Strategic Control Over Wind Power Development Policy

Chapter 3 introduced a three-step framework that could be applied to case study analysis in order to extract insights for refining wind power development policy. The first step of the framework entailed the analysis of a sufficient number of national case studies to identify prominent commonalities that influence wind power development. In this book Germany, Denmark, China, the United States, Japan, and Canada were chosen as nations for analysis. Germany and Denmark—two nations that have laudable and sustained successes in wind power development—were selected in order to provide insight into successful wind power development policies. China and the United States, which have both experienced boom and bust periods of wind power development, were picked to provide insight into factors that cause such oscillations in development. Japan and Canada, which are two nations that have underperformed in regard to wind power development, were selected to provide insight into barriers to wind power diffusion. Although only six nations were included in this study, additional wind power policy analysis undertaken by the author in Australia and Taiwan provide general confirmation of the external validity of the findings that will be summarized in this chapter. In this chapter the social, technological, economic, and political (STEP) factors that emerged as influential for either supporting or impeding wind power development in the six case study nations will be summarized. The intention of this compendium is to provide policymakers and interested stakeholders with greater clarity regarding the factors that must be strategically managed in order to enhance the scale scope and pace of wind power diffusion. The factors introduced in this chapter should not be misconstrued as constituting a best practice list for optimizing wind power policy success. As was pointed out in the introductory chapter, energy policy is designed and implemented within a contextually unique environment that involves a seamless web of dynamically evolving forces. Consequently, the notion that it might be feasible to construct a universally applicable manual of best policy practice is a fool’s errand.

Wind Power in Japan

The story of wind power development in Japan is, at its essence, a subplot to a story of path dependency and the clout of a well-entrenched nuclear power regime. Path dependency refers to the tendency of an entrenched technology to evolve incrementally, primarily due to the existence of entrenched special interests that are committed financially and ideologically to a given technology. These special-interests spawn a regime that finances incremental technological evolution in order to keep pace with consumer demand and that is capable of mounting strong market defense of incumbent technology. By achieving a high level of market penetration, an incumbent technology amasses both the market share necessary to undercut competitive offerings and the political support needed to create market entry barriers for competing technologies. In Japan, nuclear power has been such a technology. Prior to March 11, 2011, Japan laid claim to possessing the third-largest nuclear power program in the world. The nation’s 54 nuclear power reactors were capable of providing almost 30% of the nation’s electricity needs, and the government was committed to a nuclear power expansion policy that would result in nuclear power capacity providing 40% of the nation’s electricity supply by 2030. So how did a nation located in an extremely active seismic region that was on the receiving end of two atomic bombs (which killed between 150,000 and 250,000 people) wind up with such a well-entrenched nuclear power regime? The answer to this question helps explain why wind power developers in Japan have had such a difficult time penetrating the Japan market. At the end of World War II, a defeated Japan found itself under the administrative oversight of the United States. On December 8, 1953, US President Dwight D. Eisenhower delivered a speech to an assembly of the United Nations, which came to be called the “atoms for peace” speech. In his address, Eisenhower announced a US initiative to “encourage worldwide investigation into the most effective peacetime uses of fissionable material.”

Wind Power in Canada

In August 2007, the ice sheets choking off Canada’s Northwest Passage receded, permitting passage without the aid of an icebreaker for the first time in Canada’s 150-year history. Although this development presents economic opportunities, it also exposes enormous ecological threats that, 50 years ago, former Prime Minister Pierre Trudeau professed Canada should strive to avoid. Lamentably, Canada has played a role in this environmentally invidious development due to the greenhouse gas (GHG) emissions it has produced in prolific quantities over the course of its comparatively short history. This chapter highlights the barriers to developing a cohesive national energy strategy in a federal system where the states—or in Canada’s case, the provinces—enjoy constitutional sovereignty over electricity generation. More than any other case study covered in this book, this study on Canada demonstrates how political institutions can produce conditions that make it difficult to fully exploit wind power potential, despite public support for such an outcome. As of the end of 2012, Canada boasts the ninth highest amount of installed wind power capacity in the world. Based on this statistic alone, it is tempting to conclude that Canada’s wind power development policies merit recognition for being comparatively successful. However, in order to equitably assess performance in stimulating wind power development, one must also take into consideration the contextual factors which influence wind power development potential. When one does so, it becomes apparent that when it comes to wind power, Canada is a Ferrari in a world dominated by Fords. Three factors, in particular, bestow Canada with an astonishing high degree of realizable wind power potential. First, although geographically Canada is the world’s second-largest nation, it enjoys one of the lowest population density ratios in the world demand. The strategic benefit of Canada’s sheer size is that wind farms could be geographically dispersed to significantly attenuate the threats posed by wind intermittency. Wind conditions are impacted by disparate atmospheric conditions as one traverses the nearly 6,000 km from Canada’s east coast to west coast.

