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European wind energy development policies. Dynamics in the windmill manufacturing

sector and effects on the economy

Authors: Pedro Varela Vázquez (USC); María del Carmen Sánchez Carreira (USC)

Abstract

Nowadays, renewable energies are important tools in order to change the actual energy system

based on fuel energies or nuclear power. Therefore, there are several positive effects on the

environmental field, balance of payments and national security. However, renewable energies can

constitute an instrument to enhance the endogenous growth through the development of a

manufacturing sector related to renewable resources.

Hence, energy and industrial policies are key points in this evolution, because they affect

institutional and business contexts, with strong implications in the innovation area. For these

reasons, this paper compares different European wind energy development models, because it is

the most important renewable energy in terms of installed capacity as well as the contribution to

the energy balance. Finally, we analyze the dynamics in the windmill manufacturing sector with a

special stress on Galicia, a Spanish region which emerges as a national leader in wind energy.

1. Introduction

In the early stages, renewable energy policies had a singular goal to achieve some aims such as

the reduction of energy dependence or greenhouse emissions, and increasing the weight of

renewable energies in the energy supply. However, it is possible to add another outcome for the

implementation of coordinated industrial and energy policies: the generation of a manufacturing

sector related to windmill construction.

In addition, energy policies constitute a good chance to diversify the regional economies,

specially, the industrial sector. This diversification is related to higher income ratio per capita

(Rodrik, 2004). Both variables have a relationship with an inverted U-curve form. Hence, the

positive effects and externalities which arise from the wind energy development can be spill over

the society in terms of industrial production, employment, exports and firm investment.

Nevertheless, these effects are not automatic and depend on the policy implementation.

Following this idea, there are several illustrations of different development models and

consequences for the related industrial sector in Europe. For this reason, we analyse these models

and their implications in three European economies with different dynamics: Denmark, United

Kingdom and Galicia (Spain).

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2. The need of structural change in the energy system and the role of renewable

energies

From the first industrial revolution in the last third of the 18th

century, the humanity’s dependence

on no renewable fuel fossils resources (for instance, coal, natural gas or oil) increases

progressively, challenging the limits derived from the incessant reduction of the existent

resources. The definition of no renewable resources implies the exhaustible character, because of

their regeneration through natural processes takes place in a greater temporal scale than the

human one. Therefore, they are finite resources that will cause, later or earlier, shortage of out of

supplies.

In this sense, the energy requirements are exponentially increasing, as shows the fact that the

consumption of final energy to world-wide level duplicated during the period 1973-2008 (last

available data), from the 4.676 Mtoe1 until the 8.428 Mtoe (IEA, 2010). Thus, the tendency to the

reduction of the energy intensity by unit of GDP, showed at least in the developed countries, did

not result in a reduction of the energy consumption for the whole of the economy, although the

use of the energy was more efficient (Dosi and Grazzi, 2006). This phenomenon contrasts with

the Environmental Kuznets Curve (EKC), which describes a statistical relation between energy

consumption and levels of development. The EKC shows a relation of inverted “U” between

pollution and economic development. Therefore, given high levels of per capita income, the

society demands levels of pollution increasingly lower. Nevertheless, this relation was only

verified for some contaminant gases, since at aggregated level, the pollution remains stagnated

from high income levels. In this sense, several economists think that the statistical relation of the

EKC could exist in the past, but nowadays at present dilutes because of the pressure of the global

competition that affects to the requirement level of the environmental regulations (Ibid.).

Likewise, the base of the energy system is mainly no renewable, since only 13% of the world-

wide energy production is renewable in 2008, increasing only one point in percentage terms from

the first oil crisis, because of the high growth of the energy demand (IEA, 2010). Thus, although

the consumption has had a exponential growth, the discovery of new deposits does not follow the

same speed (Doldán, 2008). So, it reflects in a medium and long-term tendency to increase the

1 The tonne of oil equivalent (toe) is defined as the equivalent energy generated by burning one tonne of oil with a

calorific power of 10.000 kcal/kg; or as 107 kcal (41,868 GJ). The Mtoe is equal to one million toe.

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prices2, that only by itself do not constitute endogenous incentives to guarantee guidelines of

sustainable consumption (Dosi and Grazzi, 2006). In fact, against the neoclassical theory, there

are empirical evidences, that show that the system of relative prices, through the mechanism of

replacing the goods became more expensive by other cheaper substitutes does not work for the

case of the oil. Thus, a relative increase of prices would not automatically cause the appearance

of more efficient technological alternatives. Therefore, it would advisable to implement

regulatory measures and active rules in this field, that give incentives to the appearance and

development of alternatives to an energy sector based in the fuels fossils, to support and

complement the action of the prices system (Ibid.). Likewise, it is expected that the tendency

keep, since the regions with a marginal participation in the world-wide consumption of energy

are elevating their contribution, as it is the case of China, dropped from 7,9% in 1973 until 16,9%

in 2008. For its part, the OCDE reduces by 14 points in percentage terms its participation in the

consumption of final energy until reaching 43,8% of the total (IEA, 2010). Therefore, diverse

authors argue the need of public intervention in this field to reorient the long-term environmental

sustainability, by means of investments in basic research that find alternatives for the fuels fossils

and give solution to these problems (Dosi and Grazzi, 2006). In this sense, Chris Freeman states

that it could keep a certain economic growth combined with environmental sustainability, if the

conditions of institutional change fulfilled. These conditions refer to modify the guidelines of

world-wide development and a reorientation of the world-wide R&D to ecological aims. This

contrasts with the idea of the Rome Club, which at the beginnings of the seventies indicated the

need of economic and demographic zero growth by the year 2000, fixing the growth limits

depending on the availability of natural resources in the short term and underestimating negative

externalities in the environmental field (Ibid.). However, the Rome Club did not properly value

the accumulation of knowledge in the exploitation of resources, in a similar way to David

Ricardo or Malthus.

