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
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Outline
• Different development paths
• Why the Danes have had success
• Why they could (have) fail(ed)
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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?
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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Matching policies and measures (2)
• 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
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Matching policies and measures (3)
• 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
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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
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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
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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)
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Why the Danes could have failed (2)
• 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)
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Why the Danes could have failed (3)
• 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
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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