Institutional varieties and renewable energy
How institutional differences have influenced the respective development of
wind energy in Denmark and the United Kingdom
MSc Thesis Political Science: International Relations Research Project: The Political Economy of energy
23 June 2017
Author: Sondre Jakobsen Stensbol
11258667
University of Amsterdam
Graduate School of Social Sciences
Supervisor:
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Abstract
Wind energy is becoming an important source for electricity generation in the EU, as the energy transition away from fossil-fuels being to take shape and catch pace. Denmark and the UK have both successfully contributed to this outcome, but with diverging paths. Denmark started deploying wind energy at an early stage and has continued to deploy it consistently, with mostly incremental increases to its overall capacity. The UK, on the other hand, was for a long time lagging behind in terms of deployment, before it rather suddenly started
deploying wind energy at a remarkable pace. This thesis investigates how institutional differences in these two countries have contributed towards this outcome in several ways. Based on Lijphart’s distinction between consensus and majoritarian forms of democracy and Varieties of Capitalism, it emerges that several factors that are trace-able to these institutional varieties have contributed to this outcome.
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Table of content
Abbreviations………...………....4
1. Introduction……….5
1.1 Topic and empirical puzzle………5
1.2 Objectives………..7
1.3 Research question………..7
1.4 Theoretical relevance……….8
2. Theoretical framework………...10
2.1 Democratic institutions………11
2.1.1 Political representation and policy innovation………..11
2.1.2 Policy stability………...13
2.1.3 Political decentralization………...15
2.2 Varieties of Capitalism……….17
2.2.1 Incremental and radical innovation………...17
2.2.2 VoC and Policy-making………21
2.2.3 Influence of market incumbents………23
2.3 Theoretical compatibilities………...24
3. Research method………...26
3.1 Comparative case study………...26
3.2 Data………..26
4. Empirical analysis: Denmark...28
4.1 Policy innovation……….28
4.2 Incremental innovation………30
4.3 Policy stability, incremental upscaling and steady deployment………..31
4.3.1 The importance of incremental upscaling………..………...33
4.3.1 Constrained political power………..34
4.4 Decentralization………...35
4.5 2001-2007: Policy change………36
4.6 Back to status quo…..………..37
4.7 Persistence of CME-attributes……….38
4.8 Conclusions………..40
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5.1 Political marginalization and radical upscaling………...42
5.2 Liberalization………...43
5.3 LME-context compromises policy change………..45
5.4 Radical policy change………….……….47
5.5 Energy governance regime change………...………...48
5.5.1 Policy instruments……….49
5.6 Impact on wind energy……….50
5.7 Further influence of LME…...……….52
5.8 Conclusions………..55 6. Conclusions………...57 6.1 Hypotheses revisited …………...………57 6.2 Theoretical implications………...59 6.3 Limitations………...60 Bibliography………..61
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Abbreviations
CCA Climate Change Act
CCC Climate Change Committee CCL Climate Change Levy CCS Carbon Capture and Storage CEO Chief Executive Officer CfD Contracts for Difference
CM Capacity Market
CME Coordinated market economy
DECC Department of Energy and Climate Change DWIA Danish Wind Industry Association
EMR Electricity Market Reform ETS Emissions Trading Scheme FiT Feed-in-Tariff
GWEC Global Wind Energy Council IEA International Energy Agency
IRENA International Renewable Energy Agency LCTP Low-Carbon Transition Plan
LME Liberal market economy NFFO Non-Fossil Fuels Obligation NIMBY Not-In-My-Backyard
NOAH Friends of the Earth Denmark
OOA Organization for Information on Nuclear Power (Denmark) OVE The Danish Organization for Renewable Energy
PR Proportional representation R&D Research & development
RD&D Research, development & demonstration
RE Renewable energy
RET Renewable energy technology RO Renewables Obligation
SF Socialist People’s Party (Denmark) TGC Tradable Green Certificates
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1 Introduction
1.1 Topic and empirical puzzle
Renewable energy sources have received increasing attention as two processes compel a transition away from fossil fuels. The first is the finite nature of fossil fuels, which mean that they will deplete sooner rather than later. Such resource scarcity also has implications for the geopolitics of energy, characterized by unreliable and powerful supplier countries. The second is the growing problem of climate change as global temperature rises. This implies that an energy transition away from fossil fuels to ‘clean’ energy sources is inevitable, because this address both these challenges. Renewables do not bring CO2 emissions, diversifies energy supply and reduces dependence on fossil fuels.
The EU has set concrete and binding targets for the use of renewables within the union as a response to this challenge. Renewable energy sources accounted for 86% of all new power installations in the EU in 2016 (WindEurope 2017a). This shows that the energy transition is reaching a stage of relative maturity that is ripe for analysis.
In 2016 wind energy overtook coal as the 2nd largest form of power-generation capacity in the EU, representing 51% of all new power-installations in the EU that year. It now accounts for 17% of the EUs total power-generation capacity (WindEurope 2017a). This is a
remarkable development since 2000, when wind accounted for only 2% of the total power-generation capacity installed in Europe. Wind has added more capacity than any other technology in the period 2005-2016 in the EU. The European Commission estimates that renewables would have to account for 50% of power generation by 2030 for the EU to fulfill its commitments, implying that wind will continue to provide the major share of new
deployment among all renewables by 2030. Consequently, wind could become the largest source of electricity-generation in the EU by 2030 (WindEurope 2016). This indicates that wind energy is the most important renewable energy source in the current energy transition, and it thus seems natural to focus on it in my thesis.
However, it is important to emphasize that progress on renewable energy deployment, including wind, is vulnerable. Recent relative stagnation in the EU shows that growth in renewables is contingent on external factors, especially if they influence policy frameworks (WindEurope 2016). It is thus important to understand how policy frameworks that ensure
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sustained growth in renewables can emerge.
Notably, levels of deployment vary substantially between EU countries. Deployment of wind power in Denmark has been remarkably steady and incremental, while it has been very rapid in the United Kingdom in later years after long period almost no growth. In 2002, Denmark and the UK was compared on the basis of the former being the key representative of
successful wind energy development and the latter a failure. Wind accounted for a quarter of 1% of electricity supply in the UK and about 12.5% in Denmark in 2001. Despite having a tenth of UKs population, Denmark had over five times as much installed wind-generating capacity (Toke 2002, IRENA-GWEC 2013b).
The UK increased its total wind capacity from 474MW in 2001 to 14.542MW in 2016
(IRENA-GWEC 2013b, GWEC 2017b). A thirty times increase. Denmark, on the other hand, slightly more than doubled its capacity from 2489MW in 2001 to 5.227MW in 2016
(IRENA-GWEC 2013a, WindEurope 2017a). Naturally, this reflects the fact that the UK had a more modest starting point in 2001, hence part of the puzzle is to explain why deployment started much later there than in Denmark.