Wind Power in China

Analyzing electricity generation sector developments in China is akin to observing a person emerging from a supermarket with a shopping cart half-full with dietary products and half-full with chocolates and other sweets and trying to determine whether or not the person is going on a diet. On the one hand, in 2009 China surpassed the United States as the world’s largest emitter of greenhouse gases (GHG). Not only is China the world’s largest consumer (and producer) of coal; by 2030, coal consumption in China is expected to increase 41% from 2010 levels. On the other hand, China boasts a burgeoning wind power market. In 2012, nearly one of every three MW of installed wind power capacity was installed in China. As of December 2012, China enjoys top global spot in aggregate installed wind power capacity with 75,324 MW installed, 20% of global capacity. China is also the fastest growing nuclear power market in the world with 40,000 MW of installed nuclear power capacity expected by 2020. Although Deng Xiaoping passed away in 1997, his famous axiom “It doesn’t matter if a cat is black or white, so long as it catches mice” (In Mandarin 不管白猫黑猫, 会捉老鼠就是好猫), which was invoked to describe the underlying premise behind political and market reform embraced by the Communist Party of China (CPC), still reigns true in China today. Accordingly, one cannot help but wonder what type of mice China’s laudable commitment to wind power is intended to catch. Is this a strategic initiative that will lead to China establishing new benchmarks for wind power leadership, or is it simply a small part of an all-out effort on the part of the CPC to keep up with burgeoning demand for energy in whatever way that works? In this chapter, sociopolitical economic influences on wind power development will be examined with an intention to try to explain China’s remarkable recent achievements in wind power. The reader will find that wind power policy in China is not just about energy economics; rather, it is a tale of pragmatic planning, strategic foresight, and gradualist politics.

Wind Power in the United States

There is a lot of money on the line in America’s energy sector and where there is money, there is politics. In 2011, Exxon reported revenues of US$486 billion and after-tax profits of US$41 billion. Only 27 nations generated more GDP than Exxon generated in revenues. As of 2011, Exxon reported over US$214 billion invested into property, plant, and equipment. In short, there are a lot of sunk costs to defend. In the coal sector, America’s Peabody Energy, which is the world’s largest private sector coal company, posted US$8.077 billion in revenue in 2012. Understandably, America’s energy sector is one of the most hotly contested marketplaces in the world and in this marketplace, fossil fuel interests rule the roost. On the other hand, 9/11 and the ensuing military response have engendered a change in the ideological underpinnings of American energy security efforts. Even conservative factions that have typically supported a free trade energy policy have now begun to talk about the importance of ensuring control over domestic energy security. One study by Oak Ridge National Laboratory estimated that between 1970 and 2004, American dependence on foreign oil has cost the country $5.6–$14.6 trillion. This reflects both the cost of the oil and the direct economic consequences of macroeconomic shocks and transfers of wealth. Another more recent study estimated that oil dependence in the United States exceeded US$500 billion for 2008 alone. These claims are supported by trade data. The United States purchases more than 60% of its oil from foreign sources each year and the cost of petroleum products is the single largest contributor—48%—to the country’s US$700 billion trade deficit. Supply costs aside, one study recently concluded that the military costs in the Persian Gulf needed to protect oil assets and infrastructure range from US$50 billion to $100 billion per year; a second, independent study put the figure at between US$29 billion and $80 billion per year. The United States is spending billions each year to protect a supply chain that is in part responsible for financing terrorist activities such as the 2001 attack on New York’s World Trade Center buildings.

