ARTICLE IN PRESS

Renewable and Sustainable Energy Reviews

11 (2007) 1498–1513
www.elsevier.com/locate/rser

Overcoming the lock-out of renewable

energy technologies in Spain: The cases of
wind and solar electricity
Pablo del Rı́oa,, Gregory Unruhb
a
Department of Spanish and International Economics, Econometrics and History and Economic Institutions,
Facultad de Ciencias Jurı´dicas y Sociales de Toledo, C/Cobertizo de S. Pedro Mártir s/n,
Universidad de Castilla-La Mancha, Toledo-45071, Spain
b
Alumni Association Chair for Corporate Sustainability, Center for Eco-Intelligent Management,
Instituto de Empresa, Serrano, 105 Madrid-28006, Spain
Received 11 November 2005; accepted 19 December 2005

Abstract

This paper applies an evolutionary economics framework to analyse the factors leading to lock-out
of renewable energy technologies (RETs). The cases of wind and solar photovoltaics (PV) in Spain
are empirically analysed. The paper shows that a wide array of interrrelated factors (technoeconomic
characteristics of technology components, system-level infrastructure and institutional factors) can
create both barriers to the wide diffusion of RETs and can also be drivers that foster an escape from a
lock-in situation. Based on this analysis, the paper suggests several policy measures which may help
to overcome the lock-out of promising renewable energy technologies.
r 2006 Elsevier Ltd. All rights reserved.

Keywords: Evolutionary economics; Solar PV; Wind energy; Lock-in; Lock-out; Renewable energy technologies;
Technology policy

Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1499
2. The techno-institutional framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1499

Corresponding author. Tel.: +34 925 268800; fax: +34 925 268801.
E-mail addresses: [email protected] (P. del Rı́o), [email protected] (G. Unruh).

1364-0321/$ - see front matter r 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.rser.2005.12.003
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3. Empirical studies on renewable energy technologies in Spain . . . . . . . . . . . . . . . . . . . . 1502

3.1. On-shore wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1502
3.1.1. Barriers and drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1502
3.2. Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1506
3.2.1. Barriers and drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1507
3.3. Drivers for PV energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1509
4. Discussion and policy recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1510
4.1. Policy recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1511
4.1.1. Solar PV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1511
4.1.2. Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1512
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1512

1. Introduction

Wind power and solar photovoltaics (PV) are promising, and in some cases proven,
energy technologies that offer attractive environmental performance characteristics.
However, despite their apparent benefits, the diffusion of wind and PV technologies has
been uneven on both national and international scales. This article explores this uneven
diffusion through two detailed case studies of the Spanish wind electricity and solar PV
sectors. Interestingly, Spain is a leader in the deployment of wind energy, but lags
significantly in the diffusion of PV compared with other countries. Proximate causes, like
differential costs of the two technologies or available resources, provide only limited
explanatory power. For example, Spain has both excellent wind and solar resources, thus
favouring the adoption of both technologies. But, while Spain is currently a world leader in
wind energy deployment (only behind Germany and on par with the US) the adoption of
solar energy is minimal despite the country’s comparatively natural resource advantage
with its high rates of insolation. The lag is especially interesting when compared with
countries like Germany that receive much lower solar radiation, but are world leaders in
PV deployment.
This paper evaluates these differential diffusion rates from the perspective of
evolutionary economics to better understand the causal factors behind the deployment
of renewable energy technologies (RETs) in the Spanish context. It shows that economic
and institutional factors play decisive roles in fostering or inhibiting diffusion. The paper
first elaborates a theoretical framework that builds from an evolutionary economic
perspective and takes into account market, technological and institutional factors which
influence diffusion. The framework is then applied to the two case studies, wind and PV,
set within the context of the Spanish energy sector to explore the causal factors for the
differential diffusion rates of wind and PV technologies. Finally, the paper draws
conclusions that can inform policy making and minimise the potential lock-out of
promising energy technologies.