As a result, the UK had an 8-times increase in it its share of RE in gross final energy consumption from 2004 to 2015, which was the greatest proportional increase in the EU except for Malta with a starting point of 0.1%. Notably, the UK had one of the lowest scores in the EU-28 prior to this. In comparison, Denmark doubled its share of renewables in the same period (Eurostat 2017a).
It is thus clear that both these countries have eventually become rather successful at
deploying wind energy, but they exhibit contrasting trajectories towards this outcome. Why did development in Denmark start so early and progress steadily, while it was late and rapid in the UK?
Both countries have vast coastlines, sea territories and a windy climate, and thus great wind resources, which naturally influences deployment (Boyle 2006, Sovacool 2013).They have had fairly similar and stable levels of energy consumption since 1990, as well as similar GDP per capita and economic growth rates since 1990. Both countries have also had significant production of fossil fuel energy and enjoyed extended periods of energy self-sufficiency,
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though both face declining resources (IEA 2011 & 2012). Focus on other RE sources can also not explain this outcome, because the numbers reveal that both countries focus rather
narrowly on wind energy, if one excludes biomass. This probably reflects that their RE resources are dominantly wind, while other countries usually have a more diversified pool of resources to extract from (Eurostat 2017b, Simmie et al 2014). With such similar
pre-conditions for deploying wind energy, it is likely that their divergent trajectories can be attributed to institutional differences.
Literature on comparative democratic institutions has identified Denmark as a ‘consensus democracy’ and the UK as a ‘majoritarian democracy’ (Lijphart 2012). Furthermore, comparative political economy literature, based on the ‘Varieties of Capitalism’ approach, has described Denmark as a ‘coordinated market economy’ (CME) and the UK as a ‘liberal market economy (LME) (Hall & Soskice 2001). It is reasonable to assume that these
institutional differences can explain why wind energy deployment in Denmark began so early and progressed steadily, and why it began so late and rapidly in the UK.
1.2 Objectives
The objective of this thesis is to investigate whether there is a causal relation between these institutional differences and the contrasting trajectories of wind energy deployment. This means that the reasons for why development began in Denmark and not in the UK, why it gradually progressed in Denmark, rather than stagnating or radically take off and why change of pace in the UK was so swift has to be trace-able back to the respective institutions. I will investigate how the relevant political and economic institutions have interacted with external factors over time to produce policies and strategies that directly or indirectly support wind energy. By doing so, I hope to contribute with insight on how different institutions respond to the challenge of the energy transition.
1.3 Research question
Based on the above discussion, I have arrived at the following research question:
How can different political and economic institutions explain the contrasting trajectories of wind energy deployment in Denmark and the UK?
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a. Why did development and deployment of wind energy begin earlier in Denmark than in the UK?
b. Why was progress in Denmark so steady and stable, without major stagnations or rapid increases?
c. Why was deployment of wind energy suddenly so rapid in the UK?
1.4 Theoretical relevance
The social relevance of this thesis is adequately covered in the first part, but some points about the theoretical relevance is warranted. First, literature on energy transitions and renewables has already generated sufficient evidence of factors that are conducive or
impeding to the development and diffusion of renewables. I will return to these factors in my theoretical framework, but generally these include targeted RD&D programs, pro-active government intervention and niche-markets for emerging technologies supported by
subsidies. The most general conclusion is that a strong and stable policy framework is crucial to development of renewables (Negro et al 2012, Toke 2011a, Cetkovic & Buzogany 2016).
There are also several studies on what facilitate the emergence of such factors. For example, different narratives utilized by advocacy coalitions in the Netherlands and the UK has been used to explain why the latter adopted a more favorable policy framework for offshore wind than the former, and thus also deployed the technology more successfully (Kern et al 2015). A similar explanation was used to explain the UKs radical policy change that led to its transformation from a ‘laggard to leader’ in terms of wind energy deployment (Kern et al 2014a). Neither of these explanations pay much attention to how wider institutional settings shape the opportunities for these actors. There seems to be much scope for studies on how different institutional conditions shape the emergence of factors that are favorable to deployment of renewables.
Cetkovic & Buzogany (2016) have partially responded to this research gap by looking at how different varieties of capitalism shape energy transition pathways. However, they pay little analytical attention to the rapid change of deployment in the UK, and frame their argument primarily around CMEs institutional advantage for development of renewables compared to LMEs. They also fail to address the possibility that different resource pools for renewables in the UK and Germany may account for their findings. Hence, why I assume that comparing
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Denmark and the UK, with a similar pool of renewable resources, can illuminate the VoC-implications further and yield new insights or strengthen the authors’ findings. Finally, the authors do not consider that different democratic institutions in these countries may largely have intervened with these outcomes (Lockwood et al 2017).
Within the comparative politics literature, there is a strong perception that consensus democracies with proportional representation (PR) electoral systems perform better at implementing environmental policies than majoritarian systems (Lockwood et al 2017). Lijphart (2012) has found that consensus democracies perform better than majoritarian systems in terms of reducing carbon dioxide emissions and improving energy efficiency. Orellana (2010) found that between 1990 and 2007, countries with PR electoral systems had a 9.5% increase in carbon emissions compared to 45.5% in majoritarian systems. He
primarily attribute this to PR systems greater capacity for policy innovations, meaning how early countries will adopt certain policies. More recently, he also found that the use of renewable energy is 117% higher in countries with PR than in majoritarian countries. This can be attributed to consensus democracies’ greater capacity for representing a multiplicity of issue dimensions, and also a consequential willingness of citizens to pay extra costs for environmental protection (Orellana 2014).
Though these findings are convincing, there is still a lack of a qualitative research seeking to unpick the exact relationship between factors linking consensus democracies and sustainable energy policy outcomes (Lockwood et al 2017). I consider this as a gap that my thesis can address.
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2 Theoretical framework
Based on the introductory discussion, it emerged that different institutional conditions in Denmark and the UK is a likely explanation of why their path to deploying wind energy has been so different. These institutional differences can be captured using a framework that merges assumptions about different democratic models and the ‘Varieties of Capitalism’ (VOC) theory (Lijphart 2012, Hall & Soskice 2001).
It seems natural to merge these theories because CME countries usually have consensus forms of democracy, while LME countries tend to have majoritarian democracies. It is argued that there is a mutual dependency on the form of democracy and the capitalistic model for the optimal functioning of each, and that they reinforce each other over time (Hall & Soskice 2001). In fact, findings from studies on environmental and sustainability performance based on VoC have been questioned, due to the correlation with democratic institutions (Lockwood et al 2017). It is reasonable to assume that taking account of both set of institutions will improve the explanation.
Furthermore, both theories are derived from a rational institutionalist logic, in which
outcomes are understood as the aggregate result of many actors operating under institutional constraints. They are also based on a dichotomous distinction between two ideal types. Furthermore, because of this correlation between economic and democratic institutions, one does not sacrifice the ability to generalize findings to other cases.
