investments in generation capacity. The large amount of fixed capital assets in power production and the large-scale feature of most electric-power production in Sweden at the time of deregulation meant that ownership of generating capacity remained highly concentrated. Three companies are currently responsible for about 86 per cent of generation as of the end of 2006. Since companies that do not own any generating capacity do not have any major capital investments to be maintained, the supply and retailing side of the market is much less concentrated. The number of retail suppliers was about 130 as of the end of 2006. Of these, about 80 sell to household customers, while the others operate on the wholesale market, spot market and/or industry/commercial markets (EMI 2007). Political Foundations Although the Social Democrats have historically dominated politically, they had their worst result ever in the most recent election in September 2006. The Moderates had one of their best results and subsequently led the conservative bloc of four parties in forming a new government. Economic issues such as unemployment were important in the election results. Energy was not a key issue, although the favourable view of nuclear power held by the conservative bloc parties may have helped them a bit. Swedish concerns over climate change and electricity prices have brought nuclear power back into favour. Altogether, seven political parties are in the current parliament. The party positions on renewables and energy efficiency have tended to be fairly similar: generally supportive. There are some differences in terms of how to achieve the goals. The conservative bloc tend to put their faith in economic instruments alone, whereas the Social Democrats tend to favour a mixture of approaches. All parties essentially support RD&D for renewables and energy efficiency, which are both linked fairly explicitly in political positions not only to environmental concerns, but also to innovation, competitiveness and energy security (Regeringens Proposition 2002).

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The main energy-policy issue that distinguishes the political parties is, not surprisingly, nuclear power, which has been described as the ‘hub’ around which Swedish energy policy conflicts have moved since the early 1970s (Vedung 2001). The nuclear issue was already strong enough by 1975 to cost the Social Democrats the election, with the anti-nuclear Centre Party scoring big gains. It was the first time in Swedish history that a majority non-socialist government was formed. A nuclear phase-out plan was passed by national referendum in 1980, with the goal of closing all nuclear plants by 2010. The pro-nuclear Social Democrats were forced to change their stance with the outcome of the referendum. The Moderates and the Liberal People’s Party have maintained their pro-nuclear stance throughout. It is important to note, however, that the nuclear proponents today vary significantly in their opinions, from those who advocate only that reactors should not be closed down before their end of life, to those who wish to see more nuclear plants built on the pretext that nuclear is both economically acceptable and climatefriendly. The political positions began to change in the early 1990s with the emergence of climate change as a political issue and as memories of the 1986 Chernobyl accident faded (see Table 8.1). Of special significance is the Centre Party shift, marking a major departure from the previous alliance with the Social Democrats. The Centre Party’s previous anti-nuclear position had been a major ‘thorn in the side’ of the conservative alliance. Although the formal position of the Centre Party is stated somewhat differently, the de facto result is a more unified pro-nuclear stance for the conservative alliance. Furthermore, the Centre Party has unambiguously given climate change highest priority, with the corollary that the nuclear option must be maintained as a low-carbon alternative. Local and Regional Factors Influencing RES-E In order to be effective, national policies and institutions need to be consistent with preferences and processes at the local and regional levels. In Sweden, the second level of government is län (county) and the third level is the kommun (municipal). According to the Constitution, they have the right to levy municipal taxes, but beyond that, there is not so much specificity in terms of differentiating their roles from the national government in civil (non-defence) matters. The county government is concerned with sectors such as health care and transport, while the municipal governments deal with land use, education and other local issues. The siting of new energy facilities requires a permit from the municipal government, and also from the national government in the case of larger facilities.

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Table 8.1 Characterization of Swedish political party positions on nuclear power over time Party name Social Democrats Moderates Liberal People’s Party Christian Democrats Left Party Centre Party Green Party

–1980

1980– 85

1985– 90

1990– 95

1995– 2000

2000– 05

2005–

n/a

Key:Pro-position; Anti-position; Shifting, divided or unclear position. Source: Authors’ original.

The Swedish Planning and Building Act endowed local authorities with the right to decide on local land-use planning processes, conditional on an appropriate public consultation and the assurance of conformity with rather strict environmental guidelines (SFS 1987). The Act has contributed to significant variation among regions and municipalities in terms of RES-E development, particularly for wind power (Khan 2004). Although such local control helps in raising the concerns of the community, it can also lead to some fragmentation, inefficiencies and even barriers to promoting RES-E. One international development that has significantly affected the role of local governments in implementing environmental policies in Sweden is the UN Agenda 21. Considerable responsibility was placed on county and municipal governments for implementing Agenda 21, including land use, water and air emissions, and facility-siting criteria. Consequently, there is now a tendency for greater local control over new facilities for energy sources such as biomass and wind that depend on local conditions and/or affect local landscapes. The local and regional government trade associations completed the process of combining their organizations in March 2007, with the aim to promote local and regional interests more effectively and help to coordinate action plans and programmes.9 One unique sociocultural institution that has penetrated the Swedish environmental psyche is allemansrätten (‘every man’s right’). It was inscribed into the Constitution in 1940, and says that ‘all citizens shall have access to nature’. It provides, among other things, for free passage of citizens across private property so long as they do not harm anything or

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intrude on the owner’s privacy. It has come to symbolize the rather special relationship Swedes have with nature, and has become a cultural institution and a source of inspiration for environmental causes. Energy sources that can have a significant impact on the landscape and/or land resources, such as wind power and biomass, have been subject to criticism in part because in some cases they are inconsistent with allemansrätten.

KEY ACTORS IN THE POWER SECTOR Many of the larger business and government actors that emerged after deregulation were effectively restructured forms of previous actors, based on the new rules separating generation, transmission and distribution. Trade groups and government agencies were reorganized to reflect the new institutional set-up. Although there are some completely new actors, nearly all of these during the past ten years have been small electricity retailers and traders. The main actors that are involved in – and/or influence – governance and energy policy-making are described in the sections below. Government Ministries and Agencies The Swedish National Energy Agency (Statens Energimyndighet – STEM), along with its parent Ministry, are the main government actors in the power sector. The Swedish Environmental Protection Agency (Naturvårdsverket) also carries out some energy-related functions for air and water emissions, including GHG reporting to the UNFCCC.10 The financial incentives for renewables and the environmental taxation schemes that emerged in the 1980s meant that the Ministry of Finance also became more involved in energy-policy issues. The increasing prominence of bioenergy has also drawn the Ministry of Agriculture into some areas of energy and climate policy. The Energy Agency has been shifted around several times in the past two decades in response to political and economic changes. Originally placed in the Ministry of Industry, the Energy Agency was moved to the newly formed Ministry of Environment and Energy in 1988. It was sent back to the Ministry of Industry in 1990, due in part to industry pressure against what was perceived as a ‘radical’ environmental agenda (Nilsson 2005). It returned to the environmental realm under the Ministry of Sustainable Development11 (MSD), which was formed in January 2005 by complementing the Ministry of Environment with other functions and policy goals. The new government that took over after the last election returned the Ministry of Environment to its pre-2005 status and sent the Energy

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Agency back yet again to the Ministry of Industry, which is now formally the Ministry of Enterprise, Energy and Communications.12 The political football that the various governments have played with the Energy Agency reflects two rather different views of its function, and consequently two different views of energy policy. The conservative parties tend to link energy policy to industrial policy, whereas the Social Democrats and their allies tend to link it more closely to environmental policy. The practical effect of such organizational changes, however, became somewhat less significant after Sweden joined the EU in 1995 when policies became more harmonized. Other agencies involved in energy policy are the grid operator, Svenska kraftnät; the National Board of Housing, Building and Planning; the Swedish Consumer Agency; the Swedish National Electrical Safety Board; the Swedish Agency for Innovation Systems; and the Swedish Nuclear Inspectorate. The county administrative boards and local agencies have also become more involved in energy policy in so far as it relates to regional and local planning, permitting processes, social and housing services, and employment. One of the most recent government actors to emerge is the Energy Markets Inspectorate, formed in early 2005, which acts as a type of watchdog agency for the electricity, natural gas and district heating markets. The Inspectorate supervises the network companies, evaluates the fairness of network tariffs, and assesses the overall functioning and efficiency of the markets, including concentration of ownership and market competitiveness (EMI 2007). Since retail markets are liberalized, it does not analyse electricity prices per se, but does evaluate performance, provide information to consumers, and coordinate international collaboration regarding market structure and effectiveness. Committees of Inquiry An important investigative instrument in Swedish policy-making is the ‘committee of inquiry’, under which the government appoints a group of experts familiar with the issue at hand, based on terms of reference established by the government. Such committees are formed when the issues concerned are difficult to solve and for which the associated policy decisions may be significant and have long-term impacts. A number of committees, such as EL90 Committee, Energy Commission 1995 and Climate Committee 2000, played an important role in energy policymaking during the late 1980s and 1990s. The EL90 Committee argued successfully that the nuclear phase-out and CO2 reduction goals should

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be secondary to maintaining industrial competitiveness (Regeringens Proposition 1991). The 1994–95 Energy Commission report, although rather long and complex, helped to fuse environmental policy with the new market realities (Regeringens Proposition 1997). The Climate Committee 2000 had a great impact on Sweden’s climate strategies (Nilsson 2005). One recent Commission that received international attention was the socalled ‘Commission on oil dependence’ (Kommissionen mot oljeberoendet). The Commission, appointed by the previous social-democratic government, included respected academics as well as industry representatives and politicians. The Commission was to evaluate various strategies for achieving the goal of ‘oil independence’ by 2020, and sent its report to the government in June 2006 (Regeringskansliet 2006). Although there are some similarities with the phase-out of oil in district heating plants since the 1970s, phasing out oil from the transport sector will be much more difficult. The proposed 2020 target of becoming ‘oil-independent’ is probably not achievable. Major Electricity Producers The operation/management of the generation side of the power industry has remained highly concentrated, and today three companies – Vattenfall B, E.ON Sverige (formerly Sydkraft), and Fortum Power and Heat AB – are responsible for 86 per cent of power generation (Table 8.2). Vattenfall B is owned 100 per cent by the Swedish state. E.ON is a private corporation and a subsidiary of the German-based E.ON group, with the Norwegian state-owned company Statkraft as a large minority owner. Fortum Power and Heat AB is part of the Finnish Fortum Group. Altogether, the series of mergers that occurred in recent years has not only concentrated the suppliers further, but has also resulted in the effective transfer of two of the big three to foreign owners. The concentration is much less pronounced when viewed in terms of the Nordic region as a whole, as the Nordic market is well integrated and highly competitive. A goal of some of these mergers appears to have been to remove potential competitors, as opposed to simply economizing on costs. In some cases, this may actually reduce incentives for innovation and create barriers for renewables. However, when the European Commission (EC) reviews such mergers, it analyses only their effect on competition, which will tend to be negligible if the company being acquired is small. It does not consider the value of innovative suppliers. A case in point was the acquisition by Sydkraft of Graninge AB in 2003. The takeover was approved by the EC one month after notification (EC 2003b). Graninge was a company with a 2 per cent market share in Sweden, but it had developed a specialization in environmentally labelled or ‘green’ elec-

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Table 8.2 Electricity production by major producer in Sweden and in the Nordic region, 2004–6 Electricity production in Sweden (TWh)

Electricity production in Nordic region (TWh)

2004

2005

2006

Avg. share 2004–6 (%)

2004

2005

2006

Avg. share, 2004–6 (%)

Vattenfall 70 E. ON 34 (Sydkraft) Fortum 24 Others 20 Total 148

72 34

64 30

46 22

71 34

72 34

68 30

18 8

28 21 155

27 19 140

18 14

51 224 379

49 239 395

52 234 384

13 60

Source: Svensk Energi (2006).

tricity, and provided a ‘market-pull’ effect for small-scale renewables (Johnson and Nordström 2003). After being subsumed by Sydkraft, which was already owned by the German E.ON group, neither the Graninge label nor its innovative marketing approach were maintained. The Norwegian state-owned Statkraft took over 50 per cent of Graninge’s production capacity while Graninge customers were moved over to E.ON Sverige. The result was a loss of institutional capacity for marketing of green electricity. Another set of potential problems arises in management of state-owned companies. Some of Vattenfall’s acquisitions, such as coal-fired power plants in Germany and Denmark, are hardly in line with its stated public policy goals for environmentally friendly power. The parliament auditing agency, Riksrevisionen, issued a rather stark criticism of the company’s behaviour and of the failure of the government representatives on the board to safeguard the public interest (RiR 2004). A similar evaluation by the National State Review Board criticized Vattenfall’s performance (Statskontoret 2004). The company’s response has been that they must maximize shareholder value by reducing costs. However, the point is that they have made public duties secondary, which was not the intention when Vattenfall AB was created. Other Relevant Business Actors Low electricity prices in Sweden have been valuable to the competitiveness of certain industries in Sweden, such as high-valued-added speciality steels, or the large pulp and paper sector. Consequently, many major

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business leaders are pro-nuclear, are concerned about Sweden’s GHG reduction commitments, and tend to be sceptical about small-scale renewables due to their higher costs. At the same time, deregulation and the creation of an integrated Nordic power market has led to new business opportunities, as the number of electricity retailers increased significantly in the early years. The Swedish pulp and paper industry provides perhaps the best example of the complex relation among industrial policy, energy policy and environmental policy. Pulp and paper production accounts for half of all industrial sector energy consumption in Sweden and a similar share of industrial sector GHG emissions (STEM 2005). The prices faced by the pulp and paper sector have consistently been the lowest in the EU-15, and in 2005 Swedish pulp and paper producers had prices that were more than 25 per cent below those of Finland, Germany and the UK (Vattenfall 2005). The dependence on low electricity prices has had a negative impact on energy efficiency, which has been rather stagnant for the past 15 years or so and is above the EU average for the pulp and paper sector (Svensk Energi 2006). Unions and Trade Groups Unions have traditionally been powerful in nearly all sectors of Swedish society, in keeping with the long social-democratic tradition, and energy policy has been no different in this respect. The unions were part of the ‘iron triangle’ along with big industry and government regulators, which controlled energy policy in the ‘energy-as-infrastructure’ era that prevailed until the 1980s (Nilsson 2005). The influence of unions also continues to be felt in resistance to the nuclear phase-out. However, a number of trade groups have been active in promoting renewables. Several groups have been devoted specifically to efforts such as the Swedish Bioenergy Association (SVEBIO) or the Swedish Wind Power Association (SVIF). SVEBIO was established in 1980 while SVIF was formed in 1986. The overall trade group for the power sector in Sweden is Svensk Energi (Swedenergy), which was formed in 2001 by the fusion of several organizations representing the different elements of the industry: production, supply, distribution, marketing and grid operation. In addition to serving as a unified voice for the industry, it also provides technical support services, communication and outreach, and regional field offices. It has a respected research division, Elforsk, which undertakes independent applied analysis and research, and also offers some financial support to external research organizations.

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The Role of NGOs Non-governmental organizations in Sweden have tended to focus on antinuclear campaigns or environmental labelling of electricity. The international organizations, such as Greenpeace and the World Wide Fund for Nature (WWF), are both anti-nuclear and pro-renewables. The Swedish anti-nuclear movement (Folkkampanjen mot kärnkraft-kärnvapen)13 has been active for many years, although it does not attract the same support as it did in earlier years. The Swedish Society for Nature Conservation (NaturskyddsföreningenSNF) has had more of a direct impact through its labelling programme, Bra Miljöval (Good environmental choice).14 The programme was initiated in 1987 for consumer products, and extended to electricity supply in 1996 at the same time that the market was deregulated. The label is highly regarded among Swedish consumers, who tend to be environmentally conscious. There are some complications that can confuse consumers, such as the definition and/or inclusion of large versus small-scale hydropower, and the fact that some alternative labelling schemes promoted by business have tried to label nuclear power as environmentally sound. NGOs have not, however, been instrumental in promoting RES-E.

RENEWABLE ENERGY PROGRAMMES AND POLICIES Among the specific objectives in the 2002 Energy Policy Bill referred to in the introduction was the ‘creation of the conditions for efficient energy use and cost-efficient Swedish energy supply with low adverse impact on health, the environment and the climate’ (Regeringens Proposition 2002). This provides a clear indication of Sweden’s search for a suitable model for a sustainable energy system. Renewable energy, by virtue of being climatefriendly and improving in technological maturity, is seen as an essential part of a sustainable energy system (Nielsen and Jeppesen 2003). This ongoing transition has to be contextualized in both the domestic market dominated by nuclear and hydropower and the liberalized European electricity market where competition among Member States is increasing under the EU open market Directives (EC 2003a). This suggests that promotion of RES-E will be exposed to various competitive forces at domestic, regional and continental levels. One of the major policy debates over RES-E relates to whether government support should be based on supply-push mechanisms such as RD&D or through demand-pull programmes such as renewable energy certificate

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schemes. Over the past three decades Sweden has experimented with various types of incentives and policies in promoting renewables. The results tend to favour demand-pull approaches (Nilsson et al. 2004). In the case of wind power the supply-push approach was demonstrated to have failed in Sweden. The companies that were created through government programmes did not survive competition from Denmark (Åstrand and Neij 2006). The supply-push effect of RD&D that occurs in certain key innovating industries such as pharmaceuticals is much less likely in the power sector, where the product is essentially undifferentiated from the user’s vantage point (Grubb 2005). Innovation is more likely to come from the articulation of user demands in a market that values the diversity of energy sources and energy services. Such articulation of user demands was successfully created for a wide range of energy-efficient and renewable-energy products through the Technology Procurement Programme in Sweden in the 1990s (Johnson and Bowie 1995). Experimentation on the supply side is also an input to the process of technological learning that has proven important in the development of renewables in Europe and elsewhere. Learning curves to bring costs down, however, require different approaches that generally will not be supplied by private market actors. Furthermore, there is a need for more investment in RD&D on deployment of technologies as opposed to development of technologies (Grubb 2005). Demand Pull through Green Power Certification Schemes In Sweden, there are three certification schemes related to electricity suppliers and their products: the Bra Miljöval (Good environmental choice) of the NGO Swedish Society for Nature Conservation (SNF), the Miljövarudeklaration (Certified Environmental Product Declaration – EPD) developed by the Swedish Environmental Management Council (SEMC), and Production-Specified Electricity (PS). One distinction among the schemes is that Bra Miljöval and the EPD both rely on independent third-party certification whereas in the case of PS the supplier itself guarantees the origin of the electricity. The Bra Miljöval programme of the SNF establishes environmental criteria for electricity products. The system is voluntary and suppliers pay a licence fee. Suppliers must organize their records in such a way that they can be controlled by an independent inspector from SNF. Supply contracts must guarantee that the criterion is met in the annual energy balance. The logo has excellent name recognition in Sweden since it has been used for many different products such as laundry detergent, paper, and many other

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goods and services. The requirements of the logo have been tightened over time in order to drive the development towards a sustainable energy supply. Smaller suppliers and/or power companies that specialized in environmentally friendly electricity, such as Graninge, were able to build successfully on the existing labelling programmes. Larger companies have tended to ignore environmental labels or relegate the role to subsidiary suppliers. Vattenfall withdrew from Bra Miljöval in 2001 when the definition of hydropower was subjected to further restrictions (Johnson and Nordström 2003). Tax Policies The main taxes that affect the energy sector are energy taxes, carbon taxes and sulphur taxes. Fuels used for electricity production at electric power plants are not subject to these taxes because the taxes are levied at the local level on electricity consumption. However, there is a separate tax on electricity generated at nuclear power plants related to the thermal effect. Production of heat at CHP plants is subject to half the energy tax but the full carbon tax. Energy-intensive manufacturing industries, agriculture and forestry, and some related sectors are exempt from energy taxes and pay only half the carbon tax. These exemptions, created through a tax relief package in the early 1990s, were aimed at improving the competitiveness of Swedish industry. There has been a general political consensus in favour of the energy and carbon taxes. Sweden was among the first countries in the world to create a carbon tax, which was first imposed in 1990. Such taxes are indifferent between nuclear and renewables, and furthermore the taxes have been applied mainly to non-electricity uses, particularly district heating. The exemptions for energy-intensive industries removed some of the most formidable industry opponents from the political debate and helped to ensure passage of the taxes. Such exemptions have been a major issue in debates on international competitiveness and environmental sustainability, and have been omnipresent in Swedish energy policy. Other National Policy Interventions Before the introduction of the Renewable Electricity Certificate (REC) scheme in 2003, a variety of policy interventions was made in support of RES-E. As referred to previously, there were various forms of public support through RD&D, subsidies, tax rebate or exemption. In parallel, a number of promotional programmes entirely or partially targeting RES technologies were launched. These include two programmes initiated in 1998, the five-year

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MSEK 100 (almost €11 million)15 Technology Procurement Programme (Teknikupphandling) for renewable electricity production and a seven-year research programme with total funding of SEK 5.28 billion (about €0.57 billion), including SEK 2.73 billion (about €0.3 billion) on energy research. In addition, a number of subsidy programmes were set up, such as a fiveyear SEK 3.5 billion (about €0.38 billion) programme aiming to promote biomass-based CHP, wind, small-scale hydropower and energy efficiency (STEM 2005), and the climate investment programmes (KLIMP) with intention to reducing GHG emissions in energy and transportation sectors, including RES-E production. In addition, in order to foster commercialization of renewable electricity technologies a fund of SEK 1.61 billion (about €0.17 billion) was launched (EREC 2004). Direct support to some sources, particularly wind, will continue during the transition to the REC scheme. Under the terms of the 2004 Finance Bill, the wind subsidy will be progressively reduced for both forms of power production: for onshore production, it is proposed that it will be withdrawn entirely from 2009. For large-scale wind power, there is special funding, amounting to a total of SEK 350 million (about € 38 million) over five years, for technical development and market introduction (STEM 2004a). Nevertheless, a clear message from the government has been that the market should, under the REC scheme, choose the most appropriate RES technologies without any further policy intervention. Other instruments will be gradually phased out and are expected to play little or no role in the future, except for support at the RD&D stages. Local and Regional Initiatives With increased decentralization of government in Sweden, local authorities have taken more responsibility for energy planning, renewable energy guidelines, and implementing action plans, such as Local Agenda 21. By October 2004, there were 104 parliament-financed local investment programmes to promote renewable energy at a municipal level. This resulted in alternative energy generation of 1.3 TWh/year (SEPA 2004). Some developments across different regions and political levels are briefly discussed below. Hammarby Sjöstad is an urban district in Stockholm that was designed and constructed ecologically. There are stringent requirements with respect to energy, emissions, waste handling, water treatment and transport systems. The land was reclaimed from a former industrial area and harbour. Design began in the early 1990s and the first occupants moved in in the late 1990s. There will be about 20 000 residents by the time full occupancy is reached. The ecological design model includes organic recycling and sustainable resource management, and was developed jointly by

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Stockholm Water Company, Fortum (Energy Company) and the Stockholm Waste Management Administration. The overall environmental goal was a 50 per cent reduction in overall emissions (air, land and water) compared to newly constructed housing of the early 1990s. Energy production is based on biogas from waste, solar collectors, and a district heating system that runs on biomass and organic waste (Hammarby 2006).16 A particularly innovative aspect is the use of biogas cooking stoves, which use biogas produced from the homes’ own sewage wastewater stream, reducing household energy use by 20 per cent. Linköping is a small city in east-central Sweden with 260 000 inhabitants. Although small by world standards, it is actually the fourth biggest in Sweden. It has a large CHP plant (180 MW thermal, 77 MW electric) that uses innovative approaches to mixing feedstocks and optimizing co-firing of different fuels. The configuration used has been a direct response to the incentives created by energy and carbon taxes for biomass, as well as legislation restricting landfills (Hillring 2003). Västra Götaland is a western county that includes Sweden’s second largest city – Gothenburg – as well as the sunny and windy west coast. At present, the region has a much higher penetration of renewables – about 90 per cent, compared to the country as a whole (48–9 per cent). In the case of wind, this is due mainly to having excellent conditions. For other renewables such as biogas and woody biomass, the regional and municipal authorities have played an important role in technology promotion and public engagement (Res-E Regions 2006). Development of biogas plants is the region’s most state-of-the-art programme area, with innovative applications that integrate urban and rural demands and user profiles. Aside from longstanding local concerns over municipal waste incineration plants, wind power has been the only renewable energy source negatively affected at local levels. Due to concerns over visual impacts, noise, shadow and light effects, and the threat to birds, local authorization processes can be complicated and time-consuming. Analysis of three specific cases for wind power showed that the results across three localities depended significantly on local concerns and decision-making processes, which ultimately affected project design, ownership of the turbines, and the time required for the siting process (Khan 2003).

POLICY CONSOLIDATION: THE RENEWABLE ELECTRICITY CERTIFICATE SCHEME Responding to growing concerns about the need for consistency and stability in RES-E energy programmes, many of the aforementioned support

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schemes have been or are in the process of being phased out in favour of an REC certificate scheme introduced in 2003. Various policy measures and programmes have thus effectively been consolidated into REC scheme, which has become the key policy instrument to achieve the target defined in accordance with the RES-E Directive. No significant debate over this transition has been observed. This is related to the following factors: (a) as the functionality of the REC system is improved, electricity prices would accordingly decrease and thus benefit all electricity users; (b) the electricity-intensive industries17 have thus far no obligation to purchase ‘green’ electricity; (c) the shift of the financial burden to support RES from government revenue to electricity end-users is in line with the polluter pays principle, creating no conflicting interests among political parties. A brief summary analysis is given below concerning adoption, modification and future outlook of RECs in Sweden. Renewable Electricity Certificates Scheme In order to increase the share of renewable electricity and to achieve the RES-E target of 55.2 per cent, REC scheme was adopted in Sweden on 1 May 2003 (SVK 2003). The certificates are tradable and effectively operate as a secondary market, providing additional income for producers of electricity that is certified as renewable. Renewable energy sources were defined as including wind power, solar energy, geothermal energy, bioenergy, wave energy, small hydro and peat.18 All electricity suppliers must ensure provision of ‘green electricity’ by self-generation and/or through trading certificates with other REC producers or dealers.19 The energy suppliers not fulfilling their quota obligation are burdened with a so-called quota obligation fee per certificate lacking. This fee is currently at 150 per cent of the last 12 months’ average certificate price (the period 1 April – 31 March).20 Demand is created through an annually increasing renewable electricity quota. The RECs model represents a capacity-driven approach where demand is predetermined and met at the most competitive production price. The progressive obligatory quota will ensure an annually growing demand for renewable electricity, as well as for the green certificates in the marketplace. It is expected that this will stimulate investments in new capacity. Market prices vary with the supply and demand of the renewable electricity certificates at the spot market. The influential factors for the future price of certificates include the marginal production cost of new/expanded renewable plant capacity, the predetermined quotas, the recent prices on certificates and recent prices for power on the spot market (Morthorst

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2003). In order to foster the market, the Swedish government set two prices at the initial phase from 2003 to 2005, a guaranteed price and a ceiling price. The scheme is generally thought to have functioned well during the initial phase, although constraints on the availability of certificates were experienced due to the tendency for the more cost-competitive producers (for example biomass CHP) to ‘bank’ their certificates. Modifications to the REC scheme The recent modifications to the REC scheme were based on results from the initial period (2003–5) and included a number of provisions designed to improve the overall cost effectiveness, to clarify definitions for participants in the market, and to enhance the options for meeting the RES-E target (Regeringens Proposition 2006). Some of the key issues addressed in the modifications are outlined briefly below. In the current REC scheme, the dividing line between electricity-intensive and non-electricity-intensive is not based on the actual electricity intensity of a company, but according to the sub-category in which the company in question is officially clustered, that is, on the Swedish Standard Industrial Classification (SNI) Codes. Such a definition is somewhat arbitrary, and the new law creates three categories based on electricity consumption in industrial processes relative to the market value of production, that is the companies’ revenues.21 The new definitions and classification were designed so as to result in approximately the same overall level of TWh of consumption that is to be exempt from quota requirements (ibid.). The definition of what classifies as biomass for bioenergy has required clarification on a number of counts. First, the inclusion of peat as biomass in combined heat and power production has been accounted for by adjusting quotas in future years. Second, municipal solid waste that derives from unsorted household wastes shall not be considered as renewable biomass, mainly for ecological reasons since both Swedish law and EU directives stress the need to reduce material intensity and only increase the throughput or supply of energy use where necessary. Third, the definition of other biomass, such as vegetable oils and other liquid fuels, will remain in a somewhat grey area, requiring further analysis before legal definitions can be applied. Small-scale hydro will be phased out of the system in 2010, based on its environmental impacts relative to electricity produced in combination with its economic feasibility. The government’s analysis showed that many small-scale hydro plants are now generally on the edge of economic feasibility. Small-scale hydropower plants would become economically feasible with the REC, including some plants that have previously been closed down (Regeringens Proposition 2006). The environmental impacts of such

242


developments are deemed significant in relation to the small amount of electricity that would be produced. Responsibility for fulfilment of the quota is moved from the electricity user to the electricity supplier, except where electricity use is due to selfproduction, import or purchase on the Nordic market. Such exceptions maintain the system’s integrity since imports generally cannot be certified as renewable. The shift in responsibility will improve cost effectiveness by linking the system directly to supplier portfolios, thereby providing incentives for efficient administration. Some suppliers take an additional fee for handling quota fulfilment, while some do not. The price of certificates and handling fees will become integrated with the electricity price rather than being listed separately on electricity bills, to stimulate more competition (ibid.). Outlook for the REC scheme The most important recent modification is the extension of the REC scheme until 2030, thereby providing security for new investments. In addition to the percentage quotas, an absolute target of 17 TWh of new renewable production was set for 2016 (see Figure 8.3). Production of certified renewable electricity will be eligible for certificates for 15 years, and is thereafter phased out of the system. Provision is also made in the proposition for unifying the EU system with international certificate trading systems. This is expected to start in 2012. The quota itself will continue to peak in 2010, in line with the EU Directive. However, as a result of the adjustments and phasing in/out of production for certificate eligibility, the total production will reach a relative peak in 2016, in line with the absolute target of 17 TWh, and thereafter will rise only marginally as total electricity consumption rises. The RECs, as with all such existing schemes, focus on installed RES-E generation capacity. Energy suppliers are therefore taking the least cost and most mature technologies available in the market. New technologies are avoided due to the risks associated with the long product development cycle. However, this can result in the so-called ‘Technology Valley of Death’ in which RD&D investments create businesses that are not sustainable in the longer term. The problem of promoting new RES-E is thus sometimes viewed as bridging this valley from the demand side (Grubb 2005). Both supply-push and demand-pull approaches appear to be needed, with the resulting problem that RECs by themselves may be a ‘hollow’ policy in that they do not stimulate necessary innovation promoting new RES-E.

