Reforming Wind Power Planning and Policy: Experiences from the Nordic Countries

A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Pettersson, Maria; Söderholm, Patrik Article Reforming Wind Power Planning and Policy: Experiences from the Nordic Countries CESifo DICE Report Provided in Cooperation with: Ifo Institute – Leibniz Institute for Economic Research at the University of Munich Suggested Citation: Pettersson, Maria; Söderholm, Patrik (2011) : Reforming Wind Power Planning and Policy: Experiences from the Nordic Countries, CESifo DICE Report, ISSN 1613-6373, ifo Institut - Leibniz-Institut für Wirtschaftsforschung an der Universität München, München, Vol. 09, Iss. 4, pp. 54-60 This Version is available at: http://hdl.handle.net/10419/167061 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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For this rea- MARIA PETTERSSON* AND son decentralised systems often induce both investors and government authorities to design stra- PATRIK SÖDERHOLM* tegies that aim at increasing the local acceptance of wind power projects (e.g., compensation mecha- Introduction nisms, facilitating local ownership, etc.).1 Denmark, Norway and Sweden all have fairly decentralized Investments in new wind power often face a number planning systems, but they differ in the sense that it of economic and institutional obstacles. In the past remains more or less difficult for the local levels in most research attention has been paid to the design the respective countries to override national energy and impact of specific financial support schemes policy goals. (e.g., green certificate schemes, feed-in tariffs etc.), while fewer studies have addressed the legal permitting procedures and planning systems that underpin Wind power development and policy in the Nordic renewable energy policy and practice (Toke et al. countries 2008; Buen 2006). This paper analyzes and compares some important institutional and legal preconditions The Figure shows the development of the total in- for wind power development in three Nordic coun- stalled onshore and offshore wind power capacity in tries: Denmark, Norway and Sweden. In doing so, we Denmark, Norway and Sweden during the last also comment on recent regulatory reforms of the 30 years. In Denmark the expansion in wind power relevant legislation. took off during the mid-1980s. The introduction of wind power in Sweden and Norway became note- The electricity markets in Europe are becoming in- worthy only in the late 1990s, and in Sweden the an- creasingly international in scope, but the planning nual growth in capacity has been significant during and permitting conditions are still heavily influenced the last five years. by national legislation and legal cultures. The Dan- ish, Norwegian and Swedish electricity systems are The differences in wind power capacity can be ex- well-integrated and essentially form one common plained by a variety of factors. On a general level it Nordic electricity market, but even in these other- may be noted that, in part due to the lack of domes- wise politically homogenous countries the legal pre- tic energy sources (e.g., hydropower), the Danish conditions for investments in wind power and other electricity system has largely been organized in a power-generating plants differ in important ways. bottom-up manner with cooperative organizations For this reason, the strength and the design of the and municipalities as owners of distribution utilities various public support schemes can only provide and power stations (Thue 1995). The Swedish and some insight on important inter-country differences Norwegian electricity regimes have instead been in domestic wind power penetration rates. 1 There are several examples of how countries have reformed their permitting procedures for new power plants during recent years. In some of these countries (e.g., Italy) the reforms have led to a more centralized process (IEA 2007), while others instead have imple- mented, for instance, compensation mechanisms to increase local * Luleå University of Technology, Sweden. support (e.g., Spain). CESifo DICE Report 4/2011 54 Reform Models Figure altered from one year to the next and thus offered investors few INSTALLED WIND POWER CAPACITY IN THE NORDIC COUNTRIES guarantees of sustained support MW 4 000 over the lifetime of the project. In Denmark 3 500 Denmark explicit production support (per kWh generated electric- 3 000 ity) was introduced already in the 2 500 mid-1980s; it was guaranteed by Sweden 2 000 means of fixed-price contracts (feed-in tariffs) over a longer peri- 1 500 od (often 10 years), resulting in a 1 000 more stable investment environ- 500 ment for wind power. In Norway Norway the policy interest in wind power 0 1980 1985 1990 1995 2000 2005 2010 was more or less non-existent dur- Sources: International Energy Agency; European Wind Energy Association. ing the 1990s, but increased some- what after the turn of the century. more hierarchical and expert-dependent. For in- Since 2008 Norwegian wind power developers have stance, in Sweden there has been a lack of historical been provided a fixed feed-in tariff over a fifteen- experience with extensive investment activities in year-period, although this financial support has been small-scale power plants. The past has instead been considered too low to stimulate a significant expan- dominated by large state-supported hydropower and sion of wind power in the country. nuclear energy projects. In Norway hydropower has dominated the country’s power generation sector, In Sweden a green certificate system for renewable but the role of direct state involvement in the sector energy was introduced in 2003, and since 2006 the has been less prevalent compared with Sweden producers of renewable electricity have been able to (Pettersson et al. 2010). Norwegian power genera- issue new certificates over a time period of 15 years. tion has been local, due primarily to the favorable This system represents a much more stable financial locations of the country’s hydropower sources (and support to wind power developers compared with the associated varied sizes of the water falls). the earlier support schemes in Sweden. The green certificate system provides a relatively generous sup- It is probably fair to assert that the Danish tradition port per kWh generated and has been a key behind of explicitly acknowledging local interests and partic- the rapid expansion of onshore wind power from ipation in the planning system facilitated the expan- 2006 and onwards. Recently the Swedish and the sion of wind power during the 1980s and the 1990s.2 Norwegian governments have agreed to establish a The strong interdependence between wind power joint green certificate market by the year 2012. establishments on the one hand, and rural and local interests on the other has existed in Denmark since The relatively modest development of Danish wind the early 1900s, and there were even government- power during the last decade can be explained by the funded R&D projects focusing on wind power during fact that the generous feed-in tariffs that were in the Second World War (Jorgensen and Karnoe 1992). place during the 1990s were replaced by lower financial support for new onshore projects. Danish energy The strength and the design of the policy support for policy has instead begun to pay more and more at- wind power have played a clear role in influencing tention to offshore wind power development, and wind power penetration rates. The low rate of wind since 2004 a tendering system for offshore installa- power expansion in Sweden up to the beginning of tions has been in use. The companies that win the the 2000s was a result of significant policy uncertain- opening bids are guaranteed a fixed amount – in ties; policy support (e.g., investment subsidies) was effect a feed-in tariff – for a future production equiv- alent to 50,000 full load hours (in practice a subsidy over a 12-year time period). An important feature of 2 For instance, already in 1979 it was made possible for small,

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