Although each theory emphasizes different domains, they interact with one another.
Democratic institutions primarily concerns formation of policies and political regimes, while VoC emphasize differences in innovation as its most central outcome. However, VoC also affect the policies implemented through its distribution of power and ideology. Similarly, democratic institutions crucially impact innovation through the provision of policies and the relative stability of political regimes.
In short, these institutional varieties are the independent variables that lead to the dependent variable, which is pace of wind energy deployment in the UK and Denmark. I will now describe each theory in more detail, while applying them to important factors for the deployment of renewables identified in energy transition literature, in order to demonstrate
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the theories’ relevance for my thesis.
2.1 Democratic institutions
According to Arend Lijphart (2012), most democracies can be classified according to a dichotomous divide between consensus and majoritarian democratic models. Denmark is found to have a consensus model, whereas the UK is said to follow an archetypal majoritarian model. The two different models exhibit a cluster of attributes that largely determine political behavior within each system. It is on the basis of these attributes and its generalized
consequences that I will derive the key assumptions about respective differences in wind energy policy and its influence on deployment for my thesis.
2.1.1 Political representation and policy innovation
A key difference between the two models is the electoral systems. Consensus democracies, including Denmark, use a proportional representation (PR) electoral system, and the UK has a majoritarian “winner-takes-it-all” system. According to Lijphart (2012) electoral systems are the crucial determinant of party systems. PR models tend to generate multiparty systems, which usually leads to multiparty coalition cabinets. Majoritarian electoral models, on the other hand, tend to generate two-party systems, which usually result in one-party cabinets. This is because PR models reward political parties with parliamentary seats according to votes received, while majoritarian rules significantly alter the allocation of seats in the favor of major parties relative to minor parties.
Consensus systems, with PR electoral rules, are more likely to grant representation to smaller parties in parliament and feature coalition governments, which afford smaller parties greater political leverage and opportunity to represent less mainstream political issues. Multiparty systems can thus accommodate more issue dimensions than two-party systems because there are more parties to voice and represent issues (Lijphart 2012). As a result, issues described as “post-material”, including environmental problems, are more likely to be addressed in
consensus democracies. This will affect ‘policy innovation’, meaning how early countries will adopt certain policies. Consensus democracies are therefore expected to implement either controversial or niche policies at an earlier stage than its majoritarian counterparts. Hence it can be argued that political representation of smaller parties increases the likelihood that environmental or energy issues will rise on the political agenda and lead to relevant policies. This also imply that the public in consensus democracies are earlier and more exposed to new
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issues as part of the public debate, which increase their knowledge about these issues, and accordingly their support of policies addressing it (Orellana 2010 & 2014).
Furthermore, in two-party systems, as commonly generated by majoritarian electoral rules, the large parties favored by the electoral rules tend to go for status quo politics and hold moderate political positions to compete for voters in the center (Calvo & Hellwig 2011, Lijphart 2012). Naturally, this also contribute to the marginalization of issues that fall outside the center of political attention. However, it also indicates that environmental and energy issues will only be addressed in majoritarian systems when they have become mainstream.
This is important for my thesis because literature is rather unambiguous on the centrality of policy intervention for the development and diffusion of RE (Aklin & Urpelainen 2013, Toke 2011a, Negro et al 2012). Policy intervention is needed to support and finance the
development of RETs from its invention to the state where it reaches commercial maturity. Policy should establish ‘niche’ markets that protect RETs from market selection while they develop and mature to become market-competitive. It needs initial research and development (R&D) to develop and test the new technology in the first place. One also needs
demonstration projects to test and demonstrate whether new technologies work in practice. It needs a phase of pre-commercial development in which the R&D providers are narrowed down. Finally, a new technology needs subsidies to make it commercially viable in the market before it can diffuse, which refers to the actual use and spread of it in the market place. Common subsidy schemes are tradable green certificates (TGCs) and Feed-in-Tariffs (FiTs), but also internalizing external costs in fossil fuel prices (carbon taxes) will incentivize investment in RETs to help them diffuse. Such instruments make renewables a profitable investment opportunity, which creates a technological demand that lead to market formation, and this provide space for the technology to be tested, develop and eventually diffuse
(Simmie et al 2014, Scholten 2012, Geels 2010, Jänicke 2010).
Following hypotheses two can be derived from this:
H1a: Greater political representation of minor parties in Denmark led to earlier political attention to environmental and energy-related issues, which generated earlier political support for wind energy than in the UK, and accordingly earlier deployment.
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H1b: Centripetal dynamics in UK led to relative political neglect of energy and
environmental issues for a long time, but when they got mainstreamed the same dynamic compelled both major parties to adopt ambitious political positions on the issues which facilitated major policy change.
2.1.2 Policy stability
It is assumed that consensus democracies generate more stable, long-term policies than majoritarian democracies. This may be counter-intuitive because one-party cabinets are more durable than coalition cabinets. However, changes in coalition cabinets are usually only a piecemeal change in the party-composition, due to continuity in both personnel and
participating parties, whereas changes in one-party cabinets are complete turnovers from one majority to another. Consequently, minor and incremental policy changes are more likely in multiparty systems, while the underlying policy regime is persistent. Conversely, majoritarian systems are more likely to generate swift or radical policy changes. This is further facilitated by concentration of power in executive cabinets in majoritarian systems, affording
government great capacity for policy change (Lijphart 2012). A powerful executive facilitates the ability of the dynamic explained in ‘h1b’ to translate into a radical policy change.
Governments in consensus democracies are generally less powerful, and also constrained by the need to negotiate internally and compromise to reach agreements about major decisions with coalition partners. Political representation also gives smaller parties the capacity to function as veto players and oppose implementation of policy changes in consensus democracies (Lockwood et al 2017).
It is also found that governments in consensus democracies are more proximate to the electoral populations’ positions, and thus more responsive to public opinion. This indicates that policies should reflect a broader consensus in society, which is also a factor that
increases political stability (Orellana 2010, Lijphart 2012). The above point about consensus democracies’ capacity to include new issues in public debates and thus generate popular support for policies addressing these also pertains to this point.
This is important because it is widely agreed that policy frameworks have to be stable and long-term to yield growth in renewables (Jänicke 2008, Toke 2011a). Investments in immature technologies entail great upfront investments, and maybe decades before costs break-even, hence a stable and long-term policy framework is a requisite to reduce
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uncertainty and make investors willing to take risks by investing in RETs. Unstable policy frameworks have majorly constrained the development and deployment of renewables several places. This refers to, for example, when announcement and implementation of subsidy schemes does not correspond in terms of level of support, or when support schemes are suddenly shortened or reduced after implementation, and in some cases completely removed or replaced. As a consequence, entrepreneurs and investors have been unwilling to take risks by investing in new technologies, while confidence and trust in the government is
undermined, which reduces investor confidence in the long-term (Grubler 2012, Aklin & Urpelainen 2013, Negro et al 2012).