243

Sweden 30.0

Quota (% of electricity use)

18.0% 25.0

16.0% 14.0%

20.0

12.0% 15.0

10.0% 8.0%

10.0

6.0% 4.0%

5.0

2.0%

quota Source:

20 30

20 27

20 24

21 20

20 18

20 15

20 12

20 09

06

0.0 20

20 03

0.0%

Total renewable electricity (TWh)

20.0%

Total renewable electricity

Regeringens Proposition (2006).

Figure 8.3 REC quotas and projected certified renewable electricity production in Sweden, 2003–30

CONCLUSIONS Energy policies in Sweden have evolved over time from a focus on largescale infrastructure to a focus on environmental risks and the role of market instruments. As it stands today, the goal is to maintain a portfolio of low-carbon options for the future. However, the integrated Nordic power market may actually have helped to slow the growth of renewables in Sweden. Nord Pool led to decreasing prices in the mid-to-late 1990s, just when renewable energy technologies were nearing maturity. Increases in energy prices several years later helped to soften, and perhaps even reverse, the nuclear phase-out, with the argument of ensuring economic feasibility. Most of the early policies supporting renewables adopted supply-push approaches. These were, however, relatively unsuccessful. The later reliance on economic instruments, including energy and carbon taxes and tradable certificates, has been more effective. These efforts thus far, however, have had their greatest impact on non-electric sectors, particularly in the use of biomass for district heating and co-generation. It still appears difficult for Sweden to break the path dependence that has thus far ensured the dominance of nuclear and large-scale hydro plants. The innovative market actors

244


needed for a new energy path characterized by small-scale renewables and greater energy efficiency are quite different from the large power companies currently operating in the deregulated market. Many of the previous direct incentives for renewables have been phased out in favour of tradable renewable electricity certificates as the major policy instrument. The system will gradually be harmonized with the EU Emission Trading Scheme (ETS), and thus the future of renewables in the Swedish electricity sector will become more and more interdependent with that of the EU as a whole. Modifications in 2006 were aimed at strengthening the tradable certificate system and assuring continuity and investor security to 2030. The timeframe of 2030 also corresponds fairly closely to the critical period for shutdown of the remaining nuclear power plants. Given the current political and economic environment, the policy that is pursued on nuclear power in the next five to ten years will have a major impact on the development of renewable sources. Since all the parties are generally supportive of renewables, nuclear policy is what determines whether renewable energy will replace nuclear, or merely supplement it. Not only does this affect the urgency associated with the pace of renewables development and the overall scale-up of renewable energy; it also affects the type of renewables and the manner of their implementation, since much of the power will need to be continuous or base load. Base-load power can only be provided by biomass, among all renewables, unless costly energy storage is used. Overall, three major policy challenges for RES-E in Sweden can be identified. First, the commitment to nuclear power in the context of climate change continues to hang over Sweden as well as several other EU countries. Second, tradable certificates may be too blunt an instrument to foster innovation on a scale and time frame that can effectively contribute to climate mitigation and energy security goals. Finally, the EU needs to unify its efforts at promoting renewables, while also expanding international cooperation efforts sufficiently to have a meaningful impact globally in favour of sustainable energy systems. Ongoing efforts in Sweden and elsewhere are essentially the start of what will probably be a decades-long policy-learning process as sustainable energy platforms become internalized in planning processes and institutions. The use of the REC Scheme in Sweden is generally regarded as a success, as it has enabled the achievement of renewable electricity targets at very low additional cost, based on the principle of equivalence with respect to each kWh supplied from renewable sources. Wind and bioenergy have thus far been the main beneficiaries, largely due to their current advantageous economic position. It is important to note, however, that schemes such as the REC are ‘skimming the cream’ in the sense that options that were already

Sweden

245

close to being economically viable are given a small additional push. The REC and similar market-based schemes provide some assurance to investors of the value of investments until the fixed end date of the scheme in 2030, but this does not necessarily encourage innovation and long-term investment in RES-E in Sweden.

NOTES *

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

12.

13.

Thanks are extended to the following persons: Åsa Persson (Stockholm Environment Institute) and Björn Sandén (Chalmers University of Technology), both of whom provided valuable comments in reviewing an earlier version of this chapter; Magnus Blümer (Swedish Ministry of Environment), who provided useful information on the implementation of the RES-E Directive; and Mathias Normand (Swedish National Energy Agency), who provided valuable insights during an interview held in August 2005. Thanks also to William M. Lafferty and the ProSus team for leadership and patience, and to the SUSTEN project partners for their collegiality and diligence. The usual disclaimers apply with respect to the views expressed in this chapter. Final energy demand does not include losses in transformation and distribution. The economic potential of hydropower in these rivers amounts to 17 TWh per year, accounting for nearly 18 per cent of the total. Based on two conditions, namely: (1) sustainability of societal welfare and employment; and (2) availability of reasonable substitutes for the nuclear energy source. The Bärseback nuclear power plant is located in southern Sweden, within a short distance of Copenhagen and Malmö. The Energy Supply Bill of the Swedish government Swedish Ministry of Industry. It is estimated to generate 2 TWh by 2010 after its commissioning in 2009. For further information on Vattenfall see http://www.vattenfall.com/. Physical trade refers only to generated electricity, as opposed to futures, options and other ‘paper’ trades. See www.nordpool.com for more information. For further details, see http://www.skl.se/artikel.asp?C=756&A=180. Greenhouse gas reports to the UN Framework Convention on Climate Change. It is instructive to note that the English name for the MSD was not a literal translation, but was based on opinions solicited from a few international organizations (such as the Stockholm Environment Institute). A literal translation of Miljö-och-samhällsbyggnadsdepartementet would have been ‘Ministry of Environment and Society-building’. This second element was somewhat culturally loaded and also politically loaded in its association with the political philosophy of the Social Democrats, and hence the need for a non-literal translation. There were in fact two minister-level posts – one for Environment and one for Society-building. The Environment post retained responsibility for many of the traditional issues such as air quality and chemicals, while the Sustainability or ‘Society-building’ post included energy, housing and planning, invoking the notion of the ‘Green People’s Home’ as a vision of an ecologically sound society towards which policy goals should be directed. This latter element, being largely a creation of the Social Democratic Party, was quickly abandoned by the conservative bloc after they won the most recent election. As if this were not confusing enough, for several years in the 1990s, the Energy Agency was absorbed into another government agency – the Swedish National Board for Industrial and Technical Development (NUTEK) – from which the Energy Agency was later extracted, re-established as a separate agency and relocated in Eskilstuna, about a one-hour drive west of Stockholm. http://www.folkkampanjen.se/engfront.html.

246 14. 15. 16. 17.

18. 19. 20. 21.

Promoting sustainable electricity in Europe http://www.snf.se/bmv/english.cfm. SEK 100 = €10.85 in October 2007. http://www.hammarbysjostad.se/. All small hydro plants with installed capacity no more than 1.5 MW; under certain conditions, some built hydro plants with capacity less than 15 MW, and the incremental electricity produced from upgraded existing hydro plants are also eligible. Although peat is not considered renewable due to its long regeneration time, it was included for purposes of simplification. Including mining, wood products, pulp and paper, chemicals, basic materials and nonmetallic mineral products. One certificate is equivalent to 1 MWh electricity generated from eligible renewable energy sources. For further details see http://www.energimyndigheten.se/WEB/STEMEx01Eng.nsf/F_ PreGen01?ReadForm&. The categories are 40–50 MWh/MSEK, 50–60 MWh/MSEK and 60 MWh/MSEK (or greater). The reduction in quota requirement is 50 per cent, 75 per cent and 100 per cent, respectively.

REFERENCES Åstrand, K. and L. Neij (2006), ‘An assessment of governmental wind power programmes in Sweden using a systems approach’, Energy Policy, 34 (3), 277–96. Damsgaard, N. and R. Green (2005), Regulatory Reform in the Swedish Electricity Industry – Good or Bad? Studieförbundet Näringsliv och Samhälle (SNS) – Center for Business and Policy Studies, Occasional Paper No. 95, December. EC (2003a), ‘Directive of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity’, 2003/54/EC. Brussels: European Commission. EC (2003b), ‘Commission clears Swedish electricity merger’, IP/03/1480, Brussels: European Commission, 30 October. EMI (2007), ‘Energimarknadsinspektionen övervakar marknaderna för el- naturgas och fjärrvärme’ (Energy Markets Inspectorate supervises the markets for electricity, natural gas and district heat – in Swedish), available at www. energimarknadsinspektionen.se. EREC (2004), Renewable Energy Policy Review – Sweden, European Renewable Energy Council, May. Grubb, M. (2005), ‘Energy, climate, and innovation: moving from theory to practice’, in B. Fort and F.X. Johnson (eds), Technology Partnerships for Renewables: Key to energy security, Singapore: Asia–Europe Foundation, December, pp. 72–94. Hammarby (2006), ‘Stockholmsstad’, available (in Swedish) at http://www. hammarbysjostad.se/. Hillring, B. (2003), ‘Incentives for co-firing in bio-fuelled industrial steam, heat and power production – Swedish experiences’, in Renewable Energy, 28 (5), 843–8. Hjalmarsson, L. (1996), ‘From club-regulation to market competition in the Scandinavian electricity supply industry’, in R.J. Gilbert and E.P. Kahn (eds), International Comparisons of Electricity Regulation, Cambridge: Cambridge University Press, pp. 126–78.

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Hodes, G. and F.X. Johnson (2001), Designing a Next-Generation National Climate Change Policy: Strategies for Sweden in a European and international context, Stockholm Environment Institute (SEI) report, June. Holmberg, S. (1999), ‘Karnkraftsopinionen’ (Public opinion about nuclear power – in Swedish) in S. Holmberg and L. Weibull (eds), Åttiotalet: Svensk Opinion i Emirisk Belysning (Gothenburg: Göteborgs Universitets, Statsvetenskapliga Institutionen och Avdelningen for Masskommunikation). IEA (2004), Key World Energy Statistics 2004, International Energy Agency. Johnson, F.X. and R. Bowie (1995), ‘Quantifying market transformation: the case of technology procurement of refrigerator-freezers’, presented at the European Council for an Energy-Efficient Economy Summer Study, Mandelieu, France, June, ECEEE/NUTEK 229-05. Johnson, F.X. and M. Nordström (2003), ‘Greening the EU power market: Nordic perspectives on electricity disclosure’, presented at European Council for an Energy-Efficient Economy (ECEEE) Summer Study, Mandelieu, France, June, ECEEE, Stockholm, Sweden. Khan, J. (2003), ‘Wind power planning in three Swedish municipalities’, Journal of Environmental Planning and Management, 46 (4), 563–81. Khan, J. (2004), Local Politics of Renewable Energy – Project planning siting conflicts and citizen participation, doctoral thesis, Environmental and Energy System Studies, Lund University. Kåberger, T. (2002), ‘Swedish nuclear power and economic rationalities’, Energy and Environment, 13 (2), 193–4. Malm, U. and L. Stolt (2004), National Survey Report of PV Power Applications in Sweden 2003, Ångström Solar Center, Uppsala University, Sweden, June. Möberg, E. (1979), ‘Värdering av insatserna inom omradet vindenergi’ (Evaluation of the efforts on wind energy – in Swedish) DEF report No. 18, Delegationen for energiforskning, Stockholm, Sweden, available at www.mobergpublications.se/ tryckta/vindkraft.htm. Morthorst, P.E. (2003), ‘A green certificate market combined with a liberalised power market’, Energy Policy, 31 (13), 1393–402. Nielsen, L. and T. Jeppesen (2003), ‘Tradable green certificates in selected European countries – overview and assessment’, Energy Policy, 31 (1), 3–14. Nilsson, L.J. et al. (2004), ‘Seeing the wood for the trees: 25 years of renewable energy policy in Sweden’, Energy for Sustainable Development, VIII (1), 67–81. Nilsson, M. (2005), ‘Learning, frames, and environmental policy integration: the case of Swedish energy policy’, Environment and Planning C, Government and Policy, 23 (2), 207–26. Regeringens Proposition (1991), Prop. 1990/91:88. Regeringens Proposition (1997), ‘Ellagen’ (Electricity Act – in Swedish) Prop. 1997:857. Regeringens Proposition (2002), ‘Samverkan för en trygg, effektiv och miljövänlig energiförsörjning’ (Collaborative efforts for a safe, effective and environmentally friendly energy supply – in Swedish), Prop. 2001/02:143. Regeringskansliet (2006), Minnesanteckningar från mötet, ‘Kommissionen mot oljeberoendet’ (Memo from meeting, ‘Commission on oil dependence’ – in Swedish), Stockholm, 20 January. Regeringens Proposition (2006), ‘Förnybar el med gröna certificat’, överlämnad till Lagrådet den 23 februari (‘Renewable El with green certificates’, delivered to Lagrådet 23 February – in Swedish).

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Res-E Regions (2006), ‘Västra Götaland: electricity from renewable energy sources’, European Commission IEE project publication, available at: http://www.res-regions.info/. RiR (2004) (Riksrevisionen), ‘Vattenfall AB – uppdrag och statens styrning’ (Vattenfall AB – missions and control by the state – in Swedish), RiR 2004:18. Riksdagstryckeriet: Stockholm. SCB (Statistiska Centralbyrån) (2006), Bostads-och byggnadsstatistisk (Housing and construction statistics – in Swedish), Örebro, Sweden. SCB Statistiska Centralbyrån (Central Statistics Bureau) (2007), Statistical Yearbook, available at www.scb.se. Schipper, L., S. Meyers and H. Kelley (1985), Coming in from the Cold. Energy-wise housing in Sweden, Washington, DC: Seven Locks Press. Schipper, L., F.X. Johnson, B. Andersson and B. Andersson (1993), Energy Use in Sweden: An international perspective, Lawrence Berkeley Laboratory report, LBL-33819. SEPA (2004), ‘Local Investment Program (LIP) Statistics’, The Swedish Environmental Protection Agency, December, available at http://www. internat.naturvardsverket.se. SFS (1987), Plan-och bygglagen (The Planning and Building Act – in Swedish), Svensk författningssamling. SFS (1998), Miljöbalk (The Environmental Act – in Swedish), Svensk författningssamling. SKL (2007), Nationella miljömål – en lokal utmaning (National environmental goals – a local challenge – in Swedish), Sveriges Kommuner och Landsting, May, available at www.skl.se. Statskontoret (2004), Avregleringen av sex marknader: Mål, medel och resultat (Deregulation of six markets: Goals, measures and results – in Swedish), MISSIV 2004-09-29, N2004:02/2004/14, Postkontoret: Stockholm. STEM (2004a), The Energy Market 2004, Swedish Energy Agency. STEM (2004b), Översyn av elcertifikatsystemet Delrapport etapp 2 (Review of the renewable electricity certificate system – Preliminary report step 2 – in Swedish). STEM (2005), Energiläget 2005 (State of energy 2005 – in Swedish), Statens Energimyndighet. STEM (2006), Energiförsörjningen i Sverige – Kortsiktsprognos (Energy supply in Sweden – Short-term prognosis – in Swedish), ER2006:04. Svensk Energi (2006), Elåret (The electricity year – in Swedish), Stockholm: Svensk Energi. SVK (Svenska Kraftnät) (2003), ‘Elcertifikat – för att främja produktionen av förnybar energi’ (El-certificates – to promote the production of renewable energy – in Swedish), available at http://www.svk.se/web/Page.aspx?id=5350. Vattenfall (2001), Vattenfall, Vi fångar vinden och skapar el (Vattenfall, We catch the wind and create electricity – in Swedish), information brochure, Vattenfall, Stockholm, Sweden. Vattenfall (2005), ‘Vattenfall’s views on the electricity market 2005’, available at http://www.vattenfall.com/www/vf_com/vf_com/Gemeinsame_Inhalte/ DOCUMENT/360168vatt/397946elec/2005-ElectricityMarketReport.pdf. Vedung, E. (2001), ‘The politics of Swedish energy policies’, in S. Silveira (ed.), Building Sustainable Energy Systems: Swedish experiences, Swedish National Energy Administration, pp. 95–130.

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Westerstahl, J. and F. Johansson (1990), Vad Har Hant med Karnkraftsopinionen? (What has happened to the public opinion on nuclear power? – in Swedish), Stockholm: SNS Forlag.

9. Norway: trying to maintain maximal RES-E in a petroleumdriven economy Jørgen Knudsen, Olav Mosvold Larsen and Audun Ruud INTRODUCTION Norway is endowed with abundant energy resources that have been intensively exploited for decades. As one of the world’s leading producers of hydropower, Norway normally derives more than 90 per cent of its total national electricity consumption from hydro resources. Norway has, however, also become a major producer of oil and natural gas. In 2006 Norway was the third-largest exporter of crude oil in the world, and supplied Europe with about 15 per cent of its total natural-gas supply. In this regard, Norway has increasingly become a ‘petroleum-driven economy’. It is at the juncture of these two national energy traits – hydropower and petroleum – that an analysis of governance for renewable electricity (RES-E) must be conducted. One of the major trends affecting RES-E in Norway is the relationship between hydropower generation and the overall consumption of electricity. By all indications the former has reached a definite limit, while the latter continues to increase. There is, therefore, considerable concern as to the security of national electricity supply in Norway. A phasing in of ‘new’ RES-E production can in this context be viewed as one of five alternative energy options currently being discussed in the national political discourse (Box 9.1). Further expansion of large hydropower installations is no longer politically viable. In addition to a promotion of new RES-E as a direct supplement to large-scale hydropower (option 1), an increasingly viable strategy is to substitute hydro-based electricity heating with other renewable (biomass) alternatives (option 2). Since electricity consumption per capita in Norway is among the highest in Europe, increased energy efficiency is also identified as an important component (option 3). The use of Norwegian natural-gas resources in gas-fired power plants constitutes yet 250

Norway

BOX 9.1

251

CURRENT ENERGY POLICY OPTIONS IN THE NORWEGIAN NATIONAL POLITICAL DISCOURSE

1. Phasing in new RES-E to supplement existing levels of hydropower (principally wind and small-scale hydro) 2. Substitution of hydro-based electricity heating through the construction of district heating facilities, based on renewable resources (principally municipal–industrial waste, solid biomass and biogas) 3. Intensification of energy-efficiency measures 4. Increasing the use of domestic natural gas for gas-fired power plants 5. Increasing the volume and transmission capacity for electricity imports, primarily via the common Nordic grid Source:

Authors’ original.

another possible ‘path’ for coming to grips with increasing deficits of hydropower (option 4). Lastly, the challenge can be approached by expanding the overall volume and transmission capacity for electricity imports (option 5). Perspectives related to these different energy options are woven into the major sections of the chapter, and we return to the options in our summary discussion. As we see it, options 1, 2 and 3 listed in Box 9.1 are all compatible with the intentions and targets of the EU RES-E Directive – and all three are, in fact, central to the current governmental strategy – though in differing degrees and with differing levels of support. The EU RES-E Directive and Norway The Norwegian participation in the EU internal market, as well as involvement in related EU policy areas, has since 1994 been regulated by the Agreement on the European Economic Area (the EEA Agreement).1 Through the EEA Agreement Norway is obliged to follow the regulations related to the internal energy market. An integral part of the process is running consultations and negotiations between the EFTA countries (Norway, Iceland and Liechtenstein) and the EU Commission as to the eventual adoption of EU legal acts within these EFTA countries. The EEA Joint Committee – where the EFTA countries meet with

252


EU Commission representatives – determines whether the Act in question is to be integrated as part of the EEA Agreement. If accepted by the EEA Joint Committee, the Act is then transposed to national legislation. The EU RES-E Directive was finally adopted by the EEA Joint Committee on 8 July 2005, and was subsequently officially endorsed by the Norwegian parliament.2 The implementation of the Directive has so far not led to any substantial amendments of the legal framework in Norway since most of the required mechanisms and institutions to promote renewable electricity were already in place.3 Despite having a capacity for 100 per cent self-sufficiency in electricity from RES in a year with ‘normal precipitation’, Norway’s indicative target was set at only 90 per cent, a level that is barely above the lowest level ever recorded for RES-based electricity consumption in Norway. The target is based on a premise that the annual growth in electricity consumption will not exceed 1 per cent during the target period. The Ministry of Petroleum and Energy (MoPE) nonetheless considered the target to be ‘ambitious’, given projected increases in both consumption and additional production (6–7 TWh for the period 1997–2010).4 Not surprisingly, the Directive was considered to be in accordance with Norwegian interests by both the government and the parliament, and it was welcomed by Norwegian energy companies. The Directive was also considered to serve ‘offensive interests’ for Norway, since one of its premises was to promote international physical and financial markets for renewable electricity.5 The MoPE has the responsibility for the further follow-up of the Directive in Norway.

GENERAL PROFILE OF THE DOMINANT ENERGY SYSTEM FOR ELECTRICITY IN NORWAY In 2005 net energy consumption in Norway was 225 TWh, and electricity consumption accounted for 72.6 per cent of total stationary energy use (Table 9.1). The electricity consumption per capita is significantly higher than the OECD average, mainly due to the high amount of electricity used for heating. Traditionally electricity has been relatively cheap in Norway compared to other OECD countries. Electricity production is dominated by hydropower (more than 90 per cent). The latest comprehensive study of energy use in households (2001) indicates that space heating accounts for 31 per cent of electricity consumed (MoPE 2006a: 36).6 The Norwegian energy system cannot be comprehended, therefore, without a thorough understanding of the interaction between hydropower production and electricity consumption.

253

Norway

Table 9.1

Stationary energy consumption in Norway, 2005

Energy source

% of stationary energy consumption

Electricity Oil products Various types of gas Biomass District heating Other (coke, coal etc.)

72.6 13.0 4.3 8.0 1.5 0.6

Total (225 TWh)

100

Source: MoPE (2006a: 34).

Hydropower Today total installed hydroelectric capacity stands at 28 000 MW (MoPE 2005: 21). The bulk of this capacity was constructed during the period 1960–90, with the most intense period between 1970 and 1985. Norway is the third-largest producer of hydro-based electricity in the OECD (IEA 2006: 10). The first hydropower plant to produce electricity commercially for households was constructed in 1885, and hydro-based electricity was a key feature of Norway’s late and intense industrialization between 1905 and 1920 (Lafferty 1971; Thue 1994). Hydropower still is a crucial factor for Norwegian energy-intensive industries, and the relatively low costs associated with hydroelectricity are perceived as decisive for the future survival of the traditional Norwegian process industries. Traditionally the Norwegian state has subsidized the energy-intensive industry with long-term contracts for low-cost supply of electricity. These contracts are now mainly expiring and many companies have concluded new, long-term contracts directly with the energy companies. The public subsidies are no longer viable as they are considered state aid, and thereby not in accordance with the EEA Agreement. It remains to be seen how possible amendments will affect the overall hydropower balance and eventually the industry’s focus on both energy efficiency and alternative sources such as natural gas. Historically, most decisions related to energy production in general, and to electricity production in particular, have been related to hydropower. The 1969 discovery of oil and gas at the offshore Ekofisk field marked the start of the Norwegian petroleum adventure, but petroleum never represented a major challenge to hydropower as the dominant domestic electricity source.

254


Table 9.2 Electricity production and consumption in Norway, 1995–2005 (TWh) Year

Hydropower

Wind

Other

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

122.487 104.148 110.938 116.280 121.882 142.289 121.026 129.837 106.084 109.291 136.452

0.01 0.009 0.01 0.01 0.02 0.03 0.027 0.075 0.218 0.252 0.5

0.5 0.5 0.47 0.49 0.54 0.49 0.5 0.56 0.9 0.9 0.86

Imports

Exports

Net consumption

2.3 13.2 8.7 8 6.8 1.47 10.76 5.3 13.4 15.3 3.6

8.9 4.2 4.8 4.4 8.7 20.5 7.1 15 5.6 3.8 15.7

104.964 104.147 104.893 110.448 110.520 110.915 113.258 110.078 104.272 109.623 111.832

Source: http://www.ssb.no/emner/10/08/10/elektrisitetaar/tab-2007-05-24-12.html (in Norwegian).

The total potential for hydropower production in Norway is estimated at 205 TWh in a year with average precipitation. Of this capacity, 118.9 TWh is already developed; and 44.2 TWh is in regulated watercourses that are (politically) not available for development, leaving a possible 41.9 TWh that can be developed. In the current political situation, however, this could involve only small-scale plants. The MoPE considers the ‘theoretical potential’ for small hydropower to be around 25 TWh (MoPE 2006a: 23). The interest in building small plants is growing and the institutional capacity to handle the increased number of licence applications has recently been reinforced. As indicated in Table 9.2, the actual level of hydropower production varies significantly with changing levels of precipitation and weatherdependent consumption. The hydropower stations are ‘supported’ by water deposit reservoirs, filled up during spring and summer, and tapped off during winter. The reservoirs are an efficient means of storing energy, and are well suited for co-production with other renewables such as wind power. This, however, is still only on the planning stage. New Renewable Energy Sources for Electricity Wind power Norway’s long coastline offers numerous ideal settings for wind power. In many locations average wind speed is more than 8 metres per second, and

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on well-suited locations more than 3000 annual work hours are generated (MoPE 2005: 28). The Norwegian Water Resources and Energy Directorate (NVE) has estimated the physical potential for wind power to be 480 TWh per year, about four times the annual mean electricity production from hydropower (Gan et al. 2005: 38). The downside is that many of the most suited locations are areas with poor electricity-transmission capability. Wind power was introduced in Norway in 1989–93, with the construction of eight turbines (Christiansen 2002: 38). Despite only moderate official support, there has, since 1997, been considerable interest in developing wind energy (Gan et al. 2005: 38). As of July 2007, some 31 windpower installations – with a total installed capacity of 1733 MW – have been granted with concessions, with 322 MW currently installed (NVE 2007). The installed wind-power capacity provided only 0.5 TWh in 2005 (Table 9.2), 0.39 per cent of the electricity consumed that year. When including announced projects, the annual potential amounts to more than 3 TWh. At the time of writing, however, it is uncertain whether the energy companies actually will proceed with the planned projects. This increasing uncertainty is based particularly on the new national feed-in tariff scheme adopted in 2007 (coming into force from 2008), and the energy companies’ concern about the stipulated support level for wind power (Econ 2007). Photovoltaics The active use of solar energy through photovoltaic (PV) technology is not very common in Norway, and the contribution to RES-E production is insignificant. Off-grid PV panels are common in summer houses and cottages, but there are currently no grid-connected PV systems in Norway. A passive use of solar energy is more widespread, being closely linked to the construction of houses. Many homes utilize passive solar heating, through both insulation standards and the siting of dwellings in the terrain, but there are no reliable estimates available as to the amount of energy saved (Gan et al. 2005: 38). Biomass Despite significant potential, electricity production from biomass is not very common. There are, however, possibilities for co-generation in industry, an option that is particularly relevant in the wood-processing industry in conjunction with waste-treatment plants. Biomass can also be used more extensively in district-heating systems, enabling a substitution of hydrobased electricity heating (see below).

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Wave and tidal power Due once again to Norway’s particular coastline, wave and tidal power have been considered to have significant potential. From the late 1970s throughout the 1980s substantial financial support was given to the development of wave energy. Two high-profile wave-power projects were publicly funded from about 1976 to 1984. These were among the very first ‘new’ RES projects in Norway. Interest in wave power then declined (Christiansen 2002), but in 2003 a prototype tidal energy turbine of 300 kW was installed in the most northern county of Finnmark and connected to the grid (Kvaløysundet). Still, wave power contributes insignificantly to RES-E production. The Related Challenges of Renewable Heating and Natural Gas As indicated in the introduction, the construction of alternative, renewable heating systems, as well as the phasing in of electricity produced from new gas-fired power plants, also constitutes current political options to amend Norway’s increasing deficit of hydropower (see Box 9.1). Renewable heating Due to Norway’s exceptional use of electricity for space and water heating, it has been a principal goal to promote alternative heating sources. Since 1980 the use of petroleum for stationary purposes has been reduced by about 50 per cent, corresponding with an increase of hydroelectricity-based heating (MoPE 2006a: 34). Since petroleum used for heating often is connected to water-based heating systems, this can facilitate a conversion to renewable energy. Bioenergy-based heating is competitive when resources are available at low cost and there is a possibility of connecting to a districtheating system. Improving the infrastructure for district heating is thus considered a key measure. The use of bioenergy as a source of heat is increasing in Norway due to more fluctuating electricity prices (Gan et al. 2005: 38). In 2005, a total of 31 district-heating facilities supplied approximately 2.4 TWh,7 mainly in the bigger cities (MoPE 2006a: 40–41). Energy recovery from waste constituted about half of this production of heat, with the rest coming from biofuel, electricity and petroleum. In particular, many new public constructions are now projected with attachment to biomass-based districtheating systems, including, in some cases, private dwellings. Such projects of substituting electricity for heating are often financed by the public Energy Fund, and can thus be considered implementing option number 2 identified in the introduction (Box 9.1).