For its part, the problem of the energy supply adds to the environmental problems derived from

the extraction of these resources and their utilization for the production of all kinds of energy. At

the OECD level, another economic problem linked with the energy supply should be pointed out.

2 During great part of the 80s decade, the price of the reference barrel “Texas” ranged from the 30 and the 40 North

American dollars, quotation lower than that existing before the oil crisis of 1973. However, from the beginning of the

new millennium, it has evolved in an exponential form, until achieving the 140 dollars. Although the quotation of the

barrel in the futures market is affected by other factors in addition to the increasing tensions between supply and

demand, the evolution is enlightening.

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It consists of high external energy dependency, which reflects greater energy imports (as total, as

primary and final energy), than exports. This phenomenon causes a continuous drainage of

resources from the developed economies to the oil producing regions. In this way, the energy

imports amount to 18,5% of total Spanish imports in 2010, increasing from 8,3% in 1995. Thus,

two thirds of the national commercial deficit in 2010 belong to the label energy products

(Jiménez, 2011).

All that caused the “rediscovery” of the renewable energies, which were used from the down of

the civilisation, as it can be the case of the hydraulic or wind energy (Menéndez, 2001; Doldán,

2008). The Galician energy system presents the same environmental and global economic

problems, by what their future challenges will be similar.

The renewable energies, except the biomass that needs a process of natural regeneration, are

sources of energy in which the offer is not affected by the human consumption (also called

continuous resources), by what have the potential capacity to replace the economic and

environmental problems, such as the atmospheric pollution, water pollution, etc., derived from

the massive use of the fuels fossils. Nevertheless, it should be mentioned that the own maturing

of a sustainable energy system results from a clear orientation along the time to a regulatory

frame and some technologies that facilitate a accumulative process of knowledge and learning

that need all the productive sectors.

3. Economic effects of renewable energies. The role of the wind energy in the

productive manufacturing

In the previous section two large fields, in which the renewable energies could constitute notable

instruments to correct the unsustainable economic development patterns were pointed out. In this

sense, the achievement environmental and economic goals come in parallel.

From an overall perspective, several positive economic effects resulting from the development of

renewable energies could be indicated. Thus, the contribution of new manufacturing, assembly

and installations maintenance activities to GDP; the generation of direct and induced

employment; and the reduction of energy dependency, through replacing the fuels fossils imports

by energy generated in the territory3; constitute positive results from these renewable sources

(Menéndez, 2001; Moreno and López, 2008; APPA, 2009). Regarding with the employment, it is

3 The renewable energies allowed replacing energy products imports in an amount of 10,7 million tep in 2009,

equivalens to 2.137 million euros, based on the average quotation of crude barrel in international markets (APPA,

2009).

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necessary to point out that renewable energies open the possibility of creating high-quality

employment: besides the manufacturing, installation and monitoring activities; there is a wide

range of professional profiles in the field of engineering and consulting services to carry out

market analysis, economic-financial exams, topographical tasks, etc. (BIC Galicia, 2009).

Moreover, the renewable energies can also play a decisive role for the development and the rural

cohesion, constituting as alternative or complement to the Common Agricultural Policy (PAC) of

the European Union. In this sense, the decentralised creation of employment by part of the

renewable energies, because of the resource is distributed by the geography and it is very difficult

or impossible their transport. Therefore, they should be exploded in situ, which would help to

mitigate the depopulation of large rural areas and promote economic development by means of a

triangular interdependent approach, attending to the economic, social and environmental

sustainability (Burguillo and Del Río, 2008).

Following this perspective, several studies stand out that renewable energy sources are more

employment-intensive than the conventional, benefiting the industrial and the agricultural sectors.

The biomass is the type of renewable energy that generates greater volume of employment in the

phases of construction, operation and maintenance. A decisive factor in renewable energies

projects are the socioeconomic conditions and the governance and, especially, the participation of

the local actors, since an opposition of the community prejudices the own implementation of the

project and the perception of the profits that generates in front of other alternatives (Ibid.).

Nevertheless, for a complete and correct analysis of the impact of renewable energy sources, it

should be advisable to examine each variable both from a quantitative and qualitative

perspective.

At the same time, it should stress other very positive effects in the economy, as it can be the

productive diversification derived from the appearance of new activities, especially those linked

with the new components manufacturing industries, and the emergence of new accumulation and

knowledge paths related with these activities. In this way, it would be positive for the productive

sector that the new activities, as manufacturing as operative, had strong vertical links, as

backwards (providers and suppliers) as forwards (customers, public institutions); and horizontal

(competitors). In this sense, it should be implemented industrial plans that involve the installation

of new industries, not only to supply the national market, but also to export in a near future

(Menéndez, 2001). However, these positive effects are not automatic, but also depend of the level

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of linking between these energetic sources and the own territory, since the endogenous

development (the territory’s capacity to economically develop and unite, using their own

resources of coherent form) depends, among other things, on the institutional framework (Simón

et al, 2010). The institutional framework should be understood as the group of formal institutions,

as well as governmental entities, labour unions, employer’s organization, laws and norms; and

the informal that include the routines, habits, etc.

