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

Key Factors Leading to Wind Energy

Development in Spain

Carlos Rymer
MPA-Environmental Science and Policy
School of International and Public Affairs
Columbia University

December 10, 2008

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

Contents
Introduction ............................................................................................................ 2

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

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

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

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

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

References……………………………………………………………………….11
Appendix ............................................................................................................... 11

DISCLAIMER

This summary contains the results of a semester-long research study conducted for
Professor Bogdan Vasi of the School of International and Public Affairs at Columbia
University. The study was the result of independent research and was intended to
contribute to a book to be published in 2009 titled “Global Winds of Change: The
Development of the Wind Energy Industry.”

1
 Summary for Global Winds of Change: The Development of the Wind Energy Industry
Introduction
The Kingdom of Spain (Spain) is
located in Western Europe, east of
Portugal and southwest of France. Its
total land surface is approximately
504,782 square kilometers, which is
roughly twice the size of the state of
Oregon in the northwestern United
States. Its climate is temperate and its
land surface largely flat with scattered
rugged hills and the Pyrenees range to
the north. The population as of mid-
2008 was roughly 40.5 million, with a
population growth rate of 0.096% (CIA,
2008). The country lacks a reliable
supply of fossil fuels and is subject to
regular intense droughts that reduce its
ability to produce hydropower. In the
past two decades, this has led Spain to
begin developing a renewable energy
sector to eliminate fossil fuel
dependence. The purpose of this
research was to find how the wind
energy industry was influenced by
socioeconomic factors over time.
Spain is considered one of
Europe’s largest developed economies
with its gross domestic product (GDP)
in 2007 at nearly $1.4 trillion, placing
per capita GDP at roughly $33,600.
Investment represented roughly 31.1%
of GDP. In the last few years, it has also
posted annual GDP growth of roughly
3-4%, with a slowdown this year due to
the global financial crisis. Historically,
2
the Spanish economy has seen boom
and bust periods over its growth. From
1986 to 1990, it experienced an average
5% annual GDP growth, but that
declined substantially in the early 1990’s
as Europe entered a recession. Growth
picked up again in 1994, with a bit of a
slowdown in the early 2000s. As of 2007,
the labor force was roughly 22.2 million
and unemployment was at 8.3% (CIA,
2008).
Fiscally, the government has been
experiencing budget surpluses in the
last few years, with 2007 posting a $32
billion surplus. In 2007, total public debt
was at 36.2% of GDP and the inflation
rate was a mere 2.8%. The leading
economic sectors in Spain are tourism,
textiles, metals, food and beverages,
chemicals, and automakers (CIA, 2008).
Recently, the renewable energy
sector in Spain has been growing
rapidly, becoming a significant
economic sector. Wind energy alone
now provides roughly 45,000 jobs,
comparatively greater than jobs
provided by conventional energies, and
companies like Iberdrola, Gamesa, and
Acciona are expanding their business
globally (IEA, 2008). This summary
provides an overview of how the wind
energy industry in Spain has developed
over time and the factors that influenced
its development.
 Summary for Global Winds of Change: The Development of the Wind Energy Industry
Electricity Market Evolution
Overview
Spain’s electricity market has
been marked with an increasing reliance
on imported oil due to its lack of reliable
fossil fuels, the absence of sufficient
interconnection with neighboring
countries, and low levels of electricity
trade. Spain’s coal industry suffers
greatly from quality and production
cost problems, making the import of
foreign coal more favorable. In the last
few years, Spain has made significant
efforts to increase the use of natural gas.
However, barriers to market entry by
natural gas producers and insufficient
infrastructure have not allowed even
faster growth in the use of natural gas to
produce electricity. On the other hand,
renewable energy has grown
substantially under the government’s
1999-2010 Renewables Promotion Plan,
which sets a target of 29.4% of electricity
generation coming from renewable
sources of energy (IEA, 2005).
As part of the European internal
market directives, Spain liberalized its
electricity sector in 1998 with the 1997
Electric Power Act, which translated a
1996 EU market directive into Spanish
law. It was the period in which all the
regulatory and market institutions were
set up to supervise the electricity sector.
3
The Ministry of Industry, Tourism, and
Trade, as well as the National Energy
Commission and the autonomous
entities in the country, were given
regulatory and rule-making power over
the electricity market. This liberalization
has allowed the private sector play a
crucial role in the electricity sector,
allowing not only diversification, but
increased efficiency in the entire grid
(IEA, 2005).
In 1995, total electricity
consumption was sourced from the
following mix: 41% from coal, 33% for
nuclear, 14% for hydro, 9% for oil, 2%
for natural gas, and 1% for renewable
energies (including wind) (IEA, 2005).
By 2007, this had changed to 25% for
coal, 24% for oil, 20% for nuclear, 10%
for wind energy, 9% for hydro, and 11%
for other sources (EIA, 2008; see pie
charts in Appendix). During the same
period, energy consumption grew at an
average of just over 5% annually, going
from roughly 175TWh1 in 1995 to
261TWh in 2007 (IEA, 2005; 2008).
Figure 3 in the appendix shows the
growth in electricity demand by source
over the last three decades.
1
One TWh is one trillion watt-hours of energy.
 Summary for Global Winds of Change: The Development of the Wind Energy Industry