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Natural-gas-fired electricity As Norway is a leading petroleum producer and exporter, the issue of naturalgas-fired power plants has for more than a decade been a recurring theme in public debate. The Norwegian environmental movement has been unanimous in its opposition. Proponents claim, however, that global emissions of CO2 will actually decrease, because Norway is increasingly forced to meet its electricity deficit by importing fossil-fuelled electricity (see Table 9.2). Carbon capture and storage (CCS) has been a central issue in this debate. The issue as a political controversy peaked with the resignation of the Centre government in March 2000, after parliament had turned down the proposal of committing the gas-fired power plant projects to CCS. The incoming Labour government then provided licences for three projects without CCS obligations. For several reasons, however, the concerned companies did not immediately proceed with these projects (Tjernshaugen 2007). Other projects were later proposed, however, and currently two plants are in operation, and a third one is under construction. One of these is located on the south-west coast (Kårstø) and is expected to start its production by the end of 2007. The government has decided to supplement this plant with a CCS facility, with substantial public funding. Another project is to be located on the western coast north of Bergen. The major Norwegian oil and gas company, Statoil, has been allowed to build a plant attached to an existing petroleum refinery (Mongstad) which is stipulated to be on line by 2010. Together these two plants will produce close to 6 TWh of electricity annually, about double the wind energy target set for 2010. The Mongstad plant is committed to gradually phasing in CCS technology from 2010 also with substantial public financial support.8

MAJOR ACTORS AFFECTING PRODUCTION AND CONSUMPTION OF RES-E Partisan Politics and Positions towards RES-E9 During the last ten years there have been four different governmental constellations in power in Norway: from 1997 to 2000 there was a coalition constituted by the Centre Party (SP), the Christian People’s Party (KrF) and the Liberal Party (V), based on a parliamentary minority; from 2000 to 2001 there was a minority Labour Party (AP) government; and from 2001 to 2005 there was a minority centre–right coalition government (the Conservative Party (H), KrF and V). From 2005, AP, the Socialist Left Party (SV) and SP constitute a ‘red–green’ cabinet backed by a parliamentary majority. This is the first time the dominant Labour Party has shared

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cabinet portfolios. Traditionally the Labour Party and the Conservative Party have been leading opponents along the left–right axis. Currently, however, the right-wing Progress Party (FrP) is the major opposition party. Green issues have had various degrees of saliency in the Norwegian partisan politics, often cutting across the dominant cleavage of left–right on welfare-state issues. This cleavage has in particular manifested itself through issues concerning the construction of larger hydropower projects, and later through the debate on natural-gas-fired power plants. To provide a rough picture of political concerns related to RES-E we have analysed: references in the official party programmes from 1997 to 2005; party positions on recommendations made by the Standing Parliamentary Committee on Energy and Environment (Stortingsinnstillinger); party priorities in national budget recommendations; ‘private proposals’ by individual members of parliament (‘Document 8 Proposals’10); members’ ‘questions’ to the Minister of Petroleum and Energy (over three sessions of parliament between 2000 and 2005); and in other policy documents (propositions to the self-constituting ‘second chamber’, the Odelsting), White Papers and the government’s ‘Long Term Programme’ – presented once every four years. The analysis leads to the following conclusion: although all parties are more or less positive about RES-E, it is the left-wing SV that has the ‘most enthusiastic’ profile, showing active support through specific proposals in budget priorities, private proposals, recommendations in the Committee for Energy and Environment and interpellations at question time. SV is also the strongest advocate of an active public role in promoting RES-E. Coming from the opposite direction, the populist and right-wing FrP – with a relatively negative view of the urgency to address climate change – has forwarded several private proposals and recommendations. This activity reflects a sceptical approach, in essence an open opposition in principle to promotional subsidies. One explanation for the relatively prominent role of both SV and FrP is that neither of these parties (until recently for SV) has had ministerial and budgetary responsibility as members of the cabinet. The other political parties all claim varying commitments to RES-E, but in a less active and more general mode. Both the Labour Party and the Conservative Party, who declare their interest in providing Norway with the world’s most environmentally friendly energy supply, have been consistently weak in their follow-up on RES-E. One explanation is these parties’ wider conception of ‘environmentally friendly energy’, as they include natural gas with CCS. SV in particular has profiled RES-E as an alternative to natural gas, while FrP, H and AP – the traditional ‘growth parties’ – portray natural gas as environmentally friendly (within a global

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perspective). A major issue has thus been whether Norway should produce natural gas to replace the import of ‘grey’ electricity (AP, H and FrP’s position), as opposed to both increasing the production of RES-E and reducing the consumption of electricity in general (SV’s position). The wider political tension related to ‘growth versus conservation’ has, however, been gradually attenuated over the last years. Only FrP appears to maintain an unwavering emphasis on the former over the latter. The other parties seem increasingly comfortable with associating RES-E with both growth and environmental protection. The Role of Relevant State Entities The principal institutional actor in the energy sector is the Ministry of Petroleum and Energy (MoPE). The MoPE is entrusted with coordinating the energy policy of Norway, and thereby also the policies affecting RES-E. In addition, the Ministry of the Environment (MoE) is particularly involved in the cases of land-use and spatial planning. MoE and its subordinate agencies are also responsible for conducting environmental assessments concerning larger RES-E installations such as wind-power plants. Norwegian Water Resources and Energy Directorate – NVE As a subordinate agency to the MoPE, the Norwegian Water Resources and Energy Directorate (NVE) has the following responsibilities: managing Norway’s water resources; promoting an efficient-energy market and cost-effective energy systems; and promoting efficient energy use. The NVE is by origin anchored within the hydropower segment in Norway. It was established in 1921, and hydrology is still a very prominent interest of this agency. Due to the ambitions of increasing the diversity of energy supply in Norway, NVE has gradually adapted to the role of energy directorate. The Directorate is mandated by the Energy Act to issue licences for new electricity production, including both hydropower and wind power. There seems, however, to be a huge capacity challenge related to RES-E. The NVE has repeatedly reported that it is understaffed and not able to handle all the incoming licence applications, particularly related to wind power (Montel Power News 2007; NVE 2006). Enova and the Energy Fund Enova SF was established in 2001 as a ‘public enterprise’ (statsforetak) owned by the MoPE (Ot Prp 35 (2000–2001)). The MoPE manages its ownership through a contractual agreement. While NVE is responsible for issuing licences for new plants, Enova is responsible for initiating and

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monitoring support schemes and other promotional activities related to ‘stationary use and production of energy’.11 Its mandate is to achieve its goal by reducing energy consumption and increasing the supply of wind power and renewable heating systems with 12 TWh in total by 2010. This overall objective is composed of the following sub-targets: ● ●

●

to limit energy use considerably more than if developments were allowed to continue unchecked; to increase annual use of water-based central heating based on new renewable energy sources, heat pumps and waste heat of 4 TWh by the year 2010; to install wind-power capacity of 3 TWh by the year 2010.

In 2006 Enova had a budget of close to €100 million, based on the yield of the Energy Fund. The Energy Fund is mainly financed by an earmarked levy on the electricity distribution tariff. With the adoption of the State Budget for 2007 the above-mentioned objectives have been expanded with an ambition of achieving a joint target of 30 TWh additional RES-E, RES heating and energy efficiency combined by 2016, compared to the 2001 level. RES-E is stipulated to contribute about one-third of the 2016 objective. The Energy Fund has been supplemented by a new fund, the Basic Fund for Renewable Energy and Energy Efficiency, with approximately €1.25 billion allotted from 2007. Until 2007 the major RES-E relevant support mechanism has been investment grants for wind power. These were allocated to the most costefficient projects that would not have been realized without public support. The parliament has decided that from 2008 this will be replaced with a national feed-in tariff scheme. As touched upon in other sections in this chapter, there is an increasing challenge of realizing the wind-power target due to uncertainties of profitability and difficulties of localization. There is also a huge challenge underlying the promotion of renewable non-electric heating systems in Norway, principally due to the inertia of the dominant hydro-based infrastructure for electricity heating, as well as the relatively low cost of electricity. Compared to electricity, renewable heating systems are expensive to realize, and in some cases even considered not sufficiently energy-efficient (Rasmussen et al. 2006). In this regard Enova’s role can be said to be hampered by its limited mandate. The agency has neither the regulatory authority nor the possibility of altering the market and legal framework affecting the promotion of RES-E production. Continuous market advantages for hydropower-based electricity are probably also reducing the motivation for investing in non-hydro RES-E.

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Existing policy measures fail to provide clear and coherent incentives for a more effective implementation of both wind power and renewable heating systems, as well as the coordination of these two main options. In addition to a quite challenging mandate on RES-E and energy efficiency, Enova also has, through other political decisions, an obligation to contribute to increased domestic use of natural gas. Enova’s mandate can thus be characterized as both partially contradictory and insufficient. Branch Organizations The Norwegian Electricity Industry Association (EBL) is the trade organization for around 260 producers, suppliers, distributors and a few waterregulation associations. The main purpose of EBL is to deal with industry-related economic and political issues on behalf of its members, and to provide framework conditions for the industry that are as ideal as possible. The EBL is a major supporter of the dominant hydropower regime in Norway by representing the major hydropower producers. EBL has nevertheless supported the criticism of the level of public support for RES and, in particular, for wind-power production. The Norwegian Wind Energy Association (NORWEA) was established in 2006 and is the industrial body for wind-power producers. NORWEA works for the public acceptance of wind-power installations, as well as the amendment of the financial framework and, in particular, the promotional support schemes for wind power. The Federation of Process Industries (PIL) was traditionally perceived as a major defender of the hydroelectric ‘faith’. PIL organized companies across a broad spectrum of process industries, most of them highly dependent on electricity. In 2006 PIL merged with the Federation of Norwegian Manufacturing Industries (TBL) to become the Federation of Norwegian Industry (NI). Traditionally NI shares EBL’s position in securing support for hydropowered electricity production. NI is, however, mainly concerned with the cost of electricity to its producers, and is also a significant proponent of gas-powered electricity production. The National Council for Norwegian Municipalities Producing Electricity from Hydropower (LVK) is the interest organization of municipalities having ownership interests in hydropower installations. LVK in general focuses mostly on optimization of revenues for these municipalities. A relative newcomer in the RES-E policy field is the National Council for Norwegian Municipalities Producing Wind Power (LNVK), established in 1999, and so far comprising about 30 municipalities. This organization is working for improved framework conditions for wind-power construction,

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improved local influence in planning and licensing processes, as well as providing and developing competence for negotiations with other authorities, landowners and the energy companies. The Major RES-E-Related Companies In 1992, as a direct consequence of the Energy Act of 1991, the state-owned enterprise ‘National Power Company’ (Statkraftverkene) was divided into two separate state-owned units: Statnett SF and Statkraft SF. The first runs the monopoly-based transmission of power and has national system-wide responsibility for the electricity grid, while the second is responsible for the generation of electricity. Statnett is responsible for the management of the central grid. It is a public enterprise, owned by the state through the MoPE. Electricity from hydropower is not stored and must be used as it is generated. A system operator, in this case Statnett, must, therefore, ensure that supply and demand are in balance at all times. As a transmission-system operator, Statnett owns and operates most of the Norwegian power grid, as well as the Norwegian share of power lines and underwater transmission cables to other countries. As for Statkraft, its ownership was transferred from the MoPE to the Ministry of Trade and Industry in 2002. In October 2004 Statkraft changed its status from a state-owned enterprise to a limited stock company. With a total power production of 42 TWh, the Statkraft group is the third-largest producer of electricity in the Nordic region, as well as the second-largest producer of renewable energy in Europe. Statkraft is the largest hydropower producer in Norway, with approximately 30 per cent of total production capacity (MoPE 2005: 22). In Norway it also operates through an increasing number of subsidiaries and attached companies, all of which are regionally important enterprises. Statkraft currently operates wind farms in central and northern Norway. Norsk Hydro ASA was founded on the exploitation of hydroelectric power for producing fertilizers in the early twentieth century. Norsk Hydro later evolved into a leading offshore producer of oil and gas, building on its strong semi-state positions in both the process industry and hydroelectricity. The company is the third-largest integrated aluminium supplier in the world, relying primarily on hydropower for its Norwegian energy-intensive operations. It is generally acknowledged that Norsk Hydro alone accounts for roughly 10 per cent of Norway’s total electricity consumption. With respect to RES-E, it is important to note that Norsk Hydro was involved in several wind and hydrogen projects, in Norway and abroad, and notably offshore wind power.12 However, the petroleum activities were merged with

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Statoil in October 2007. Included in this merger are also Norsk Hydro’s wind and hydrogen projects, but energy is still a core business in the new, but smaller company. As for Statoil, with its dominant position in the Norwegian economy, it also has a crucial role in the development of CO2 technology, thus exercising considerable influence on the ‘developmental space’ for RES-E innovation and path creation in Norway. Until the recent merger, Statoil had no major RES-E activities except some limited bioenergy projects. Another major actor is the conglomerate Hafslund ASA. Hafslund is both the largest private power-grid owner and the largest power retailer and distributor in Norway. The company also ranks seventh among Norwegian hydropower producers. Hafslund is not directly involved in activities related to new RES-E, but has been a major shareholder in the leading solar-energy company, Renewable Energy Corporation (REC). REC is the largest RES-related firm in Norway, and one of the largest solar companies in the world. The company specializes in leading-edge technology related to the manufacture of silica wafers for the PV industry, and has numerous subsidiaries worldwide in different areas of application of PV technology. In addition to REC, new initiatives for solar energy development have recently been taken by other Norwegian companies. NGOs and Growing Local Resistance to RES-E Production Climate change and energy issues are major concerns among the key Norwegian environmental NGOs. The NGOs generally stress the need for renewable energy, but also see it as important to come to grips with consumption and to introduce energy-efficiency measures. While there are few substantial NGO initiatives aimed at promoting renewable electricity production as such, the Norwegian environmental organizations have been almost unanimously in favour of a green certificate scheme, considered to be more effective than the feed-in tariff scheme agreed upon (further details in the next section). During the last 10–15 years the environmental NGOs have been heavily engaged in the issue of gas-fired power plants and related carbon capture and storage (Tjernshaugen 2007). One could claim that this preoccupation with the gas-power issue has overshadowed engagement related to other aspects of the energy policies, including RES-E. However, there are differences in opinion when it comes to implementation of specific renewable technologies, mainly wind power. Here the environmental NGOs differ in their conservationist orientation, with some being more concerned about the possible consequences for local landscapes and biodiversity. This scepticism is, however, more outspoken at the regional and local level than in the national debate. Smaller, ad hoc ‘resistance groups’ have also been

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established in order to impede the actual construction of wind-power plants, particularly on the western coast. Many of these local groups are gathered in the umbrella organization ‘STOP ravaging the coastline’ (STOPP rasering av kysten). These groups have also been actively supported by the tourism industry, both locally and nationally. In parallel to the growing local scepticism towards wind power, the interaction with local stakeholders is increasingly emphasized by the energy companies. The regulatory framework for wind power is quite complex, but it provides various opportunities to inform and involve the local community and stakeholders. Local communities are thus increasingly invited by the energy companies to take an active part in influencing the planning and execution of the projects.

THE POLICY FRAMEWORK FOR RES-E IN NORWAY The Basic Legal–Regulatory Structure for Hydropower While the legal procedures affecting non-hydro renewables differ in certain ways from those regulating hydropower, the hydropower legal regime constitutes a major historical and institutional basis for the regulation of RES-E in Norway at large. Management of watercourses has a long tradition in Norway, with the first law on watercourse regulation dating from 1887. Several Acts followed, most of which are still valid. Together these regulations constitute a very hydropower-specific regulatory framework. In 1973 the first Protection Plan for Watercourses (covering 95 watercourses) was adopted. Since then three additional plans (1980, 1986 and 1993), and a supplement to the plans (2004), have been adopted. Together they constitute an extensive body of hydro regulation. Parallel to this, the parliament decided in 1981 to establish a Management Plan for Water Resources, encompassing all watercourses not already regulated. The purpose was to rank these watercourses according to the potential rate of return for developing the systems, as well as the degree of expected political controversy in each case. This plan has been the central reference for all subsequent discussions of further development of specific watercourses. The 2004 supplement to the last Protection Plan states that large projects are no longer viable. Additional hydropower development in Norway will in principle have to be in the form of small-scale hydro units. An important additional implication of parliament’s decision is that ‘micro’ and ‘mini’ hydropower plants (less than 1 MW) can be given a concession (with some exceptions) even if located in protected watercourses. In 2007 the MoPE adopted new guidelines for the licensing of

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small hydropower plants in order to make the process more coordinated and efficient. Another important regulation is the Industrial Concession Act of 1917, formulated to ensure a continued national ownership of Norway’s important hydropower resources. The Act prescribes to ‘whom’ and for ‘how much’ the power plants can sell their resources. According to this Act the Norwegian state takes over, free of charge, any waterfall or hydropower installation managed by private interests when a licence expires. This regulation does not, however, restrict the power producers’ ability to invest in and improve the plants. The conformity of the Act with the EEA Agreement (as to the principle guaranteeing reversion of ownership to the state) has been heavily questioned by the EFTA Surveillance Authority (ESA). The case was taken to the EFTA Court, and in June 2007 it was decided that Norwegian authorities had to amend the principles in the Act to treat public and private owners equally. At the time of writing the Norwegian government is working on an amended regulation. It is clear from the reactions to the EFTA court judgment that national, and preferably public, ownership is considered decisive for politicians at the national and local levels. The main political divergence in the case echoes the general right–left cleavage on the perspective of public versus private ownership. As to the actual consequences for new RES-E production, it is difficult to see that national public ownership will ensure a higher level of investment than increased private and/or foreign ownership.13 The Energy Act and the Case of Wind Power The Energy Act of 1990 has been instrumental in changing the overall energy policy orientation in Norway. The Act made Norway the first country in the world to guarantee consumers the right to choose their own suppliers of electricity. The Act is also the basis for the licensing and management of all electric installations and district-heating systems, as well as for power trading and the overall coordination of the electricity grid. It also has direct implications for the commercial framework for private sale (contracts, measurement, invoicing) as well as transnational trade in electricity (MoPE 2005). The provisions of the Act pertaining to RES-E installations can be illustrated by a brief reference to the procedures concerning windpower production. Potential wind-power producers must apply for licences to the Norwegian Water Resources and Energy Directorate (NVE). During its assessment NVE can request specific reports on environmental and other consequences. Facilities having an installed capacity of more than 10 MW are always subject to such reports. The NVE’s evaluation of the application

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must be coordinated with local authorities’ assessment of the localization of the installation. The local authorities’ assessment is based on the Planning and Building Act. The NVE – in cooperation with local authorities – must arrange public hearings with regional and local stakeholders. In addition, other public authorities at the national level must scope the more specific consequences of the installations in question, inter alia, related to biodiversity and the cultural heritage, in order to identify and rank the level of conflicting interests. As part of the assessment of a licence application, the NVE also assesses the necessary grid connection, and the regional and general capacity affected by the new installations. There is, however, no clear, formalized provision as to how to distribute the actual costs of eventual grid amendments. In sum, the framework for planning and assessment before the final issuance of a licence for wind-power production is very complex. The actual time span from an initial announcement of interest to the eventual granting of a licence is three to six years. In 2007 the government adopted new guidelines to induce a more coordinated and coherent assessment of wind-power and small hydropower plants. The guidelines encourage authorities at the county level to develop regional wind-power plans. It remains to be seen whether these voluntary guidelines will lead to a smoother planning process. Nord Pool ASA The wholesale trade between power producers, suppliers and major consumers of electricity is either taking place bilaterally, or through the Nordic Power Exchange Nord Pool. Nord Pool is a direct consequence of Norway’s amended Energy Act of 1990. An increasing number of transactions are being concluded through Nord Pool. Established in 1993, it was the world’s first multinational exchange for trading electric power. It was originally a Norwegian-based market, but Sweden joined in 1996, Finland in 1998, and Denmark in 2000. Nord Pool involves the trading and clearance of physical and financial power contracts among the Nordic countries. As of 2006, approximately 350 actors were trading in one or more of Nord Pool’s markets. The common Nordic electricity market has provided increased opportunities for import to Norway in periods of deficit and it has given Norwegian actors access to the wider European market, by trading with both physical and financial contracts. The fluctuations in electricity exports and imports, illustrated by the figures listed in Table 9.2, also indicate the dynamics of these transactions.

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Guarantees of Origin and the RECS ‘Guarantees of origin’ (GO) constitute an important element of the RESE Directive. In 2003 the state-owned power-grid company, Statnett, was given temporary responsibility for issuing RES-E certificates of origin in Norway. In order to formally codify the RES-E Directive’s provisions in Norway, a specific regulation has now been prepared by the Ministry of Petroleum and Energy. Statnett has also been active in the RECS (Renewable Energy Certificate System), a voluntary certificate system established by European power companies in 2001 as an initiative to create a uniform cross-border certificate trading. Statnett now issues combined GOs and certificates to Norwegian producers. The European trading of such certificates is growing fast, and Norwegian and Swedish electricity producers dominate the European market. It seems uncertain, however, whether accumulated profits from this trading will generate more investments in new RES-E production in Norway. The Evolving Policies for RES-E In 1982 the Conservative government submitted a White Paper on new renewable energy sources in Norway. This was the first, and to date only, policy document devoted solely to policies for ‘new renewables’. The White Paper presented a relatively optimistic position (White Paper 65, 1981–82: 24). Christiansen (2002) argues, however, that during the 1980s the previous optimism faded. Allocations for R&D remained unchanged. In a White Paper from 1989 the Labour government signalled an ambitious climate change policy as a follow-up of the Brundtland Report (White Paper 46, 1988–89). Reinforced public efforts in support of RES were proposed as a key policy measure to stabilize the CO2 emissions by 2000 (ibid.: 58). The White Paper further suggested establishing ‘goal-oriented’ and ‘time-limited’ R&D programmes, with specific responsibilities for each RES branch. A subsequent White Paper in 1992 marks a shift towards a more cautious approach (White Paper 41, 1992–93). With the adoption of the White Paper on policies for climate change and the emissions of NOx (White Paper 41, 1994–95), Norway officially abandoned its domestic stabilization target in favour of a cost-effective strategy for the mitigation of greenhouse gas (GHG) emissions. However, at the same time the Labour government signalled a strengthening of support schemes for the development of new renewable energy technologies. In the White Paper on ‘Environmental policy for sustainable development’ (White Paper 58, 1996–97), a new Labour government proposed that electricity

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consumption in a so-called ‘normal year’ should be based entirely on renewable energy sources. Key goals were set to reduce the use of electric heating in cases where new renewable energy sources and technologies could be deployed, and to increase the utilization of bioenergy and waterborne heating by about 5 TWh over a period of five to ten years. In 1999 the centre coalition government proposed alternative approaches for a more environmentally benign energy policy (White Paper 29, 1998–99). These proposals were partly based on recommendations from an Expert Commission’s report on the future prospects for Norway’s energy balance (MoPE 1998) triggered by a significantly lower hydropower production in 1996, as shown in Table 9.2. A key recommendation from this Commission was increased energy source diversity. Subsequently, as a result of the political process following White Paper 29 (1998–99), Enova was established in 2001 as a public body to promote energy efficiency and the development of RES. RES-E Promotional Measures In 2000, with reference to the EU’s ongoing early preparation of a possible common system for tradable certificates for renewables, the Norwegian parliament requested the Labour government to consider a national ‘green certificate system’ (Budsjettinnst. S. nr. 9, 2000–2001). On this background the centre–right coalition government concluded in 2003 that a functional national system would require a wider international market structure (White Paper 9, 2002–3: 107–8). The parliamentary majority nevertheless decided to establish a green certificate scheme, preferably integrated with the Swedish system established in 2003. With more documentation on the possible effects of such a joint market, the MoPE sent to hearing a proposal for a law in early 2005. The intention was to establish a common Swedish–Norwegian certificate system by 1 January 2006. Disagreements arose, however, between the Swedish and Norwegian negotiators, and in February 2006 the Norwegian centre–left coalition government decided to abandon the joint green certificate project. This provoked harsh criticism from opposition politicians, energy suppliers, NGOs and the Swedish government (Dagbladet 2006). The Norwegian government argued that the scheme would be ‘too expensive for Norwegian consumers and industry’ and opted instead for a strengthened national promotional scheme through Enova (MoPE 2006b). As part of the State Budget proposal for 2007, the government proposed the introduction of a feed-in tariff scheme in support of wind power, small hydropower and bioenergy. The new support scheme will be effective from 1 January 2008. The proposed support level for wind power at approximately

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€0.01 per kWh has been particularly criticized, as it is far below the average support level for wind power in the EU. It is difficult to establish a complete picture of the centre–left government’s real motivations for cancelling the joint certificate market with Sweden. The decision to replace it with a national feed-in system is considered as inferior by the energy companies (Econ 2007). Given the Socialist Left Party’s (SV) traditionally favourable position on RES-E, it is likely that the more hydropower- and natural-gas-oriented Labour party majority of the government went against the more RES-E-friendly position.14 An additional reason could be an ambition to reinforce the replacement of hydroelectricity for heating by renewable alternatives, and thereby de facto (if not as an outspoken strategy) give renewable heating priority.15

EFFORTS FOR RES-E INNOVATION Norwegian innovation policy system suffers in general from ‘an inherent tendency toward fragmentation’; ‘poor co-ordination among governmental ministries and autonomous institutions’; and ‘a general lack of long-term thinking and priorities’ (Remøe 2005: 217). This also holds true for ‘green innovation’ and new renewable energy (Lafferty and Ruud 2006; Larsen 2005). The responsibilities for RES-E innovation are clearly fragmented, and no ministry has a coordinated responsibility for energy and innovation. As indicated above, the major responsibility for pursuing the promotion of RES was transferred to Enova SF in 2001. Enova has not, however, had a specific mandate for fostering innovation. The agency allocates mainly resources to projects based on well-proven technologies. A basic principle has been Enova’s focus on technology use rather than development. However, this focus seems to be gradually changing. Enova is now also managing a programme on energy technology development. In cooperation with Innovation Norway, a state-owned company with the responsibility of spearheading the government’s innovation policy, and the Research Council of Norway, Enova also manages a joint programme on innovative energy solutions. Relatively little funding was allocated through these programmes in 2005 and 2006, also due to a low number of applications. Enova points out the general uncertainty about the future public production support as a main reason for this modest interest (Enova 2007). The Research Council of Norway (RCN) has in particular one programme with direct relevance: RENERGI (Clean Energy for the Future). This programme covers research on both energy production and consumption. In principle, the dimension and funding of the programme does not allow support for major demonstration projects.

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In addition to the government-induced programmes, there are several research initiatives at the university level and within larger affiliated research institutions. The Foundation for Scientific and Industrial Research (the SINTEF Group) is of particular importance, with numerous projects related to the development and dissemination of renewable energy. The Centre for Renewable Energy at the Norwegian University of Science and Technology (NTNU) in Trondheim is also an important potential actor, but is still in a relatively early stage of development. Nevertheless, it is important to emphasize the substantial R&D activities conducted by major energy companies. In particular, there is a growing interest in offshore wind power development in Norway among scientists, technology developers, energy and industrial companies, investors and politicians. These often point to Norway’s broad experiences with both offshore installations and energy technologies in general.16 Offshore wind power is also considered in relation to the power supply to offshore petroleum installations. These are traditionally operated by gas turbines, providing an important share of Norway’s CO2 emissions. The alternative could be either supply from onshore hydropower, or – more in accordance with innovation and the overall security of supply – developing innovative, offshore wind power generation. This focus has also been echoed by Norsk Hydro, which has for several years been working on cutting-edge technology for offshore turbines. The company was granted a licence in 2006 from the NVE to set up pilot prototypes of floating offshore wind turbines 11 km off the south-west coast of Norway, and this is followed up by StatoilHydro. The government is currently considering more specific efforts for offshore wind power, but no decision has been made thus far. Finally, a new development that may lead to major changes in the organization and funding of RES-E-related innovation is currently taking place. The Norwegian Research Council and stakeholders from research and the energy sector are in 2007–8 involved in a process entitled ‘Energy 21’. The aim is to identify the major research and innovation priorities related to domestic energy production and consumption, and thereby contribute to more comprehensive public funding and – eventually – induce new policy measures as well.

PHASING IN RES-E AT THE REGIONAL LEVEL Central Norway represents an illustrative region with regard to both the path dependence of the dominant energy system and possible path creation for RES-E. It is also a very succinct illustration of how the five political

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options listed in Box 9.1 mobilize different actors and interests in a regional setting. Central Norway is characterized by a generous abundance of natural resources, including wind, hydro and fossil fuels. Yet the region nonetheless faces projections predicting a growing deficit of electricity in a year with limited precipitation. This is particularly related to an expansion of energyintensive industries, in primary aluminium production (Norsk Hydro), and to the recently established ‘Ormen Lange’ installation, a gas-processing and production plant related to offshore gas exploitation. The transmission capacity from the central grid has been considered insufficient given these new major industrial projects.17 The deficit is predicted to reach approximately 9 TWh by 2010.18 This has resulted in increasing ‘regional unrest’ from both consumers and industry, and significant political attention nationally – particularly with a current Minister of Petroleum and Energy from the Centre Party, Norway’s traditional defender of regional interests. Two gas-fired power plant projects have been licensed for the region. The first of these (by the company Industrikraft Midt-Norge) is not yet on stream, but is stipulated to deliver 6.4 TWh annually. The project could possibly be realized with a bioenergy component in addition to natural gas. Second, Statoil later planned, but abandoned the project of constructing a plant capable of delivering 7 TWh by 2011. Both gas-turbine projects have been strongly supported by the actors of the dominant energy system (both hydropower and petroleum), through regional and local politicians and industrial actors. They perceive the gas option as favourable because it strengthens security of supply and stimulates regional economic development. The proponents also perceive it as environmentally benign even without carbon capture and storage (CCS). Parallel to the gas-turbine option, there has been strong interest in the wind-power potential of the region, as the coastline is well suited. Major emphasis has been placed on a relatively spectacular initiative for offshore wind farms (Havsul). The turbines are to be localized close to the coast of the county of Møre and Romsdal. Altogether these installations were expected to generate about 3 TWh of electricity in a normal year. The Havsul project provides a clear indication of the magnitude of the windpower potential capable of serving this region with energy-intensive industry. Not surprisingly, however, both the size and visibility of the project, which is planned to be located relatively close to the coastline, have provoked resistance from local citizens, the tourism industry and conservationoriented NGOs. The Havsul project was originally divided into four different sub-projects, and one of these was cancelled in 2006 due to strong local resistance. The rest of the project is still under assessment with the NVE.