2. The techno-institutional framework

New technologies, like wind energy and PV, do not enter into a virgin market terrain,
but instead must compete with pre-existing technologies that currently provide similar
services. This means that ‘‘history matters’’ and that new technologies often have to adapt
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in path-dependent ways to previous investment and policy decisions, made often decades
in the past. Pre-existing infrastructure, both physical and institutional, can create
important constraints on the adoption patterns of new technologies. Failing to account for
the path-dependent nature of technological evolution can limit the potential success of new
technological offerings.
In the case of new energy technologies, they must compete with large, well-established
systems which, in some cases, are the biggest structures ever created by humankind. Energy
systems can be characterised as Techno-Institutional Complexes (TIC) which include the
large physical technologies themselves and the social organisations and institutions that
build and manage them [1]. TIC emerge through a path-dependent process driven by
increasing returns to scale, which powers their growth and ultimately fosters numerous
sources of quasi-irreversibility or lock-in. Fig. 1 illustrates graphically the elements of the
TIC Framework. It has been argued that these systems are largely responsible for the lock-
out of promising energy technologies [1–3].
The focus of the framework is at the level of complex technological systems like
electricity generation, telecommunications and transportation, that rely on network
relationships among complimentary technologies, organisations and governing institu-
tions. They emerge through a path-dependent co-evolutionary process that begins when
innovation creates several technological variants that compete in an environment of
technological increasing returns to scale [4]. Ultimately one variant emerges from the
competition as a dominant design, locking-in key technological architectures [5]. Surviving
dominant design-producing firms organisationally lock-in around standardised decision
routines, core competencies, distribution networks and customer–supplier relationships,
which conditions their investments in non-dominant design technologies [6]. As the system
scale expands, complementary industry and interindustry networks, including financial

Public Institutions

Co-evolution

Technological System

Social Milieu
Managing Organizations

Co-evolution

Component (Subsystems)

Fig. 1. The elements of a techno-institutional complex.

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Table 1
Elements of a techno-institutional complex

Type of lock-in Source

Technological Dominant design, standard technological architectures

Organizational Routines, hierarchies, customer–supplier relations
Industrial/System Industry standards, technological interrelatedness, value chain relations
Societal System socialization, adaptation of preferences and expectations
Institutional Government policy intervention, legal frameworks, departments/ministries

institutions, emerge and lock-in coordination standards, relationships and capital

investment patterns. If the system becomes socially pervasive, advocacy groups, voluntary
associations and the media socialise the system, adapting preferences and expectations to
continued system dominance. Finally, government may intervene in system growth for
policy reasons (national security, universal service, anti-trust/natural monopoly, etc.) and
encourage system expansion through subsidies, incentives or outright ownership. The
intervention by government, which overrides market forces, signals the emergence of a
techno-institutional complex. Table 1 broadly summarises the ‘‘types’’ of lock-in discussed.
The establishment of a TIC facilitates the extension of useful technological systems by
ensuring lower economic, social and psychic costs of the dominant design relative to
alternative technologies. Thus thinking in terms of the techno-institutional framework can
help structure public and private efforts to extend new technological systems, like
renewable energy technologies. However, while the TIC can create stability, predictability
and possibly reliability in the system, it can also create inertia to change which can prove
problematic over time. As public policy and private investment decisions are frequently
made with limited foresight and discounting of potential future risks, unintended
consequences can become locked in along with the TIC. This appears to be the case
with environmental disutilities created by fossil fuel-based energy systems, which were not
foreseen when the systems were initially built.
Despite the barriers that engender lock-out of desirable technologies, technological and
institutional change have occurred repeatedly in history. Sources of energy and systems to
convert it have varied dramatically through history and include agricultural collection of
solar energy and conversion through animal and slave labour thousands of years ago, to
the use of whale and animal oils hundreds of years ago, to the modern reliance on fossil
fuels today. A new change will certainly occur again in the future, especially if the
predictions of climate disruption and other induced environmental change are borne out.
The fundamental question is ‘‘will promising renewable energy technologies overcome the
lock-in of fossil fuel systems before irreversible environmental damage occurs?’’ and, if not,
‘‘can policy efforts facilitate a transition to a new energy infrastructure?’’
We pursue these questions by undertaking an empirical case study which applies the TIC
framework to the case of the Spanish energy sector. We evaluate each of the elements of
the TIC—technological, organisational, industrial systems, institutional and social—where
they are applicable to the two technologies under consideration, wind and PV. Each of the
TIC elements can play a role in facilitating or constraining the adoption of new
technologies. The way interconnection (system) standards are designed, for example, can
either lock-out alternatives from the grid or facilitate their inclusion. Government policy
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can either reinforce (lock-in) the dominant technology, or it can foster variety and
alternatives. We address these dual roles in the case analyses that follow by organising the
factors based on whether the create barriers to the adoption of RET or whether they are
drivers of RET diffusion.

3. Empirical studies on renewable energy technologies in Spain

In this section an evolutionary economics interpretation of the barriers (and drivers) for
the diffusion of two key RETs (wind and solar PV) in Spain is provided. Data for these
two in-depth case studies have been obtained from a variety of sources and include official
statistics, reports by industry associations, manufacturers, energy suppliers, investors and
NGOs. A small number of unstructured interviews with key actors and experts in the wind
and solar realms have been carried out. The material collected has been interpreted in the
light of the theoretical framework set in Section 2. These two technologies have been
chosen for this study because Spain is well endowed with both wind and solar energy
resources (see below) compared to other EU countries, thus effectively controlling for the
effect of resource endowment.