This is underpinned by observations from previous energy transitions, which highlight how transitions usually are a slow and incremental process. The transition to non-fossil fuels is expected to be even more challenging than previous transitions, because of the sheer scale of the transition considering the increased energy demand and the technological development needed before renewable energy sources can substantially replace fossil fuels (Smil 2011, Grubler 2012, Kuzemko et al 2016). Consequently, it is argued that governments need to develop long-term visions for 25 years or more ahead to act as a guide for formulating policy option and setting interim targets, as well as to show commitment. This should include quantifiable targets and concrete governance strategies (Andrews-Speed 2016).
This is similar to the concept of credible commitment, referring to the trust investors have in government’s will and capacity to abide by its stated commitments, which largely determines their will to invest in technologies or infrastructure. In consensus systems this should arise organically from the tendency to produce coalition governments characterized by
negotiations and compromises, implying that policies should reflect true consensus. In
majoritarian systems, consensus is not only less likely, but also less credible, because it likely reflects tactical repositioning of one of the major parties. If investors fear that cost or other concerns may in the future lead to the suspension or reversal of support policies, they may hold back from investing. The above point about centripetal dynamics in two-party systems is also pertinent in this regard, because it entails that consensus may be the result of tactical repositioning of one major party rather than a genuine consensus, and policy is thus more vulnerable to other concerns (Lockwood et al 2017).
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of renewable energy sources, ideally featuring concrete long-term targets, is an important factor in creating a niche market for new renewable energy technologies (Kuzemko et al 2016, Geels 2010, Simmie et al 2014). It is argued that for policies to be successful, they should be logically framed within a well-reasoned and long-term commitment to increase the legitimacy of policy, ensure investor confidence, attracts powerful actors and direct research and technological development (Kern & Kivimaa 2016). Political consensus is likely
conducive to generate concrete and long-term ambitions (Lockwood et al 2017).
H2a: Frequent coalition-governments and political representation of minor parties led to a stable policy framework in support of wind energy in Denmark, and stable deployment accordingly.
H2b: Concentration of power in single-party governments and competitive politics have generated less long-term energy and RE policies in the UK, and the policy regime has been characterized by frequent changes.
2.1.3 Political decentralization
It is also argued that consensus democracies tend to generate relative political
decentralization, whereas majoritarian models result in strong centralization. Lijphart (2012: 178) describes Denmark as decentralized, whereas the UK is described as maybe the most centralized state in Europe. This is particularly relevant because political decentralization is found to correlate with, and may be a pre-condition for, decentralized electricity generation, which is argued to be conducive to development of renewables (Toke 2011a). Indeed, Denmark has a decentralized distribution system of energy, while the UK has a very centralized one (Lehtonen & Nye 2009).
This has several implications relevant to my thesis. First, it is generally assumed that novel energy technologies are not instantly compatible with the paradigm of large-scale centralized electricity generation. Premature attempts to upscale technologies in order to converge with the paradigm can undermine technological development. Furthermore, access to the grid is crucial for the diffusion of an energy technology, and a decentralized system can open up for this at an earlier stage. Hence, a decentralized system of distribution that is more ready to accommodate small-scale energy technologies is expected to be crucial in the initial phases of technological development (Grubler 2012, Negro et al 2012, Toke 2011a). This is likely to
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have contributed to the earlier deployment of wind energy in Denmark than the UK and also facilitated technological innovation in Denmark.
Secondly, local distribution of energy can increase the public support and legitimacy of energy technologies. NIMBY-ism (Not-In-My-Backyard) has commonly been mentioned as constraint on deployment of wind turbines. This term is essentially based on the idea that people who oppose a project because it is located close enough to their homes to cause them a nuisance would be in favor of the project if located elsewhere (Ladenburg 2008). Wind turbines has also been challenged by complaints about threat to birds, wildlife, perceived high costs and its low production of electricity compared to conventional energy sources
(Kuzemko et al 2016, Negro et al 2012). Local, small-scale deployment of renewable energy-generation by communities is expected to increase the acceptance, legitimacy and popularity of these technologies because it brings concrete benefits (Süsser et al 2017, Ladenburg 2008, Toke 2011a). This is important because public opposition can cause problems for granting planning consents of new wind farms, and because it changes the political demand in disfavor of wind energy (Toke 2011b). Notably, legitimacy of wind turbines will also benefit from long-term policy visions that logically justify the technology (Kern & Kivimaa 2016).
Another implication of political decentralization is that local governments should have a greater degree of authority on the deployment of wind energy in their area. This could also encourage local political participation, which should generate projects that are more in line with local interests and thus face less opposition later in the planning process. It can also foster more knowledge about the technology among the participants, which could yield greater public acceptance of the technology (Sovacool 2013, Kuzemko et al 2016).
H3: Decentralized energy distribution and governance facilitated an earlier start of
deployment and reduced the public opposition to wind energy in Denmark relative to the UK.
Public acceptance of wind turbines can also account for steady deployment under the framework of long-term plans, by providing a favorable environment for policy-makers towards this. Conversely, opposition to turbines primarily functions as an explanation of the UKs relative late start. The centralized, top-down characteristics of the British system implies that this is an obstacle possible to overcome if sufficient political will is present, and hence, it keeps possibility of a radical change open.
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2.2 Varieties of Capitalism
VoC is based on a dichotomous distinction between ‘coordinated market economies’ (CME) and ‘liberal market economies’ (LME). Each type consists of a set of interlocking institutions that facilitate and sustain each other. To repeat, Denmark is argued to be a CME, while the UK is classified as an LME. The easiest way to distinguish LMEs from CMEs is that the former coordinate their activities primarily through competitive market arrangements or constructed hierarchies, while the latter coordinate their endeavors more through non-market institutions. This is enabled by a degree of state intervention in the economy that supports institutions facilitating coordination between firms and between the state and industry (Hall & Soskice 2001).
2.2.1 Incremental and radical innovation
The central outcome of interest in VoC, is that CMEs tend to generate incremental
innovations, whereas LMEs generate more radical innovations (Hall & Soskice 2001). This is obviously relevant to studies on energy transition, considering innovations in RETs is a crucial pre-condition for the transition (Süsser et al 2017, Aklin & Urpelainen 2013, Jänicke 2008, Geels 2014). Innovation can be conceptualized as a process from the invention of a novel technology to its diffusion into mainstream markets (Scholten 2012, Negro et al 2012).
Hall & Soskice (2001: 38) defines incremental innovations as continuous small-scale
improvements to existing product lines and production processes, and radical innovations as substantial shifts in product lines, the development of entirely new goods, or major changes to the production process. In the context of an energy transition, one could thus assume that incremental innovations imply ‘cleaner technology’, while radical innovations entail ‘clean technology’. Though this should indicate that radical innovations are more effective,
incremental innovations may be more likely to diffuse, which is a crucial pre-condition for its contribution to the transition objectives (Scholten 2012, Negro et al 2012, Jänicke 2008).