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In addition to possible offshore wind power, there are several onshore wind-power projects in the region, both installed and projected. Nearly half of the currently installed wind-power capacity in Norway is in fact localized in this region (161 MW of 322 MW), one of them being Norway’s largest wind-power plant (Smøla). In addition there are several planned projects not yet constructed. The lack of progress is, among other things, due to the low promotional funding schemes – and the challenge of grid access. The Norwegian geography, with long distances between the remote, sparsely populated areas where the wind-power potential is localized, and the regional and central grid, represents a specific challenge in this regard. Since the Norwegian electricity supply is organized as one centrally coordinated system, there is little room for regionally differentiated solutions. New wind-power projects therefore often imply grid amendments which are at least partly to be financed by the wind-power developers. This is the case with several projects localized at the Fosen peninsula within this very region, where it is aimed to provide a coordinated solution for all planned wind-power projects. This issue is not yet finally clarified. There is also a potential related to new hydropower production, but, as earlier indicated, current political guidelines require that this can only be realized through small-scale plants. The potential contribution is limited, but increasingly controversial with a growing number of projects. With respect to the region’s grid capacity, Statnett is projecting an expansion by building a new transmission corridor to the south.19 This will improve the flexibility of the regional electricity system, but will also imply environmental and landscape impacts in fragile ecosystems. Besides – contrary to the proposals for wind farms and gas-fired power plants – this will not improve the national energy balance. In sum, all the more important ‘solutions’ considered thus far to ameliorate the possible deficit in Central Norway are intertwined with both national and regional–local circumstances. The prospect of the mostprofiled RES-E option – the Havsul offshore wind-power project – is at the time of writing very uncertain.

SUMMARY ASSESSMENT Until very recently Norway has been unique in Europe with an electricity supply totally generated by hydropower. As shown in Table 9.2, however, this has gradually been changing due to increasing levels of overall El electricity consumption. Imports and exports have been growing, and the share of domestic RES as a percentage of total electricity consumption has

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declined. Norway thus represents a very particular case where the peculiar exigencies of an RES-dominant energy system have reached the political–legal limits of ‘old’ RES. It is in confrontation with this challenge that we outlined at the start of the chapter five political options that could be pursued (Box 9.1). Although there is still approximately 29 TWh of unrealized large-scale hydro generation available, it has clearly been stated by successive political majorities that there will be no more large-scale installations. A potential for small-scale hydro clearly exists as one alternative path, and an interest in this resource is developing. This option fits well with the traditional structure of the Norwegian energy system and can be characterized as a reflection of path dependence rather than path creation. Nevertheless, as the number of such ‘small’ plants increases, there is also a growing concern with environmental impacts. Wind power is the most obvious new renewable energy source in the near future. Wind power is, however, an object of increasing controversy at both national and local levels. In particular, there is increasing uncertainty as to the effect of the new feed-in tariff scheme to be introduced from 2008. It is thus uncertain whether the politically decided target for wind power (3 TWh by 2010) can be realized within the stipulated time frame. However, recent developments hint at an increasing interest by political, research and industrial actors for a new national innovation programme for offshore wind power. If this interest eventually leads to actual funding and coordinated implementation, Norway, with its extensive wind-power potential and offshore technology competence, could become an international RESE technology champion in this area. If such a huge path-creation manoeuvre is to succeed, however, it requires substantial changes towards more integrated perspectives and priorities. In this context the construction of gas-fired power plants constitutes a critical factor. Gas-fired plants will provide a shift in the dominant hydrobased energy system in Norway. Political differences on the domestic use of natural gas are present within both the current (‘red–green’) and former (centre–right) governing blocs. The extensive public funding of technologies for carbon capture and storage (CCS) represents a possible solution to this controversy, but it remains to be seen how this option plays itself out, both domestically and with respect to the European Union. Aside from the crucial effect that a collapse of the CCS option would have on Norway’s commitment to the Kyoto Protocol, it is also clear that significant increases in gas-fired electricity consumption would undermine Norway’s ability to hold the line at a 90 per cent of RES-E share of total electricity consumption. At present the share of RES-E is in practice reduced by the purchase of fossil-fuel-based electricity through Nord Pool

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(though methods of factoring in import–export effects are not yet in place). One can claim, therefore, that the prevailing techno-market structure of the Norwegian dominant energy system contributes to meet security of supply and industrial development – at the expense of both unrealized potentials for RES-E and increased CO2 emissions. Given, however, the exceptional Norwegian situation with about 30 per cent of electricity used for space heating (MoPE 2006a: 36), the strategy of substituting electricity for space heating with other renewable energy sources has become a political priority. If this potential is realized successfully, it will clearly lead to an overall reduction in demand for electricity, and thus contribute to improving the RES share in the electricity balance. The national energy agency Enova SF gives high priority to this path, but it remains to be seen how successful it can be in actually limiting usage of the ‘freed-up’ electricity – particularly with respect to the price mechanics of the highly ‘successful’ liberalization of the Nordic electricity market. The current political and legal framework for the implementation and further development of RES-E policy is also directly affected by traditional approaches to hydropower. Water resource management and the related legal framework represent a specialized and complex regulatory framework. This framework also reflects a long process of political conflict related to the balancing of energy and environmental interests. These regulations thus represent an institutionalization of the traditional political cleavage between those concerned with economic growth and those concerned with environmental protection. This can also explain the challenge of implementing new RES-E projects where the focus in Norway has mainly been on investment subsidies and production support. With the recent increases in the funding scheme managed by Enova, efforts to promote energy efficiency and renewable heating are particularly intensified. The framework thus far, however, does not seem to provide either the stability or regional flexibility for RES-E projects, as experiences from wind power indicate. The deregulation of the electricity market has contributed to internationalizing the market and related market policies in Norway. Issues of new electricity production, grid connection and price dynamics are highly interdependent within the Nord Pool context. Nord Pool transactions are increasingly being influenced by other countries through the ongoing integration of Nord Pool with other regional electricity markets in Europe. The system has also been strongly influenced by the greenhouse gas emissiontrading schemes, which has further complicated possible predictions of future electricity prices. This integration process is apparently also transforming the interests and perceptions of market actors away from a traditionally national to an internationalized arena. In this light it is also

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unclear whether the increasing surpluses provided by the Nord Pool transactions will contribute to fulfil the national target of the RES-E Directive.

CONCLUSION The present analysis indicates clear uncertainty as to whether Norway’s indicative target of 90 per cent RES-E by 2010 will be reached. With overall consumption of electricity rising, and the situation for ‘normalized’ production of RES-E from hydropower approaching a stable level, the probability of missing the target because of growing consumption – and uncertain production from ‘new’ RES – increases. Since the 1990s, there has been a shift of influence from governmental regulation to an increasingly complex and less transparent international market arena as a powerful premise for future RES-E production and consumption. Nevertheless, national political decisions still constitute crucial framework conditions, as illustrated in Norway by a complex regulatory framework and relatively weak promotional funding schemes. The newly adopted feed-in tariff scheme (to come on line as of 2008) has led to a growing uncertainty as to the realization of RES-E alternatives to hydropower in Norway.20 Simultaneously, the option of increasing electricity production from natural gas has been actively pursued by both the former and present governments. Norway’s huge petroleum industry has through this strategy gained considerable new momentum, and this will hardly be weakened by the highly funded ongoing CCS initiatives. In this context, it seems most likely that the major corrections for power deficits in Norway will be derived from fossil fuels rather than from new renewable energy sources, at least in the short term. Norway can, therefore, be considered an anomaly within the European context, since its challenge is to maintain existing maximal levels of RES-E in the face of increasing levels of both domestic and imported fossil-fuel electricity.

NOTES 1. 2.

3.

Through the EEA Norway, Iceland and Liechtenstein are participating in the internal market, while not assuming the full responsibilities of EU membership. Decision of the EEA Joint Committee No. 102/2005 of 8 July 2005, amending Annex IV (Energy) to the EEA Agreement. The formal implementation of the RES-E Directive was then postponed due to delayed adoption by Icelandic authorities; EU legislation must be formally adopted by all EEA countries before entering into force. Thus the Directive formally came into force in Norway 1 September 2006. In order to clarify the legal authority related to the issuance of guarantees of origin – as pertaining to the RES-E Directive’s Article 5 – the Energy Act was amended by the

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4. 5.

6. 7. 8.

9. 10. 11. 12.

13.

14. 15. 16.

17.

18. 19. 20.

Promoting sustainable electricity in Europe parliament in 2006. The Ministry of Petroleum and Energy (MoPE) assesses in its 2007 report to the EFTA Surveillance Authority (ESA) that the existing Norwegian system for licensing for RES-E facilities is based on sound principles, and will be further improved through the ongoing work to implement new guidelines for small hydropower and wind power (MoPE 2007). Based on the MoPE’s preparatory memo on the Directive, dated 26 August 2005 (‘Rammenotat om dir. 2001/77/EC’). This is based on: (1) the assessment of Assistant Director-General in the MoPE, Mr Johan Vetlesen (telephone interview conducted by Maria Gjølberg, 7 September 2004); and (2) the national hearing of the Directive where sectoral actors clearly considered the Directive as favourable. The study was carried out by Statistics Norway in 2001. No regular statistics of electricity consumption for heating are available. This refers only to heating, but is measured in TWh. Consequently it is not indicated in the overview presented in Table 9.2. This builds on an agreement between the government and what was then Statoil, signed in October 2006, where the concession for the gas-fired power plant at Mongstad is conditioned by the installation of CCS facilities. The concession states that a more concrete plan on the phasing in of full-scale CCS is to be agreed upon by early 2009 (MoPE 2006; Tjernshaugen 2007). This section was initially based on documentation provided by Maria Gjølberg. The ‘Document 8’ procedure is a mechanism by which MPs can raise issues and propose policy measures and/or regulations vis-à-vis the government. The government’s followup depends on the parliamentary support of the proposal. Excluding the funding of research and innovation, which is the responsibility of the Norwegian Research Council. The best-profiled pilot project is the experimental plant on the island Utsira, off the south-western coast of Norway, where Norsk Hydro conducted a demonstration project on hydrogen-driven electricity generation based on wind power. Given the merger, this project is currently part of the StatoilHydro portfolio. In addition to the Acts described in this section, hydropower is affected by the following Acts: The Watercourse Regulation Act, with rules on the regulation of water-storage reservoirs and water levels; The Water Resource Act (2001), constituting the national implementation of the EU Water Framework Directive and prescribing procedures for a coherent and environmentally benign management of watercourses and groundwater. SV has only five of 19 members of the centre–left cabinet. Several centrally positioned SV politicians were reported to be very disappointed by the government’s decision. This last-mentioned perspective was partly confirmed by the then Minister for Petroleum and Energy, Odd Roger Enoksen, in an interview with Montel Power News, Newsletter for Norway (No. 6, week 35, 2007). For example: ‘Vindkraft til evig tid’ (‘Wind power for ever’), a commentary article in the Norwegian newspaper Dagens Næringsliv, 12 July 2007, written by prominent representatives of research, industry and regional politicians standing out as active proponents for a substantial programme for offshore wind power technology development. It has recently become evident that the consequences of the Ormen Lange project on the regional electricity supply situation were heavily underdocumented and underestimated by the authorities and politicians during the planning period before the parliament’s acceptance of the project in 2004 (Teknisk Ukeblad, No. 29, 2006). Statnett press release, 22 February 2006. Press release from the Ministry of Petroleum and Energy, 14 December 2006. However, policies in this area are constantly changing: in September 2007 the MoPE got a new minister when the leader of the Centre Party, Ms Åslaug Haga, took over this portfolio. She quite swiftly declared that she understood the frustration over the announced support level for RES-E, and signalled a possible revision.

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REFERENCES Budsjettinnst. S. nr. 9 (2000–2001). Christiansen, A.C. (2002), ‘New renewable energy developments and the climate change issue: a case study of Norwegian politics’, Energy Policy, 30, 235–43. Dagbladet (2006), Norge er en energibrems (Norway as an energy laggard – in Norwegian), 8 March. Econ (2007), Mulig ny norsk energiproduksjon. Utarbeidet for Energibedriftenes Landsforening (EBL) (Assessment of potential new energy production in Norway – in Norwegian), Rapport 2007–016, Oslo: Econ. Enova (2007): Enovas resultat- og aktivitetsrapport 2006 (Enova’s report on activities and outcomes in 2006 – in Norwegian), Trondheim: Enova. Gan, L., G.S. Eskeland, H.H. Kolshus, H. Birkeland, S. van Rooijen and M. van Wees (2005), Green Electricity Market Development. Lessons from Europe and the U.S. and Implications for Norway, Cicero Report 2005:3, Oslo: Cicero, University of Oslo. IEA (2002), World Energy Outlook 2002, Paris: OECD/EIA. IEA (2006), IEA Statistics. Renewables Information, Paris: OECD/EIA. Lafferty, W.M. (1971), Economic Development and the Labour Movement in Scandinavia, Oslo: University Press. Lafferty, W.M. and A. Ruud (2006), ‘Standards for green innovation: applying a proposed framework to governmental initiatives in Norway’, Evaluation, 12 (4), 453–72. Larsen, O.M. (2005), Governing Innovation for Sustainable Development. Integration of environmental and innovation policies in Norway, ProSus Report 4/05. Oslo: University of Oslo–ProSus. Montel Power News (2007), ‘Underbemanning i NVE kan stoppe regjeringens vindkraftmål’ (Insufficient capacity in the NVE could hamper the fulfilment of the Government’s wind power target – in Norwegian), Newsletter for Norway, No. 14, week 27. MoPE (1998), NOU 11 1998: Energi- og Kraftbalansen in Norge mot 2020 (Norway’s Energy- and Power Balance towards 2020 – in Norwegian), Oslo: Ministry of Petroleum and Energy. MoPE (2005), Fakta 2005. Energi- og vassdragsvirksomheten i Norge (Facts 2005: The Energy Sector and Water Resources in Norway – in Norwegian), Oslo: Ministry of Petroleum and Energy. MoPE (2006a), Fakta 2006. Energi- og vassdragsvirksomheten i Norge (Facts 2006: The Energy Sector and Water Resources in Norway – in Norwegian), Oslo: Ministry of Petroleum and Energy. MoPE (2006b), ‘Mutual green certificate market will not be established – too expensive for Norwegian consumers’, Press Release No. 26/06E, Oslo: Ministry of Petroleum and Energy, 27 February. MoPE (2007), ‘Reports in accordance with the Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the internal electricity market’, Report to the EEA Joint Committee, prepared by the Norwegian Ministry of Petroleum and Energy, available at http://www.regjeringen.no/Upload/OED/Vedlegg/03-01052-41_Reports_in_accordance_with_the_ Directive_20-_0717-EC_522610.pdf. NVE (2006), press release, 19 October. NVE (2007), Vindkraft – idriftssatte og planlage anlegg (An oversight over wind power – installed and projected plants – in Norwegian), Oslo: Norwegian Water

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Resource and Energy Directorate, http://www.nve.no/modules/module_111/ netbasNVE.asp?script=8, 1 July 2007. Ot.prp. nr. 35 (2000–2001), ‘Om lov om endringar i lov av 29. juni 1990 nr. 50 om produksjon, omforming, overføring, omsetning og fordeling av energi m.m. (energilova)’ (Proposition for Amendments of the Energy Act – in Norwegian), Oslo: MoPE. Rasmussen, I., J. Knudsen and A. Ruud (2006), Politisk styring og lønnsomhet. En analyse av rammebetingelser for energiomlegging i bygge- og eiendomssektoren i Norge (Political signals and profitability. Analysis of external conditions affecting energy shifts in the construction and property industry in Norway – in Norwegian), SUM Report No. 12, Oslo: Centre for Development and the Environment (SUM). Remøe, S.O. (2005), ‘Governing fragmentation: the case of Norway’, in S.O. Remøe (ed.), Governance of Innovation Systems: Case studies in innovation policy. Paris: OECD, ch. 8. Thue, L. (1994), Statens kraft: Kraftutbygging og samfunnsutvikling (The Construction of Electricity Production and Societal Development – in Norwegian). Oslo: Cappelen. Tjernshaugen, A. (2007), Gasskraft. Tjue års klimakamp (Gas-fired Power. 20 Years of Struggle on Climate Change – in Norwegian). Oslo: Pax Forlag. White Paper 65 (1981–82), Om nye fornybare enerkilder i Norge (On new, renewable energy sources in Norway – in Norwegian), Oslo: Ministry of Energy and Petroleum. White Paper 46 (1988–89), Miljø og utvikling. Norges oppfølging av Verdenskommisjonens rapport (Environment and development. Norway’s followup of the World Commission’s report – in Norwegian), Oslo: Ministry of the Environment. White Paper 41 (1992–1993), Energiøkonomisering og nye fornybare energikilder (Energy conservation and new, renewable energy sources – in Norwegian). Oslo: Ministry of Industry and Energy. White Paper 41 (1994–95), Norsk politikk mot klimaendringer og utslipp av nitrogenoksider (NOx) (Norwegian policy directed against climatic changes and emissions of nitro group gases (NOx) – in Norwegian). Oslo: Ministry of Environment. White Paper 58 (1996–97), Miljøvernpolitikk for en bærekraftig utvikling. Dugnad for framtida (Environmental Policy for Sustainable Development – in Norwegian) Oslo: Ministry of the Environment. White Paper 29 (1988–89), Om energipolitikken (On energy policy – in Norwegian), Oslo: Ministry of Petroleum and Energy. White Paper 9 (2002–2003), Om innenlands bruk av naturgass mv. (On domestic use of natural gas etc. – in Norwegian), Oslo: Ministry of Petroleum and Energy.

10. Conclusion: Energy path dependence and the promotion of RES-E in Europe William M. Lafferty and Audun Ruud THE NEED FOR A MORE CONTEXT-SENSITIVE ENERGY POLICY As indicated in the introductory chapter, the project on ‘Promoting sustainable electricity in Europe’ (SUSTEN) was conceived as a focus project for studying how European states work with the challenge of governing/ governance for sustainable development. The essential idea of the project has been to choose a specific initiative at the level of the European Union, an initiative that all Member States and associated states of the Union are committed to implementing. The initiative chosen is the so-called ‘RES-E Directive’: the Directive on ‘the promotion of electricity produced from renewable energy sources in the internal electricity market’, referred to here as the ‘RES-E Directive’ (OJEC 2001). The most general analytic level of the project is thus the status of the RES-E Directive as a specific initiative for promoting the sustainable development ‘agenda’ in Europe. As further pointed out in the introduction, however, the Directive has also been viewed by the EU itself (most particularly the EU Commission) as an essential part of the ‘Lisbon agenda’ for achieving a more ‘competitive Europe’ through the promotion of innovation, technological competence and employment. Any assessment of the implementation of the RES-E Directive must, therefore, be seen in the light of the alternative values of the two agendas. Further, as we have increasingly understood throughout the study itself, this implies a more critical focus on the monitoring and assessment role of the European Commission. We return to the more general of these perspectives below, and begin our summary assessment of the implications of the case studies by returning to the more specific knowledge goal of the project: an attempt to provide contextual ‘balance’ to what we perceived at the outset to be a relatively one-sided emphasis by the European Commission on ‘techno-market’ 279

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promotional schemes (Chapter 1). This perception has, to a certain degree, been moderated since the start of the project. As we shall see below, the European Commission has made some concessions to contextual factors, particularly in its initial assessment from 2004 (CEC 2004). Having concluded the national studies, however – and having compared these with the official assessment of the Commission – we nonetheless maintain that the major ‘thrust’ of Commission policy is biased towards Community-wide standardization, with little attempt to incorporate national lessons in a positive and constructive manner. The difference in our view is one of: (a) viewing national–regional factors as understandable but unfortunate barriers that are to be overcome by standardized promotional instruments versus (b) an attempt to grasp the essence of energy ‘path dependence’ in a manner more conducive to achieving context-sensitive promotion – ‘path creation’ – for more robust sustainable energy futures. As we conclude our study (November 2007), it is still unclear which direction the Commission will take in recommending new initiatives to promote RES-E. Most signals point, however, towards an attempt to introduce a ‘Community framework’ that will build on some form of the ‘techno-market approach’, most probably a standardization and legal strengthening of tradable green certificates (TGCs) combined with temporary (‘transitional’) feed-in tariffs (FITs). Such a solution would amount, on the one hand, to a pragmatic recognition of the crucial role FITs have played in the leading RES-E Member States; on the other, it would maintain the Commission’s paramount commitment to a more ‘neutral’ freemarket approach. In our view, however, such a ‘synthetic’ solution would only manifest an underlying belief that the issue really is one of first, proving the technologies effective in delivering the electricity goods, and second, getting the prices of the individual technologies ‘right’. As stated in our introduction, we feel that such an outcome is functionally necessary as far as it goes, and completely in accord with the historical role of the Commission to actively promote Community-wide standards. Our conviction, however, is that this approach doesn’t go far enough; that the Commission’s role as a standardizing central agent leads to a ‘suppression’ of important contextual insights; and that the result can be a less sensitive, less ‘robust’, and overall less effective promotion of RES-E in Europe. We begin our ‘concluding argument’ in this direction by presenting two perspectives on the Commission’s assessments of the performance record on the RES-E Directive thus far. Both perspectives are taken from the most recent full-scale evaluation of the implementation of the Directive: the assessment carried out in the latter half of 2006, and presented to the Council and Parliament in January 2007 as a ‘Green Paper follow-up action – report on progress in renewable electricity’ (CEC 2007b). This is

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the assessment that was referred to in the introductory chapter here, principally in relation to the ‘grading’ of national performance as presented in Table 1.6. These views will then be followed by brief summary profiles of the eight national case studies, before we round off the analysis with conclusions as to the more general implications of the study. Progress on RES-E: The Commission Assessment ‘Priority areas for action’: the techno-market orientation The first perspective we wish to draw attention to is reflected in the list of ‘Eight main areas of action on renewable electricity’ that concludes the Commission’s assessment (Box 10.1). These are action areas that the Commission feels ‘must be immediately developed’. We want to highlight the following points.

BOX 10.1

1. 2. 3.

4.

5.

EIGHT MAIN AREAS OF ACTION ON RENEWABLE ELECTRICITY TO BE ‘IMMEDIATELY DEVELOPED’ WITHIN THE EU/EEA

Member States must correctly and fully implement the Directive on renewable electricity. Immediate lifting of administrative barriers, unfair grid access and complex procedures is necessary. Optimisation of the support schemes as defined in COM (2005) 675 must occur. The Commission will re-examine, in 2007, the situation concerning Member States’ support systems for renewable energies with a view to assessing their performance and the need to propose harmonized support schemes for renewables in the context of the EU internal electricity market. While national schemes may still be needed for a transitional period until the internal market is fully operational, harmonized support schemes should be the long term objective. To wake up the biomass sector through the actions in the Biomass Action Plan. Special attention shall be given to increasing of the use of biomass for CHP. Credibility in the long term: the Commission will propose in 2007 a new legal framework for the promotion of renewable energy sources as set out in the Renewable Energy Roadmap.

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6.

7.

8.


The Commission will continue to co-operate closely with grid authorities, European electricity regulators and the renewables industry to enable better integration of renewable energy sources into the power grid and will pay particular attention to the special requirements related to much larger deployment of offshore wind energy, notably as regards crossborder grid connections. Opportunities provided by the TENE scheme should be examined. Work should begin on a European offshore super-grid. The internal electricity market shall be developed in a manner consistent with the development of renewable energies. Liberalisation, in particular concerning transparency, unbundling and higher inter-connectors capacity, also offers the opportunity for new innovative players to enter the market. Renewable energies should be speedily integrated into the Lisbon strategy of the European Union through the competitiveness and innovation programme (CIP), regional and cohesion funds, rural development and reinforced RTD in the period 2007–2013.

Source:

CEC (2007b: 19–20).

Point 2 addresses a crucial aspect related to the ‘dominant energy systems’ (DES) of the Member States. The issues raised can be seen as perspectives on the national systems with respect to technical barriers (access to the grid); administrative barriers (granting concessions for RES-E installations); and planning barriers (achieving successful implementation at the regional and local levels). All these issues are taken up in the Directive itself, and the Commission has actively pursued these ‘non-technological’ problems from the start. Once again, however, the goal has been to standardize solutions to the challenges, solutions that will ‘work’ across all Member States in the EU-25. Point 3 makes a forceful restatement of the need for ‘harmonized support schemes’ within the Community as a whole, and clearly signals the prospect of adopting new legislation to achieve this by the end of 2007. These signals have, however, been actively opposed in Brussels by several of the major collective RES-E actors, most particularly the European Renewable Energy Council (EREC), the European Renewable Energies Federation (EREF), the European Wind Energy Association (EWEA) and the European Forum for Renewable Energy Sources (EUFORES). Equally important, the signals have been much more positively received by leading ‘old electricity’ associ-

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ations, such as the Federation of European Industrial Energy Consumers (IFIEC) and the Union of the Electricity Industry (EURELECTRIC).1 Even though the final decision as to a new standardized regime has not yet been announced, several reports indicate that the Commission is most likely to submit a proposal involving a standardized TGC scheme, and the Commissioner for DG TREN was quoted to this effect at a press conference in Brussels on 12 October 2007.2 Point 5 on the list specifically follows up Point 3 by advising on the intention to ‘propose in 2007 a new legal framework for the promotion of renewable energy sources’. Point 6 is addressed to grid issues, and specifically stresses the need for better integration of RES into the grid. What is interesting to note here, however, is the special attention devoted to a ‘much larger deployment of offshore wind energy, notably as regards cross-border grid connections’, and even more specifically, the open admonition that ‘work should begin on a European offshore super-grid’. The point clearly indicates a strong emphasis on large-scale standardization and integration of offshore wind energy, seemingly to the detriment (or, at any rate, neglect) of the smaller and more decentralized wind solutions that make up the major share of existing wind-power initiatives. Finally, Points 7 and 8 are forthrightly expressed in the language of ‘liberalization’, increased ‘competition’ and the Lisbon strategy. While it has always been an aim of the RES-E Directive to also address issues of employment and economic development, these issues have clearly been viewed as more subservient ‘add-ons’ to the major values and goals of combating climate change, security of supply and sustainable development. The lack of points providing clear signals and priorities on these issues does not automatically mean that they are not central to the Commission’s planning for the future development of RES-E in Europe, but it does mean that such issues are not viewed as ‘priority areas of action’ that ‘must be immediately developed’. Good guys and bad guys: how good? – and why bad? The second perspective from the assessment that we wish to highlight is related to the first, but with an opposite ‘valence’ for the case-study material. Whereas the eight action points represent a positive bias in the direction of a standardized, market-based approach to promotion, the second perspective reflects a form of negative bias, in the sense that the evaluation report devotes very little systematic attention to the contextual differences across national systems. This despite the fact that, as pointed out in the introductory chapter, the Commission seems to use selective, and relatively ‘judgemental’, criteria (on policy processes and political change) which are not systematically applied across all Member States.

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The first aspect of the perspective is demonstrated by the fact that six of the EU-15 Member States are placed in the second-best category of performance, with no serious attempt to differentiate among the systems within the category (CEC 2007b: 7–8). They are simply judged to be ‘performing’ at a satisfactory rate vis-à-vis their indicative targets, with a listing of the different promotional schemes employed by each system, but with very little of substance as to how and why the performance levels actually are being achieved. It is good to know that Finland, Ireland, Luxembourg, Spain, Sweden and the Netherlands all deserve one ‘smiley face’ for their efforts on implementing the RES Directive, but surely there is more to learn from their relative success than that which emerges from the cryptic Commission assessment. The second aspect of the perspective involves the very interesting case of Austria. Whereas the first aspect glosses over the substance of positive results, the second involves a very pointed negative treatment of Austria. In the first national assessment, Austria was placed in the second-best grouping of Member States: those that were ‘about to be on track’ on overall performance. The commentary was that Austria had ‘a good perspective for growth’; it had created ‘good conditions’ for removing administrative barriers and ‘medium conditions’ for tackling grid barriers. It was also listed as one of only five Member States that had completed ‘full implementation’ of the conditions necessary to issue ‘certificates of origin’, and was further mentioned positively in relation to the promotion of wind power, photovoltaics, and solar-thermal power. Austria was also singled out as one of only two countries that had initiated a ‘good practice programme’ for promoting electricity from solid (wood) biomass (CEC 2004: 14–33). Less than two years later, however, the Commission is definitely not smiling on Austria. Clearly seen as no longer ‘promising’, the country is relegated to the lowest category for the entire EU-25 – that is, those states that are ‘far from commitment’ vis-à-vis the RES-E Directive. The Commission points out that ‘there has been considerable growth in capacity in the wind, and biomass sectors due to favourable feed-in tariffs’, but then immediately strikes another chord by saying that ‘there are currently poor investment conditions due to a revised support scheme, leading to stagnating RES-E development’ (CEC 2007b: 9). Beyond this very brief and critical assessment, Austria is only mentioned (in an evaluative light) twice: once where the country is identified as one of eight important contributors to RES-E from biomass; and once where it is mentioned as one of six Member States against which the Commission had already initiated ‘infringement proceedings’ for not sufficiently implementing the Directive.3 The Commission lists five general reasons why the proceedings have been initiated, but says nothing specific as to which countries

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are being called to task for which infringements. Looking at the results published in the assessment table, however, it appears that Austria’s major weakness is judged to be a serious reversal in RES-E share between the reference year of 1997 and the level of ‘penetration’ in 2005. As reproduced in Table 1.6 here, Austria’s share of RES-E is presented as having declined from 70.0 per cent in 1997 to an actual (‘achieved’) level of 54.9 per cent in 2005. It is apparently this negative trend that is interpreted by the Commission as ‘stagnating RES development’. Alternative data – alternative assessments? As we see it, the assessment of the Austrian case illustrates two more general shortcomings in the general approach of the Commission to RESE promotion. The first problem is very technical, and has to do with the computation of the key indicator for the assessment: the share of RES-E as a percentage of total electricity consumption. The RES-E Directive indicates that progress is to be measured in terms of ‘electricity produced from renewable energy sources in total’, measured as a share of ‘total’ (or ‘gross’) electricity consumption. In other words, the object of change is measured in production of RES-E, measured as a proportion of the total national consumption of electricity. This means, of course, that variations can take place along two dimensions, and that factors affecting the development of RES-E must be viewed in relation to factors affecting the ‘total’ consumption of electricity. Without going into further detail here, it can be summarily stated that the issue of measurement is anything but clear and ‘transparent’. The RESE Directive stipulates that ‘ “consumption of electricity” shall mean national electricity production, including autoproduction, plus imports, minus exports (gross national electricity consumption)’ (Article 2 (d)). We must assume that the Commission has used this definition. Without going into detail, however, we feel that the references provided as to the sources used for the assessment (CEC 2007b: 5, footnotes 8 and 9), are far from ‘transparent’. The simplest way to illustrate the problem is to refer to the most recent OECD/IEA (2006) overview of Electricity Information. Here we find figures for at least four different levels of ‘total’, ‘gross’, ‘net’ and ‘final’ national consumption. Given that the Commission does not provide the actual figures for ‘gross national electricity consumption’ in the assessment (and that we were not able to get them from the Commission directly), we shall here simply use what we believe to be the most reasonable measure available from the standardized OECD/IEA statistics. The results are shown in columns 1 and 2 of Table 10.1. We have chosen a point of departure earlier than the ‘reference year’ for the ‘indicative targets’ of the Directive (1990 instead of 1997), but the figures for 2004

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2.8 18.3 1.7 56.9 20.2 5.8 75.0 125.0

1990 (1)

29.9 30.8 6.2 51.8 22.7 6.0 67.0 98.7

2004 (2)

% RES-E of total electricity consumption (1990–2004)

29.0 31.5 9.0 55.2* 29.4 13.2 78.1* 90.0

2010 (3)

RES-E indicative target from Directive

T.A. + 0.7 + 2.8 + 3.4 + 6.7 + 7.2 + 11.1 T.A.