FIGURE 1. Energy Institutions

Key Institutions
OECC: The Spanish Office of
Climate Change is under the
General Secretary for
Pollution Prevention and
Climate Change. It acts as a
coordinating body with other
ministries and public and
private entities in the area of
climate change.

Ministry of Industry,
Tourism, and Trade: This
ministry is the main authority
for all energy matters in Spain
and with its Secretary of
Energy arm. It works with
other ministries in creating
plans, rules, and regulations
for mining, nuclear energy,
fossil fuels, and all other
sources and activities related
to energy production and
consumption.

ational Energy
Commission: Attached to the
Source: IEA, 2005 Ministry of Industry, Tourism,
and Trade, it is responsible
Wind Energy Growth energy, which receives with providing substantive
advice to the ministry in the
a fixed tariff for every oil, gas, and electric sectors,
Since 1998, Spain has been
kilowatt-hour of particularly related to
strongly supporting wind energy regulation.
electricity produced
development with financial incentives. CIEMAT: The Center for
and sent to the grid.
As part of the liberalization of the Energy, Environmental, and
This scheme is similar Technological Research is
electricity sector, Spain created a
to the feed-in tariff in responsible for research and
“Special Regime” under which certain development of new
place in other countries
sources of energy, largely renewable technologies, including
like Germany and cooperation with international
sources of energy, would receive fiscal programs. Its areas of focus
Denmark. As a result,
incentives through a feed-in tariff are combustible renewables,
the wind energy nuclear technology, and and
scheme. This regime includes wind
industry began to grow solar power.

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

rapidly in Spain, leading to the creation demand growth in that same period. In
of large wind energy developers and 2007 alone, 3,522MW of wind capacity
manufacturers like Iberdrola, Gamesa, was added to the national grid, making
and Acciona, as well as roughly 45,000 a record and confirming that the
new jobs (IEA, 2008). Spanish wind energy industry is
growing exponentially. In addition, this
In 1998, wind supplied about 1%
domestic growth accounts for only 50%
of total electricity consumption, with
of Spanish wind energy activity, as
less than 2,000MW of installed capacity.
roughly 50% of production is dedicated
By the end of 2007, wind supplied 10%
for export (IEA, 2008). The figure below
of all electricity consumption with
shows the strong growth in installed
15,145MW installed capacity, reflecting
capacity and the Spanish government’s
the strong growth in the wind energy
objectives to 2010.
sector in spite of the annual 4-5%
FIGURE 2. Growth of Wind Energy Capacity

Source: EIA, 2008

Policy Framework

The key policy that is driving industry is the feed-in tariff, instituted
strong growth in the wind energy through the 1998 Royal Decree on