3.1. On-shore wind

The diffusion of wind on-shore power in Spain over the period 1995–2004 can be
described as impressive and has made Spain second in wind energy installed capacity, only
behind Germany and on par with the US.
Wind power adoption statistics are presented in Table 2, but aggregate data obscure
important regional differences. Five regions account for 85% of the total installed capacity
in Spain. The province of Galicia leads the way, followed by Castilla-La Mancha, Castilla
y León and Aragón. In contrast, there is no deployment in the capital region of Madrid,
Cantabria and Extremadura regions.

3.1.1. Barriers and drivers

The Spanish wind energy model has certain peculiarities compared to other Northern
European countries. Large and medium size on-shore wind farms predominate in Spain,

Table 2
Accumulated wind power in Spain (1995–2003)

Year Power installed (MW) Accumulated power (MW)

1995 46 119
1996 95 214
1997 213 427
1998 407 834
1999 705 1539
2000 795 2334
2001 861 3195
2002 1440 4830
2003 1377 6207
2004 1746 7953

Source: [7] and APPA.

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whereas other countries follow a more decentralised model, with smaller clusters and even
individual wind turbines scattered over the territory. Wind energy investors in Spain are
mostly consortia of power utilities, regional government and turbine manufacturers [8],
with the role of private individuals insignificant compared to other countries.

3.1.1.1. Drivers of wind energy diffusion. Ten years ago, the installed wind capacity in
Spain was similar to many other countries, but deployment has increased markedly over
the period of data. What are the reasons behind the accelerated adoption of wind energy in
Spain? Diffusion cannot be attributed to any single factor but, rather, several interrelated
factors are involved:
Resources: Spain benefits from high-quality wind potential. According to the European
wind resource map [9], more than 80% of the Spanish territory has good wind resources
(speed above 7 m/s, and power above 400 W/m2), and several places in the south, north-
west and north-east have excellent wind resources (speed above 9 m/s and power above
850 W/m2) [10]. Thus, lack of resource is not a constraint for the deployment of wind
power (see below).
Costs and technical factors: Learning effects, economies of scale and R&D efforts have
substantially reduced wind energy costs [12] and system components. According to [11],
costs in Europe have fallen by 20% over the last 5 years. In Spain, data shows that these
costs have gone down from 1700 h/kW in 1986 to 864 h/kW in 1999 [13] and they are
expected to reach 700 h/kW in 2010 [14]. The average size of installed wind turbines has
risen every year, reaching 808 kW in 2002 [7]. Mass production and technological
improvements have reduced the costs of construction/installation and operation/
maintenance, leading to improved returns on investment [15].
The level of technological competency in Spain is high relative to international
standards. Spanish wind turbine manufacturers have a position of international leadership,
being among the world’s 10 largest manufacturers commanding a joint market share of
16.4% in 2002.
Factors driving cost reductions are interrelated, making it difficult to separate the effect
of individual drivers. The reduction in manufacturing costs is partly a result of support
policies in several countries, leading to an increase in the market size and to cost
reductions. It is not surprising that the three countries which have experienced the largest
increase in wind energy deployment in Europe (Germany, Spain and Denmark) are also
those with the top turbines manufacturing firms [16].
Highly supportive institutional framework: high support levels, stability and certainty of
promotion schemes: Institutional factors, including national promotion schemes, have been
crucial factors behind the widespread diffusion of wind energy in Spain. The main pieces of
legislation impacting wind energy include the Law of the Electricity Sector (Law 54/97),
the 2818/1998 Royal Decree on the Special Regime, the 1999 Plan for the Promotion of
Renewable Energy (PFER), the Plan of Electrical and Gas Infrastructures (2002). A
modification of the existing system was made in 2004 (Royal Decree 436/2004) [17]. These
regulations have provided a strong incentive through generous high feed-in tariffs awarded
per kWh generated. Price support measures (feed-in tariffs) give two alternatives to
renewable generators, either they receive a premium (on top of the market price) or a fixed
price. Both have been adjusted annually since 1999 by the Government and the support is
paid by the final consumer in its electricity bill. Table 3 illustrates the evolution of the
premiums and the fixed prices for wind since 1999.
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Table 3
Trends in wind electricity premiums and fixed prices (in hcents/kWh)

WIND 1999 2000 2001 2002 2003 % variation (1999–2003)

Premiums 3.16 2.87 2.87 2.89 2.66 18.2%

Fixed prices 6.62 6.26 6.26 6.28 6.21 6.2%

Source: [22].