2004 > 2010 (4)

Gap to be between achievement 2004 and target 2010

1177 11 317 99 270 16 1 10

1995 (5) 6 108 154 2 735 987 22 814 1 841 1 738 673

2006 (6)

Gross RES-E wind (GWh)

316 6608 289 2308 815 0 1820 265

1995 (7) 2 185 11 584 3 852 6 910 5 992 132 2 654 344

2006 (8)

Gross RES-E biomass (GWh)

Overview of selected RES-E indicators for eight European countries, 1990–2006

1 1 1 0 15 0 1 0

1995 (9)

13 3 35 0 80 0 13 0

2006 (10)

Gross RES-E photovoltaic (GWh)

Sources: Columns 1–2: OECD/IEA (2006), Country data, Table 3; Columns 5–10: OECD/IEA (2007), Country data, Tables 1 and 3; Column 3: OJEC (2001, annex 1).

Notes: * For reasons related to the variability of hydropower, Sweden originally changed its own target (in footnote 6 to the RES-E Directive Annex) to 52.0. This was, however, later renegotiated with the Commission up to a level of 55.2. Austria also proposed that its target should be reduced (for similar reasons), stipulating that a predetermined level of gross national electricity consumption (56.1 TWh) should be used to calculate Austria’s penetration in 2010. In 2005, the Secretary General of DG Transport and Energy declared (EREF 2005) that, in his view, the footnotes to the Annex had no legal status. In their assessment of the EU-15 (Table 1.6 here), the EU Commission has nonetheless used the altered target for Sweden – but not for Austria. The figures for RES-E in columns 1–2 aggregate electricity generated from ‘hydro’ (minus ‘pumped storage’), ‘geothermal’, ‘solar’, ‘tide’, ‘wave’, ‘ocean’, ‘wind’ and ‘combined renewables and waste’. The figure for ‘total consumption’ is adjusted for imports/exports, transmission losses and ‘energy sector consumption’ (see OECD/IEA 2006, Table 17 for the definition used here). This basis is used for two main reasons: (1) the Commission figures for 2005 are based on estimates; (2) the 2004 date – and the OECD/IEA data tables – enable standardization of all the countries included in the case study, as well as full transparency. T.A. target achieved as of 2004.

Denmark Finland Netherlands Sweden Spain Ireland Austria Norway

Table 10.1

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should be comparable to the Commission figures for 2005. As we see from the table, however, the figures for Austria differ considerably from the Commission data. Whereas the Commission report shows Austria with an ‘achieved penetration’ of 54.9 and a ‘normalized penetration’ of 57.5 per cent for 2005, our calculations show an achieved penetration of 67.0 per cent in 2004. This means that the Austria of our data had an actual RESE penetration in 2004 that was 12.1 percentage points greater than the CEC’s Austria for 2005. More importantly, the deviations for the other six EU countries in our sample are much smaller, varying from 5.8 for Finland to 1.4 for Sweden. A portion of this deviation could, of course, be attributed to a difference between 2004 and 2005, but given that Austria actually increased its ‘gross’ RES-E generation by 307 GWh between these two years, this does not seem likely (OECD/IEA 2007: 94). Austria remains by our calculations the country with the largest ‘gap’ up to the 2010 target. But we must again ask if this is primarily a result of: (1) an exceptionally poor performance on promoting ‘new’ RES-E; or (2) a target level (and a real situation) that is overly sensitive to the hydro-based reference point. It is interesting to note in this regard that, whereas Austria was assigned an overall gap of 8.1 percentage points between the reference year and the target year, the other two hydro-dominant states, Norway and Sweden, were assigned gaps of – 9.0 and + 2.1 percentage points respectively! The level of hydro-based RES-E remained, however, virtually flat in Austria between 1995 and 2005, while increasing considerably for both Norway and Sweden (OECD/IEA 2007). Looking at the other figures in Table 10.1, we see that Austria shows considerable growth in RES-E from both wind and photovoltaics, but much less from biomass. On the basis of these figures alone, Austria would rank number one in terms of relative change on wind, tied for second on relative change in photovoltaics, and only better than Norway on a relative increase in biomass. In short, there is clearly considerable room for both different interpretations of the use of different indicators, and different impressions of the individual countries within and across a common indicator distribution. The policies and promotion schemes that the Commission focuses on, and the indicators used to assess these, obviously capture important aspects of the implementation challenge. They build on the basic prescriptions of the RES-E Directive, in terms of both targets and legislative goals (on certificates of origin, licensing procedures and grid access). We maintain, however, that this is their weakness as well as their strength. The monitoring of these selected aspects is in line with the prescriptions of the Directive, but the picture emerging from the ‘grading exercise’ is not comprehensive

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enough to grasp the essence of what is ‘really going on’ in the obligated states. The result in our view is a lack of information on the contextual factors that clearly underlie the positive distinctions among high performers, as well as the questionable designation of laggards. As a final illustration of these points, we can conclude with another significant citation from the Commission. In their summary overview of the ‘energy road map’ (CEC 2007a), issued simultaneously with the RESE assessment, we read the following on barriers to achieving the overall target of 12 per cent RES by 2010: The difficulties encountered in meeting this target can partly be explained by: ●

● ● ● ●

the high cost of renewable energy owing to the investment required and the fact that externalities (the ‘external’ cost of the different energy sources, particularly their long-term impact on health or the environment) have not been taken into account, which gives fossil fuels an artificial advantage; administrative problems resulting from installation procedures and the decentralized nature of most renewable energy applications; the opaque and/or discriminatory rules governing grid access; inadequate information for suppliers, customers and installers; the fact that the 12% target is expressed as a percentage of primary energy, which puts wind power at a disadvantage (a sector that has experienced considerable growth during the period in question).

Furthermore, the progress made by the Member States has been patchy and highly uneven. The absence of a legally binding target and the gaps in the Community’s legal framework for renewable energy have meant that real progress has only been possible in the few Member States whose determination has outweighed their changing political priorities. (Europa 2007)

We return to these barriers in the concluding analysis below, but wish here only to draw attention to the final point. In the view of the Commission, ‘real progress’ on RES promotion will only take place when: (1) targets are made binding, rather than ‘indicative’; (2) the Community has adopted a more comprehensive and ‘tighter’ legal framework; and (3) national ‘determination’ on RES transcends shifting political priorities. All three of these points indicate a belief in centralized administrative governance that raises serious questions as to both the political role and ultimate effects of the Commission’s active promotional ‘steering’ through the RES-E Directive. Let us now see how these perspectives ‘resonate’ with the summary profiles of our national case studies.

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NATIONAL PATHS AND LESSONS The Interaction of Competing Technological Regimes As outlined in the introduction to the present work, the SUSTEN project was initiated in the belief that the mainstream ‘techno-market’ approach to achieving a ‘virtuous cycle’ for RES-E promotion provided a necessary, but not sufficient, policy framework for achieving sustainable energy progress. Having conducted and presented the eight national case studies, and having reviewed the Commission assessment of the Member States, we are now convinced that the contextual approach is necessary for a more insightful and effective deployment of RES-E. As a means of focusing this conviction conceptually, we have introduced the well-known (and diversely applied) idea of ‘path dependence’. Further, following the work of Garud and Karnøe (2001, 2003), we have supplemented the idea by connecting it directly to the notion of ‘path creation’. This gives us the analytic perspective portrayed in Figure 1.2, where the ‘techno-market’ model is understood to be ‘embedded’ in historically dependent energy ‘paths’ that, on the one hand, raise contingent barriers to the implied instrumentality of the model in specific contexts; and, on the other, provide the sociocultural–political ‘medium’ within which barriers of any kind must be transcended. In short, we accept the generalized ‘virtuous’ nature of the techno-market approach, but we view its functioning as a matter of ‘conditioned virtuosity’ (innovation) in each national setting. With respect to the Commission assessment, we have seen that the Commission, in focusing on the prescriptions of the RES-E Directive, places major emphasis on two principal ‘dynamics’ of the RES-E problematic. First and foremost is the emphasis on the achievement of the indicative targets, for both the Member States and the Community as a whole. Second is the attention devoted to the three more policy-specific goals of the Directive: (1) the achievement of a working system for issuing and accepting ‘guarantees of origin’ for RES generation; (2) the removal of administrative barriers to a more effective ‘clearance’ of RES-E projects (that is, procedures for reviewing projects, granting them licences/concessions and, ultimately, getting the projects ‘up and generating’); and (3) the removal of technical, economic and legal barriers to central grid access for RES-E projects. In all four of these areas, the Commission has supported very instrumental applied-research efforts within both the ‘Intelligent Energy Europe Programme’ (IEE) under DG Energy and Transport, and the relevant thematic areas of the successive 6th and 7th ‘Framework Programmes’ under DG Research (see the projects discussed in Chapter 1). The IEE in

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particular has been crucial in providing a knowledge base for the analysis and assessment by the Commission, most particularly through the extensive and cumulative projects discussed in Chapter 1 as the ‘Vienna–Karlsruhe initiatives on promotional schemes’. In both of the key assessment documents from 2005 (CEC 2005a, 2005b) and 2007 (CEC 2007a, 2007b), the principal research references are to projects carried out by this group.4 What is equally significant, however, is that the 2007 assessment makes only one very passing reference to the evaluation carried out in 2005. The 2005 effort was, however, both much more comprehensive with respect to incorporating insights from the Vienna–Karlsruhe projects and considerably more comprehensive in its supporting ‘staff working document’ (2005b). The latter provides results from a much wider selection of projects, many with direct relevance for a more contextual understanding of the RES-E challenge. Why these insights are generally lacking from the 2006 evaluation is unclear. We can only register that it is through the 2006 assessment that the Commission has announced its intention to conduct yet another review of the need for a Community-wide framework in December 2007, and that (as outlined above) most ‘signals’ indicate that the Commission will here propose a new, Community-wide TGC scheme. We return to the promotional profile of the Commission in our concluding section below. Here we simply point out that there is room for considerable interpretation as to what the role (and effect) of the Commission is in relation to the crucial interaction between the ‘dominant energy system’ (DES) and the alternative energy systems that support RES-E. As this is perhaps the key issue for the future policy debate, we shall focus our summary overview on the path-dependence/path-creation interaction between these two energy constellations. Following the lead of our Dutch colleagues on these issues – with an eye towards the more general theoretical discussion of promotional schemes – we refer to these constellations as ‘technological regimes’. Kemp et al. (2001: 272–3) provide a definition and a perspective here that closely matches the problematic of the SUSTEN study: Technological regimes . . . are configurations of science, technics, organizational routines, practices, norms and values, labelled for their core technology or mode of organization. Between the different elements, strong and weak linkages occur, creating a semicoherent structure that serves to guide engineering activities in particular directions and not in others. The prefix ‘semi’ is important, because such structures are not perfectly coherent: there are tensions in the form of product imperfections side effects, bottlenecks . . . and unsatisfied demands (of consumer or general public). There may also be competing designs. Designs are not given as such but evolving. The way in which they evolve, however, is not at random but structured. In particular, designs are structured by the accumulated knowledge, engineering practices, value of past investments, interests of firms,

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established product requirements, meanings, intra- and interorganisational relationships, and government policies that make up a technological regime. (Ibid.: 273)

This definition provides a specific reference to a theoretical discourse on ‘industrial transformation’ and strategies for innovation that clearly reflects the basic ideas of the SUSTEN approach outlined in the introductory chapter. As defined by Kemp and his colleagues, the idea of a technological regime is similar to the notion used in political science (ibid.). The concept connotes established patterns of interaction among identifiable actors that are mutually involved (have ‘interests’) in the technologies in question. On the one side we have the path-dependent regimes of the dominant energy system (whether generated by fossil fuels, hydro resources or nuclear power), and on the other we have the challenging regimes of the new technologies: wind, biomass, solar, small-scale hydro, tidal etc. The new and emerging regimes must, of course, get both the technologies and their prices ‘right’ to be seriously competitive, but the nature of what is ‘right’, and the manifestation of how techno-market factors ‘work’ in different historical, cultural, social and political settings, is open to considerable variation. It is into the dynamics of this variation in each national setting that the EU Directive has been introduced as a common ‘prod’ for regime change and realignment. In the following overview of the ‘storylines’ of each case, we aim to highlight those aspects of the cases that provide insights on barriers and possibilities above and beyond the challenges of technological adaptation and market deployment. Given the detailed summary conclusions accompanying each of the case studies, we focus here only on selected aspects of each case: aspects that, in our opinion, illustrate the learning potential of greater contextual understanding. The goal is to illustrate the diverse nature of the contextual factors at work, so as to provide a foundation for a concluding discussion of the relevance of the analysis for the ongoing policy discussion. We want to make it very clear, however, that space only allows for the briefest of ‘highlights’ with respect to the lessons and implications of the individual cases. Each national chapter here tells its own ‘story’, with numerous additional insights as to how the implementation task is being pursued under specific historical, cultural and sociotechnical conditions. The case studies are profiled in relation to four perspectives: (1) the latest summary assessment from the EU; (2) a brief description of the ‘dominant energy system’ (DES) in place at the inception of RES-E promotional efforts; (3) an overview of the principal RES-E instruments applied thus far; and (4) a ‘short list’ of selected ‘lessons’ related to path dependence.5

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Promoting RES-E in Contexts of Energy Path Dependence: Eight Variations Carbon dominance (I): the Netherlands EU assessment: [Good opportunity to reach 2010 target ☺] Significant growth in RES-E, especially in biomass, due to the support system of feed-in tariffs and high oil prices. However, the indefinite freezing of financial support for large scale pure biomass and offshore wind in August 2006 may destabilise the market for RES-E initiatives. Greater certainty and support is needed to meet the 2010 target of 9 per cent.6

Dominant energy system The Dutch case is one of three countries in the SUSTEN study where the energy system was massively carbon-dependent at the outset of the initiative for ‘new’ RES-E. With over 90 per cent of electricity generation coming from fossil fuels in 1999, the Netherlands was the most carbon-dependent country in Europe. The dependence was, moreover, primarily based on natural gas (57 per cent). The effects of this dependence are evident throughout Arentsen’s presentation (Chapter 2). Given that the development of the DES has been from coal-dominant to gasdominant, the latter has been viewed as more flexible, ‘cleaner’ and – after the discovery of the huge Dutch gas reserves in the 1960s – more reliable. Having so recently developed a highly efficient network and infrastructure for gas in relation to both heating and electricity, the status of the dominant ‘technological regime’ has been truly ‘ascendant’. The regime has, therefore, demonstrated classic ‘inertia barriers’ to the promotion and phasing in of RES. With so ‘efficient’ and ‘progressive’ a fuel available, and with so many key energy ‘actors’ deeply involved in the development of the regime, there has been little industrial support for developing the institutions and ‘drive’ necessary for establishing alternative RES-E regimes. Promotional instruments There is an early history of tradable green certificates, but this is gradually supplanted by both tax exemptions and – most consequentially during the period 2003–6 – generous feed-in tariffs. All instruments are, however, in ‘abeyance’ after 2006. Lessons Despite the strong inertia of the DES, the Dutch record is clearly one of the better ones in the EU. The EU assessment focuses mainly on the growth of biomass, but as shown in Table 10.1, there has also been progress in both wind power and photovoltaics. The lesson here is one of mixed implication. As Arentsen points out, the high level of feed-in tariffs

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between 2003 and 2006 clearly increased the development of both biomass and wind. For biomass, however, the increase was also apparently strongly conditioned by the existing interest in, and infrastructure for, cogeneration. The use of municipal and industrial wastes in regional initiatives was clearly a pre-tariff support factor. As for wind, it would appear that the tariff incentive was seriously instrumental, particularly since there have been both administrative barriers and local NGO resistance to onshore wind projects. Another very interesting lesson here is purely political. Apparently the major reason for dropping the relatively high feed-in tariff was that it was so successful that the Netherlands was already on the verge of meeting its 2010 indicative target. The political rationale was, therefore, that it made little sense to continue a subsidy programme when the job had already been accomplished. As we see it, this raises serious questions as to the overall effectiveness of the target-setting strategy. We return to this below, and will only mention here that, in a recent comprehensive overview of renewable energy policy and politics, Karl Mallon (2006) draws attention to the potentially dysfunctional aspects of target-based policies. Finally, the Dutch case illustrates another crucial lesson emphasized by Arentsen with respect to the interaction between tradable green certificates (TGCs), liberalization and the promotion of RES-E. The Netherlands was an early mover in introducing a form of TGCs (in the 1990s) without fully working through the implications of the system vis-à-vis imports–exports and the effect on promoting RES-E. The result was a major increase in the import of green electricity (principally hydro) – a situation that looked good on the demand side for RES-E, but which actually seemed to hinder the development of indigenous RES-E generating capacity.7 The implications of the case warrant considerable more study, but it seems to represent a clear manifestation of the contradictions that arise when one tries to pursue the promotion of RES-E generation coincidentally with the pursuit of a completely liberalized market for electricity. Carbon dominance (II): Denmark EU assessment: [Perfect – on track for meeting the 2010 target ☺☺] Strong growth of RES-E, especially wind energy. World leader in offshore wind energy. Assuming current growth continues, Denmark will easily exceed its target of 29 per cent in 2010. The target will possibly be met three to four years early.

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Dominant energy system Before the first initiatives for RES-E (which came more than a decade ahead of the EU Directive), the Danish system was similar to the Dutch in being massively carbon-dependent. During the period 1970–90, more than 96 per cent of domestic electricity production came from fossil fuels, dominated in the early period by oil and by the end of the period by coal. In 1990 more than 90 per cent of gross electricity production came from coal-fired plants most of it imported. Between 1990 and 2000, there was a further shift in the fossil mix due to Denmark’s own exploitation of oil and gas on the continental shelf, with gas taking over a larger share than oil. By 2004, the dependence on fossil-generated electricity was still at 75 per cent, with coal accounting for 46 per cent, gas for 25 per cent, and oil for only 4 per cent (OECD/IEA 2006: II: 212). Managing these transitions was a DES organized as a centralized ‘semipublic monopoly’ with respect to generation and a highly decentralized, and largely municipally owned, structure for retail distribution and management of the grid. The Danish DES thus reflected a relatively standard mode of Nordic ‘social-democratic’ governance, with vertical integration of, on the one hand, a strong central bureaucracy controlling the provision of basic resources and, on the other, regional and local community bodies with responsibility for distribution. Promotional instruments The first central initiatives for promoting RESE were put forth as early as 1979, as part of an effort by the Ministry of Housing to achieve greater energy security and efficiency. These consisted largely of installation grants, tax incentives and other support schemes for R&D. More active promotion did not ‘take off’, however, until a social-democratic government came to power in 1993. Between 1993 and 2001, a broad number of different schemes were launched, most importantly, perhaps, a system for generous feed-in tariffs, but also tax exemptions, a new energy-tax regime and public awareness campaigns. These programmes were temporarily halted after another change in government in 2001, but the feed-in tariff scheme was subsequently reintroduced, along with a major tendering scheme for two large offshore wind installations. Lessons As the outstanding example of wind-energy promotion in the world, Denmark offers, of course, a wealth of empirical material from which lessons can be drawn. As mentioned in the section above, Garud and Karnøe (2001, 2003) have already provided numerous contextual insights into the Danish case – insights that, in our opinion, provide a very positive answer to the question posed by Karnøe and Buchhorn here: ‘Can the Danish model travel?’ We shall, therefore, only briefly highlight what we see

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as the most significant contextual lessons for the present approach to the implementation of the RES-E Directive. First, there is a highly significant insight which directly affects the ‘travelability’ of the Danish experience with respect to the point of departure for the Danish ‘wind miracle’. With its huge dependence on the ‘ugliest’ of fossil fuels, coal, one might have thought that Denmark would be the last country in Europe to achieve outstanding performance on RES. And, had the Danish dependence been on domestic reserves of coal and oil, with a private ownership structure, the supposition surely would have been correct. It was, however, due to the oil crisis of 1973, and the subsequent economic crisis this triggered in Denmark, that the publicly dominated DES reacted with a determined commitment to address the critical nature of ‘security of supply’. One should not, therefore, get the impression that Denmark’s success on wind power is somehow a reflection of a small Hans Christian Andersen-like country, where windmills simply seem to fit with the local landscape. The turn towards wind was born of a conviction that wind power – and gradually RES in general – was the smartest solution available to security of energy supply and further economic growth. Second is the equally interesting ‘counterfact’ as to the type of conditions deemed necessary to promote technological development and innovation. As shown by Karnøe and Buchhorn, it was as a direct consequence of the governmental decision to support wind power with subsidies that led to a need for quality control and certification of those projects worthy of support. This led to the assignment of the control task to the Nuclear Research Centre at Risø, which subsequently became the leading scientific–technological installation for wind power in the world! This was certainly an interesting twist on path dependence/path creation, since the Risø Centre was originally established as the major research and monitoring body for the Danish nuclear industry, an industry that was politically stopped dead in its tracks. Once again, the contingency of the situation is striking. As we see it, the possibility of such a constellation of politics and research competence for RES-E developing under conditions of purely market-oriented innovation are small indeed. ‘Politics’ is also the key phrase for the third lesson from Denmark: the very positive interaction between the popular mobilization against nuclear energy on the one hand, and the so-called ‘Auken regime’ during the period of social-democratic governance between 1993 and 2001. Named after the then head of the Social Democratic Party, Sven Auken, the regime was established when Auken was elected Minister of the Environment in 1993, and quickly moved to integrate the energy portfolio into the Ministry. An exceptionally dynamic and charismatic figure, Auken quickly established the new ministry as a major source of innovation and RES policy. The clear

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lesson from his eight-year period in office is directly addressed to what the OECD and European Environment Agency have long identified as the single most important factor in the realization of strategies for sustainable development: political will (OECD 2001, 2002). There can be very little doubt that the ‘miracle’ of Danish wind power had a very secular and pragmatic ‘godfather’ in Sven Auken. And it was during Auken’s period of office that the fourth contextual lesson took hold: the development of the Danish ‘technological regime’ for wind through the process that Garud and Karnøe (2003) refer to as ‘bricolage’. The standard dictionary definition of ‘bricolage’ (www.dictionary. com) is ‘something made or put together using whatever materials happen to be available’. For Garud and Karnøe (as summarized in Chapter 3 here by Karnøe and Buchhorn), the idea perfectly captures the process in Denmark whereby the new wind regime emerged through a process of pragmatically steered governance, with central government functioning as a facilitator of emergent change, rather than as an active ‘driver’ for technological ‘breakthrough’. The ‘way forward’ for RES in Denmark was, in short, staked out by the travellers in concert, relying more on trial and error to circumvent barriers than trying to attack them head on with concentrated research power. That the system was not only well adapted to key features of the Danish DES, but also worked, cannot be denied. To identify the process and its effect on both Danish RES-E and Danish industry in general as ‘bricolage’ is a masterful bit of semiotics. The etymological roots of the concept are from the French bricole (trifle) and the Italian briccola (catapult). ‘Making do’ in a ‘trifling’ manner with the promotion of RES from wind has ‘catapulted’ the Danish wind-turbine industry into a leading position worldwide. It has also made Denmark the outstanding performer on the RES-E Directive. Finally, our fifth choice for contextual learning from Denmark is the most general of all from the point of view of path dependence: the need to adapt and maximize the advantages inherent in different national political paths. As indicated above, the modern history of the Danish political system can be viewed as a variant of ‘the social-democratic state’. This is an analytical construct that was developed in Norway in the 1980s to better differentiate among the Scandinavian countries as highly similar ‘advanced welfare states’ (Lafferty 1986, 1990, 1991). Whereas all three countries consistently headed varying lists of welfare states with respect to benefits and equality, this was also the case for other small European countries. Empirical analyses revealed that what was really distinct with ‘The Middle Way’ in Scandinavia was an extensive history of political dominance by social-democratic parties over nearly half a century. It was along this dimension that the Scandinavian states differed most clearly

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from other paramount European welfare states. Of particular relevance in the present case, however, it was further shown that the countries in question differed among themselves with respect to the nature and paths of their social-democratic development. Here, Denmark distinguished itself by a labour movement and a social-democratic party oriented more to the values of small-scale craftsmen, in contrast to either the tradition of industrial organization in Sweden or quasi-syndicalist organization in Norway. That the Danes have been able to mobilize this tradition in the service of RES-E is a clear positive manifestation of the path-dependence/ path-creation perspective. The contingency of the effect is apparent in a comparison of RES-E profiles within Scandinavia (see the profiles for Finland, Sweden and Norway below), but it is also clear from the difficulties encountered by the centre–right government that came to power in Denmark in 2001 when they tried to alter the ‘nurture and shape’ strategy of the ‘Auken regime’ towards more market-oriented instruments. Along these lines, the Danish case represents an instance of how path dependence can also exert significant positive effects on RES-E deployment – effects that make alternative modes of ‘competitive’ path creation less successful.8 Carbon dominance (III): Ireland EU assessment: [Good opportunity to reach 2010 target ☺] Moderate increase in RES-E, mainly due to wind energy. The new feed-in support system is expected to provide more positive investment conditions than the previous tendering scheme, leaving Ireland in a good position to meet the 2010 target.

Dominant energy system As late as 1990, Ireland’s overall primary energy mix for electricity was massively fossil-based, with approximately 84 per cent of output coming from coal, oil and gas, and another 14 per cent coming from peat. Further, as succinctly summarized by Fitzgerald (cited by Mullally and Murphy in Chapter 4), the system was characterized by a ‘high level of import dependence; low levels of interconnection with larger systems; limited competition among few market actors; and demand pushing the limits of generating capacity’. The combination of fossildominance, excessive energy dependence, and (from roughly 1990 on) outstanding economic growth and consumption, confronted Ireland with an exceptionally strong challenge on the RES-E Directive. Add to this the fact that the island of Ireland was in 1990 still divided by one of the longest, bloodiest and most bitter ethno-religious–political conflicts in modern

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European history, and the challenge of mobilizing the resources and will to promote RES-E becomes daunting indeed. Promotional instruments Mainly a competitive tendering scheme with technology bands, price caps and a 15-year time frame (Alternative Energy Requirement – AER – 1995–2004). The AER was supplemented by tax relief for investments and, from 2003, a Public Service Obligation charge (PSO) levied on all customers. The AER scheme was replaced in 2006 by the Renewable Energy Feed-in Tariff (REFIT), with a budget and time frame (15 years) designed to meet the Irish RES-E target of 13.2 per cent in 2010. Lessons It is against the background of a fossil-dominant, highly importdependent energy system – embedded in transnational conflict – that we find the most interesting lesson of the Irish case. The Republic of Ireland has long been known as a ‘communitarian’ society, a state long torn by political strife that launched its newly won independence in the early 1920s with a developmental programme based on traditional family values within a Catholic–agrarian ethos. On the level of national decision-making, this orientation gradually led (with post-war modernization) to the establishment of ‘partnership politics’, a way of governing (and governance) that sought to make the best of any possible deal through negotiation and compromise. This decision-making structure – with massive economic assistance from the European Union – helped to lay the foundation for the ‘Celtic Tiger’ experience: unprecedented economic growth in a relatively short period of time. The same structure has also come strongly and directly into play with respect to Ireland’s pursuit of its RES-E obligations. As thoroughly documented by Mullally and Murphy (Chapter 4), Irish efforts on RES-E gradually became integrated into Ireland’s ‘partnership approach’ to sustainable development. Despite the original inertia of the externally supplied, fossil-based DES, the national decision-making structure aimed to incorporate both the goals and possibilities for RES into an extensive effort of planning, strategy and public–private coordination. Together with major initiatives to achieve ‘unbundling’ of the major monopoly institutions, the governmental apparatus brought into play a series of draft strategies and proposals that were subjected to extensive consultation processes. These were supported by several intragovernmental bodies (with widespread stakeholder contacts and participation) that jointly moved the RES-E agenda along different paths, but in an increasingly coordinated and consequential direction. In the present context, the most important of these bodies have apparently been the Renewable Energy Development Group (REDG) and the

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Short Term Analysis Group (STAG). The latter in particular has had a mandate to work specifically towards achieving the goals of the RES-E Directive within the 2010 time frame. As we see it, if Ireland does meet its target – focusing mainly on wind and biomass, in addition to some highly interesting riverine hydro projects – it will be largely due to the administrative creativity and partnership culture of the decision-making structure. Of equal interest, however, is the fact that these initiatives have also been joined to the development of cross-border bodies that aim to remove many of the technical and administrative barriers between the northern and southern political domains. As documented by Mullally and Murphy, the two responsible governmental departments in the north and the south have joined in issuing three major policy documents on cross-border energy issues, and have signed a ‘Memorandum of Understanding’ whereby they commit their respective governments to developing a ‘Single Electricity Market’ (SEM), supported by a separate consultation document on Renewable Electricity – A ‘2020 Vision’. Through this initiative, the administrative entities of the north and the south have joined forces in a campaign for renewable energy that might not only remove serious technological and administrative barriers to the growth and integration of RES-E, but also play a significant role in the future peaceful integration of the island of Ireland. Finally, we want to mention briefly just one of the many other possible lessons from Ireland. As pointed out in the Irish case study, and echoed by numerous other analysts, Ireland is clearly endowed with one of the most advantageous situations for the development of wind power in Europe. Yet, despite the fact that a given conventional turbine would produce approximately twice the amount of RES-E in Ireland as a similar turbine in the leading wind nation in the EU, Germany, the promotion of wind has progressed quite slowly. There are, we believe, two final interrelated lessons here. First, there is a clear manifestation of the fact that specific technologies invariably confront socially constructed mediums within which the technology must function. Despite all the obvious advantages that Ireland offers for wind power, and despite the availability of a well-functioning technology, at a reasonable price (for a country strongly dependent on imported energy, with a business segment brimming with cash and entrepreneurial enthusiasm), the potential for wind energy has been clearly under-exploited. Second, once the national political apparatus and ‘social partnership’ reached a level of ‘new seriousness’ and more effective coordination on RES-E, things happened quickly – so quickly that IEA has singled out the Irish programme for planning and administering wind projects as clearly exemplary (OECD/IEA 2004: 368–9). In the view of the IEA, the Irish

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system manages to integrate three crucial aspects of wind deployment in a single integrated procedure: the nature of the immediate electricity market; the conditions for grid integration; and the multi-level coordination of spatial planning. This system clearly warrants further study and emulation, a task already initiated here by Mullally and Murphy with two examples of local wind projects that illustrate both the inertia and potential for transcendence in this area. Carbon dominance nuclear, hydro: Spain EU assessment: [Good opportunity to reach 2010 target ☺] Strong increase in RES-E penetration mainly due to wind energy growth. Spain is the world’s second producer of wind energy and has a good approach to incorporating high levels of intermittent wind capacity into the grid. However, the strong growth in electricity consumption overshadows the impressive level of renewable deployment.

