View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by NORA - Norwegian Open Research Archives Wind power success in Brazil MSc in Innovation and Entrepreneurship Andreas Nesse Persson 18.05.2015 1 Study title: Wind power success in Brazil Delivery date: 18.05.2015 Author: Andreas Nesse Persson MSc program: Master of Science in Innovation and Pages without attachments: 93 Entrepreneurship Supervisor: Tom SKauge Pages with attachments: 94 Study object: The emergence of a wind power industry in Brazil Method: Qualitative Case study Summery: This study seeks the explanation behind the Brazilian wind power success. Since the beginning the industry have turned out to be a success by becoming the cheapest source of electricity. This study discusses three different explanations (hypotheses) to the success: Technological explanation (hypothesis 1), marKet explanation (hypothesis 2) or governmental explanation (hypothesis 3). The study has been conducted as a triangulated qualitative case study by combining interviews and written data. The explanations were not supported as one-factor explanations. The technological - and the marKet explanation were concluded to be necessary but not sufficient. The governmental explanation was both necessary and sufficient to create the success. Keywords for library: PROINFA, Brazil, Wind Power, Path-dependence, Path-creation, Innovation, Technology, Lock-in, Entrepreneur, innovation models, demand, supply, government regulations, 2 Preface This thesis marKs the end of my MSc Innovation and Entrepreneurship at Bergen University College. The work on this thesis has been exciting, instructive but at times also demanding. I want to thanK everyone who made this thesis possible. I would liKe to thanK my talented supervisor, Tom SKauge for his patience and guidance with my thesis. He has always taKen the time and given me good and constructive feedback that has been a great help to me throughout this thesis. I will also thanks the researchers: Tom SKauge, Einar Braathen, Jan Froestad and Antonio José Junqueira Botelho from the research program: Transition to sustainable energy systems in emerging economies – A South African focused comparative project (comparing China, India, South Africa and Brazil, the southern BRICS) for collecting interviews and let me use their data material in this study. ThanKs to Antonio José Junqueira Botelho for taKing time for interview when you was visiting Bergen spring 2015. Thanks to Ricky Röntsch for transcription of one of my interview. Thanks to Paula DeWitte for review this thesis. 3 Glossery GWEC Global Wind Energy Council PROINFA Program of Incentives for Renewable Energy BRICS Brazil, Russia, India, China, South-Africa WBG World Bank Group BNDES Brazilian National Development BanK CO2 Carbon dioxide SOE State Owned Enterprise PPA Power Purchase Agreement ABEEólica Brazilian Wind Power Association RETs Renewable Energy Technologies CAPEX Capital Expenses IRENA International Renewable Energy Agency R&D Research and Development 4 List of content Preface ............................................................................................................................... 3 Glossery ............................................................................................................................. 4 1 Introduction .................................................................................................................... 7 1.1 Problem definition ....................................................................................................... 9 1.2 Outline ....................................................................................................................... 11 2 Theory ........................................................................................................................... 12 2.1 Technology development and innovation ................................................................... 13 2.1.1 Technology adoption life cycle ........................................................................................................................ 15 2.2 Market and the entrepreneur ..................................................................................... 18 2.2.1 The Entrepreneur ................................................................................................................................................. 19 2.3 Path-dependence and government regulations (2.4) .................................................. 22 2.3.1 Path-dependence/Path-Creation ................................................................................................................... 22 2.3.2 Defining the term “Path-Dependence” and “Path-Creation” .............................................................. 23 2.3.3 Strength and weakness of “locK-in” ............................................................................................................... 28 2.4 Government regulation .............................................................................................. 29 2.4.1 Feed-in tariff ............................................................................................................................................................ 30 2.4.2 Competitive bidding process ............................................................................................................................ 30 2.4.3 Green certificate .................................................................................................................................................... 31 2.4.4 Quasi markets ......................................................................................................................................................... 34 3 Method and research design ......................................................................................... 35 3.1 Collection of data ....................................................................................................................................................... 36 Interview ............................................................................................................................................................................... 36 Written data ........................................................................................................................................................................ 38 3.2 Quality requirements .............................................................................................................................................. 39 Internal validity ................................................................................................................................................................. 39 External validity ................................................................................................................................................................ 40 Reliability .............................................................................................................................................................................. 40 4 Discussion ..................................................................................................................... 42 4.1 Technology explanation ............................................................................................. 43 Rotor ....................................................................................................................................................................................... 43 Tower ..................................................................................................................................................................................... 44 Drive system ........................................................................................................................................................................ 45 4.1.1 Brazil in the technology adoption life cycle ............................................................................................... 47 4.1.2 Wind turbines meet wind .................................................................................................................................. 49 4.2 Market explanation .................................................................................................... 53 4.3 Governmental explanation ......................................................................................... 60 4.3.1 From private, to Public and private again .................................................................................................. 60 4.3.2 Building a new industry ..................................................................................................................................... 61 4.3.3 Creation of renewable energy market ......................................................................................................... 62 4.3.4 PROINFA goes into Auctions ............................................................................................................................ 65 4.3.5 Handling the risK ................................................................................................................................................... 70 5 4.3.6 Local content requirement ................................................................................................................................ 72 4.3.7 Quasi-marKet,