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 Summary for Global Winds of Change: The Development of the Wind Energy Industry
Special Regime (RD 2818) and the 1997
Electric Power Act (Law 54). Under the
feed-in tariff, producers are guaranteed
a premium above their market price for
every unit of electricity produced. This
scheme creates an attractive investment
climate by providing a monetary
incentive to grow rapidly. The feed-in
tariff levels have been set by royal
decrees since their institution, being
modified in 2004 to allow for variability
depending on project size (Del Rio and
Gaul, 2007).
Under the Plan for Renewable
Energies (PER), which covers the period
2005-2010, 12% of all electricity must
Research Goals
This research study was intended
to contribute to the book “Global Winds
of Change: The Development of the
Wind Energy Industry,” by Professor
Bogdan Vasi at the School of
Goals
1. Analyze the business and political
environment of the Spanish wind energy
industry.
2. Determine what factors played an
important role in the growth of the
Spanish wind energy industry.
6
come from wind energy by 2010. This
means that by 2010, there must be
20,155MW of installed capacity. With
the growth rate from 2007, this level will
be reached by 2009. As a result of local
plans to create more jobs and spur
development, 39,000MW will have to be
installed between 2010 and 2020,
holding great prospects for wind energy
growth in Spain. The private sector itself
has set a goal of 40,000MW by 2020.
Currently, total installed capacity is
92GW, and it grew 10% in 2007 alone
(IEA, 2008). With the feed-in tariff in
place for the next decade and increasing
confidence in wind energy, these goals
are attainable.
International and Public Affairs at
Columbia University. The book
discusses the various factors that have
led to the growth of the global wind
energy industry, from climate change
concerns to demands by non-
governmental organizations to
innovation and entrepreneurship. The
book is an in-depth look at what is
fueling the industry’s growth and what
are the key lessons learned from nations
leading in wind energy.
In this context, this study focused
on one piece of the global picture: Spain.
 Summary for Global Winds of Change: The Development of the Wind Energy Industry
The goals of the study were to analyze
the Spanish wind energy industry and
gather new information regarding what
has contributed to its growth. Spain was
selected because of its leadership status
globally in wind energy development.
The new information gathered
regarding the growth of the wind
Methodology
As mentioned above, the study’s
goals were to analyze the Spanish wind
energy industry and identify factors that
determined its growth over the last
decade. To achieve this, two methods
were used:
1) Secondary research
2) Interviews
Secondary Research
The first part of the study
involved secondary research, which is
the collection and synthesis of primary
research. The main source of primary
documents was Lexus-Nexus, an online
database of articles. In addition, Web of
Science, a database for academic articles,
was used to find scholarly information
regarding the wind energy industry in
Spain. Finally, reports from non-
governmental organizations were used
as well to gather information about the
industry.
7
energy industry in Spain was intended
to relate to socioeconomic factors,
including the significance of pressure
groups, the demand for jobs in Spain,
and the requirements by the European
Commission to meet certain goals for
renewable energies.
In total, hundreds of articles were
collected and compiled to identify key
contacts in the Spanish wind energy
industry and find useful information
regarding social actions in favor of wind
energy and developments in the private
sector. In addition, several scholarly
articles and reports were found, which
contribute to this summary and will
provide useful statistics for the book.
Interviews
The second part of the study
involved interviews. The contacts
identified for interviews were found
through personal contacts in Spain and
actual secondary documents.
Interviewees were mostly from the non-
governmental sector, but some were in
the public sector and private sectors. All
interviews were transcribed and focused
on what factors were significant in
helping the Spanish wind energy
 Summary for Global Winds of Change: The Development of the Wind Energy Industry

industry develop to its current state. affiliations of those interviewed.

Table 1 below shows the names and
TABLE 1. Interviewees
Name Affiliation
Jose Garcia Greenpeace-Spain
Miguel Mendonca World Future Council
Navarre Department of Innovation,
Begona Uriel
Enterprise, and Employment

Findings
The study revealed mixed results actions covered by the articles involved
from what was expected. In general, the anti-nuclear, anti-coal, and climate-
research team assumed that social related groups. These included labor
factors would play a very large role in unions and large environmental
creating the political and organizations like Greenpeace. They all
entrepreneurial climate needed to had a strong stance against nuclear
advance the Spanish wind energy energy and fossil fuels, and also wanted
industry to its present state. However,
there were other factors that played key
roles as well. Most of the key findings
relevant to the study’s goals were Key Actors

actually found through interviews. • Acciona

• Asociacion Empresarial Eolica
Secondary research was helpful in
• Association of Producers of Renewable
finding key data and information Energy (APPA)
• Centro acional de Energias Renovables
regarding the existing policy • Ecologistas en Accion
framework. • Ecotecnica
• Ecyr
• Enel Union Fenosa Renovables
Secondary Research
• Gamesa
• General Electric
In summary, the Lexus-Nexus • Greenpeace
articles, dating from 1989 to 2008, • Iberdrola
• Siemens
provided information regarding actions • Vestas
by unions and environmental groups, as • World Wildlife Fund