By its part, wind energy is the renewable energy source with larger contribution to the Galician

energy balance. It also presents the greater installed capacity, reaching the 3.272 MW at the end

of 2010, what constitutes 3,9% of the EU total, being a very similar figure than one countries like

Denmark. At national level, Spain conforms one of the first powers in wind energy at European

and world-wide level, possessing 20.600 MW installed in 2010 (24% of the EU total), and being

in the second position after Germany (EWEA, 2011). This fact confers to wind energy a

predominant role for changing the energy system both at regional and European level, as well as

a role of technological leadership and sectorial public politics in the field of renewable energies.

The positive effects of the wind energy in the productive sector are very similar in qualitative

terms, to those of the rest of renewable energy sources. In this sense, the wind energy allows a

reduction of contaminants emissions, contributing to avoid climatic change. It is a continuous

resource; so it is inexhaustible and allows restraining the exhaustion of the fuels fossils to be able

to use them for other industrial ends. On one hand, the wind energy, unlike largely conventional

sources, does not cause any type of alteration on aquifers, does not destroy the layer of ozone

neither generates sour rain. Besides, nowadays, due to the technological advances, it is an energy

source that could compete in profitability with the thermal power station and even with the

nuclear if it internalized the environmental and prices security externalities (Martínez et al, 2002).

On the other hand, just like the rest of renewable energies, it allows reducing the external energy

imports dependency, being a key factor in the equilibrium of the Spanish commercial balance.

However, in the spatial planning it is necessary to take into account the visual impact of the

windmills, the possible negative effect in the bird’s migration, the technical impossibility of

storing the electrical energy surplus and the land movement derived from the necessary civil

work for the installation of any wind park.

Regarding the employment, it should stand out the importance of manufacturing wind

components, amounting roughly to 59% of the direct employment related with this source at

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European level. It is followed, at large distance, by installation, maintenance and operation with

11% of employment (EWEA, 2008). These results proceeding from the European Wind Energy

Association (EWEA) confer to wind energy a decisive importance to the sectorial policies

focused on the development of an industrial sector similar to the direct exploitation of the wind

resource, not only in employment terms, but also in the potential exporting, researcher and

innovative capacities. Thus, according to the same study, roughly 4% of the associated direct

employment is linked with the tasks of consulting, engineering and R&D related with

technological centres, universities and the own manufacturing companies. At the same time, the

manufacturing sector shows as the greater added value and larger dragging effects in the rest of

the economy. Therefore, diverse public administrations promulgate plannings protecting this

sector, for example, by means of obligations of national content in the wind parks of their

territory. Nevertheless, in a lot of regions as Galicia, these proposals were hampered due to the

systematic failure to comply with the rules or the lack of a manufacturing sector that can supply

the demand (Simón et al, 2010). In this sense, combined policies that act by both the supply and

demand side would constitute the successful election in the energy and industrial fields.

Regarding the spatial location of the components industry, the technological base of the products

manufactured by this sector consists of knowledge in the electricity and mechanics areas. By this

way, in those regions where previously existed a specialization of the industry of transformed

metallic and machinery equipment is where localized a greater number of manufacturing

companies linked with the wind sector (Martínez et al, 2002). In this way, it not only appreciates

a transfer of knowledge and technology from a sector to another, but depending on the intensity

and change of the main activities of these companies, it could give place to the creation of one of

the “jacobian cluster” by evolution (Cooke, 2009). But the generation of a cluster, with all this

characteristics, cannot be generalized for all the cases.

4. Historical evolution of the wind energy in Denmark, United Kingdom and Galicia.

Origins and progress

4.1. The Danish case

Denmark was the first European country where wind power could develop a deep energy and

industrial framework with endogenous roots. The origins come from the end of 1970’s, when the

Danish society, after a severe oil crisis, preferred an energy system based on renewable energies

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rather than nuclear power. This process causes an evolutionary “path dependence” in the sector

with strong implications in the technological and industrial fields.

Hence, the origin of the wind energy was social, with several interactions among all the agents in

the national system. For this reason, it is most typical the mix of bottom-up policies and the top-

down (Gregersen and Johnson, 2008, 2010), as one of the main characteristics of the wind energy

development, specially, in early steps. In the opposite side, the Mediterranean model, with

countries such as Spain, Italy or Portugal, consist of central decisions taken by the government

and energy companies, with a low level of interactions with landowners or local communities.

Following the evolution of the wind energy power, the Graph 1 describes a moderate progress

throughout the last decade. In fact, Denmark was the first country which develops offshore wind

energy, but nowadays United Kingdom has a higher proportion with 1341,20 MW (Renewable

UK, 2011). Moreover, offshore wind energy has a lot of opportunities in the North and the Baltic

Seas.

In addition, there is certainly no doubt about the lack of progress between 2003 and 2008,

because the government stopped the advancement of renewable energies during this period

(Gregersen and Jonhson, 2008). It induces a reduction of the Danish world share of wind energy

power and a lost chance to enhance the national industrial production of windmill components,

reducing the dependence of exports.

Graph 1. Evolution of the Danish wind energy installed capacity (1999-2010).

Source: Danish Wind Industry Association and Danish Energy Agency, 2011.

4.2. The British case

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United Kingdom was not a traditional wind energy leader in Europe. In fact, the whole set of

policies developed in the last years have played a role as follower of the Nordic ones. Moreover,

until 2005, the total wind energy installed capacity was marginal whether we contrast it with

others energy sources, such as coal, nuclear or hydropower.