Dominant energy system Before approximately 1960, the Spanish electricity system was largely fuelled by domestic hydropower and some coal. From this point onwards, however, the system changed considerably in the direction of a major dependence on foreign oil, gas and more coal. It also managed to incorporate a significant contribution from nuclear energy, which, at the initiation of the RES-E Directive, accounted for almost a third of electricity generation. The generating structure of the DES was, therefore, both relatively ‘new’ and relatively differentiated at the start of RES-E deployment, but with a strong dependence on fossil-fuel imports. Promotional instruments Spain has principally applied feed-in tariffs, with a producer option for a fixed price or premium tariff. Tariffs are set and adjusted by the central government according to the variation in average price of electricity. The tariffs are available for the entire lifetime of the RES-E installation. They have been supplemented by soft loans and tax incentives, with additional subsidies available on a region-by-region basis. Lessons The major lessons to be learned from the Spanish case are related to the country’s recent historical, economic and political development. Having maintained an authoritarian governing structure longer than most other Member States of the EU-15, Spain has had to take on the prescriptions of the RES-E Directive in a context of political consolidation and exceptional economic growth. In many ways, therefore, Spain stands as a test case for having to balance the strongly contrasting drives of economic

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growth and increasing affluence with the demands for sustainable development from the EU. And, as documented by Navarro in Chapter 5, the record thus far clearly suggests both positive and negative lessons. On the negative side of the ledger (vis-à-vis RES goals), Spain has not managed to reduce its overall dependence on imported gas, oil and coal. Nor has it managed to limit progressive increases in the overall consumption of electricity. In a very significant way, Navarro’s analysis represents an important learning ground for the entire European Union. First, there are lessons for the new and prospective Member States in eastern and south-west Europe, all of which aspire to similar levels of growth as Spain. Second, there are several aspects of the increase in energy consumption in Spain that are directly driven by both immigration as well as increased tourism from other countries in Europe. And third, one of the most severe challenges to the energy system in Spain – falling levels of precipitation and consequent drought that seriously affect hydropower resources – is clearly the result of global climate change, which is increasingly an issue for the EU as a whole. A further analysis of how Spain has confronted these challenges, at both the central and regional levels of governance, has major implications far beyond Spain’s borders. On the more positive side of the ledger, Spain is, of course, widely acknowledged as a major achiever in the promotion of wind energy. Navarro explains why this is so with respect to the very forceful series of promotional measures that were initiated as part of new electricity legislation in 1994. The most important of the measures has clearly been the very robust feed-in tariff scheme that has functioned to trip all of the right ‘switches’: generous levels of support; long-term commitment; technological sensitivity and differentiation – in short, all of the aspects that are necessary for stability and predictability, the essential conditions for investment confidence. At a point in the history of energy policy worldwide, where both nuclear power and ‘clean coal’ are being actively pushed as alternatives to the designated RES-E technologies of the EU, it is vital that the cost–benefit calculations underlying the Spanish ‘wind miracle’ be subjected to comparisons with fully internalized calculations for these ‘alternative’ fuels. We are also convinced, however, that the Spanish ‘wind regime’ warrants closer scrutiny in the forthcoming discussion as to both the need for, and eventual nature of, a Community-wide support framework for the EU. While fully recognizing the enormous cost reductions in wind projects that the Spanish support programmes have contributed to, we are leery of an approach that views the subsidy aspect of these programmes as of necessity something that must be phased out and ultimately incorporated in a ‘normalized’ market for electricity. The costs of success in promoting wind in Spain are completely transparent and thoroughly rationalized in relation

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to the entire spectrum of goals expressed in the RES-E Directive. When the same can be said for the alternative fuels available to the Spanish energy system, we may have reached a point for phasing out the FIT scheme. At that point, however, the exercise of internalizing costs for gas, oil, coal and nuclear power will have revealed so many other contextual aspects of energy and society that the issue of what is and is not a ‘subsidy’ may appear in a very different light. Finally, we wish to list three sub-topics, all related to the constitutional structure of the Spanish state. First, we draw attention to what appears to be a very creative ‘tension’ between the central government (CG) and the autonomous communities (regions) (AC). Navarro emphasizes here the interesting division of functions between the two levels, whereby the CG alone has the power to set the price and budgetary framework for the feedin tariffs, while the ACs have the responsibility for incorporating national goals into regional strategies and action plans. This has resulted in a situation where the cumulative amount of projected GWh from wind projects set by the ACs is nearly double the budgetary allocations staked out by the CG. Navarro speculates on how this will play out in practice, with most possibilities pointing towards a more dynamic and progressive situation than would have been the case if the one or the other level had exclusive responsibility for the promotion. Second, there is the very clear lesson that emerges from the comparison in the case study of two of the most active regions in wind promotion, Galicia and Andalusia. Both regions have highly advantageous weather conditions for wind power, yet Galicia has emerged as a major success story, while Andalusia has not realized its potential. Navarro touches on several explanatory factors, and clearly concludes that the difference between the two regions is only understandable from a contextual perspective. The history of specific events, differing property relations, the nature of consultative procedures and the types of financial compensation involved – all contribute to exceptional onshore deployment in the one region, and missed opportunities in the other. Finally, there is not so much an exemplary lesson as an opening for critical learning. Navarro points out that the development of RES-E from biomass in Spain is both far below its estimated potential, and far behind actual national and regional targets. This needs explanation. The basic resource potential for RES-E from biomass in Spain is no less promising than the potential for wind. Yet the one has succeeded exceptionally, and the other has progressed far below expectations. Once again, the answer does not appear to lie in either a lack of technological development or competence, or in an inability to choose and effectively deploy market penetration. Only future studies of the specific conditions affecting the status

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of the biomass technological regime in Spain will provide lessons for change. Here too, comparisons between the Spanish, Finnish, Swedish and Austrian regimes will be of key importance. The broad mix – nuclear–carbon–biomass–hydro: Finland EU assessment: [Good opportunity to reach 2010 target ☺] Produces around one quarter of its power from RES-E, with half from hydro and half from biomass. New policy emphasis is being placed on the increased use of local biomass resources.

Dominant energy system A major aspect of the Finnish DES is its transition during the latter half of the past century from a system dominated by hydropower to a system with a broad mix of electricity sources. Whereas more than 90 per cent of electricity was generated from large-scale hydro in 1955, by 1999 the figures were: 29 per cent fossil fuels (with roughly equal shares for coal/peat and gas, and a small share from oil, with all sources but peat imported); 33 per cent from nuclear; 20 per cent from ‘new’ RES-E; and only 18 per cent from large-scale hydro. Both the nature of the original hydro system, and the administrative constellations that managed the transition to a mixed system (with respect to both the import of fossil fuels and development of the nuclear cluster), resulted in a centralized system at the outset of the RES-E implementation period. It is hardly surprising, therefore, that the major new forms of RES to be developed in Finland have been developed through an effective alliance between Finland’s powerful forestry industry, governmental support of R&D, and strong regional– agrarian interests. As emphasized by Kivimaa in Chapter 7, the dominating industrial actors, energy companies and major political parties have all embraced biomass as a viable path for further development. Promotional instruments Finland is the only country in our study, and the only country in EU-15, that has not relied mainly on one or the other of the two most preferred promotional instruments: feed-in tariffs and tradable green certificates. The principal support schemes have been different types of tax exemptions, along with varying forms for investment incentives.9 The country participated in a pilot project for TGCs between 2001 and 2002, and will most probably be an active participant in the EU ETS system to come on line in 2008. Interest in TGCs has, however, been relatively low in Finland (for the domestic market at least). RES is, however, more generally endorsed as a policy goal within both Finland’s overall climate strategy and the ‘Advanced Renewable Strategy’ (ARS), and numerous support programmes for R&D are in place, particularly for

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different forms of bioenergy. In general, promotion schemes for wind, solar and tidal energy have been only modestly effective. Lessons The most important lesson from a path-dependence perspective with the Finnish case would seem to be the historical–geographical situation. The major driving forces behind both the development of the DES and its impact on RES-E appear to be Finland’s need to move into a more independent position vis-à-vis the Russian and European spheres of influence, and the need to secure a more solid foundation for continued economic growth. These factors come to expression in the chapter by Kivimaa in the form of two major ‘drivers’ of energy policy: (1) a clear need to increase security and diversity of supply; and (2) a strong national commitment to a long-term strategy for R&D as the basis of a more robust modern economy. As we see it, the combination of these two ‘thrusts’ in Finnish national development has created an energy situation whereby the prospects for RES-E have been ‘funnelled’ by the combined needs of security, economic competitiveness and employment. It is in this light that the Finnish profile of combining a strong central steering of energy policy with an active integration of regional concerns and involvement can be understood. The centralized aspect is reflected in a stepwise history consisting of: (1) an initially state-sponsored hydropower which is then diversified through; (2) a state-sponsored import of fossil fuels; (3) a state-sponsored move to nuclear energy; (4) state–regional efforts to develop peat as an important part of the ‘mix’; and, ultimately, (5) a state–regional cooperative effort to focus on that form of RES that could best be combined with regional economic development and employment – bioenergy. As succinctly expressed by Kivimaa at the start of her case study: ‘Dominant actors strongly believe in centralized electricity production by nuclear, coal-powered and natural-gas plants, although many smaller power plants utilizing peat and biofuels, primarily for heating, also exist’ (Chapter 6, p. 159). Within this context, both R&D resources and promotional instruments have been principally directed at those forms for RES that promise most ‘pay-off ’ (literally) for regional economic development. As clearly documented by the EU and other ‘monitoring’ initiatives, progress on virtually all other forms of RES-E has been very modest in Finland – a result that is clearly reflected in the overall attitudes and priorities of the major Finnish actors in the energy system, including, to a surprising degree, Finnish NGOs. While many of the actors endorse broader and more consequential policies for promoting RES-E across the board, most of these endorsements appear to remain of a virtual nature. As modestly stated by Kivimaa, ‘Thus the existing socio-technical regime – dominated by large industrial

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actors, energy companies and major political parties – has not opposed bioenergy’ (p. 182). The principal lesson from Finland in this regard would thus seem to be: ‘It’s the economy, stupid.’ Not to be belied, however, the contextual situation offers at least one interesting ‘deviation’ lesson from this picture. We refer to the relationship between large-scale hydro on the one hand, and the active initiatives to both increase imports of fossil fuels and develop nuclear energy for the generation of electricity on the other. Roughly less than half of Finland’s watercourse resources have been developed for hydropower. Yet a clear moratorium on further development has been established, primarily on the basis of opposition from Finnish NGOs. Based on the brief treatment by Kivimaa, it appears that the interests of nature conservation have won out to the advantage of both nuclear and fossil-fuel energy sources. The trade-off here was apparently consolidated several decades ago, but there is nothing in the case study that indicates that the situation is being reconsidered today; nor is there any evidence of an active policy for small-scale hydro. This leads directly to a final insight from Finland: the type of ‘lesson’ where the point is to raise important questions rather than to answer them. The issue relates to the problems raised earlier as to the substantive implications of the EU target-based approach to assessment. Granted that Finland is judged to have a ‘good opportunity’ to reach its target of 31.5 per cent RES-E by 2010, what does this imply? How, in short, is Finland one of the ‘good guys’, and what does the Finnish profile of achievement mean for the broader pursuit of RES-E goals? The first aspect to highlight here is (again) the massive importance of large-scale hydropower as part of the Finnish RES-E profile. By way of illustration, the data presented in Table 10.1 are for 2004, the most recent year with updated figures (from the IEA) on electricity consumption. The figures show an ‘achieved penetration’ for Finland of approximately 30.8 per cent RES-E in 2004. This indicates that Finland would have a ‘gap’ of 0.7 percentage points to be achieved over a six-year period. However, if we use the figure for ‘normalized penetration’ applied by the EU Commission for 2005 (25.4 per cent), the gap increases to 6.1 percentage points across five years. Further, if we look at the actual raw data for hydro generation, we find enormous variation. Whereas hydro accounted, for example, for 9591 GWh in 2003, the figure one year later was 15 070 GWh (OECD/IEA 2007: 134). The increase in hydro for this period was thus more than ten times the increase in all other RES combined! Clearly countries with relatively large shares of conventional hydropower in their RES-E mix face challenges in relation to ‘target achievement’ that are substantively very different from the challenges faced by non-hydro countries.

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Second, we feel a need to raise a parallel issue: the nature of the ‘new RES’ that will (or will not) allow Finland to reach its target – bioenergy. As clearly demonstrated by Kivimaa, the major thrust of the RES-E initiative in bioenergy in Finland – in its many forms – is as an adjunct of regional, industrial and economic policy. Interest in virtually all of the other forms of RES-E is very subdued across the board of major energysystem actors. In short, the Finnish case indicates that the positive score allocated by the EU Commission reflects two of the three major goals put forth in the RES-E Directive: security of supply and economic competitiveness (regional employment and economic development). The degree to which it reflects the third goal of the Directive – environmental concerns and climate change – is more unclear. What is clear, however, is that neither of the assessment reports presented by the Commission in either 2005 or 2007 explicitly addresses the issue of climate change in its rankings. Furthermore, the issue goes unmentioned in the list of ‘Eight main areas of action’ that concludes the 2007 assessment (Box 10.1). What we do find in the last action point, however, is an admonition from the Commission that ‘Renewable energies should be speedily integrated into the Lisbon strategy of the European Union through the competitiveness and innovation programme (CIP), regional and cohesion funds, rural development and reinforced TRD in the period 2007–13.’ Is it in this light that we are to interpret Finland’s ‘good opportunity’ to reach its 2010 target? In sum, Finland has been innovative in rapidly increasing the bioenergy capacity and in producing bioenergy technologies exported globally. A major trajectory for biomass is in other words a continuation of the dominant energy system through the reliable and easily manageable large-scale power plant. The increased use of bioenergy has thus not radically changed Finland’s energy system or infrastructure. The centralized electricity system created during the 1960s and the 1970s has enabled the use of bioenergy, peat and natural gas because they complement the system rather than deviate from it. Thus the existing socio-technical regime – dominated by large industrial actors, energy companies and major political parties – has indeed ‘not opposed bioenergy’. Other forms of ‘new RES’ are apparently viewed as less relevant for the Finnish energy system. Hydro dominance + carbon: Austria EU assessment: [Far from commitment ] The production of renewable energy is dominated by large-scale hydropower (60 per cent of total electricity consumption). Over recent years, there has been

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considerable growth in capacity in the wind and biomass sectors due to favourable feed-in tariffs. However, there are currently poor investment conditions due to a revised support scheme, leading to stagnating RES-E development.

Dominant energy system The Austrian energy system has been strongly hydro-dependent. Within Europe, only the leading hydroelectric country in the world, Norway, has more hydropower in the energy mix than Austria. The share of hydro as a proportion of overall electricity consumption in 1997 was approximately 69 per cent. This level proved fateful for Austria, since it resulted in a reference figure for the RES-E Directive of 70 per cent, and an indicative target for 2010 of 78 per cent. The rest of the energy mix for electricity before the adoption of the Directive was composed of gas (16 per cent), coal (9 per cent) and oil (5 per cent) – nearly all of it imported. Given the combination of large-scale community-based hydro dominance, and an eviscerated private industrial structure after World War II, the Austrian DES was strongly directed by government bodies at both the federal and state levels. The treatment of energy issues thus became an integral part of the ‘corporate–pluralist’ (‘social partnership’) mode of governance that strongly characterized Austria before its entry into the EU (Bischof and Pelinka 1995). In addition, the system was directly affected by the ‘historical residues’ of two bruising energy battles: a conflict over – and ultimate rejection of – nuclear energy in the 1970s; and two high-profile confrontations with NGOs over large-scale riverine hydro projects (at Hainburg and Lambach) in the mid-1980s. Promotional instruments Early initiatives in the form of ‘decrees’ by the federal government (1992–98), which were followed up and supplemented by various activities at the state (Land ) level. An initial attempt to standardize promotion through a form of feed-in tariffs was contained in the Federal Electricity Act of 1998, with a subsequent amendment in 2000. The most significant change came, however, with the adoption by the federal government of the Eco-Electricity Act of 2002, which was designed to implement the RES-E Directive through generous feed-in tariffs. For a number of conflicting reasons, the Act was amended in 2006, introducing a ‘cap’ on the amount of RES-E support that could be allocated for the period 2006–11 (€17 million). This provision – which also introduced energy-efficiency standards for the different technologies, as well as separate budgets for subsidizing CHP plants and smallscale hydro – is designed to achieve a level of 19 per cent ‘new RES-E’ by 2010. If successful, Austria could meet its EU target of 78.1 per cent, given a reasonably stable contribution of 60 per cent from large-scale hydro.

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Lessons Of the numerous contextual lessons emerging from the Austrian case, we can only highlight three. First, on the positive side, we would stress one aspect that, in our opinion, receives much too little emphasis in the EU assessment: the creative and highly effective cooperation between regional authorities and new innovative engineering enterprises in the areas of biomass, biogas and solarthermal panels. As documented by Pflüglmayer and her colleagues in Chapter 7, the basic industrial–institutional nature of the DES, strongly affected by the ‘historical learning’ of the conflicts over nuclear energy and large-scale riverine hydro projects, created a ‘vacuum’ with respect to the internal dynamics of the business sector in support of alternative energy projects. As summarized by the authors, ‘The conventional large-scale technology providers have not been interested in small-scale solutions, and the utilities have also been reluctant to build diverse and small-scale RES-E installations’ (Chapter 7, p. 196). This has resulted in numerous new alliances and projects: a classic case of ‘niche’ initiative and management, leading to an emergent ‘technological regime’; which has already put the Austrian Länder at the forefront of regional bioenergy and solar-thermal developments. Second, Austria clearly illustrates another type of ‘barrier’ that receives very little attention in the official assessments: a direct conflict between concurrent ‘environmental initiatives’ from the EU, the RES-E Directive and the European Water Framework Directive (2000/60/EC). The Austrian energy balance is confronted by the conflicting demands of these two directives along two dimensions: the potential for upgrading and/or further development of large-scale, reservoir-based hydro; and the development of all forms of riverine hydro. In several ways Austria apparently has, in this light, been caught between a ‘rock’ of hydro restrictions and a ‘hard place’ of RES-E demands. Third, and most significant for the entire EU monitoring operation of the RES-E Directive, is the amazing confusion and competing interpretations of ‘RES-E reality’ in the Austrian case. As already indicated above, the issues here are numerous and convoluted: in other words, typical of EU member-state relationships when ‘targets’ and performance are at issue. In the present case, however, the net effect of the process itself seems to be negative for the promotion of RES-E in both Austria and the EU in general – and that should certainly not be the case. Space allows us to mention only two aspects of the problem. Austria’s target For reasons that are anything but ‘transparent’, the agreed Austrian target for 2010 (78.1 per cent) was qualified by a footnote in the Annex to the RES-E Directive. The footnote reads:

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Austria states that 78.1 per cent would be a realistic figure, on the assumption that in 2010 gross national electricity consumption will be 56.1 TWh. Due to the fact that the production of electricity from renewable sources is highly dependent on hydropower and therefore on the annual rainfall, the figures for 1997 and 2010 should be calculated on a long-range model based on hydrologic and climatic conditions. (OJEC 2001: 40)

In other words, Austria was allowed a footnote to the Directive that, in effect, attempted to ‘lock’ the level of its target to a predetermined level of ‘total’/‘gross’ consumption of electricity for the target year of 2010. In an action aimed at clarifying this issue, the European Renewable Energies Federation (EREF) took upon itself the responsibility of ‘appealing’ the status of the Austrian footnote to the European Commission. In a press release of 23 November 2005, the EREF announced that the director general of DG Transport and Energy had – ‘without prejudice of an authentic interpretation to be made, eventually, by the Court of Justice’ – stated that ‘the footnotes to the Annex are not considered to have legal effects as to the correct method for calculating the reference value’ (EREF 2005: 2). Declaring the ‘decision by the European Commission’ to be a ‘major breakthrough’ on the issue – with direct implications for all of the footnotes to the Annex – EREF openly indicted not only Austria, but France, Sweden and Italy for ‘trying to avoid commitment to their targets by using these footnotes and thus hiding the fact that they did not do enough to curb down electricity consumption and increase of RES production in their country’ (ibid.). Without going further into the very obvious serious implications of this type of interchange between a sectoral business association and the top civil servant of DG Transport and Energy, we would simply point out that the entire procedure of first, allowing the publication of such footnotes in the Annex to a Directive, and then declaring the footnotes to be legally irrelevant by administrative fiat, is not only totally unacceptable by normal standards of legal–administrative procedure, but – more importantly in the present case – clearly self-defeating with respect to creating an effective system for monitoring and evaluation of member-state performance. Austria’s performance A second aspect of the issue that needs to be highlighted (and questioned), is the treatment of Austria by the Commission in the crucial 2007 assessment. As indicated above, the Commission clearly changed its view of Austrian progress on RES-E between the 2004 and 2006 assessment. While getting relatively good ‘grades’ from the Commission in the first round, Austria is relegated to the bottom of the class in the second round, getting two ‘sad faces’ and being declared ‘far from commitment’. Moreover, the only apparent reason for

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the degradation is that ‘a revised support scheme’ has led to ‘currently poor investment conditions’ and ‘stagnating RES-E development’. In light of both the Austrian case study and the data presented in Table 10.1, this is a most interesting ‘report card’. As indicated in the case study (and briefly presented above under ‘Promotional instruments’), the change of policy in Austria was apparently undertaken with an admittedly ‘political’ justification, primarily because the existing feed-in tariff system was proving so successful as to introduce clear market inefficiencies vis-àvis competing electricity production costs. The government was of the opinion, in other words, that the existing system had reached a point where it was at odds with the liberalist principles of free markets in general, and the EU Single Market (Lisbon strategy) in particular. Had the government, on this basis, totally eliminated support schemes for RES-E, there would have been room for a discussion (again) as to which EU ‘agenda’ Austria was/should be pursuing: the ‘most competitive economy in the world’ in line with Lisbon, or ‘sustainable production and consumption’ in line with Gothenburg. That is not, however, what the government did. To the contrary, they apparently introduced a new set of incentives which, in the official view at any rate, were clearly aimed at meeting the Austrian RES-E target! Given that Austria also had made really significant progress between 2004 and 2006 on wind, solid biomass and biogas (OECD/IEA 2007: 94), one can only react with amazement at the EU’s negative assessment and labelling. The implications of these ‘lessons’ from the Austrian case are both farreaching and potentially very crucial for how and why the Member States of the EU pursue the goals of alternative energy. We return to some of these implications in the concluding section below, but wish here merely to stress the very obvious need for greater contextual nuance when ‘digesting’ and working further with the assessment provided by the European Commission. Nuclear-hydro dominance: Sweden EU assessment: [Good opportunity to reach 2010 target ☺] Strong biomass policy in the last few years with 3 TWh of solid biomass produced and 3 TWh more planned through biomass co-firing in existing plants. The new energy bill and policy horizon up to 2030 could sustain the good results of the recent years.10

Dominant energy system The Swedish DES is similar to Finland’s, with a history of hydropower dominance, and a relatively quick transition to

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nuclear power. Both the remaining level of hydropower and scope of nuclear power have, however, been stronger than for Finland, leading to very marginal dependence on fossil-fuel imports. The only countries in the OECD with lower levels of fossil-fuel-generated electricity are Iceland, Norway, Switzerland and Luxembourg (OECD/IEA 2006: I: 35). Sweden has also had a traditionally strong forestry and wood-products sector, so it is not surprising that RES-E from bioenergy has also emerged as the most likely candidate for growth in new RES. The Swedish DES has, therefore, been characterized by strong centralized governance, powerful public bodies and private energy companies, national political plans and strategies, and strong party-political involvement. The key drivers of the transition from the traditional DES to the existing system have been: the political issue of phasing out nuclear power altogether; liberalization of the national and regional electricity markets; and very ambitious national and local programmes for sustainable development. Promotional instruments Along with Finland and Norway, Sweden was one of the first countries (in 1990) to adopt a carbon tax on energy use. Regulation of energy has thus gone through several different ‘regimes’ affecting RES-E, most of them involving one or another form of ‘market interventionist’ instruments. Since 2003, the focus has shifted more strongly towards quota-regulated, demand-stimulating market mechanisms, primarily tradable green certificates (increasingly referred to as ‘Renewable Electricity Certificates’ – RECs). The scheme was revised and strengthened in 2006, with the objective of providing 17 TWh of new renewable production by 2016, principally in support of biomass. Additional funding has since been added with the intention of realizing 10 TWh from wind by 2015. Holding other factors constant (which is virtually impossible in a hydrostrong DES), these initiatives should be enough to enable Sweden to reach its (revised) target of 55.2 per cent RES-E by 2010. Major lessons The contextual lessons we wish to highlight from the Swedish case are related to: (1) the impacts and insecurities attaching to an energy system that is path-dependent on large-scale hydro and nuclear energy; (2) insights on the workings of an advanced TGC market. On the first point, it is important to stress once again the impact on RESE deployment (and assessment) of a system with a major hydro component. Hydropower accounts for roughly 46 per cent of electricity generation, so the impact in Sweden is roughly similar to Austria. And, as discussed in the Austria case, these are the two countries that filed amending ‘footnotes’ to the Annex to the RES-D Directive (see also the footnote

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to Table 10.1). The bureaucratic ‘snafu’ (situation normal: all fouled up) that has arisen from the EU Commission’s treatment of these footnotes simply highlights the difficulty of applying common assessment criteria to the pursuit of RES targets across very diverse energy systems. The underlying problem is, however, much more challenging. Large-scale hydropower, which is traditionally very unpredictable, has only become more so because of the effects of climate change. Increased drought in the southern climes, and increased precipitation in the northern climes, with increasingly large variations in both, make the business of planning and working for ‘new’ RES extremely difficult. Given further that large-scale hydro is definitely not excluded as ‘legitimate’ RES-E, the issue of both adapting to and factoring in large-scale hydro within the strictures of the Directive becomes an accountant’s nightmare. And the situation is hardly better in Sweden with respect to nuclear power, though we here are confronted with a ‘nightmare’ derived from politics rather than natural conditions. When it comes to energy policy in Sweden, nothing has dominated the national political discourse more than the issue of nuclear energy. Originally viewed as a ‘saving grace’ vis-à-vis both ‘clean’ energy and security of supply, it plummeted to pariah status in the post-Chernobyl years, becoming a dangerous and unwanted guest of the Swedish folkhemmet (‘people’s home’). Despite its official ‘ejection’, however, it was nonetheless stopped at the threshold and has been kept (mostly) ‘on hold’ for the past several decades. Discussing the fate of renewable energy sources that in substance, form and consequence are highly different from the existing dominant alternative energy sources in Sweden has resulted in a Swedish RES-E debate that is uniquely contingent. As we see it, it is the nature of this contingency that has led to several specific outcomes for the Swedish system: (1) a general reluctance of the major energy actors to promote ‘new’ RES-E (since existing sources are already perceived as ‘clean’, reliable and exceptionally cost-efficient); (2) a specific ‘opening’ for a bioenergy niche, since this fits with both the existing industrial structure and the ‘lie of the land’ in general, as well as offering an attractive replacement of hydro and nuclear electricity for heating; (3) a particular lack of interest in small-scale hydro (clearly viewed as relatively inefficient ‘small change’ by the dominant producers); and (4) a gradual convergence within the dominant regime in the direction of what Chen and Johnson (Chapter 8) refer to as ‘demand-pull’ rather than ‘supply-push’ instruments. Focusing here only on the latter, we feel that the Swedish case offers an exceptional ‘laboratory’ for assessing the implications of ‘demand-pull’ schemes. Few countries are more strongly integrated policy-wise into such a well-functioning and highly competitive regional market for electricity as

