Analysing the determinants of on-shore wind capacity additions in the EU:
An econometric study
Pablo del Río
a,
⇑
, Miguel-Ángel Tarancón
b
a
Consejo Superior de Investigaciones Científicas (CSIC), C/Albasanz 26-28, Madrid 28032, Spain
b
Facultad de Derecho y Ciencias Sociales, Universidad de Castilla-La Mancha, C/Ronda de Toledo s/n, Ciudad Real 13071, Spain
article info
Article history:
Received 15 July 2011
Received in revised form 26 October 2011
Accepted 15 January 2012
Available online 23 March 2012
Keywords:
Wind energy
Electricity
Policies
Regression
abstract
The aim of this paper is to identify the determinants of differences in on-shore wind electricity capacity
additions in the EU Member States. An econometric model is developed in which capacity additions are
explained according to several variables (wind resource potentials, support levels, electricity generation
costs, type of support scheme, administrative barriers, social support for wind electricity, the general
investment climate in the country, electricity demand, the share of other low-carbon technologies, coun-
try area and whether there have been major or minor changes in the support scheme). The results show
that capacity additions are significantly and negatively related to administrative barriers and changes in
the support scheme and positively and significantly related to the general investment climate. The other
variables are not statistically significant, although they generally have the expected sign. The results sug-
gest that, more than the level of support granted to renewable energy technologies and the wind resource
potentials of each country, capacity additions are encouraged by the removal of administrative barriers
and by greater regulatory stability, leading to lower investment risks.
Ó 2012 Elsevier Ltd. All rights reserved.
1. Introduction
Capacity additions in electricity from renewable energy sources
(RES-E) are crucial in order to decarbonise the energy system and
achieve CO2 concentrations compatible with a 2° increase in tem-
peratures [1]. Furthermore, renewable energy targets have been
set for 2020 in the EU and its Member States and countries have
submitted National Renewable Energy Action Plans to reach those
targets. Thus, an analysis of the main drivers and barriers to those
capacity additions can shed light on the most appropriate policies
to encourage them. Within RES-E, on-shore wind plays a promi-
nent role, representing 50% of non-hydro renewable electricity
generation (and 3.1% of total electricity generation) in the EU in
2007 [2]. The aim of this paper is to identify the sources of differ-
ences of on-shore wind capacity investments in the EU Member
States. An econometric model is developed in which the determi-
nants to those capacity additions are analysed according to several
variables.
Europe is an appropriate context for our empirical analysis,
both for its leading role on climate change and energy policies
and because it is the world region that attracted the largest share
of new renewable energy investments in 2008 [3,4]. Wind has been
the renewable energy source experiencing the greatest absolute in-
crease in the 1990–2007 period. Most of the increase in wind en-
ergy investments is due to on-shore wind. According to data
from the European Wind Energy Association, off-shore wind ac-
counted for only 3.2% of all wind capacity additions in 2006–
2008 [5].
The empirical literature on the analysis of the determinants to
RES-E has focused almost exclusively on the policy variable (see
Section 2.1 for a review of the literature). An integrated framework
in which all the determinants of RES-E capacity investments are in-
cluded has been lacking, both in case studies and econometric
models. In contrast, our study considers the most relevant factors
that influence investments in wind capacity additions in the EU.
Furthermore, the literature has mostly been restricted to case stud-
ies, with few econometric studies on the topic. In addition, energy
models simulate future trends in the electricity generation mix
and, thus, RES-E and include relevant variables such as capital
costs, O&M costs lifetime of plants, learning rates and availability
factors [1]. While case studies provide relevant information on
key factors inhibiting investments in RES-E and identify the details
of policy instruments and processes which have an influence on
investments in renewable energy technologies, they are unable
to identify the relevance of different drivers/barriers across coun-
tries. Econometric techniques allow a more rigorous analysis of
those determinants. This paper fits within this second category of
studies.
0306-2619/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.apenergy.2012.01.043
⇑
Corresponding author. Tel.: +34 916022560.
E-mail addresses: pablo.delrio@cchs.csic.es (P.del Río), miguelangel.tarancon@
uclm.es (M.-Á. Tarancón).
Applied Energy 95 (2012) 12–21
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