Nevertheless, the interest to analyze the British development model is linked with the exponential

increase of off-shore installed capacity during the last decade. From 2005 to 2010, the total

amount of MW grew a 473%. This is a product of the implementation of specific active policies

in that field, which are focused solely on the off-shore maturation. The

Graph 2 shows this spectacular dynamic.

Graph 2. Evolution of the British wind energy installed capacity (2005-2010)

Source: Department of Energy and Climate Change and Renewable UK, 2011

The recent British wind energy development is a consequence of the mix between good resources

and a policy adaptation which came from Denmark. The aim of joining all agents affected by this

renewable energy cause a great social consensus in order to create common goals. We will be

able to examine this last issue more deeply in another section.

4.3. The Galician case

Traditionally, Galicia is the Spanish region with the highest proportion of the total wind energy

installed capacity. In fact, at the end of 2010, it reached 3272 MW, almost the same capacity than

Denmark. Nevertheless, the similarity ends here, because Galicia had been had neither off-shore

wind energy4 nor the same policies. In fact, it is the typical top-down model in which the regional

government and the energy firms take part in the policy development with low level of

interaction with local communities.

4 There is a state regulation which permits off-shore wind energy installations (Decree 1028/2007). However,

actually, there is not any off-shore wind farm in Spain.

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The wind energy development began in the 1990s, motivated by the great wind resources which

were exploited by the large national energy and engineer societies like Endesa or Acciona. It is

important to notice that in this case, there is not any social debate about the emergence of that

renewable energy like the Danish one. Essentially, it was a result of a mix between governmental

and business strategies.

In its origins, the evolution was characterized as a strong and continuous increase of the capacity

and its electric generation in the Galician energy balance. Reflecting this situation, the Graph 3

shows an important installed capacity elevation throughout 2003-2007.

Graph 3. Evolution of the Galician wind energy installed capacity (2003-2010)

Source: Instituto Enerxético de Galicia (INEGA), 2011

Nevertheless, during the next period (2007-2010), we can appreciate a steady state which has had

important side effects in the sector and the auxiliary industry in Galicia. The main cause of this

state of affairs is an institutional problem derived from a lag in the regulatory context after the

derogation of the last setting by the new regional government elected in 2009. From this year,

there are few new wind turbines because the regulation is not clear. There is no coordination with

other administration levels such as the national, as well as a lack of consistency.

5. Main characteristics of the sectorial system context. Dynamics and their effects on

the sector

In this section, we examine all the factors, which have an important outcome in the wind energy

development, in each country. First of all, we focus on the Danish model with its integrated

framework. Secondly, we study the British case with a high potential degree in the off-shore field

and, finally, the “top-down” Galician model.

5.1. A history of success: The Danish wind energy sector.

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It would seem that the relative early beginnings of the wind energy could help in order to build a

coherent structure, where the accumulative learning is the central piece in the design and

implementation of the different policies (Gregersen and Johnson, 2010). This process is

characterised as a system, where the interactions among all the agents, such as public sector,

landowner, energy firms, local councils or windmill components industry; can enhance a progress

with several positive externalities which spill over the society. For instance, there is a new law,

called Renewable Energy Act, which established various agreements, based on social consensus,

with landowners, central government and energy firms in order to install 150 MW on-shore. The

result of this kind of policies is a high level of renewable supporters and a socialization of the

wind energy benefits. This last issue is the clearest difference between this model and the

southerly one.

The specific network in the wind sector constitutes another strength. Universities (Aalborg,

Aarhus or Copenhagen), central government, public agencies, public laboratories (such as Risø

Research Laboratory), manufacturing companies, partnerships (Megavind), or landowners and

turbines owners associations, are working together in the educational and research area and the

testing-demonstration fields in order to introduce new innovations to the market (Ministry of

Foreign Affairs of Denmark and Danish Wind Industry Association, 2010). As main

consequence, the Danish sector is the most competitive worldwide and a good case study to apply

others energies such as solar cells (Cooke, 2009) or marine energy industry (Aqua Marine Power

Ltd., 2010).

Moreover, coordinated policies in the energy and industry fields have generated an endogenous

windmill manufacturing sector which represents the 8,5% of the Danish in 2009, and more than

the 70% of the total energy technology exports (Danish Wind Industry Association, 2010). In

2010, 25.000 employees were working in the sector.

In addition, it is important to underline the evolution of the own qualities in the area, because the

wind sector developed from the naval sector in the north of Jutland after the 1970s (Cooke,

2009). This clearly illustrates the evolution of a Jacobin’s cluster. Perhaps, which represents a

good lesson to learn from Galicia, area with high relative important naval sector and with a

significant amount of wind resources.

As a result, Vestas, the worldwide leader in that manufacturing sector come from Denmark as

well as the fifth company, Bonus-Siemens, a Danish-German merger (Lewis and Wiser, 2007).

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5.2. A follower model: the British wind energy sector

There is certainly no doubt that the British case is a good illustration of the adaptation of the

Danish policies in order to build an integrated framework. In fact, the most recent strength, off-

shore wind, was developed by Danish from 1997 in their cost with own technology.

The main headlines of this process are established on the social dialogue, societal consensus and

accumulative learning process, such as the Danish example. A good example is constituted by the

Best Practice Guidelines (British Wind Energy Association, 2002). It based on some rules for the

consultation and stakeholder dialogue. These guidelines are a set of tools to manage the social

conflicts which arose in the on-shore development (a lack of local linkages and environmental

policies). The effectiveness of this formal rule consists of the participation of different agents

such as public agencies and departments, energy companies, turbines owners associations and

also ecological associations. This provides an extent social base.