Incremental innovation is more important for fields of advanced manufacturing where it is important to maintain the high quality of an established product line, to devise incremental improvements to it that attract consumer loyalty and to secure continuous improvements in the production process in order to improve quality control and hold down costs (Fioretos 2001, Hall & Soskice 2001).
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Radical innovation is important in fast-moving technology sectors, which call for innovative design and rapid product-development based on research, as well as in service sectors such as airlines, advertising, corporate finance and entertainment. While incremental innovation is more important for products for which demand turns more heavily on quality relative to price, radical innovation is advantageous for products for which demand is very
price-sensitive. This should generate relatively fewer technological innovations of high quality and reliability in LMEs (Hall & Soskice 2001, Fioretos 2001).
Literature on previous energy transitions argue that incremental and gradual upscaling of technologies has been the most important. The complexity of energy systems and its fundamental importance to the economy and other societal functions determines an incremental path to technological change (Smil 2010, Grubler 2012). Research on RETs highlights how premature upscaling of technologies have led to poor and unreliable designs. Hence, incremental innovation can be a crucial strategy to ensure robust and reliable designs that have the ability to diffuse (Negro et al 2012, Toke 2011a).
There are a number of interlocking institutions that together direct CMEs towards a strategy of quality-based production featuring incremental innovation and LMEs towards a cost-competitive strategy centered on radical innovation (Wood 2001). These institutions are important to understand in order to analyze how the institutional varieties can contribute to the outcome of interest. I will now elaborate on these.
Patterns of investment
CMEs are characterized by monitoring and information-sharing which provide investors with information about the internal operations of firms. Furthermore, CME-investors are more likely to be motivated by strategic or other motivations than purely share-value maximization for ownership, such as technological development. This results in provision of stable long-term finance, which allows companies to invest in projects only generating long-long-term returns and to retain investment in stagnating industries. Conversely, investors in LMEs emphasize current profitability of companies and short-term returns (Hall & Soskice 2001, Vitols 2001).
Authority structure
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counterparts, who rely on agreement from other levels of authority within and outside the firm. Consensual decision-making compels managers to focus more on reputation and less on profitability compared to their LME counterparts (Hall & Soskice 2001, Vitols 2001).
Consensual decision-making also increase the stability of business strategies and prominence of long-term perspectives and is important to production processes where workers are granted extensive autonomy and encouraged to contribute towards technological development. Swift, unilateral decision-making in LMEs facilitates rapid adjustments to changing circumstances and a centralized, top-down approach to production (Lehrer 2001).
These factors are relevant to RE projects, which are generally perceived to entail great upfront investments and likely to bring profits only in the long-term. It can also appeal to investment-motives for technological development, which is also a long-term process (Grubler 2012, Kuzemko et al 2016, Aklin & Urpelainen 2013). This distinction between long-term investments and stable business strategies in CMEs and rapid changes in LME also mirrors the outcome observed in term of wind energy deployment in my two cases.
Skill formation
CMEs tend to generate firm-and industry-specific skills, while LMEs generate general skills. This is reflected in respective educational systems, of which CMEs are noted for effective vocational training schemes, enabled by industry-education relations, intended to generate a skilled workforce (Hall & Soskice 2001, Estevez-Abe et al 2001). Importantly, Denmark is said to dominantly generate industry-specific skills and not firm-specific skills, due to its high unemployment protection, but low employment protection. Conversely, the UK is found to have one of the lowest scores for both unemployment, and employment protection, which generates transferable and general skills. Firms are encouraged to engage in business or production of which there is an abundance of appropriate labor force under each system (Estevez-Abe et al 2001).
Industry-specific skills enable company strategies in CMEs based on high work autonomy, information-sharing and encouragement to come up with technological solutions. This is crucial to develop deep competencies within established technologies, and to continuously upgrade and improve existing product line. Hence, industry-specific skills are a core component of incremental innovation (Estevez-Abe et al 2001).
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It is argued that a lack of skilled staff can constrain the diffusion of RETs. Consequently, it is reasonable to assume that generation of skilled labor in Denmark has facilitated its early start of wind energy development and steady deployment, while it has been a constraint in the UK. Skill-attainment also entails that industry and education should coordinate, so educational programs can quicker update themselves to accommodate novel technologies. This is usually a long and incremental process that relies on long-term business strategies and industry-education relations. Hence it is expected to observe more of this in Denmark (Negro et al 2012).
Inter-company relations
Inter-company relations in CMEs are usually organized and collaborative, which foster common technical standards that help to diffuse new technologies, and they contribute to a common knowledge-base that facilitates collaboration among personnel from multiple forms, as to the industry-specific skills fostered by training schemes (Hall & Soskice 2001, Casper 2001, Wood 2001). Inter-firm relations in LMEs are typically organized in the market, under competitive conditions. Technology transfer usually takes place through the movements of scientists and engineers from one company to another or from research institutions to the private sector, facilitated by fluid labor markets. LMEs also rely heavily on licensing or sale of innovations to effect technology transfer (Hall & Soskice 2001).
Inter-firm collaboration and technology transfer encourage corporate strategies that focus on niche production in CMEs, partly because it increases the capacity of companies to provide R&D for new technologies. Inter-firm relations in LMEs, however, generate intense product competition, which should equally constrain R&D provision and niche production (Fioretos 2001, Hall & Soskice 2001).
This finds support in energy transition literature, which argues that coordination among firms and entrepreneurs facilitate the diffusion of technological knowledge. Conversely,
competitive environments for firms and entrepreneurs are an impediment towards this. This is further facilitated by interaction between knowledge institutes and industry, which can lead to a strategic direction in research and the build-up of a knowledge infrastructure through which technological knowledge can diffuse. This generates a positive feedback mechanism which tasks researchers with finding appropriate improvements on technologies as requested by firms in the industry. Hence, diffusion of technological knowledge is naturally said to lead to
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better and more reliable technological designs. It also reduces uncertainty about novel energy technologies and contributes to articulation of collective demand among investors and the public, which is essential to incentivize investment in the technology (Negro et al 2012, Grubler 2012, Toke 2011a).
Information-sharing, inter-firm coordination, consensual intra-firm interaction, a skilled and autonomous workforce and access to stable and long-term finance should thus observable attributes in the Danish wind energy industry. This should have compelled a process of incremental innovation concentrated on delivering quality and reliable products. The link to the outcome of interest seems obvious, as incremental innovation shape conditions for first early, and then steady and gradual deployment of a technology. In the UK, one expects to find market-based, competitive relations, lack of skilled staff, top-down decision-making and less access to long-term finance. Attempts to deliver cost-efficient technology based on radical innovation should have followed from this. It also implies that the UK was only able to accommodate the technology once it was relatively cost-efficient.