Introduction: The Global Imperative

The years 2006–2007 represented an intellectual tipping point for climate change advocacy. Over this short period of time, there was ample evidence of a general convergence of understanding between many environmentalists and economists on the perilous threat posed by climate change. In the summer of 2006, the release of Al Gore’s An Inconvenient Truth turned climate change into an issue of public concern in the United States. The domestic debate that the film helped inspire escalated over the next year to a point where energy policy suddenly became a vote swaying issue in American politics. This development became a topic of interest for the rest of the world because signs of a weakening in American reticence toward climate change mitigation would have significant repercussions for the 128 nations that were struggling to keep the Kyoto Protocol from falling apart. In October 2006, a comprehensive independent study called the Stern Review, commissioned by the Chancellor of the Exchequer in the United Kingdom, presented an assessment of the anticipated impacts of climate change. As a foreboding sign of the content which would follow, the report began by describing climate change as “the greatest and widest ranging market failure ever seen”. The report concluded that the long-term costs of climate change were expected to be so great that early action to abate global warming was the most cost-effective alternative. It estimated that the net benefits (benefits less costs) from reducing greenhouse gas (GHG) emissions to achieve a stabilization level of 550 parts per million (ppm) by 2050 would be in the neighborhood of US$2.5 trillion. In February 2007, the first of four reports that comprise the Fourth Assessment Report of the United Nation’s Intergovernmental Panel on Climate Change (IPCC) was released. The goal of this first report was to “describe progress in understanding of the human and natural drivers of climate change, observed climate change, climate processes and attribution, and estimates of projected future climate change.”

Applied Policymaking

Chapter 10 summarized nine social factors, seven technological factors, seven economic factors, and nine political factors that have influenced the fortunes of wind power development in the six case study nations covered in this book. The premise underpinning the previous chapter is that successful wind power development policy depends on strategic management of forces of change within four contextual areas depicted in Figure 11.1. There are three basic tenets underpinning this model. First, the environment in which wind power policy is formulated and implemented can be better understood by comprehensive analysis of conditions within four contextual areas: the sociocultural context, the economic context, the technological context, and the political context. Within each of these four areas there are dominant forces (variables) that have proven to be influential in hindering or helping wind power development. The trouble is that for each nation, the relative importance of each influential variable differs because energy policy in each nation is influenced by a unique conflation of sociocultural, technological, economic, and political conditions. For example, a high degree of information asymmetry is evident in both Japan and China. Citizens of both nations lack adequate information about the pros and cons of energy technologies to make informed decisions. In Japan, information asymmetry helps explain why there is so little support for wind power and why the government has been able to continue its advocacy of nuclear power. In China citizens are also kept largely in the dark about energy sector developments, but this is not a problem for wind power development because the government is committed to supporting wind power whether the public consents or not. In short, information asymmetry is a barrier to wind power development in Japan, but in China, it is not. Second, the analysis of STEP forces is complicated because variables within each of these four contextual areas interact in unpredictable ways due to the complexity of variable interrelations. Cause-and-effect links are extensive which means that numerous positive and negative feedbacks catalyze chaotic systemic evolution. For example Canada possesses a wealth of hydropower capacity that suggests a high degree of grid resilience.

Understanding Wind Power Systems

All of the above statements represent prominent objections to wind power development. For the most part, these statements are premised upon small truths that have been exaggerated by wind power opponents in order to generate public opposition. The intent of this chapter is to try and separate fact from fiction in order to give the reader a better technical understanding of the true hurdles faced by nations that embark on ambitious wind power development programs. Although a technical understanding of wind power systems is not necessary to understand the case studies presented in this book, enhanced technical understanding will help the reader better understand the possibilities and limitations of the technology. This chapter begins by describing the basic components of a wind power system before exploring how technical choices made in regard to system components and site location influence generation costs. From this technical foundation, the discussion will shift to the stochastic (fluctuating) nature of wind power and examine existing solutions for smoothing power fluctuations. This will provide the reader with a better understanding of the potential of wind power systems to replace fossil fuel electricity generation technologies. In concluding sections of this chapter, an attempt will be made to separate truth from fiction in regard to community and environmental impacts commonly attributed to wind power systems. Hopefully, by the end of this chapter, the pros and cons associated with wind power development will be better understood. There are basically two main wind turbine designs—vertical axis and horizontal axis. Vertical axis wind turbines (VAWT), which can resemble egg beaters placed on towers, are not widely used for electricity generation, so this section will focus on the main components of horizontal axis wind turbines (HAWT). The main components of a wind turbine includes the rotor blade; the nacelle (which houses the gearbox, generator, and yaw motor); the tower upon which the wind turbine is placed; the foundation which anchors the tower to the ground; the control system and transformer (usually located at the base of the tower), which transforms the collected energy into electric current that can be delivered to the electricity grid; and the electrical conduits that connect the wind turbine to the electricity grid.