Another interesting analogy was the creation of an extent industry-academia collaborative

network, called OWEN (Off-shore Wind Energy Network), which promotes researches in the off-

shore area (Renewable UK, 2011). The main goal in this network is to encourage the interactions

and cooperation among commercial organizations and researchers. OWEN was financially

supported by the Engineering and Physical Sciences Research Council (EPSRC).

In contrast to the Danish case, the windmill manufacturing sector is least important than the

Danish one. In spite of the recent home market size increase, there are few significant British

firms which operate in the world markets. The main reason is that the domestic demands are

important in the early steps of every technology, but the wind energy development develops later

in UK in comparison with Denmark, Spain or Germany, for instance. Hence, they must compete

with the international established competition.

5.3. A top-down model: the Galician wind energy sector

The Galician wind energy development model is characterized by central decisions which arise

from state or regional government and the energy firms.

The spectacular increase of installed capacity has not generated endogenous capacities with

important positive externalities in the manufacturing sector, because it has been an exogenous

development with few local linkages.

Traditionally, there were not any communication channels among the different agents such as

landowners, local municipalities, manufacturing companies and regional government. In fact,

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there is a lack of sectorial networks or integrated associations, which do not work, solely, as a

particular lobby.

In addition, the level of governmental control of the wind energy planning was low (Simón et al.,

2010). Therefore, energy companies have not fulfilled their goals, when they achieve the

administrative concessions.

Moreover, recent changes in the regional energy laws are not coherent with the central

government energy incentives and they provoke a restriction for the installed capacity expansion

(Varela and Sánchez, 2010).

In the next sections, we focus on the consequences for the business dynamics in the Galician

manufacturing sector. We underline the aftermaths in the human capital, research and innovation

fields.

6. Energy, business and social development of wind energy in Galicia

6.1. Methodology of the Galician case

A survey based on personnel questionnaires was carried out in order to analyze the business and

innovation dynamics of components manufacturing firms. It was directed to the whole sector of

components, conformed by eight companies. The census was elaborated using the data of

manufacturers of the Galician Wind Association (EGA). This first source was updated, because

of the extinction of two companies, the takeover of other three, and several companies do not

devote to the manufacturing, but to activities of components storage and maintenance and control

of wind farms. In this sense, the questionnaire was aimed at whole census, obtaining the answer

of four companies (50% of the population). It should stand out the varied composition of the

sample, in which the distinct types of companies are present: an indigenous Galician company of

average size (51 employees devoted exclusively to these tasks) and an average size (120

employees) subsidiary of a Spanish multinational. On the other hand, two companies, which

occasionally carry out activities of this subsector, also include in this empirical study. One is a

company owned by Galician capital with important foreign presence (250 employees) and

another company owned by the Spanish capital (with 100 employees). Therefore, the sample

could be considered representative of the whole sector, following quantitative as well as

qualitative criteria.

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The questionnaire is based on the criteria of the Manual of Oslo and the INE5 Survey on Business

Innovation. It consists of different sections, such as financing sources, human capital, internal

R&D activities, product innovation, process innovation or cooperation.

With regard to the human capital, the Table 1 was carried out by means of personalized

questionnaires directed to the manufacturers of windmills included in EGA and other companies

suppliers. The average was calculated using a weighted average depending on the workers of

each company devoted to these tasks and on the weight on the total sample. The graduates with

ESO6 or high school diploma are considered as “no specialized” due to the fact that they do not

have an academic or technician knowledge oriented to a certain field.

Finally, the data referred to R&D, innovation and cooperation were result from the answers and

assessment of the personalized questionnaires.

6.2. Analysis of Human capital

The group of agents that form and retrain the human capital, and the interactions among them, are

extremely important to describe the tendency and the patterns of innovation in a territory. The

selection of knowledge (academic and technician) areas to be fostered in a region determines the

subsequent industrial, technological and scientific policies. This is due to the fact that the human

capital supply constitutes a primary input to develop any industrial/technological pole, except for

the case of considerable foreign workforce participation. However, this would cause fewer

positive effects in the social environment of this territory and lower possibilities of demonstration

effects and endogenous growth. It would seem that in underdeveloped regions the hiring of high-

skilled workforce is a key strategy in order to increase the innovation level (Vence, 2007).

Within the companies grouped in the Galician Wind Association (EGA), we focus on the

segment of manufacturing for windmills and any another company of civil construction, that

during some time devoted to manufacturing components such as power station and even

researching in the towers manufacture. The aim is to stand out several structural characteristics

derived from the nature of the sector where carry out their main activities.

A large part of the medium and small size (which ranges from 40 to 200 workers) do not devote

exclusively to the manufacture of wind turbines, which derives from one of the outstanding

characteristic of the Galician wind market: high dependence on the public tenders to power

5 National Statistics Institute

6 Obligatory Secondary School

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allocation. Thus, it is necessary to filter the professional profiles of each company to examine

who are the responsible of the production linked to this field in each staff. Likewise, the sudden

stop that suffers the sector because of the contesting of the regional tender corresponding to 2008

and the delay and uncertainty that even surrounding that of 2010, also caused the change of many

companies profile and even the closure of others. This involves the need to analyze historical data

that comprise the period 2000-2010, with special attention to the first four years, where the

greater increases of production had taken place.