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Sweden. Space allows for only a very ‘short list’ of relevant issues: a list that clearly illustrates a need for further, more comprehensive, ‘probes’. First, there is an interesting question related to the general history of promotional schemes in Sweden. The authors of the Swedish case clearly state that the ‘supply-push’ approach to the promotion of wind power failed in Sweden, and that this was apparently due to competition from Denmark. Given that ‘supply-push’ instruments (in the form of feed-in tariffs) have been the most successful means for promoting RES-E in nearly all other countries where they have been tried, and given, further, that Germany managed to apply FITs successfully to wind deployment in direct contact and competition with Denmark, why did Sweden not succeed on both counts? Second, given that the transition to a ‘demand-pull’ approach did not come into full effect until 2003–4, what can we learn about promotional schemes in general from the fact that significant increases in RES-E from solid biomass were achieved before this period (OECD/IEA 2007: 286)? Was this not because of the several ‘supply-push’ programmes that were in place between 1997 and 2002 (several explicitly targeted at biomass); and what will happen with the electricity-generating aspect of biomass (as opposed to the heating aspect) when these programmes are phased out in the name of ‘demand-pull’ measures? Third, how are we to interpret the information provided by Chen and Johnson as to the consequences of the extremely intricate and technical rules that Sweden has deemed necessary to make the RECs scheme work most effectively? As documented by the case study, these regulations have already led, on the one hand, to the inclusion of peat as an acceptable RES-E fuel under the scheme and, on the other, to an apparent outright phase-out of small-scale hydro in 2010, because of ‘its environmental impacts relative to power produced in combination with its economic feasibility’. Even though the latter is apparently timed to correspond with the target date of the RES-E Directive, there are no ‘sun-down’ clauses attached to the Directive, so the exclusion of small-scale hydro as a worthy RES will have no status within the EU. Even more problematic, however, is the practice of including peat as a legitimately ‘green’ source within the REC framework. Clearly, if Sweden can make such an exception on its own, then both Finland and Ireland should be able to do the same. Further, how will such member-state abrogations of the Directive affect the attempt to reach agreement on a Community-wide scheme in the wake of the upcoming review (in early 2008)? Fourth, we note also the brief observation by the authors to the effect that the REC scheme by itself appears to be a ‘hollow’ policy, ‘in that it does not stimulate necessary innovation promoting new RES-E’. We see this as

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a most serious indictment of a national energy system that currently relies massively on large-scale hydropower and nuclear energy. Finally – and perhaps most generally for the overall debate on both the need for, and nature of, a harmonized promotional regime for the EU as a whole – is the highly predictable internal contradiction of any one-sided effort in the direction of a ‘demand-pull’ scheme. As pointed out in the Swedish case, a really successful liberalization of the electricity market – as, to a large degree, has already been achieved in the North European region – tends (under ‘normal’ conditions!) to lead to cheaper electricity. And cheaper electricity, in turn, clearly tends to counteract private investment in RES-E. Given the very modest results on promoting RES-E within the Nord Pool market thus far (with the obvious exception of Denmark), why and how will Sweden, Finland and Norway move beyond token initiatives to promote new RES-E in an increasingly liberalized market context? In Sweden, the green certificate system appears to rely on increased mandatory REC quotas for electricity suppliers, coupled with serious financial sanctions for failure to comply. Is this liberalization? Will this contribute to reduced electricity costs to consumers? Is this a system that will ‘work’ beyond the extremely wealthy countries of Northern Europe? Has Sweden, in short, come up with a solution to the challenge of having your cake and eating it too? Hydro dominance: Norway11 Assessment by editors As the most hydro-dominant electricity system in Europe, Norway is faced with very particular challenges in relation to the RES-E Directive. Having adopted political limits on any further development of large-scale hydropower, Norway’s ability to meet RES-E targets is dependent on either a stabilization of consumption at current levels, or the development of additional ‘new’ RES-E. Attempts thus far to promote significant new RES have, however, been only moderately successful. As of 2004, Norway had already surpassed its indicative target of 90 per cent (on the basis of large-scale hydro), and continues to generate between 90 and 100 per cent of total consumption from hydro every year. Given in addition the major political commitment by the national energy agency to reduce overall electricity consumption, there is no reason to believe that Norway will not be able to meet its target level in 2010.12 Dominant energy system The energy system in Norway, for industry as well as for households, was, for most of the previous century, dominated by large-scale hydroelectric power. From the middle of the 1970s, however, the path has been dramatically supplemented by the growth of an offshore

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fossil-fuel sector. Originally devoted to the exploration and production of crude oil, the sector has increasingly developed to include major operations in natural gas. Given, however, that oil has never been seriously used to generate domestic electricity, and, further, that the first gas-fired plant did not come on line before 2007, impacts on the development of new RES-E have come primarily from the hydroelectric regime. Until the mid-1990s, any attempts to develop alternative-energy technologies in Norway were directly affected and ‘channelled’ by the hydro DES. This was a closely interwoven regime of national bureaucratic regulators; local–regional owners of watercourse rights; and the powerful electroprocessing industry. Considering that the regime was also closely ‘embraced’ by the politically dominant Norwegian Labour Party and its powerful ally, the Norwegian labour movement, it is hardly surprising that support for alternative ‘new’ energy systems was symbolic, perfunctory and in general inconsequential. Trying to develop a ‘niche’ for the so-called ‘softer’ forms of RES has not been easy in an energy setting dominated by powerful state organs and quasi-private companies that are totally immersed in large-scale, capital-intensive technologies and production processes. Promotional instruments Early efforts to promote RES-E focused mainly on relatively small-scale initiatives within R&D. Most of these projects were, before the 1990s, conducted in cooperation with the hydro DES, and most came to nothing. Norway remains, however, a major innovative force in large-scale hydro technology, and, more recently, the Research Council of Norway has conducted a priority programme on alternative energy (RENERGI). Norwegian industry has also become increasingly involved in new RES research. The quasi-public firm, Norsk Hydro ASA, has been a leading actor (in cooperation mainly with the Norwegian Technical University in Trondheim) in fuel-cell and wind technology; and the electrochemical industry has spawned a classic gründer initiative in the form of a major new photovoltaics ‘cluster’ (the Renewable Energy Corporation (REC) and subsequent spin-offs). The principal policy instruments for promoting new RES-E within the context of the EU Directive have been: (1) R&D support and investment incentives; (2) an initial attempt to develop a joint green certificate (REC) system with Sweden (abruptly dropped by the Ministry of Petroleum and Energy (MoPE) in 2006); and (3) strong governmental support for the national energy agency, Enova SF, with particularly comprehensive initiatives in the area of energy efficiency and the substitution of electricity for heating. Of particular interest is the fact that an attempt to establish a joint TGC scheme with Sweden was abandoned at the last minute by the current

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‘red–green’ government for being ‘too expensive for Norwegian consumers and industry’. The MoPE opted instead to reinforce the already major position of Enova SF, in effect transferring the basic mechanics of RES-E promotion to the agency. Most of the promotional instruments of the earlier regime have been phased out, to be replaced by a feed-in tariff scheme as of 2008. Parallel to these initiatives, however, the government is investing heavily in major industrial projects for ‘cleaning’ gas-fired power plants (through CO2 sequestration); a project that, if successful technologically – and if accepted by the EU – will clearly overshadow future initiatives for new RES-E.13 Lessons At present the leading techno-economic challenge for the new ‘dual’ DES is to maintain a secure supply of electricity that coincidentally meets both the demands of growing industrial/household consumption and Norway’s international commitments to combat climate change. Unlike Sweden and Finland, Norway wrote off the nuclear option in the 1950s and 1960s, so that option, while occasionally still mooted, is politically closed out. Norway is thus steeped in the parallel DES ruts of hydropower and fossil fuels. Both paths impinge on the prospect of developing new RES-E, and both have, thus far, exerted mainly negative influences on techno-market deployment. The enormous dominance of large-scale hydro has set a technological standard for RES which is, on the one hand, effective and efficient in powering crucial industrial sectors and, on the other, cheap enough in the market to discourage more costly RES-E alternatives. At the same time, the new ‘big guy on the block’, the petroleum industry, has employed enormous resources for R&D within its own technological sphere. Most of this is devoted to greater efficiency of production and safety, with ‘green issues’ dominated by local environmental impacts and CO2 sequestration. Windmills, biomass, solar panels, waves, tides and small-scale hydro have, until very recently, been viewed as simply too marginal for this technomarket environment. Norway has become a world leader in the production of high-grade silicon wafers for export, but large-scale solar installations are non-existent.14 Little wonder, therefore, that the MoPE has allocated the major responsibility for promoting ‘new RES’ to the same agency that, thus far, has had most success in subsidizing heat pumps and the insulation of buildings. The principal lesson from Norway is, therefore, that neither a long tradition of technological competence in energy production, nor more recent extremely advantageous market conditions (with a unique combination of excessively high costs for petroleum products and excessively high revenues from the same products that, in theory, could be used for RES-E

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investment) are enough to achieve ‘take-off’ in new RES-E. It is symptomatic indeed that in the autumn of 2007, with less than three years to go to the EU target date, support conditions for new RES-E are widely viewed by RES branch organizations as totally inadequate. With respect to wind, for example, Norway has exceptional natural conditions for both onshore and offshore installations, and there was a minor ‘spurt’ between about 2000 and 2006 (Table 10.1). Further deployment has, however, come to an abrupt stop, with several major regional projects being placed ‘on hold’, and with an announcement recently that Norway’s leading national energy-production body, Statkraft, has made major new investments in both Swedish and British wind farms! The prospective feedin tariff (from 2008) of 1 eurocent per kWh is simply much too low to stimulate the initiatives necessary to reach the national energy agency’s own modest target of 3 TWh by 2010. In sum, the probability that Norway will maintain its RES-E target achievement through 2010 is quite high. It will be an achievement, however, that is mainly due to a combination of greater efficiency in the use of electricity and continued high levels of large-scale hydropower. It will definitely not be due to an active and long-term policy for the promotion of new forms of RES-E. The principal Norwegian lesson on RES-E could have been to demonstrate how an exceptionally well-endowed energy nation can employ its wealth and technological expertise in the service of carbonreplacement technologies. Instead we experience an extremely expensive, publicly financed initiative to develop technologies for ‘cleaning’ natural gas and ‘sequestering’ its carbon. And all this comes at a time when Norway’s excellent models on climate change predict ever higher levels of precipitation, more than enough presumably to keep the hydropower magazines filled for decades to come. Norway stands out in other words as an exceptionally ‘contingent’ case. First there was the natural ‘gift’ of hydropower; then the natural ‘gift’ of offshore petroleum and gas; then the natural ‘gift’ of increased precipitation to keep the mountain turbines whirring. One could argue that such largesse carries with it a special obligation to use the benevolence of nature to hinder further serious harm to nature. Norway could, in other words, take on the ‘burden’ of following the lead of Denmark, Germany or Spain in wind energy, and the lead of Finland, Sweden and Austria in biomass. But such lessons are not available from the Norwegian case. And therein lies what is perhaps the most crucial lesson of all: possessing the means for getting both the technology and the prices ‘right’ is simply not enough. Noblesse oblige – but only if noblesse veux.

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CONCLUSIONS We have in the previous section presented what we believe to be some of the most important and policy-relevant aspects of the eight national case studies. We have been careful to warn the reader that our profiles are highly selective with respect to the wealth of perspectives and insights available in the individual studies. We repeat, therefore, that the major lesson of the book lies in the studies themselves. We have abstracted out specific features of the national contexts, but the essence of understanding what ‘works’ for RES-E – where, when and how – lies in the totality of each national storyline. It is important to stress that, while we have asked all the authors to focus on the implementation of the RES-E Directive, the material that is presented goes much deeper into energy-policy issues, and is, therefore, relevant in a broader context than the directive itself. In line with the SUSTEN project design, however, it has been our task to choose an analytic approach that focuses on what we see as a critical issue in the discussion of alternative energy promotion: the necessity to combine the contextual effects adhering to specific national energy systems with the generalizing insights of techno-market promotional schemes. We have portrayed the approach in terms of a simplified interaction between four types of ‘variable’, and we have used the terms ‘path dependence’ and ‘path creation’ to capture the contextual dynamic within which technomarket instruments must function (Figure 1.2). This dynamic has guided the selection of ‘lessons’ for the national profiles, and we feel that the materials themselves, backed up by the complete studies, demonstrate the dynamic in practice. Promoting RES-E in Europe is, in this light, a matter of combining the most robust insights on promotional schemes in general, with the contextual and conditioning insights of transcending energy path dependence through alternative energy path creation. In drawing the study to a close – and with a hope that the implications of the approach will have the widest possible influence on the promotional problematic – we conclude by briefly sketching the relevance of the analysis for two vital discourses for RES-E development: the conceptual nature of the promotional framework and the political role of the EU. Integrating RES-E in Europe: Expanding the Implementation Framework As pointed out in the introductory chapter, there was, at the outset of the SUSTEN project, little specific research done on the implementation of RES-E in Europe. Further, the research that was contracted at the time, in the immediate wake of the adoption of the RES-E Directive, was primarily focused on what we have referred to as the ‘techno-market’ promotional

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model. This preference was, of course, largely driven by the prescriptions and implementation goals of the Directive itself. But, as we have argued, it was also a direct reflection of the European Commission’s own convictions and knowledge base (as specifically set forth in the REMAC 2000 project OECD/IEA 2003). During the course of the SUSTEN project, numerous results from the initially funded projects have appeared, and these have gradually been complemented by additional RES-E projects funded by other bodies. We have earlier referred to what we believed to be the most relevant projects at the outset of SUSTEN (Chapter 1); and would like here to add references to those studies that have appeared since the start of the project, and that are of particular relevance for the promotional discourse. The major thrust of the following studies is on the general nature and apparent effects of the different promotional schemes: Böhringer et al. (2006); Gan et al. (2007); Harmelink et al. (2006); Held et al. (2006); Huber and Morthorst (2003); Lund (2007); Menanteau et al. (2003); Muñoz et al. (2007); Uyterlinde et al. (2007); and Verbong and Geels (2007). The following studies, while not ‘contextual’ in the sense applied here, all contain perspectives of direct relevance for an ‘expanded’ and more ‘balanced’ policy discourse: Cowell and Strachan (2007); del Rio (2005); del Rio and Gual (2004); Foxon and Pearson (2007); Fuchs and Arentsen (2002); Jansen and Uyterlinde (2004); Johansson and Turkenburg (2004); Lauber (2001); Meyer (2003); Midttun and Koefoed (2003); Reiche and Bechberger (2004); and Verbong and Geels (2007). The insights from all of these works will have to be integrated into an emerging, more context-sensitive, framework. At the present juncture, however, we feel that the two major analytic perspectives applied in the present work – path dependence/path creation and the interaction between dominant and competitive ‘technological regimes’ – offer the greatest promise for integrating the techno-market and contextual approaches. We shall, ourselves, be working with a further systematization of the pathdependence/path-creation approach (along the lines staked out by Garud and Karnøe 2001, 2003), and shall continue to monitor closely the work on technological regimes being done in the Netherlands (Berkhout et al. 2004; Geels 2002; Hofman 2005; Kemp 1997; Kemp et al. 2001, 2005; Kemp and Loorbach 2006; Polatidis et al. 2003; Voss et al. 2006; and Voss and Kemp 2006). In relation to both of these tasks, however, we want to conclude this section by drawing attention to what we now see as a major common reference for the future discussion: the work mentioned earlier in this chapter by Karl Mallon (2006). In his work on Renewable Energy Policy and Politics, Mallon combines an academic training in physics and renewable

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energy, with leadership experience from Greenpeace and the World Bank, along with an extensive portfolio of consultancy and project responsibility around the world. His book is subtitled A handbook for decision-making, but it is much more than that. While his perspective is scientific–analytic, his experience and empirical focus are extensively ‘hands-on promotional’. Space does not allow us to go into detail on the wealth of insights and strategic proposals contained in the first five chapters of Mallon’s book (the other six chapters, written by national experts, cover RES experiences in the UK, USA, India, Spain, Germany and Cambodia). Suffice it to say that Mallon has provided a framework that touches on nearly all of the issues raised and researched in the above lists of RES-E references. At the same time, however, he specifically incorporates the essence of what we have been trying to demonstrate and communicate through the SUSTEN project. His framework is, therefore, exceptionally ‘synthetic’ with respect to the alternative approaches focused in the present study. Mallon’s task is not to develop sophisticated theory, but to present as comprehensive an overview of the critical factors affecting RES deployment as possible. He thus provides a framework for ‘policy discourse’ in the most promising sense of that term. To briefly illustrate the scope of the approach, we present in Box 10.2 a list of what Mallon refers to as ‘myths, pitfalls and oversights’. The perspectives and issues raised under these critical categories are then used by Mallon to generate a more proactive ‘checklist’ of ‘Ten features of successful renewable markets’. Each point on the checklist is elaborated by means of specific questions that focus acutely on the necessary conditions to promote the positive effects of the designated feature. Subsequent chapters then look at the crucial roles of stakeholders and ‘the politics of achieving legislation’. It is in the crucial interaction between these two categories of actors that Mallon finds the most significant potential for broad-based and robust change. His perspective on stakeholders focuses on issues related to conflicts and potential synergies among competing technological regimes, and his view of politics and legislation is specifically directed towards refuting the ‘hands-off (by government) myth’. By drawing attention to the crucial role of central government in establishing positive conditions for RES promotion, Mallon places politics and traditional ‘governing’ in a position that automatically directs attention to the specifics of national political constellations. In his view, the refutation of the ‘hands-off myth’ through an acknowledgement of the role of governments involves the refutation and correction of all of the other ‘myths’. As for Mallon’s ‘policy pitfalls’, we return to them in the next section, and conclude here by emphasizing the synthesizing importance of the ‘oversights’. While two of the ‘oversights’ are directed towards the type of specific

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BOX 10.2

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KARL MALLON’S ‘MYTHS, PITFALLS AND OVERSIGHTS’ IN RES POLICY FORMATION

Myths The technical myth: the price of renewable energy will be reduced by technical breakthrough The myth of the righteous: a good idea will always succeed and intervention is unnecessary The hands-off myth: government intervention only undermines the proper working of markets The money myth (I): renewable energy is more expensive than thermal power The money myth (II): renewable energy is more expensive and capital intensive, the best governments can do is to throw money at the problem Policy pitfalls Underdefined objectives Cross-cutting objectives Inadequate resource and/or technology identification Incorrectly targeted measures Opaque incentives Boom and bust – a lack of policy and market stability Inadequacy/excessive fiscal constraint Oversights Absence of contextual frameworks Energy market reform and access Poor risk/cost–benefit distribution Absence of commensurate planning and planning reform Source:

Mallon (2006: 5–33).

issues that have been raised and researched under the direction of the EU Commission – ‘Energy market reform and access’ and ‘Absence of commensurate planning and planning reform’; the other two – ‘Absence of contextual frameworks’ and ‘Poor risk/cost–benefit distribution’ – are directly related to the more substantive issues of path dependence/path creation presented here. Mallon has, in other words, presented a comprehensive

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conceptual framework for working further on the development of more context-sensitive techno-market promotional schemes. The Political Role of the European Commission Finally, in turning our attention to the political role of the European Commission, we refer to our earlier critical comments on what we have perceived as a bias in the Commission in its handling of the RES-E problematic. The first aspect of this bias has already been outlined in the introductory chapter, where we pointed out that there was a documented tendency toward ‘single-market’ solutions in the Commission’s run-up to the RES-E Directive. In short, the Commission has given priority to those instruments and schemes that are most compatible with the goal of incorporating RES-E into the values and mechanisms of commoditization and market integration. This aspect of Commission bias is ‘endemic’ to the nature and function of the Commission within the constraints of the Single Market Act, and should be neither surprising nor normatively problematical from a ‘constitutional’ perspective on the European Union. As indicated in the introductory chapter, it was this aspect of the Commission’s role in formulating the RES-E Directive that originally motivated our interest in an alternative approach to the implementation challenge. In the course of our analysis, however, we have also become aware of another type of bias on the Commission’s part: a bias related to the Commission’s role as ‘monitor’, ‘evaluator’ and overall ‘promoter’ of RESE implementation. This awareness first emerged as a general reaction to the different profiles of the prescribed assessment reports, where we felt that the focus of the reports moved from an earlier interest in a relatively broad assessment of the diverse conditions affecting techno-market deployment (for example, the assessment in 2004 – CEC 2004) to a more limited emphasis on those factors that pointed towards Community-wide ‘harmonization’. Again, this could be interpreted as consistent with the overall role of the Commission, but what we reacted to was the implication of such a practice within an evaluation framework. If evaluation by the Commission is solely designed to find support for a predetermined policy line, then such differences are understandable. If, however, evaluation is designed to discover and communicate the best possible knowledge for promoting RES-E as a matter of effective and ‘robust’ change, then any deviations from consistent and ‘objective’ norms become questionable. And the more we probed the general lines of the most recent Commission assessment (CEC 2007b) in relation to the results of our national case studies, the more questions emerged. We were particularly surprised by the treatment of Austria, and particularly disappointed in the

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lack of substantive explanations for why the other rankings had been assigned. In the end – and, again, with reference to our reading of Mallon (2006) – we came to the conclusion that the ultimate assessment by the Commission was not only biased towards techno-market promotion, but was also conceived and carried out in a spirit of centralized standardization. In this view, the Commission has moved to place nearly all emphasis on the very specific demands of the RES-E Directive itself: indicative targets and the removal of infrastructure and administrative barriers through ‘one-size-fits-all’ admonitions. We thus feel that both the substance of the Commission’s assessment procedures, the individual rankings of the Member States and, most crucially, the list of ‘priority points for action’ – all reflect a very ‘instrumental’, ‘target-steered’ approach to implementation. While we clearly have nothing against the setting of targets within any area of governance for sustainable development, we have, on the basis of our study, become much more conscious of the potential ‘downside’ of this type of emphasis. Here too Mallon (2006) offers structured insights through his identification of ‘policy pitfalls’ (Table 10.3). Without going into detail, we can simply say that questions can be raised under every one of his ‘pitfalls’ with respect to the overly ‘centralized–standardized–instrumentalist’ approach of the Commission on RES-E promotion. This does not mean, of course, that what the Commission arrives at through its assessment is necessarily ‘wrong’. This is clearly not the case, since its perspective is advised by a number of very solid research projects and consultations. What we feel, however, is that the general thrust of the Commission’s conclusions and ‘priority’ recommendations is steeped in an orientation that views – and tries to promote – implementation within an overly abstract and ‘externalized’ conceptual frame. The problem here is similar to the long-standing debate in education, where one set of interests tends to overemphasize the role of standardized national and international ‘tests’ in assessing student progress to the detriment of what another set of interests views as more holistic, contextual, and individual-based assessments. Such an observation can, of course, be criticized as categorical and relatively simplistic. Two aspects of the present approach oppose such an interpretation: (1) the clear contrast between the results of our case studies and the results (and recommendations) of the Commission assessment; and (2) the nature of Mallon’s catalogue of pitfalls, all of which reflect context-sensitive qualifications to the notion of ‘one-size-fits-all’ promotional schemes. The ultimate aim of the RES-E Directive must surely be to achieve wellfounded and stable technological regimes; regimes that are directly and explicitly associated with national strategies for sustainable development, and that are socially, culturally and normatively integrated with local and

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regional communities. The pursuit and monitoring of externally standardized targets and goals can and should be an important part of this challenge, but not at the expense of evaluative transparency, objectivity and, in the end, solutions that contribute to the type of consequential and ‘tenacious’ change that is clearly necessary for achieving sustainable production and consumption. Fortunately in this regard, several of the research efforts sponsored by the Commission contain empirical analyses, lessons and recommendations that provide important insights into the types of pitfalls outlined by Mallon, and that in essence are much more context-oriented than the Commission itself gives expression to. One of the most comprehensive of these is the OPTRES project, which delivered its final reports in 2006 (Ragwitz et al. 2007 and Resch et al. 2007). We find here numerous perspectives and conclusions on RES-E support schemes and barriers that point in the direction of a strong emphasis on greater interaction between the techno-market approach and the exigencies of national and regional contexts. One can only hope, therefore, that the Commission, in its forthcoming recommendation (early 2008) on the need for a more ‘harmonized’ scheme, will pay heed to one of the many admonitions of the OPTRES project: Given the large diversity of support instruments applied throughout the EU, it is impossible to highlight one specific instrument as being the best support instrument in all markets under all circumstances. The specific design or implementation of the instrument rather than the type selected is decisive for the success of the instrument in promoting renewable energy developments. (Ragwitz et al. 2007: 17–18)

‘Decisive’ it is indeed. As it now stands, however, there are numerous indications that the Commission may choose to focus on those aspects of promotion that represent a ‘least common denominator’ across the vast diversity of the European Economic Area. If so, the EU risks stumbling into several possible ‘pitfalls’, where the ‘best’ for the Union in general becomes a boomerang for substantial progress on sustainable energy. Over the long term, any solution to the challenge of seriously increasing the share of RES-E in Europe that builds solely, or even mainly, on ‘top-down’ technological dominance and abstract market steering, risks losing such vital ‘internal’ dynamics as transparency, citizen insight and acceptance, and, most crucially, community ownership and commitment. Bringing in the contextual perspective is, therefore, not just a necessary condition for reaching the targets and goals of the RES-E Directive; it is a key premise for consequential democratic decision-making in the service of sustainable development in Europe.

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NOTES 1.

2. 3. 4.

5.

6. 7.

8. 9.

10.

11. 12.

Position papers and other documents are available for all associations at their respective websites: EREC (http://www.erec-renewables.org/); EWEA (http://www.ewea.org/); EREF (http://www.eref-europe.org/); EURELECTRIC (http://www2.eurelectric.org/); IFIEC (http://www.ifieceurope.org/). See the article entitled ‘Piebalgs reveals support for renewables trading’ (ENDS 2007). The other five states are Cyprus, Greece, Ireland, Italy and Latvia (CEC 2007a: 18). The one exception (if it is an exception) is to the Ernst and Young ‘Country Attractiveness Index’ for investing in renewable energy. Available at http://www.ey.com/ GLOBAL/content.nsf/International/Oil_Gas_Renewable_Energy_Attractiveness_Indi ces. The principal projects that underlie the RES-E assessment appear to be Green-X, PROGRESS, Optres and FORRES. In addition to the structured accounts provided by the case studies, we have also consulted two parallel collections of national overviews of renewable energy more generally: the excellent Handbook of Renewable Energies in the European Union, edited by Danyel Reiche (2005); and the comprehensive overview of Renewable Energy: Market and Policy Trends in IEA Countries by the OECD/IEA (2004). These sources have been extremely important for controlling the enormous amount of detail attaching particularly to the documentation of energy systems and promotional schemes. Note that the ‘EU assessments’ are all direct citations from the 2007 report (CEC 2007b: 7–9). Another facet of this aspect of the Dutch case is the apparent confusion that existed for a number of years with respect to the indicative target. As indicated by Arentsen, there appeared to be an opinion in the decision-making community to the effect that the goal of the target was to increase consumption of RES-E, when in fact the goal (and the target) are about increasing production of RES-E – as a proportion of overall electricity consumption. In addition to the sources cited, the perspective here builds on the excellent collection of Nordic energy studies by Kaijser and Hedin (1995), and particularly the work on Denmark of Hvelplund (1995, 2001). We note that the ‘SETREC Digest Report of RES-E in Finland’ (Burgers et al. 2005) uses the term ‘feed-in tariff’ to describe the Finnish tax rebate to consumers for purchases of RES-E. We follow here the conventional understanding of a FIT (as defined in the SETREC|GO ‘Glossary’, p. 27): ‘A statutory arrangement regulating the price paid to generators selling electricity into grid networks.’ Sweden has currently an indicative target of 55.2 per cent of gross electricity consumption from renewables by 2010. This target is the outcome of a compromise between the original allocated target of 60 per cent as per 2001 and a proposed level of 52 per cent that the Swedish government put forward in 2004 as a more reasonable target (see Chapter 8). The RES-E Directive formally entered into force on 1 September 2006, and Norway is not included in the EU Commission’s latest evaluation. However, to enable a comparison, we will point to similar major features characterizing the current situation in Norway. Whether or not Norway (or any of the other major hydro-producing states) has met its target in 2010 will clearly depend on which level of achievement is chosen: either ‘achieved penetration’ or ‘normalized penetration’ (see Table 1.7). Using a time series for ‘normalized penetration’ over the period 1997–2006 (Table 9.2 here), the achievement levels vary between roughly 90 and 98 per cent. A similar time series over ‘achieved penetration’ for the same period (from the official regulator Statnett) shows a variation between 91 and 100 per cent. Given the medians for both series, and ‘other things being equal’ vis-à-vis trends for consumption and precipitation, there is no reason to assume that Norway could not exceed its target of 90 per cent in 2010. Given the lack of any serious sanctions, however, the possibility is present for Norway to export ‘green electricity’ in sufficient amounts to miss the indicative target.

326 13.

14.

Promoting sustainable electricity in Europe The official price tag for the carbon ‘cleaning’ projects at the Kårstø and Mongstad gas installations is projected at billions of Norwegian kroner. Fully effective ‘cleaning’ will not take place until about 2015 at the earliest. In the meantime, the EFTA Surveillance Authority (ESA), which monitors relationships between the EU and Norway, Iceland and Liechtenstein, has issued preliminary signals to the effect that the Norwegian ‘clean and store’ initiative is most probably at odds with subsidy-forbidding provisions of the European Economic Area agreement. Exchanges of documents and negotiations are currently underway (November 2007) between the ESA and the Norwegian Ministry of Petroleum and Energy. The new opera building in Oslo does, however, have an integrated PV facility as part of its impressive marble façade. The initiative is not, however, a result of Norwegian promotional schemes – but of a grant from the EU programme ‘ECO-Culture’.