If a valid explanation, one needs to find evidence of mentioned institutional attributes. Hence, the following hypothesis:
H4: Collaboration, information-sharing, skilled labor and long-term finance have characterized the wind energy sector in Denmark, while the UK sector has been characterized by competition, skill-shortage and top-down management.
2.2.2 VoC and policy-making
LMEs are likely to generate market-based incentives to induce economic actors to perform more effectively, such as tax incentives. However, deregulation is the primary political measure to improve efficiency in LMEs. CMEs are more likely to yield interventionistic policies that address firm needs, such as skill levels or technological capabilities, with relative precision. This also entail establishment of institutions that facilitate information-sharing by enhancing trust and credible commitment (Hall & Soskice 2001).
Underpinning this, and also all the above, is the different role of government afforded in the respective varieties. Neoliberal principles in LME countries imply a belief that innovation, and the economy as a whole, functions best left alone, limiting the possibility of targeted
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industrial policy measures. The market picks the technological winner. In contrast, CME countries have an established practice and normative acceptance for government intervention in the economy. This means that innovation can be steered by political decisions about technology choice (Hall & Soskice 2001, Cetkovic & Buzogany 2016, Kuzemko 2016).
It is likely that the overarching political economic setting will be reflected in countries’ energy governance (Scholten 2012). Hence, we expect to see more deliberate, government-oriented energy governance in Denmark, and a more market-government-oriented approach in the UK, which also should be reflected in energy and RE policies and instruments. Market-based instruments are typically carbon taxes and tradeable green certificates (TGCs). The typical example of a more interventionistic policy instrument is feed-in-tariffs (FiTs) (Toke & Lauber 2007). Accordingly, one expects to see more of the former in the UK, while Denmark should have utilized more of the latter. However, one should generally see more policy measures in Denmark than in the UK, maybe even market-based, due to the government-role in the respective economies. Essentially this means that the state in Denmark have a
comparatively greater capacity to create niche markets for new technologies to develop within, which could explain why development of wind energy succeeded earlier there than in the UK.
For example, information-sharing and monitoring means that investors and government institutions are better positioned to assess the performance of firms in CMEs than in LMEs. This should enable governments to create more appropriate policies and supportive
mechanisms in accordance with changing circumstances and development, which is crucial to a government-based energy governance (Lockwood et al 2017, Hall & Soskice 2001). It is likely that this have facilitated the emergence of comprehensive energy plans featuring concrete long-term targets in Denmark, and constrained its emergence in the UK. As previously argued, this has substantial implications for RE deployment. This overlaps with consensus democracies better capacity at generating consensual decision-making and policy stability, which also is conducive to long-term planning, indicating the institutional
compatibilities further.
H5: Energy governance has been relatively government-based in Denmark and market-oriented in the UK, which induced earlier deployment in the former.
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2.2.3 Influence of market incumbents
It is also argued that a more liberal economy increases the capacities of major companies (Geels 2014, Hall & Soskice 2001). This pertains to my thesis, because there is a cross-theoretical consensus in energy literature that overturning the incumbent technological
‘regime’ is vital to open up for renewables. A ‘regime’ consists of, among other things, major companies and their connections to political influence. Due to their economic importance and corresponding political influence, these companies have the capacity to constrain the
implementation of policies that favor renewables. However, it has been noted that this is a vicious circle that can be escaped by implementation of measures that support renewables. Such measures can directly undermine the regime or just merely improve the competitiveness of renewables. Carbon taxes directly challenge the economic competitiveness of incumbents, while subsidies, tax exemptions and RD&D-funding directly improve the competitiveness of renewables. Ideally, policy is a mix of mutually reinforcing mechanisms addressing both dimensions (Geels 2014, Kern & Kivimaa 2016, Simmie et al 2014, Kuzemko et al 2016). Because many states provide subsidies for both fossil fuels and renewables at the same time, a first step could be to align these policies by removing fossil-fuel subsidies (Grubler 2012).
Essentially, this implies that an institutional setting with a greater capacity to overcome resistance of major companies should be better equipped at breaking this vicious circle. Because of its LME, the UK is expected to be characterized by major companies enjoying influence to constrain deployment of wind energy. Conversely, Denmark’s CME should afford less influence to major companies and find this less of a constraint. Furthermore, this interacts with the political systems. For example, decentralized energy distribution, as enabled by political decentralization, makes it harder for major energy companies to oppose change by denying grid access to RE-developers (Negro et al 2012).
Even when incumbent companies become involved in the energy transition, it is generally perceived that their primary motivation is short-term survival in the market by removing competition from independent developers rather than to develop renewables. Conversely, public entities are more likely to focus on long-term goals and technological options. Accordingly, it is expected that incumbent firms will prefer innovations that are near to market maturity and compatible with the existing regime, such as CCS. Similarly, they will block the entrance of new actors to the market, who are more likely to contribute to
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Kivimaa 2016, Negro et al 2012, Scholten 2012). Hence, incumbents can constrain RET deployment both through political influence and market behavior.
Majoritarian systems that concentrate tremendous power in the central governments, have the capacity to counter the institutional constraints posed by the business community during policy formation, however. Effectively, the influence of producer groups is politically undermined in such systems, just like interest group influence (Wood 2001). This is
important, because the capacity in majoritarian systems to instigate radical policy change that could lead to rapid deployment of wind energy is central to the outcome I try to explain.
Relating to the relative centralization of energy distribution systems, it is also likely that profit-maximizing companies will generate projects that contradict local interests more than small and locally-based projects would. Naturally this will lead to more public opposition, which can constrain the deployment of wind energy (Toke 2011a). It is thus reasonable to assume that the UKs LME has generated more controversial projects and faced more popular opposition than Denmark.
Because liberalism is said to empower major companies, it should be observed that these companies have influenced policies, opposed innovation and raised public opposition to a greater extent in the UK than major companies in Denmark. This can account for the early start and steady deployment of wind in Denmark, as well as the late start in the UK. The power of government in the UK, mean that major policy change has still been possible.
H6: Major energy companies have had greater political influence and presence in the wind industry in the UK than in Denmark, which has shaped respective deployment trajectories.
2.3 Theoretical compatibilities
Returning to the point about the theoretical compatibilities and institutional co-evolution, it seems clear that the stable policy frameworks associated with consensus democracies is a pre-condition for the long-term business strategies in CMEs. Conversely, capacity for radical policy change in majoritarian democracies discourages long-term investments and business strategies, precludes institutions of coordination. It rather encourages cost-sensitive firm behavior characterized by short-term perspectives and radical innovations (Wood 2001, Fioretos 2001, Hall & Soskice 2001). We can also see this dynamic in energy governance.
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For example, both a government-based energy governance regime and consensual policy-making are important to generate long-term plans and stability, which is crucial to foster RE deployment.