In this way, analyzing the quantitative and qualitative characteristics of the human capital related

to the manufacturing of windmills, two significant phenomena could be pointed out. They

contrast with several guidelines established by the decrees that regulate the wind planning and,

particularly, the industrial plans of the contract-winners of Business Wind Farms during the last

ten years. In this sense, as governmental sources as different authors (Varela and Sánchez, 2010)

emphasize the necessity for setting the percentages of the wind turbines purchase that should

execute in Galicia, because of being a sector of high added value (specially, if it is compared with

the civil construction in strict sense). In this way, fostering the sector construction of wind

turbines would cause the creation of quality employment, with high requirements of human

capital. Nevertheless, the data show that the percentage of workers with Professional Training

within small and medium size enterprises devoted exclusively to the wind field is clearly higher

than the university graduates, since the former reach more than a half staff. Apart from being the

less large group, the university graduates are characterized by having a very different presence in

the sector, due to the fact that in some companies reach almost 20% and in others there is not any

graduate. On the other hand, in most of the cases the percentage of the staff that does not have

any professional specialization is higher than the university graduates. This shows that there is a

possible burden to execute the tasks of internal research and innovation within the companies,

because they have not skilled personnel. It is also worrying that almost 40% of the staff have not

specialized studies, because of innovations (product or process one, derived from the acquisition

of machinery or services, purchase or use under license of patents, internal training, etc) will not

be so frequent as in the case of more trained human capital. We can observe in the Table 1 an

average for the sector firms.

Table 1. Distribution of employment by educative level in the companies devoted to

manufacturing/assembly and installation of wind turbines

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Percentage of workers

With university studies 10,6%

FP (level higher and medium) 57,4%

Without specialization 32,0%

TOTAL 100%

Source: Own elaboration.

This factor is being aggravated when it is confirmed that hardly exist specialization of the human

capital in the wind market within this type of small and medium size companies. Most of the

workers were relocated in the sector in the prosperity time of this market niche, but nowadays

they return progressively to the former activities. This last factor causes that the personnel and

the company could not benefit neither from the processes of learning and innovation inherent to

the accumulation of the production (learning by doing) nor from the own unitary average costs

reducing due to the internal economies.

In this same way, the short-term tendency is to keep this composition, due to the fact that 66% of

the companies interviewed expect to hire a greater number of workers with professional training

than university graduates during 2011 and 2012. The rest of companies have not thought to

contract, because of the strong reduction of activity; in fact, they are firing personnel. Following

the same previous guidelines, 50% of the companies that want to hire personnel, will tend to

choose only the professional training profile.

6.3. Intensity of R&D and innovative activities. A qualitative approach.

In this section we examine the research and innovation dynamics of the sector companies, as well

as their cooperation patterns with the other agents of the system of R&D&I.

6.3.1. The internal R&D activities in the Galician windmills sector

The Galician sector of windmills is characterized by low internal R&D intensity. In this sense,

only one surveyed company of the four that conform the sample, states that executes internal

R&D activities periodically, what means a quarter. Besides, the active company in this field

based its research on a prototype of tower for wind turbines with new materials, novelty that have

not still entered in the market. Its market niche is not specifically the manufacture of wind or

assembly secondary installations of wind farms, but also a secondary activity that becomes

important around the middle of the last decade because of the peak of the wind sector in Galicia.

On the other hand, the main activity of two companies consists of this renewable energy, but they

do not carry out any type of R&D, because they work basically by request. The own customer

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provides the different plans to the manufacturer and the necessary technical requirement, but

anyway, it deals with some standardized products and services to the European and national

levels.

Another very significant factor is that the company that devotes substantial resources to R&D in

this sector presents the same dynamics in its more traditional activities, which are the civil

construction. In fact, this company has an engineering/design and R&D consolidated department,

where is common practice to conduct experimental designs and pilot trials. Therefore, we can

assert that the own activity of manufacturing (inserted in the market routines) and its

development model did not give incentives to execute tasks of basic or applied research or

experimental development, but when this happens is due to firms internal routines, caused by

other activities that are their main ones.

These results are consistent with the structure of the human capital previously analyzed. The low

level of personnel with university studies (around 10%) involves a low research and development

capacity. However, the relatively numerous proportion of technicians with professional training

provides an important help so that the processes carry out properly, and that they are sources of

process innovations.

Finally, we should point out that when asking the companies if they purchased R&D services by

contract, agreement or another modality; the answers reflect a similar situation to the case of the

internal R&D. In this way, the companies that did not execute this last activity, neither acquired

nor contract R&D. In the case of the active company on the research field, it acquired these

services from companies of the group and one close university, what indicates a significant level

of collaboration with universities. Nevertheless, the applications of the new material that is being

tested in the company have multipurpose functions, with secondary effects in the activity of

manufacture/installation of windmills.

6.3.2. Innovation in the windmills sector: origins and determinant factors in Galicia

Innovation can constitute the result from the research and development of new products, services

or processes (the model called as “science-technology-innovation”), which reach the market.

Now then, it could also mean the process itself by which new or improved services or processes

are introduced into the market without need to be supported by a process based on the science;

thus we would be in the case of a “doing-using-interacting” model. In this way, the previous

section proved that only one company carried out R&D tasks systematically, while most of the

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companies did not execute such activities. This does not involve that the company that carried out

these tasks was innovative and the other no, since there are different ways of incorporating the

knowledge, which differs from the traditional one based on the science.

