Industry’s Innovation Fund for NTNU Wind Power Developments in Denmark and Norway: A comparison Jørund Buen Department for Interdisciplinary Studies of

Industry’s Innovation Fund for NTNU

Wind Power Developments in Denmark and Norway:

A comparison

Jørund Buen

Department for Interdisciplinary Studies of Culture Norwegian University of Science and Technology

(NTNU)

“Strategies for Sustainable Energy Technology”

Workshop, Trondheim, 20-21 November 2003


Outline

• Different development paths

• Why the Danes have had success

• Why they could (have) fail(ed)


Strikingly different development paths

• Then: – Oil embargo (1973) both countries wished to

prevent energy shortage through new energy tech

• Now: – Denmark: 5,600 turbines, 2,880MW effect, +19 % of

electricity. Norway: 0– Danish turbine and blade manufacturers 40-50% of

growing global market. About 20,000 employees; turnover DKK 20 billion, mainly for export

– Norway: few, small and scattered subcontractors

• Why?


Available land? Wind resources?

• Norway: Europe’s 5th largest country, but fewer inhabitants than small Denmark

• No major local resistance in Denmark until late 1980s, but first major Norwegian projects ran into problems

• Norway in general better wind resources than Denmark


Possible explanations

• Political-industrial context: – Norway coercive, Denmark consensual?

• Nature of policies and measures: differences in support for dynamic efficiency?– Providing continuous (dynamic) incentives

for beneficial technological and structural change at company and sectoral level?

• Nature of environmental problem to be solved: – International vs domestic approaches to

climate problem?


Why the Danes succeeded1: Benign political-industrial

context


Political-industrial context 1: Research & Development

• Bottom-up, incremental, trial-and-error improvement

• Risø Test Station – Quality control, consulting, information exchange,

R&D

• Craftsmen first, engineers later– Technical high-schools, not universities

• 1976-96: DKK 100 million – 4.2% of world total, but ca 50% of world market…

• Funding stable organisationally and monetarily


Political-industrial context 2: Industrial structure (1)

• Embryonic phase: Small and medium-sized agricultural companies– Rooted in cooperative tradition– Used to produce solid machine– Other countries: space industry, large agricultural

and machine-building companies• Wind business piggy-backed on established

companies’ competence, supplier network and capital base– Vestas– Bonus– Nordtank (NEG Micon)– LM Glasfiber


Political-industrial context 2: Industrial structure (2)

• Close collaboration with network of (mostly) Danish subcontractors– Brakes, blades, controllers, nuts and bolts, hubs,

etc. – 2000-: Dominant players aim for vertical

integration – more of value chain in-house

• Horizontal information (and personnel) flow between competitors– Similar social, professional and/or

educational background– Discuss common technical challenges


Political-industrial context 3: Political window of opportunity• Energy crisis: Oil embargoes in 1973 and 1979

– Strongly dependent on imported petroleum products– However, strong public sentiment against nuclear

power– Energy security major role in early development of

wind power• Grassroots environmental movement provided

credible alternative to nuclear• Strong need for strong measures to stimulate

employment• Radical government

– Links to grassroots– Sympathetic to government intervention


Political-industrial context 4: Organisations

• Danish Wind Turbine Owners’ Association (1978)– Naturlig Energi: transparency, facilitated

competition– Negotiations with government– Manufacturer groups for sharing of experiences

• Danish Windturbine Manufacturers’ Association (1978)

• New Renewable Energy Organisation (OVE) (1976)– “Vindtræf” – meetings up to 4 times a year– Exchange of experiences


Why the Danes succeeded2: Adaptation to problem

types


Adaptation to problem types: Wind power’s shifting rationale

• 1975-ca 1990: Provider of energy security– Prevented oil and gas imports through increased

self-sufficiency

• Ca 1990-: Important part of domestic solution to greenhouse gas emissions problem– EU “bubble”: DK to reduce GHGs 21% by 2008-12– DK coal-based economy very GHG-intensive– Denmark now (almost) self-sufficient in oil and

gas– Can also be exported to developing countries

through project-based Kyoto Mechanisms


Why the Danes succeeded3: Matching policies and

measures


Matching policies and measures (1)

• P&Ms adapted to industrial development phase

• Embryonic: Strong government involvement – Production subsidies– Installation subsidies– Direct government investment: Dansk

Vindteknik



• Consolidation of industry: government support changed– Guaranteed grid connection and fixed

payment– Production and installation subsidies

gradually reduced to zero (1982-9)– Government withdrew from direct

investment (1989)– Public-private financing 1984-9, export

guarantees 1989-– MW agreements; national/local planning



• Maturity of onshore industry:– Policy for replacement of old turbines (1994-

6; 2000-2)• Fewer, larger turbines located in less

intrusive places– MW agreement for offshore development:

Technological niche– Exports: Tied aid for new markets in

developing countries; carbon funds– Compensated for CO2 tax on electricity– Minor production subsidy; depends on

turbine age


Matching policies and measures (4): Whole period

1975-• Installation and production subsidies

tailor-made to create incentives for local involvement– Individuals can only grid-connect one

turbine – Must be placed on their own land– Can invest in co-operatives– Each shareholder in private co-operatives

cannot own shares equalling more than 30,000 kWh

– Investment yields tax deduction – and less NIMBY problems


Additional success factor: International political niche

market• Californian export market 1983-7 essential

for industrial development…• … and its demise

– All efforts directed at one (strongly policy-driven) export market

– 1987: DK +50% of a rapidly growing market covering 90% of global market activity

– Shrank rapidly after tax rebate removed 31 Dec 1985

• Today: Wind power still “political product” – market niche = politically driven markets worldwide– Germany, Spain, India, China, US


…and why the Danes could just as well have failed


Why the Danes could have failed (1)

• 1976-1979: Utilities, Ministry of Trade wanted R&D on large-scale wind power– Utilities, established industrial actors,

employers’ and workers’ organisations uninterested in small-scale wind

• 1979-1989: Large-scale R,D&D programme in parallel with small-scale R&D + commercialisation– Costly failure (but much to learn from)



• Wind power was a political product, and no hedge was available; 1985: Annus horribilis– California scrapped tax rebate– Demand from cooperatives weakened because1) Danish production subsidy reduced overnight2) Secret 100MW agreement between utilities

and govt3) Private turbine ownership restricted

financially, geographically)– State export subsidies removed overnight

(1986-7)



• MW agreements 1985- central government and utilities common

interest in large-scale, concentrated wind power development (on- and, later, offshore wind farms)

local (government) protests against wind power development

+2 year delays in implementation Coordinated planning process initiated, but

brought uncertainty and reduced demand at first Could have broken the neck of companies if

timing different


Why the Danes can still fail

• Offshore investment: – Uncertainty regarding size, speed, rentability– Cooperatives prevented from participation -

1997• Uncertain future framework for wind

power support (hostile government) • Strong international competition -

relatively weak position in two dominating “political markets” Germany and Spain

• Danish majors to produce blades internally single companies (and Danish cluster) vulnerable


Preliminary conclusions/Lessons for Norway

• Uncertainty related to policies and measures as well as wind resource planning have powerful impact on market development

• Bottom-up approach yields far less difficulties in obtaining local approval

Documents

Industry’s Innovation Fund for NTNU Wind Power Developments in Denmark and Norway: A comparison Jørund Buen Department for Interdisciplinary Studies of