Due to the correlation between economic and democratic institutions, it is unlikely that an explanation based on only one of these would be complete. It would be hard to demonstrate which institutional setting that produced a given outcome, and it is not necessary if they generally complement each other, meaning you usually will not have one without the other. They also tend to mirror one another, as stability and incremental change is a trait of both CMEs and consensus democracies, while rapid changes and instability is more likely in both LMEs and majoritarian systems.
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3 Research method
3.1 Comparative case study
This is a qualitative research based on an analysis of secondary literature, reports and
documents. It follows naturally from my research question and puzzle that a comparative case study design is appropriate. In general, case study designs sacrifices some external validity, or representativeness, by only including a limited set of cases. However, it also opens for a more detailed and in-depth exploration of the relationship between the independent and dependent variables. As a result, it is easier to establish the causal relation at play, which increases the internal validity of the research.
Furthermore, the comparative politics literature identified a research gap in establishing the exact relation between different democratic models and performance regarding
RE-deployment and environmental improvement, and this method responds to that gap. I also think a qualitative methodology is the best way to apply the VoC framework on energy transitions, because a broader set of cases would yield findings that are too distorted by natural advantages in terms of energy resources. A comparative case study approach is thus more appropriate to illuminate the actual influence of institutional varieties by choosing cases of similar resource advantages. Generally, the institutional varieties have rather complex implications, and this method allows for a more comprehensive exploration of the various ways these varieties can influence the deployment of wind energy.
Though the case selection was based on an observed puzzle, and thus preceded theory, I think the two cases are ideal for an energy research based on these theories. The cases are very similar on factors that can determine development of renewable energies, except for different economic and political institutions. As a result, this case selection should illuminate the influence of institutional varieties on the outcome of interest. Though a case study approach sacrifices some generalizability, this should anyway ensure that important findings about institutional impact can be applied to other cases with similar institutional conditions.
3.2 Data
The most dominant source of information is scholarly literature, both peer-reviewed journal articles and academic books. I have primarily concentrated on literature that directly
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with literature on environmental and energy politics in the respective countries because it is likely that this will have a significant impact on the deployment of wind energy. Because the preliminary literature analysis revealed that the initial interest in commercial wind energy in both countries emerged as a response to the 1973 oil crisis, this is the starting point of my analysis (Sovacool 2013, Kern et al 2014a). The time frame will run up until today. Hence, I will need a mix of both old and new literature, and possibly literature that cover the entire period of both countries.
Several statistical reports have been used to gain information about deployment of wind energy over time. For this, I have used reports from the Global Wind Energy Council (GWEC), WindEurope, Eurostat, the International Energy Agency (IEA) the International Renewable Energy Agency (IRENA), RenewableUK and the Danish Wind Industry
Association. Some of these reports have also contributed with other insights, such as analysis of policy efficiency and policy formation, which I have taken use of. In general, concrete numbers are important to illustrate how policies correspond with deployment.
Official documents from the respective countries have been useful to get an overview over concrete targets and proposed strategies. However, I have not used these for analytical data, as I generally believe they are biased sources. To the extent I have taken use of these sources, it has often been to assess how they correspond with the secondary literature, to ensure the reliability of my sources and provide counterweight to possible biases.
I have also used the Danish government website to get info about governments since the early 1970s. This is important to analyze stability in government, frequency of coalition
governments and which parties that have held power at given times. Additionally, this reveal whether cabinets have included explicit energy and/or environmental ministries, which is an important indicator of how prioritized the issue is and how involved the state is in energy governance. This information is naturally important to test the assumptions derived from the democratic institutions framework, but also to assess energy governance regimes.
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4 Empirical analysis: Denmark
This part will try to explain why Denmark adopted commercial wind energy so early and why it has deployed it consistently and gradually ever since. Wind covered about 2.5% of Danish electricity consumption in 1990, rising to 12.3% in 2001, 22% in 2010 and 37.6% at the end of 2016 (Lindboe & Hethey 2014, IRENA-GWEC 2013a, GWEC 2017a). As a result, Denmark leads the world in both per capita use of wind electricity as well as the share of wind electricity as a percentage of national supply (Sovacool 2013, GWEC 2017b). I will try to explain the early start and steady development with factors determined or facilitated by Denmark’s institutional setting, consisting of a consensus form of democracy and a CME.
4.1 Policy innovation
Serious interest in wind energy began to develop in Denmark following the 1973 oil crisis, when Denmark depended on oil for 95% of its energy supply. However, there is no
guaranteed link between an energy crisis and support for renewables. The Danish government was, initially, primarily interested in nuclear energy and coal as solutions to the problem of oil-dependence (Andersen 1990, Sovacool 2010, Meyer 2004).
During the 1970s, both environmental problems and nuclear energy were politically salient issues in Denmark. Popular interest was mobilized by interest groups such as NOAH (Friends of the Earth Denmark) and Organization for Information on Nuclear Power (OOA). Two minor parties on the left, Socialist People’s Party (SF) and the Danish Social Liberal Party (henceforth Social-Liberals), also took an interest in the environment and the nuclear energy issue. These parties enjoyed significant support in the 1970s, consistently close to 20% combined (Andersen 1990). Notably, these two parties have functioned as the ‘green’ parties in Denmark, explaining why the actual Green Party never gained much support (Kosiara-Pedersen & Little 2016). Importantly, representation for these parties essentially meant greater political accessibility for interest groups as well (Lipp 2007). In other words, the party system in Denmark opened up for early attention to environmental protection, which was reflected in the establishment a Ministry of the Environment in 1971 and a law on
Environmental Protection in 1973.
The Danish Organization for Renewable Energy (OVE) was formed in 1975, and soon gained support from OOA and NOAH. Surveys proved the direct relation between opposition to
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nuclear power and support of renewables, particularly among farmers which became the typical investors in the early wind turbines (Andersen 1990). Along with the general public, these interest groups were influential in the energy policy debates that followed the oil crisis. Together with SF and the Social-Liberals they exerted strong pressure on the Social
Democratic government to provide support for wind energy technologies and to abandon nuclear energy. Though nuclear energy was a central part of the government’s Energy Plans in 1976 and 1981 this pressure constrained it from actual implementation. This provided greater scope for wind energy as a solution (Lipp 2007, Garud & Karnoe 2003, Meyer 2004).
The Danish government became heavily involved in energy governance following the energy crisis, which is illustrated by the establishment of the Danish Energy Agency in 1976 and subsequently the Ministry of Energy in 1979 (IEA 2011). It has released comprehensive energy plans every 2-5 years since 1976, setting out concrete targets and means to achieve them (Sovacool 2010 & 2013).
Responding to advocacy demands, the government began offering subsidies for investment in wind research to individual farmers and local cooperatives in the mid-70s, and also started heavily taxing gasoline, diesel and oil, which should indirectly support wind energy (Sovacool 2013). A coordinated R&D program in support of wind energy started in 1976, focused on technological information-diffusion from the Riso Research Center and the Danish University of Technology (Klaassen et al 2005).