Focusing on the analysis of the sample, we can observe in a first examination that all the

companies innovate, included those that do not devote resources to R&D, giving particular

importance to the process innovations. In this sense, analyzing the Graph 4, it could be

appreciated a clear bias in the sector by the incorporation of knowledge through the acquisition of

machinery, equipment, hardware or software devoted to the production of new or significantly

improved products, due to the fact that this action is executed by the 100% of the surveyed firms.

Likewise, this kind of equipment acquisitions needs some specialized skills, different from the

usual ones for the personnel. The same companies point out that it was necessary to carry out

formation and retraining tasks of the employees for the operation of the new equipment. In the

case of the company that carries out internal R&D tasks, it stressed on the continuous retraining

of the workers in the new computer applications that were introducing in the company; although

its main purpose was not the design or production of windmills or its installation.

Graph 4. Ways to obtain new or significantly improved goods, services and process based on the science, technique

or other kind of knowledge in the last three years.

Source: Own elaboration.

With regard to the rest of activities for the incorporation of knowledge to the productive chain

with the purpose to produce new or significantly improved goods, services and processes, the

companies hardly are present, and the channels diversification of the incorporation of this input

mainly concentrated on the company that has a dynamic research and innovation. In this way, the

only company that purchased R&D services to different entities also purchased and used patents

or not patented inventions, and other technical knowledge, and carried out internal R&D

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activities. Thus, this company shows the most complete profile related to its research activities.

Nevertheless, one of the companies that incorporated knowledge through equipment purchase

conducted trials and studies in the field of the manufacture of wind turbine towers.

6.3.3. Conclusions of the innovation channels of the windmills sector in Galicia

The manufacturing sector in Galicia present some marked innovation patterns that could be

inferred from studying the sample of four sector companies. In this sense, three of the four

companies can be inserted in an innovation pattern dominated by the providers, according to the

Pavitt’s taxonomy (Pavitt, 1986), since the greater source of innovation (product, service or

process) consists of the incorporation of new specialized machinery. Moreover, the incorporation

of machinery is combined with the internal or external training of the staff to develop new tasks

and methods. However, a fourth company would not include in any of the innovation patterns,

since, on the one hand, has a method based on the science, but also incorporates new equipment

and machinery to the production process. This last case is assimilated to that of a company that

has several different production lines, with distinct target markets niche and different technical

needs and working dynamics. Likewise, the pattern of specialized suppliers could not be ruled

out in the whole sample, due to a large part of its business model consists of personalized and by

request manufacturing of many pieces and machinery for the wind turbines. In this way, a

customer demands some components with some certain technical specifications and, these

companies manufacture them custom-made. Nevertheless, this innovation pattern is not very

clear because the manufacture is carried out on the basis of plan and the learning resultant from

the experience with different customers is reduced, because the own companies assert that they

have to discuss with the customers if they execute some no stipulated modification in the request,

which are not very usual. Even so, it is a channel that would not have to disregard, as it will be

appreciated in the cooperation section, the customers represent a decisive way for the

incorporation of knowledge to the productive activity.

6.3.4. Innovation activity and importance

Product Innovations (goods and services)

According to the Manual of Oslo (OCDE and Eurostat, 2005, 58) a product innovation consists

of “the introduction of a new good or service, or significantly improved regarding its

characteristics or the use to that allocates. This definition includes the significant improvement of

the technical characteristics, the components and the materials, the integrated information, the

20

ease of use and other functional characteristics”. Following this definition, product innovation

comprises as goods as services and not only new, but also substantially improved, what can

originate an additional profit derived from its utilization.

In this sense, although the companies of the sector have very concentrated the channels to carry

out innovations in some models very dependent of the equipment suppliers, it must be pointed

out that they are very active in the field of the product innovations. As it can observe in the Graph

5, three of each four companies carried out product innovations in the last three years. In the

majority of the cases, the innovations consisted of improved products, because of process

changes derived from the acquisition of machinery and new equipment, and changes in the

interactions with customers and other entities that form a continuous learning framework.

Therefore, it does not deal with radical product or service innovations neither for the market

neither for the own company.

Graph 5. Percentage of companies which carried out product innovations in the period 2007-2010

Source: Own elaboration.

Although the Manual of Oslo (3rd

edition) considers innovation regardless if it was only for that

company or for the market, it is also decisive to analyze the innovations scope. This is because

these two kinds of innovation have not the same effect. In this way, the consequences in the

turnover as well as the competitiveness of the company and the sector are of different intensity.

Likewise, the ways to achieving an innovation only for the company or for the representative

market also differ.

Within this same argument, three companies of the sample that introduced some innovation in the

last three years were selected to prove the scope of their innovations. The data presented in the

Graph 6 show that two companies executed product innovations that reach the market and the

remaining company only introduced a standardized product for the majority of the companies.

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One of the innovative companies had introduced two years ago a new product for the companies

settled in Spain and Portugal, but the dynamics of technological advance in that it is immersed all

the wind sector caused that it extended in all the sector. Finally, in the case of the remaining

company, the product innovation that is executing at present and that has not yet reached the

market could be considered as breakthrough, because of the utilization of an entirely new

material in the manufacture of towers.

Graph 6. Scope of innovations introduced by the companies of the wind components sector in the period 2007-2010.

Source: Own elaboration.