well as actions by private actors. The

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

strong government action on climate Iberdrola and Acciona were mentioned

change. However, no single action was
dedicated to promoting wind energy.
Some articles were related to local
opposition to wind farms, while some
focused on record wind energy
production during very windy days.
In terms of business climate, the
Lexus-Nexus articles focused on the
expansion of Spanish wind energy
manufacturers and developers globally.
In particular, there was strong mention
of Iberdrola, Gamesa, and Acciona.
Gamesa was mentioned as a leading
global manufacturer of wind turbines,
selling their high-quality turbines all
around the world. On the other hand,
as leading wind energy developers, not
only developing new projects in Spain
and abroad, but also buying up already
existing wind farms. In particular,
Iberdrola was given greater coverage
because of its entrance into the United
States market, where it is buying up
wind farms and planning large new
wind farms.
Interviews
The interviews revealed factors
that played a significant role in the
development of policy. The key factors
that led to strong policy regarding wind
energy development were, in order of
relative importance, the following:

1. Reliance on fossil fuels and the economic impact of higher oil prices and a costly coal
industry.
2. The need for job creation and economic development in regions with high rates of
unemployment.
3. Educational and strategic campaigns organized by non-governmental organizations in
support of renewable energy and climate change action.
4. Increasing concerns related to climate change at the European Community level,
signaled by the adoption of the Kyoto Protocol.
5. Lobby efforts by non-governmental organizations and the private sector in support of
policy frameworks favorable to renewable energies.

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 Summary for Global Winds of Change: The Development of the Wind Energy Industry
Conclusions
The study revealed that Spain’s
wind energy industry is very dynamic
as a result of a political framework that
not only created a favorable business
climate, but also supports research and
development, education, and exports.
The wind energy industry is growing
rapidly and will continue to lead the
world in years to come. In addition,
Spain’s wind energy manufacturers and
developers are poised to continue
spreading around the world, exporting
technology and business knowledge key
to global wind energy development.
With a robust wind energy industry,
Spain is positioned to compete with
other wind energy leaders
capitalize on emerging technologies like
offshore wind.
In terms of key
influencing the Spanish wind energy
industry’s growth, the study found that
socioeconomic factors, such as
creation and energy independence, are
significant and can match the influence
of lobby efforts and environmental
groups. In addition, being part of a
region that is behind renewable energies
in general also influences
outcome in support of wind energy. In
Spain, opposition to coal and nuclear
energy, as well as increasing reliance on
imported oil, greatly contributed to
regional and national policies that
promote wind energy. Lobby efforts by
private companies and environmental
groups also influenced specific policy
outcomes, and the need for jobs in
regions suffering from unemployment
made wind energy a popular choice for
economic development.
In conclusion, the study suggests
that countries with little fossil fuel
resources, heavy reliance on imported
energy, available labor force, and
enough financial resources to promote
new energy technologies may be
capable of developing wind energy
and industries like Spain’s. In order for such
countries to successfully create wind
energy manufacturing and development
factors capacity, there must be strong popular
support, interested business actors, and
a politically sound government that can
job work to design policies that will enable
the creation and growth of a wind
energy industry. Actors in nations with
similar characteristics as Spain’s can
play their part to lead to policy
outcomes that incentivize wind energy
policy production, provide training for new
jobs, and support research and
development.
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 Summary for Global Winds of Change: The Development of the Wind Energy Industry

References
Central Intelligence Agency. (2008). Spain. Retrieved November 30, 2008.
https://www.cia.gov/library/publications/the-world-factbook/geos/sp.html.

Del Rio, Pablo and Gual, Miguel A. (2007). An integrated assessment of the feed-in tariff
system in Spain. Energy Policy, 35: 994-1012.

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

Research, Development, and Deployment of Wind Energy Systems. (2008). IEA Wind
Energy Annual Report 2007. International Energy Agency.

International Energy Agency. (2005). Energy Policies of EIA Countries: Spain 2005 Review.
Organisation for Economic Co-operation and Development.

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

Appendix
FIGURE 3. Map of Wind Installation Distribution

Source: EIA, 2008

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

FIGURE 4

FIGURE 5. Electricity Mix for 1995 and 2007

1995 2007
2% 1%

11% Coal
9% 25%
Nuclear
10%
14% 41% 1% Hydro

Oil

Natural Gas
24% 20% Wind

33% Others
9%

Source: EIA, 2005; 2008

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

FIGURE 6. Tariff Levels for Wind Energy

Sources: Country Submission

12