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Index abstract market steering 324 Action Plan for Renewable Energy, Finland 171–3 additional premium for green labels 62 administrative procedures of the Directive 12 affluence of Spaniards 136 Agreement in the European Economic Area (EEA Agreement) 251 agricultural policies and energy policies 69 agriculture, intensive, in Netherlands 69 air-conditioning, Spain 136 Airtricity, wind energy retailer 109–10 ‘all-island’ energy approach 125 All-Island Energy Market, Ireland 121–2 Alternative Electricity Requirement (AER), Ireland 109 alternative energy generation, Sweden 238–9 Alternative Energy Requirement (AER) 113 ‘alternative movement’ 58 Andalusia 148, 152–3 wind energy targets 149–53 wind promotion 302 Arklow wind farm, Ireland 116 Association for Photovoltaic Industry, Spain (ASIF) 148 Association of Electricity Producers, Netherlands (SEP) 52 Asturias 148 atomic power 75 Denmark 80 ‘Auken regime’, Denmark 76, 78, 295–7 Auken, Sven, Social Democrat, Denmark 76, 78 ‘godfather’ of wind power 295–7 Austria 189–215

exporter of electricity technology 195 negative treatment 284–5, 287 rebuilding after World War II 197 Austrian Bioenergy Centre research funding 210 Austrian Biomass Association 197 Austrian Strategy for Sustainable Development 209–10 ‘autarchy’, Spain 133 authoritarian government, Spain 300–301 autonomous communities, Spain 150 RES-E promotion 143 role of 147 targets 145 tension with Spain, 302 barriers 282 and instruments 25–38 to RES-E deployment 27 to target-achieving 288, 289 Bay of Cadiz, oil exploration 131 bias in the European Commission 322 biodiversity, concern for 263 bioenergy Finland 160–64, 306 as source of heat 256 Sweden 223–4 bioenergy crops, through agriculture 183 bioenergy developments, Austria 308 bioenergy innovations 180 biofuels 162 Finland 170 biogas 5, 84, 239 Austria 190, 192 cooking stoves 239 industry 89 solar heating and 96 biomass 1, 5, 32, 55, 69, 94 co-firing 69, 113, 115

331

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constitution of 241 definition of 6 Finland 303 heating plants, Austria 191–2, 213 as major option, Netherlands 52, 58–9 Norway 255 Spain 138, 141 biomass emissions, cancer-causing 205 biomass-fuelled CHP plant 108, 118 biopower 28 bird deaths from wind turbines 88 black liquor, pulp industry by-product 162, 170 boiler technology 170 Bra Miljöval programme, Sweden 236 ‘bricolage’ 296 business leaders, pro-nuclear, Sweden 233 business lobbies, influence of 125 business organizations, Denmark 79 business representation, Ireland 110 Cambodia, RES experiences 320 Canary Islands, oil exploration 131 cancer-causing emissions 205 Cantabria 148 carbon Austria 306–10 Finland 303 carbon capture and storage (CCS) 257, 273 carbon dioxide (CO2) carbon dominance Denmark 293–7 Ireland 297–300 Netherlands 292–3 Spain 300 carbon-replacement technologies 317 carbon tax 119, 125, 237 debate, Ireland 126 on energy use 311 Finland 173 Castilla y León, political vision 147 Catholic-agrarian ethos 298 cattle breeding, intensive, Netherlands 69 ‘Celtic Tiger’, Ireland 102, 104, 298 centralized approach of Commission 323

chemical quality of water 204 Chernobyl accident 46, 56, 95, 194–5, 219 effect on Sweden 312 citizen acceptance 324 Civil War, Spain 133 clean-coal technology 123 climate change 1, 149 and hydropower 312 policies for 267–9 Climate Committee 2000 231 CO2 emissions increase in Spain 132, 135 reduction 76 CO2 storage 46 coal 46, 102 lack of, Ireland 107 Netherlands 46–8 Spain 132 coal-based electricity 225 coalition government Ireland 111 Netherlands 51 coal-powered combustion plants, Finland 159, 161 coastal wind farm, Andalusia 134 oastal winds 151 co-firing of biomass in coal plants 59 co-generation of biomass in industry 255 cold climate, Finland 159 combined cycle gas turbine (CCGT) 125 combined heat and power (CHP) 50, 83 Sweden 223 technology 161 combustion of waste stocks 6 commercial interests 149 commitment avoidance, Austria 308–309 commitments to work together, Ireland 122 committee of inquiry, Sweden 231–2 commoditization 322 communal ownership of wind farm sites 153 ‘communitarian’ society, Republic of Ireland 298 community commitment 124, 324

Index community opposition to hydroelectric plants 161 community-owned wind-energy projects 117 companies related to RES-E 262–3 compensation for environmental costs 62 for green electricity 62–3 for production costs 63 competitiveness of Finnish industry 166 innovation programme and (CIP) 282 conditioning influence 17 conflict 2 over gas pipelines, Ireland 108 conservationist NGOs 271 Constitution of Ireland 111–13 consultation in Irish government 120 consumption of energy, Spain 131, 137 contextual frameworks 321, 324 contracting initiatives 203 cost competitiveness 113 cost-benefit criteria 23 Council of European Energy Regulators (CEER) 29 craftsmen, small-scale 297 cross-border grid connections 283 Danish Energy Authority 82–90, 96 Danish Environmental Protection Agency 96 Danish Nature Preservation Foundation 88 Danish Power Suppliers’ Association (DEF) 82, 83 Danish Research Centre for Nuclear Power 75 Danish Society of Wind Turbine Neighbours 88 Danish Wind Power Association 89 demand-pull approach 235–6, 312–14 demonstration projects, Denmark 92 Denmark and EU RES-E Directive 87 success story 73–99 world leader in wind energy 293 dependence on imported fuel, Ireland 104, 115 ‘dependent development’ 102

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deregulation of electricity market 274 DES see dominant energy system 21, 24 developing countries, technologies for 213 dioxins 59 Directive on RES-E promotion 11 Directorate General for Transport and Energy (DG TREN) 9 domestic technology, Finland 170 dominant energy system (DES) 19–22, 124 Denmark 84–5 of Member States 281–2 Norway 252–7 double-brake system, in wind turbines 79 drought in southern climes 312 in Spain 301 Dublin Bay wind farm plan 116 Durkheim, Emile 17 Dutch electricity industry and ‘renewables’ 45–9, 67 policy goals 60–61 Dutch Energy Council (AER) 54 Dutch energy policy, control of central government 49–54, 60 Dutch, lack of progress in RES-E promotion 54–6, 68 Earthwatch (Friends of the Earth, Ireland) 110 eco-effectiveness 23 eco-electricity 147 Eco-Electricity Act (2002), terms 200–201, 204, 206 amendments to 201–202, 204 eco-electricity program ÖKOP, Austria 209 Ecologic Council 88 ecologists against wind turbines, Andalusia 152 economic competitiveness 2 Finland 304 economic development 2, 106 of Spain 130 economic growth, fast, Ireland 298 Edenderry Power Ltd 115 Edison, Thomas 45

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EFTA see European Free Trade Association EL90 Committee 231 electricity cheap in Spain 136–7 environmental labelling 235 green, in Europe 1–40 for heating, Norway 252 Netherlands 53, 66 renewable 133–5 reporting the origin of 173 Sweden 221, 243, 314 trade in 224–5 Electricity Act (1999), Ireland 112 (1989), Netherlands 50 (1998), Netherlands 50–51 electricity companies, 148 electricity consumption, 91 definition 285 growth in 145 increase in, Norway 250 rapid rise, Spain 135 electricity from renewable sources 33, 37, 83, 102 Austrian method 199–200 Denmark 84 Spain 144 electricity-grid system Ireland 106 Norway 262 electricity importer, Netherlands 46 Electricity Information overview 285–7 electricity-intensive and non-intensive 241 electricity interconnector, Ireland and Wales 123 electricity market European 104 Ireland 105 liberalization 49 price 30 Electricity Market Act, Finland 161–2 electricity prices, low in Sweden 233 electricity production Denmark 82 Finland 168–9 by fuel 74 Norway 254 profiles, EU 7

Sweden 232–3 tax 173, 174 electricity sources in Finland 163 electricity suppliers, licence fee 236 Electricity Supply Board, (ESB) Ireland 106–107 electricity system ‘central-station’ 45 Dutch 48, 49 Spain, modernization 133–5 electricity trading as commodity 162 Nordic countries 225 electric power trading 266 ELKRAFT, Denmark 82, 83 ELSAM, Denmark 82, 83 embeddedness 19 emission reduction 119 emissions of NOx 267 employment in windpower 140 employment boosting in midlands of Ireland 115 EnergieNed (Netherlands) 51–4 Energy Act of 1999, Norway 265–6 energy and political agenda, national 106 Energy Camp, Denmark 89 Energy Commission 1995 231 energy companies Denmark 89 Finland 168–70 energy consumption reduction 145 Spain 301 Energy Contracting Programme, Upper Austria 209 energy conversion in electricity 49 energy demand in Sweden 220–21 energy dependence in Spain 131–8 Energy Economic Group 28 energy efficiency 203 in electricity 49 Ireland 114 energy imports 102 energy innovation, fossil fuel 68 energy-intensive industrial production 159 Energy Market Authority (EMV), Finland 165

Index energy-market liberalization 109 energy markets 321 internal, Austria 204–5 Energy Markets Inspectorate, Sweden 231 energy path dependence 279–326 Energy Plan for Upper Austria, ‘Energy 21’ 76, 208 energy policy 1, 50 control by unions 234 Denmark 73 Finnish 160 Ireland 109, 111 Norway 251, 259 Sweden 231 Energy Policy Bill (2002) Sweden 219, 235 energy prices 106 energy production 87 energy resources, renewable 2 Spain 131–3 energy system alternative 290 Denmark 74–82 dominant 37 existing 17–18 Finland 164–70 national 18 regional-local 19 energy tax 162, 173, 237 exemption from 62 energy technologies Austria 190, 195 new 89–90 ‘energy transition’ 49 energy use limitation 260 energy, primary consumption, Spain 131–3 Enova SF 259–61, 269, 315, 316 enterprise-focused government 125 Environmental Assessment Unit (EAI), Denmark 78 environmental degradation in Austria 190 environmental hazards 59 environmentalism 106 costs of wind-based electricity 57 criteria 236, 237 factors and electricity market 104–105

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goals, conflicts, Austria 204–205 groups 64 resistance from 149 Irish 102 permits 165 pressures 108 responsibility 113 environmental movement Finland 171 Norway 257 Spain 149 Environment Management Act 203 Essent, Dutch electricity company 50 green label granted 64 ethno-religious political conflict, Ireland 297–8 European Commission assessment of progress 281 assessment of targets 35–6 political role 322–5 European electricity supply policy 106, 126 European Environment Agency (EEA) 25–28 European Free Trade Association (EFTA) 251–2 European integration 106 European legislation on competition 204 European Union Habitats Directive 110 European Water Framework Directive 207 evaluation by the Commission 322–23 evaluation reports 12 experts on issues and policy 231 Federal Act on Promotion of Environmental Protection, Austria 203 Federal Electricity Act 1998, Austria 199–200 federal system, Austria, challenge of 213 Federation of Process Industries (PIL) 261 feed-in tariffs (FITs) 10–11, 30, 147, 263, 301–02 2010 target 121 Austria 200–01 role of 280

336


fermentation systems, agrarian sector 58 finance institutions 148 for renewable energy 109 financial support 153 for RES-E 150 for targets 204, 206 financing, third-party 203 Finland 159–84 imports 164 independence from Russia 304 industry, and national energy policy 168 national energy profile 160–64 political parties, on renewable energy 167 target for renewable energy 160 firewood 169 fishing and farming activities, compensation 161 fishing industry against offshore projects 153 Galicia 152 flooding 59 flue gas desulphurization 195 foreign dependence, Austria 190 foreign direct investment 102 foreign ownership in Swedish electricity 226 foreign takeovers of Dutch electricity production 49 forestry industry Finland 159, 168–70 powerful 303 Sweden 223, 311 technology 161 Fortum (Energy Company) 238 fossil-based thermal system 46 fossil fuels 1, 4, 56, 68 dominance 37–8 Finland 160–64 Ireland 105, 297 Norway 275 reduction of dependence on 73 Spain’s lack of 131 Sweden 220 Franco dictatorship, Spain 133 free-market approach 11, 204, 280 Friends of the Earth, Finland 171

Friends of the Irish Environment (FIE) 110 fuel importation, dependence on 102 fuel mix 106, 124 Ireland 125 funding for energy research 91 Galicia political vision 147 wind energy targets, success 149–53 wind promotion, success 302 gas consumption, Spain 131 gas-fired power plants, Norway 273 gas for Irish electricity 107–109 gas reserves, Netherlands 46–8, 53 gas-turbine project, Norway 271 geographical situation of Norway 272 geothermal energy 1, 5, 6, 28, 32 Germany demand for wind turbines 95 and Nord Pool 225 RES experiences 320 GHG see greenhouse gas globalized society, Ireland 102 global warming 95 goals of RES-E Directive 12–13 Gothenburg agenda 1, 2, 119, 125 governance framework, RES-E Promotion 147–9 governments, policies on RES-E Austria 193 Denmark 94 Finland 171–80 Norway 257–9 Spain 142–8 support of R&D 303 Sweden 230–31 governmental organizations, Finland 166–8 ‘grass-roots movement’ on RES technology 80–82, 198 green certificate scheme 60, 170, 263 Norway 268 green electricity 1–40, 112 Austria 213 European market for 62 Netherlands 51, 70 Norway 258

Index greenhouse gas (GHG) emissions 3, 4, 104 pulp and paper industry 234 green label system 62 Green League (GL), Finland 165 Green Paper on Sustainable Energy, Ireland 119 Green Party, Austria 194, 198, 212 green power, certification schemes 236–7 Greenpeace 88, 320 Greenpeace Nordic 171 grid connections agreements for wind 120 Ireland 117 to other countries, Spain 135 grid integration 12 grid modernization 134 grid operators 231 ‘Hainburg confrontation’, Austria 197 Hammarby Sjöstad, ecological urban district 238–9 hard coal 169 harmonization 10, 11 ‘harmonized support schemes’ 281–3 Havsul offshore wind-power project 271 hazardous prevention 59 heating installations 196 heating sources in Norway 256 heating system in towns, Finland 164 high-tech challenge 79 house construction for solar energy 255 housing in Sweden, energy efficiency 220 housing services 231 hydrocarbons 131 hydroelectrics 1 dominance Austria 306–310 Norway 314–17 plants, Finland 160 schemes in Ireland 107 hydro power 5, 84, 102, 241 Austria 189, 191, 194, 197 Europe 62 Finland 160, 163,169, 303 Ireland 107

337

large-scale 32 legal structure 264–5 Netherlands 59 Norway 250–4, 261, 265 Spain 132, 133, 137–8, 300 to wind power 138 Sweden 222 hydropower, large-scale 6, 36 Austria 212–13 Finland 305 Norway 273 Iberian Peninsula, wind conditions 150 Iceland, EFTA country 251–2 immigration into Spain 136, 137, 301 implementation framework, expanding 318–22 import-dependent energy system 131 Ireland 102, 103, 105, 298 imports to Netherlands 60, 61 incentives 30 and policies for renewables 235 incineration 69 India, RES experiences 320 industrial competitiveness 231 industrial corporations 148 industrial heat pumps 51 industrial liquors 162 industrial organizations, Denmark 79 inertia in DES 19, 21, 22 inflation fears, Spain 137 infrastructure expansion for windpower 140 innovation of RES-E 269–70 in environmental technology, Austria 195 policy Finland 179–80 Norway 269 vertical and horizontal 211–13 Institute for Energy Diversification and Saving (IDAE) 148 integration 126 Intelligent Energy Europe Programme (IEEP) 29 international competitiveness 79 international developments 95 International Energy Agency (IEA) 13–14 international pipelines 131

338


investment environment, stable 67 investment incentives 31 Finland 176, 303 private, on wind power 150 investor confidence 148 investor enthusiasm for electricity sector, Spain 134 Ireland 102–126 absence of defined goals 118 economic growth 102 regional case studies 114–18 and wind power 299 Irish governments, north and south 299 Irish Peatland Conservation Council (IPCC) 110 Japanese technologies 195 ‘Kaplan turbine’, Austrian invention 195 Kyoto commitment 104 Kyoto Protocol 3, 108, 111–12, 125 greenhouse gas emissions 131 Spain 136, 143 Kyoto targets, meeting 4, 172 little progress, Ireland 125 landfill 59 legal restriction of 239 landfill gas 5 landscapes, disfiguring of, by wind power 204 land-use and spatial planning, Norway 259 for wind power 182, 183 legislation, new 282, 283 liberalization 106, 126 Denmark 85 of electricity market, Austria 198–9 of energy markets 195 in Netherlands energy policy 52–4 Liechtenstein, EFTA country 251–2 Lisbon Agenda 1, 2, 119, 279 local and regional integration 324 local authorities, Sweden 228–30, 238 local economy support 180 local group power in Netherlands 64

local resistance to RES-E production, Norway 263–4 to wind-power project, Norway 271 Mallon, Karl Myths, pitfalls and oversights in RES policy formation 321 Renewable Energy Policy and Politics 319–22 market-based system 49 marketing regime for RES-E 144 markets integration 322 liberalization of Swedish electricity 226 penetration 17 of wind power, Denmark 86 trans-European 5 Marx, Karl 17 material infrastructure 106, 124 measurement of progress 285 Member States, priority action areas 281–2 Ministry of Petroleum and Energy (MoPE), Norway 259 Ministry of Trade and Industry, Finland 166, 171, 179 Moneypoint coal-fired power station, Ireland 107, 108, 125 ‘motorization’ rate per inhabitant, Spain 136 mountain windfarms, environmental protests 151–2 multi-fuel base, Finnish energy 162, 164 multilevel policy coordination 69 myths in RES policy formation 321 National Atomic Energy Agency 75 national case studies 37 National Climate Change Strategy Finland 160, 170–173, 171 Ireland 119 national contexts 324 National Development Plan, Ireland 124 national energy agenda 124 national grid 124 national strategies for sustainable development 323

Index national targets 8–9 natural conditions for windpower, Norway 317 natural gas 46–8 from Algeria 131 Finland 16 line from Russia 161 market in Spain 131 Netherlands 66 North Sea 73, 83 plants 159 resources, Norway 250–51, 256, 257 Spain 154 natural resources abundance, Norway 271 utilization 165 nature conservation 6 in Finland 163, 304 Navarra, political vision 147 negotiation issues 4–5 Netherlands 45–71 New Electricity Market, Sweden 226 NGO see non-governmental organization ‘niche’ initiative, Austria 308 noise pollution from wind turbines 88, 164 non-governmental organizations (NGOs) 80–82, 110 influence in Austria 196–7 Norway 263–4 role of 234–5 Nord Pool ASA 266 trading market 225 transactions 274 Nordic electricity market 162 Nordic Power Exchange 98 Norsk Hydro ASA 270, 315 Northern Ireland 114 north-south electricity connector, Ireland 108 Norway 250–77 and the EU RES-E Directive 251–2 and hydropower 6 natural ‘gifts’ 317 Norwegian Electricity Industry Association (EBL) 261 Norwegian Technical University, Trondheim 315

339

Norwegian Water Resources and Energy Directorate (NVE) 259, 265 Norwegian Wind Energy Association (NORWEA) 261 nuclear campaigns 235 ‘nuclear disaster’ of Zwentendorf, Austria 197 ‘nuclear-free zone’, Austria 189 nuclear-hydro dominance, Sweden 310–14 nuclear power 1, 8, 52, 56, 65–6, 79 contested in Denmark 74–5 facility, Co.Wexford, opposition to 102 Finland 160–64, 169, 303 Green League against 165 in Netherlands 46 Spain 132, 133, 300 Sweden 219, 222–3, 227–9, 312 opposition to 223 Nuclear Research Centre, Risø, Denmark 295 nuclear versus alternative energy, Denmark 81 Nuon, Dutch electricity company 50 obligation for compliance 3 oceanic power 32 Ireland 108 offshore see also wind, windfarms fossil-fuel centre, Norway 315 gas exploitation, Norway 271 petroleum and gas, Norway 317 turbines, south of Dublin 116 wind parks 64–5, 69 in North Sea 51–2 Norway 270 research 91 Spain 140 Sweden 224 oil dependence 232 Finland 169 major producer, Norway 250 oil crisis, 1970s 102, 133, 161, 219 oil crisis 1973 54, 73, 74 olive oil industry, waste product 141 ‘one-size-fits-all’ approach 323

340


onshore wind parks, opposition 29 see also wind, windfarms onshore wind turbines, Netherlands 52, 63 opposition to global emissions of CO2 257 to wind turbines 181 OPTRES project 324 organic recycling 238–9 oversights in RES policy formation 321 ownership structure of wind farms, Galicia 153 partisan cleavages in Ireland 112 partisan politics towards RES-E 257–9 ‘partnership politics’ Ireland 298 path creation 17,19–25, 280, 297, 319 path dependence 17, 19–25,124, 289, 290, 319 Denmark 297 of dominant energy system 21, 22 first, second, third-degrees 20, 21 and independence, Ireland 105 Sweden 311 path dependence-path creation 27 path-dependent energy systems 23 paths, alternative 20, 21 peat 16,102 benefits local economy, Finland 169 from Ireland 107, 115–16, 297 peat-burning power station 108, 115, 125 petroleum 161, 253, 316 petroleum-driven economy, Norway 250–77 photovoltaic (PV) technology 32, 55, 63 Netherlands option 57–8 Norway 255 planning reform 321 Poland and Nord Pool 225 policy development in Irish groups 120–21 policy framework for RES-E, Norway 258–9, 264–9 political conflict on energy, Austria 192–4 political foundations in Sweden 227–8 political instability, Spain 136

political parties Denmark 76, 77, 78 Finland 165–6 Spain 142–47 support for renewables 227, 229 political strife 298 politics and energy sector, Austria 193 population rises in Spain 137 power distribution company, Denmark 75 power generation 159 power grid integration 182, 183 power sector, Sweden 230–35 precipitation increased in northern climes 312 increased, Norway 317 price of feed-in tariffs 302 primary energy, Spain 132 primary fuel mix, Ireland 103 private investment in RES-E 314 private investors in wind power, Spain 147 private property, free passage, Sweden 229 Production-Specified Electricity (PS) 236 profits for re-investment 82 project guide, To Catch the Wind 117 promotion of RES-E 23 Denmark 85 in Europe 279–326 Netherlands 61–4 Norway 268–9 in research projects 30 protests against hydropower, Austria 194 public bodies 148 public monopoly, Danish energy system 82 public organizations, Finland 166–8 public ownership 123 Public Service Obligation (PSO) 85 pulp and paper industries 159–60, Finland purchase contracts 134 quantity-driven mechanisms 31 quota obligations 30 QWERTY keyboard example 20

Index R&D activities in energy 270 expenditures and market development 95 support in Sweden 227 rainfall decline in Spain 137–8 REC quotas, Sweden 243 recycling 59 regional agencies 149 regional and local planning 231 Finland 165 regional concerns, integration 304 regional government, Sweden 228–30 regional levels in Norway 270–72 regional promotion of RES-E technologies 180 regulation of energy 311 regulatory issues 121 Denmark 85–7 REMAC 2000 project 28–9 renewable electricity certificate scheme (REC scheme) 239–42, 311 modifications to 241–2 renewable electricity production in Austria 205–207 renewable energy campaign, Irish 299 Renewable Energy Certificate System (RECS) 62, 267 Sweden 239–242 Renewable Energy Consortium, Austria 197 Renewable Energy Corporation (REC), Norway 263 Renewable Energy Development Group (REDG) 298 Renewable Energy Feed-in Tariff (REFIT) 113, 114 Renewable Energy Market Accelerator (REMAC 2000) 13–14 Renewable Energy Network Austria (RENET), research 210–11 Renewable Energy Partnership (REP) 117 renewable energy policies, Sweden 235–9 Renewable Energy Source-Electricity see (RES–E) renewable energy sources (RES) 2, 3, 5–8 Austria 202–3

341

certificates trading 267 for electricity (RES-E) 45 generation, ‘guarantees of origin’ 289 Ireland 114, 121 barriers to 110 legislation 203 neutral stance 171 policy formation 321 Spain 134 technologies 14, 56–9, 95 UK 320 renewable heating, Norway 256 research and development programmes, Finland 175–7 on RES-E 90–93 research in Austria 210–11 RES-E Directive of 2001, 3, 4–13 Austria 198–207 Denmark 78 Netherlands 60 resistance to promotion 64 new energy arena 88–90 progress in EU 15, 25, 33–8 Spain 138–49 success 73–99 targets, policies for 118–24 technologies 138–42 reservoir-based hydro 308 RES-E technologies(wind, biomass, photovoltaics, geothermal and small-scale hydro) 23–4 resistance to wind farm, Norway 271–2 resistance to wind turbines, Netherlands 63–4 resource diversification, Netherlands 46–8 ‘right-left’ politics in Europe, decline 2 right of access to nature, Sweden 229 risk distribution 321 Risø National Laboratory, Roskilde, Denmark 29 river ecology 59 riverine hydro 308 rural livelihoods, support 180 Russia and Nord Pool 225 Samsø island, wind turbines 92–3 scepticism about RES-E 76

342


Schumacher E.F., Small is Beautiful 80 Science and Technology Policy Council, Finland 179–80 security of supply 113 self-sufficiency in electricity, Norway 252 in RES-E, Danish islands 92 sewage treatment plant gas 5 Short Term Analysis Group (STAG) 299 silicon wafers export, Norway 316 Single Electricity Market (SEM) 125 Ireland 299 Single Europe Act (1986) 5 Single Market Act 10, 322 ‘single-market’ solutions 322 small hydropower 28 Small Hydropower Association, Austria 197 small-scale hydro Spain 141 Sweden 313 small-scale renewable energy, Austria 198 ‘smart-energy’ choices 149 social and cultural factors 65 social cohesion 4 social-democracy Denmark 296–7 Nordic governance 294 tradition in Sweden 234 solar cells 89 solar energy 1, 5, 55, 84, 255 Netherlands 57–8 solar photovoltaics 28 Spain 141–2 solar-thermal 28 Austria 308 space heating, electricity for, Norway 274 Spain 130–58 ecological fragility 154 RES experiences 320 recent political development 300 resource scarcity 154 Spanish Electric Power Act (SEPA) 143–4 Spanish Strategy for Energy Saving and Efficiency 143, 145 Spanish Strategy for Promoting Renewable Energy 143–4

Spanish Wind Energy Association 140 speciality steels 233 stakeholders 320 standardized approach of Commission 323 state (Land) level, Austria 307 state aid for environmental protection 204 state-sponsored projects, Finland 304 Statkraft, energy production, Norway 317 steam power from wood waste 160 Stockholm Waste Management Administration 238 Stockholm Water Company 238 structural variable 17 sub-national levels (Länder), Austria 207–209 subsidies 302 success of wind power in Denmark 94–6 sulphur dioxode emissions 161 sulphur taxes 237 ‘supply-push’ 312, 313 mechanisms 235, 236 support mechanisms for renewables 69–70 support schemes 260 Community-wide 9–11 sustainable development (SD) 1–13, 45, 49 Finland 178–80 Sustainable Energy Ireland (SEI) 119–20 sustainable resource management 238–9 SUSTEN project 279, 289 approach 27 case studies 37 model for promotion of RES-E 17 studies 319 SUSTEN research team 16, 17 Svensk Energi (Swedish energy) 234 Sweden 219–46 Constitution and access to nature 229 electricity system, governance 226–30 political parties on nuclear power 229 pulp and paper industry 233, 234

Index Swedish Bioenergy Association (SVEBIO) 234 Swedish Environmental Management Council (SEMC) 236 Swedish-Norwegian certificate system 268 cancelled 268, 269 Swedish Society for Nature Conservation (SNF) 236 Swedish Standard Industrial Classification (SNI) Codes 241 Swedish Wind Power Association (SVIF) 234 target for Denmark by 2010 87 target types and levels 8–9 targets binding 9 indicative 8, 9 of renewable energy production, EU 10 ‘target-steered’ approach to implementation 323 tax on electricity consumption 173, 174 exemption 51, 62–3 Finland 303 incentives 31, 204 policies, Sweden 237 rates for Finnish electricity 174 supports for renewable energy 17 taxation and investment support, energy 170 ‘technological regime’ in Austrian Länder 308 technologies development 106 of Directive 28 dominance, ‘top-down’ 324 performance, improvement 17 potential 153 regimes 290–91 dominant and competitive 319 technology programmes for energy, Finland 177 techno-market approach 13–25, 28, 29, 31, 289, 322 tendering systems 31 test station for wind turbines 91

343

thermal-based electricity system, Netherlands 45 thermal capacity 225 thermal effect 237 third degree path dependence 22 Three Mile Island 219 tidal energy 1, 5, 6 tidal power, Norway 256 tide-wave-ocean 32 Tönnies, Ferdinand 17 tourism Norway 271 Spain 301 tradable certificates 267, 268 tradable green certificates (TGCs) 5, 10, 11, 30–31, 280 trade groups, Sweden 234 transmission lines, construction 135 transparency 324 transport sector energy consumption 220 UN Agenda 21 229 unions, powerful in Sweden 234 United States demand for wind turbines 95 multinational companies 102 RES experiences 320 uranium imports 164 urban ecological district, Sweden 238–9 validity of RES-E 11 Vestas Wind Systems, Denmark 73 Vienna University of Technology 28 Vienna-Karlsruhe initiatives 29, 290 vultures killed by wind turbines 152 waste and biomass 51 incineration 58, 59, 69 products 205 watchdog agency for heating markets 231 water-based central heating 260 water basins, high standards 204 watercourse regulation, Norway 264–5 water-resource management 167 waterways, protected, Finland 163

344


wave energy 5, 6 research 92 wave power, Norway 256 Weber, Max 17 welfare state in Spain 130 wetlands, biologically diverse, Austria 194 White Paper on energy, Netherlands 54–6 Norway 267, 268 on sustainable energy, Ireland 123 wholesale and retail markets 226 wind deployment, crucial aspects 300 wind energy 1, 5, 28, 32, 51–2, 55 Ireland 104 projects, local 117 Spain 301 Wind Energy Association, Spain (AEE) 148 wind farm communities, fees 151 wind farms, offshore 271 east coast of Ireland 116–17 local oppposition to 110 urban, Dundalk, Ireland 116–17 west of Ireland 117–18 wind-generated electricity, Denmark 76 wind installations, Galicia 151–2 wind power 29, 94 and noise 239 and threat to birds 239 and visual impacts 239 wind power development Austria 191 in autonomous communities 145–7

competitive 125 Denmark 73, 80 Finland 164, 169 Gothenburg 239 Ireland 108 national and regional targets, Spain 146 Norway 254–5, 261, 265–6 on and offshore 84–5 promotion, Ostrobothnia, Finland 181 Spain 132–3, 139–41 Sweden 224 wind-turbine owners, Denmark 79, 80 wind turbines accidents 152 coastal, Andalusia 152 construction 170 development 88–9, Netherlands 56–7 exports 79 industry, Denmark 296 killing of birds 204–5 research 82 resistance 65, 66–7 wood 160 wood, benefits to local economy, Finland 169 woodfuels 162 Finland 159 World Bank 320 World Wide Fund for Nature (WWF) 64, 88, 149 WWF Finland 171

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