Procces Innovations

According to the Manual of Oslo (OCDE and Eurostat, 2005, 59), innovation process is “the

introduction of a new, or significantly improved, production or distribution process. This

involves techniques, materials and/or computer programs changes”. The process innovations are

fundamental in the sector, because the main channel to introducing innovations consists of the

equipment acquisition that has a direct implication in the production processes. They are sectors

dominated by suppliers, according to the Pavitt’s taxonomy (Pavitt, 1986). The process purposes

could be the reduction of unitary costs, improving the quality or producing new or improved

goods and services.

A certain bias to the process innovations focused on the manufacturing method and, not so much

to the rest of typologies of process innovations, can be guessed within this sector. Once again, the

company that carried out all types of innovations in this field is a multinational that shows better

behaviours regarding human capital, internal research and product innovations.

On the other hand, a company that only was five years (2000-2004) in the sector of windmills did

not carry out any type of innovation in this period, because of the temporary character of this

activity.

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Graph 7. Percentage of companies that carry out the different typologies of process innovation in the period 2007-

2010.

Source: Own elaboration.

6.3.5. Collaboration among windmill companies in Galicia and other economic

agents to create, diffuse and apply new knowledge

The cooperation is another determinant element that can contribute to the formation of research

capacities of an agent of the national innovation system (for example, a company, a university or

a technological centre) and in the construction of the innovative capacities. Moreover, it can

generate some virtuous dynamics and cycles, when getting in touch with different elements

inserted in different realities. In this way, one advantage of the worldwide cooperation, in

addition to resulting in an increasing need due to the greater demand of incremental specific and

multidisciplinary capacities; is represented by the chance of being in close with different creative

frameworks and processes dynamics.

In a more concrete way, the innovation cooperation consists of the active participation among not

commercial organizations and/or institutions, involving some closer links than the own sporadic

contact caused by the productive activity among customers, competitors, etc. Likewise, the

cooperation can be formal, through contracts or agreements of active collaboration among all the

participants; or more informal collaboration, but continuous and active, that can be established

among customers, suppliers or competitors to improve or create new products and services.

The cooperation can happened integrating supplies with customers in the supply vertical chain

(OCDE and Eurostat, 2005), or also could be horizontal, being constituted among companies and

public research centres.

In this sense, because of the characteristics of the sector, a priori it would be more common the

vertical cooperative links, when manufacturing on the basis of plan and request, whereas the

23

horizontal collaborations would be minor, given the low research dynamic of the own companies

and the shortage of qualified personnel. On the other hand, 100% of the sample carries out some

kind of cooperation.

However, showing the data of the sample in the Graph 8, we find a very similar weight of the

vertical (suppliers of equipment, components and software; and customers) and horizontal (public

research organisms and technological centres, universities and competitors) cooperation. In some

way, it must turn in relative terms some relations of horizontal cooperation. In some cases, they

were a necessary condition to conduct trials on new processes, that could not carry out in the own

installations of the company, public research organisms or technological centres. Thus, a more

passive role to the company is conferred, approaching to the concept of outsourcing that would

not enter in this category.

On the other hand, within the horizontal collaboration the universities stand out, with a similar

weight to the suppliers and higher than the customers, but that it is necessary also to turn in

relative term due to two facts: the low percentage of personnel with university studies (three out

of the four companies present values about 10% and another asserts that there is not any

employee with university studies, devoted to manufacturing windmills) hinders notably these

active relations. On the other hand, two of the three companies that indicated that the universities

are important agents to their collaboration, do not carry out any activity of internal R&D, neither

purchased neither subcontracted R&D services. They also affirm that their main innovation ways

were the equipment purchase. Therefore, it does not obviously show an enough background to

carry out an active collaboration among academic entities and research and the own companies.

Graph 8. Number of companies that include any way of cooperation among the three former by importance.

Source: Own elaboration.

24

Regarding the competitors, and consultants and private R&D laboratories must be pointed out

their atony. In the case of the competitors, their scarce importance is reflected in the fact that

three of the four surveyed companies indicate specifically that their competitors represent a

threat, because of existing an excess of productive capacity according to the level of existent

activity. This phenomens is the one that explains the low importance.

Finally, the importance of the vertical cooperation (of suppliers) is reflected indirectly by the

business dynamics, as in the field of the internal research as in the innovation one.

7. Conclusions

There is certainly no doubt that the institutional context influences the potential development of

whatever sector and public intervention play an important role in these dynamics; sometimes it

creates new opportunities for emerging sector and others functions as a restriction.

The history of the wind energy sector in Europe is an illustration of this purpose. Some models,

specially the Nordic ones, serve as a good policy intervention tool in order to generate a

minimum organizational and technology base supported by a global social consensus. Following

this idea, the main advantage of the Danish wind energy sector is to be the historical leader from

1970s. From this reason, they have enough time in order to establish a domestic market and

international competitiveness for exports.

However, the followers, such as UK, are able to build the same setting for enhancing their energy

balance based on renewable energies. The advantages for the manufacturing sector have least

importance than the Danish case, because it is a question of accumulative learning in the policy

and technological fields. Nevertheless, a set of policies which underline the interactions among

all the agents and the continuous learning have positive externalities and effects on the energy

development and its socialization.

In contrast to these models, the Galician policies, which arise from the regional government and

energy companies which few local linkages, are typical top-down policies. In addition, there is

not institutional stability because the normative context is changing frequently, and not only due

to government changes. For this reason, the manufacturing sector suffers a clumsy level of

activity. Hence, the main consequences of that are a low level of high-skilled labour force and

innovation performance. As a result, a region with adequate amount of wind resources has a

traditional and small size wind energy manufacturing sector.

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