Furthermore, the connection of small turbines to the national grid in Denmark was formalized by the authorities in the late 1970s. Now, anyone with an approved wind turbine had the ability to connect to the national grid and to receive payments for any surplus electricity they supplied to the network. This was important, as the diffusion of the technology depended on electricity generators making some use of wind energy. Soon after, legislation was passed that allowed individuals who had shares in cooperatively owned turbines in or near where they lived, to pay no tax on the income from electricity sales up to about 9000kWh (Simmie 2012, Lipp 2007).
Such policy innovation correlated with the entrance of environmental and energy issues on the political arena, made possible by institutions that provided representation to the smaller parties representing these issues. Hence, the debate about energy policy in Denmark became
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characteristically inclusive, featuring a broad range of actors. This was also due to decentralized political authority and energy distribution, which encouraged political participation locally. Another benefit of wide, social participation was that it curbed the influence of the incumbents on policy-making, which favored wind energy (Meyer 2004, Sovacool 2011).
4.2 Incremental innovation
Researchers in Denmark during the 1970s began to experiment with existing technological designs derived from pioneer Danish inventors Poul La Cour and Johannes Juul. Ownership of turbines was based on the cooperative model, in which each individual member owned a part of the corporation, with a long tradition as a form of organization in the Danish
economy. This process was organized around local farming communities that engaged in networks of collaboration to solve technological issues (Sovacool & Sawin 2010, Simmie 2012). In other words, ownership of wind projects was decentralized and local rather than concentrated in the hands of large corporations. This implied consensual decision-making and encouraged a strategy for technological development that emphasized reliability, as well as an interest for local and environmental benefits rather than just profits (Sovacool 2013, Toke 2011a).
It was primarily agricultural machinery manufacturers that got involved in the production of the new technology. These companies had long experience with engineering robust and reliable agricultural equipment based on incremental innovations. This determined an approach to wind turbine manufacture based on reliability and incremental innovations. Notably, Vestas was one of these companies (Simmie 2012).
Incremental improvements to Juul’s turbine design led to the construction of the first reliable 1MW wind turbine in 1978. 1MW was the minimum level needed for commercial electricity production from wind turbines, hence this turbine laid the foundation by which Danish wind turbines developed and later diffused. The following year, the first commercial wind turbine was installed by Vestas (Simmie 2012, Toke 2011a).
The Danish Wind Turbine Owners’ Association and the Association of Danish Wind Mill Manufacturers emerged in 1978. Though this also strengthened the organized political interests in support of wind energy in Denmark, it was primarily important with regard to the
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process of incremental innovation. They promoted information-sharing among thousands of wind turbine users, detailing the operational results and problems of all wind turbines installed in Denmark. Technological weaknesses or challenges related to blade design or structural dynamics was thus quickly revealed and could be addressed in cooperation
(Heymann 1998, Garud & Karnoe 2003). This spurred the growth of networks between many small competitors that began to coordinate their efforts at improving the technology. Also the Danish University of Technology started incorporating new knowledge in their programs, as well as promoting new knowledge. A so-called knowledge infrastructure emerged, which provided both customers and producers with a thorough knowledge of turbines offered, and this stabilized the demand of the technology (Sovacool & Sawin 2010).
Additionally, a government-funded Test Station for Smaller Turbines at the Riso Research Center was established in 1978. It published comparative tests of turbines so that testing-standards coevolved with the technology. Government regulators also established formal standardization and evaluation mechanisms. The test station’s reports further facilitated the close interaction between private wind turbine owners and suppliers, as well as between suppliers and the research community, resulting in positive feedback effects, information-sharing and collaboration (Heymann 1998, Sovacool & Sawin 2010, Sovacool 2010). These factors were central to the process of incremental innovations.
4.3 Policy stability, incremental upscaling and steady deployment
SF and the Social-Liberals maintained high level of support throughout the 1970s and 1980s. This yielded consistent attention to environmental issues, and it constrained Danish
governments from implementing nuclear power until it was officially abandoned in 1985. This was crucial to deliver an energy policy that increasingly emphasized sustainability and wind energy (Andersen 1990). Since 1981, all energy plans in Denmark have set concrete targets for wind energy deployment and its contribution to the energy mix as well as the means to achieve them (Meyer 2004, Lipp 2007, Sovacool 2013). For example, in 1985 the government set a target of having 10% of electricity production covered by wind by 2000, which was met in 1999 (Toke 2002). As noted, such long-term targets are crucial to establish a market for a new technology.
The Ministry of Energy introduced a 30% subsidy to cover the capital cost of installing wind energy in 1979, providing investors with price and market security (Simmie 2012). Only
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wind turbines licensed by the test center at Riso qualified for the subsidy. This assured the quality of turbines sold to the public and thus increased the security of investments further, which facilitated market formation (Heymann 1998, Garud & Karnoe 2003, Meyer 2007).
Governments in Denmark now embarked on years of policy innovation. It passed a FiT in 1981, requiring utilities to buy all power produced from RETs at a rate above the wholesale price of electricity in a given distribution area. This was the first instance of a FiT system in the world (Toke 2011a). A government committee for promoting energy systems based on renewables was established in 1982, and became crucial to provide funding for renewables (Meyer 2007). In 1985, an agreement was reached between the government and the
electricity utilities, committing the utilities to install 100MW of wind capacity over a five-year period. That same five-year the government also established the Danish Wind Turbine Guarantee, providing long-term financing of large wind projects that used Danish-made wind turbines. Danish electricity distribution companies became legally obliged to finance,
construct and operate the transformer stations and transmission and distribution infrastructure for centralized wind farms and decentralized wind turbines owned by ordinary people. They were required to connect wind power and expand the grid if necessary, and provide financial compensation if any of the wind power generated was curtailed (Sovacool 2011).
Such measures were reinforced by gradual expansion of fossil fuel taxes, which were held consistently high during the 1980s and 1990s. This improved the market-competitiveness of wind energy by raising the prices of fossil fuels. These taxes also created government revenue to finance RE research programs (Sovacool 2013).
This development was facilitated by the simultaneous growing attention to environmental issues, reflected by the fact that Denmark had by far the largest nature-preservation organization in Europe. Having solved the nuclear issue, the environmentalists now emphasized pollution from fossil fuels, which would highlight the benefits of wind energy further. Willingness of voters to pay extra cost for environmental protection rose accordingly. Significantly increasing environmental consciousness was also found in most Danish parties during the 1970s and 1980s (Andersen 1990). Responding to demand, the biggest party, the Social Democrats, sharpened their environmental profile in the 1980s as a means to regain power (Klok et al 2006). This meant that environmental issues were represented by a majority in the Parliament, which effectively constrained the conservative-liberal governing