Wind Power in Germany

In the previous chapter, the malleability of Danish energy policy was highlighted as a key factor behind the successful diffusion of wind power in Denmark. This chapter examines wind power diffusion in Germany, and in the process highlights a different, though equally successful policy ideology. Compared to policy of its Nordic neighbor, wind power development policy in Germany has been far more structured and invariable. In fact, the success of Germany’s wind power development strategy often serves as an exemplar for proponents of consistent feed-in tariff regimes, which is considered by some to be the most effective strategy for driving wind power development. As this chapter will demonstrate, fostering wind power development in Germany is, like in other nations, a complex challenge involving dynamic interactions between government and nongovernment actors. As German wind power capacity expanded, there has been social dissent and utility opposition. Nevertheless, the German government has remained committed to aggressive wind power diffusion policies and has responded to emergent challenges in a remarkably unified manner wherein state, regional, and local government actors have formed integrated problem-solving networks. This chapter also highlights the seamless web of nation-specific STEP factors influencing wind power development that is apparent in Germany. As one pair of researchers observed, wind power development in Germany has been marked by “close interplay between the actors within the political system, technical and economic development, as well as social factors.” As has been the case in most industrialized nations, forces in support of wind power development began to amass during the two energy crises of the 1970s. As the government began to evaluate its alternative energy technology options, nuclear power and wind power emerged as the two most viable utility-scale options. In the 1970s, nuclear power in Germany enjoyed a modicum of developmental success. The nation’s first commercial nuclear power plant commenced operation in 1969. By 2010, nuclear power contributed approximately 22% to Germany’s electricity supply. However, nuclear power development has been contentious. Although there has been industrial support, there has also been strident public opposition, especially since Chernobyl.

Wind Power in Denmark

In technological policy literature, the term “path dependency” frequently emerges in attempts to explain why a given technological track develops. The premise behind the notion of technological path dependency is that historical social, technological, economic, and political forces foster conditions for a particular technology to thrive. Once a technology becomes dominant, vested interests—which profit from the technology—hinder radical change, because change carries an implicit threat that those benefitting from the status quo might suffer an erosion of economic benefits. To illustrate path dependency, consider the history of the QWERTY keyboard (referring to the sequencing of letters from left to right on the top row of a standard computer keyboard). Keyboards on typewriters were designed in this way to reduce mechanical type hammers from clashing with each other. Over time, type hammers were made obsolete by type-balls. Nevertheless, the QWERTY keyboard remained unchanged (even in this day of computerized word processing)—despite the fact that research has shown the QWERTY layout to be inferior in terms of optimizing typing speed. This layout has perpetuated because legions of typists have learned on the QWERTY keyboard; therefore, technological familiarity has insulated this design feature from change. The notion of path dependency is relevant to the story of wind power development in Denmark because, as will be described in this chapter, a number of social, economic, technological, and political forces shepherded Denmark’s ascent to the top position as the nation with the world’s highest percentage of wind power contributing to national electricity generation. In addition to illustrating the influence of technological momentum, there are two other contemplative policy insights to be gleaned from studying wind power diffusion in Denmark. First, Denmark’s wind power development experience demonstrates that grassroots support mechanisms which engage communities and individuals in the development process bolster the effectiveness of economic incentives. Second, Denmark’s wind power story demonstrates that establishing a technological foothold is never a guarantee of uncontested market entrenchment. As any technology matures, its impact on society, business and political fortunes evolves.