In addition to the supports, the government has also used targets to stimulate adoption.
A target of 13,000 MW of installed capacity by the year 2011 has been set for wind energy.
This will be crucial to help Spain achieve its RES-E Directive target (Directive 77/2001/
EC): that 29.4% of electricity consumption in 2010 comes from RES. The stability and
certainty of the Government’s promotion framework, and the resolute role in the
promotion of wind energy taken, has its roots in its perceived environmental and
socioeconomic benefits, especially job creation.
There has been a reduction of the prices paid. This is criticised by the Spanish
Renewable Energy Association (APPA), which claims that this will not help achieve the
ambitious targets set for wind energy (see below). Public officials argue that the consumer
is loaded with the high costs of public promotion of RES-E and defend the reduction on
the basis of the ‘‘sharp reduction in wind costs’’ [18].
One of the main advantages of this system is its relative simplicity, lack of bureaucracy
and stability but the sector asks for a long-term price guarantee like in Germany and
more certainty of the support that will be provided during the payback period. They
criticise the annual revision of support prices (dependent on the evolution of the average
power market price) and claim that knowing ex ante the support to be granted would allow
them to reduce the capital costs and to ensure the availability of financial funds. This
shows that an accurate regulatory framework is crucial for the widespread diffusion
of RETs.
Local acceptance and NGOs: The larger social context has been supportive of wind
energy and is generally regarded by local actors as highly beneficial for its associated
employment and development opportunities. Environmental NGOs have been generally
supportive, although the local NGOs have sometimes criticised wind for the visual
intrusion that turbines may cause. While not a major concern today, experiences in other
countries like the UK indicate local community concerns could be an important obstacle in
the future.
The role of pioneers: The role of a handful of ‘‘visionarie’’ entrepreneurs has been
important in the development and initial adoption of wind electricity in Spain. These small
entrepreneurs and engineers saw the business potential of wind energy and undertook the
initial risky investments. They showed that investing in wind electricity was technically and
economically feasible, which paved the way for further investments.
Financial institutions: Finally, financial institutions have been supportive of wind energy,
given the proven profitability of wind energy investments, which is partly related to other
factors (stability of support schemes, high level of support and continuous costs
reductions). The regulatory stability, discussed above, and the demonstration of successful
installations has decreased perceived investment risks and led to favourable lending
conditions [8]. Here again different factors have mutual reinforcing effects, in that low
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lending rates contributed to greater profitability and stimulate more interest in wind
investments.

3.1.1.2. Barriers to wind energy. While for the most part the above drivers have
dominated, barriers to diffusion do exist. Reaching the wind energy target for 2011 will
depend on the removal of a number of potential barriers.
Authorisation procedures: Institutional arrangements create barriers including author-
isation procedures for construction, connection to the grid and initiating production in
wind farms. These regulations often delay the granting of permits, increasing lead times
[19] transaction costs and risks for project developers. In Spain, this is a very relevant
problem with its three levels of government competency: national, regional and municipal.
Several administrative levels: Authorisation procedures involve many administrative
jurisdictions (municipal, regional and national). There is an overlapping of procedures and
competencies between the national and the regional governments. Unlike in other MS (i.e.,
Germany), there is no catch-all application process by virtue of which all administrative
procedures are reviewed and one single permit is issued [21]. Several application
proceedings must be conducted contemporaneously and are interlocking at specific stages.
The implementation of wind farms is affected by 60 different regulations involving
40 different procedures between different administrative levels [22] and causing lead times
of 4 to 8 years [20,23]. A streamlining of these procedures is desirable.
Distinct administrative procedures per region: Competency for authorisation of new
wind capacities is at the level of regions (Autonomous Communities, AACC). However,
different procedures for the authorisation of wind farms exist in different AACC without
harmonisation at the state level. Investors are thus forced to consult the different legal
and authorisation procedures in each region where they plan to install a wind farm,
raising the costs of multi-location investment. In addition, within each region, there is a
lack of objective and quantitative criteria to assess the environmental impact of wind
installations. This leads to long delays in the reply of AACC to the environmental impact
assessment submitted by project developers [24] creating additional costs for wind
investors.
Municipal Authorisation: Municipalities actively participate in the authorisation
procedure and they can delay the actual implementation of a wind energy farm. The
complaint of local residents and NGOs could block the permitting of wind energy projects
for substantial periods. Information campaigns, environmental impact assessments and
agreements between the project developer and the local communities may reduce the
opposition of local communities [25]. Finally, project developers have to pay regulated
charges to the local administration for the use of the public domain. However, effective
payments usually exceed those regulated charges [13] causing uncertainty on the final cost
for the investor.
Difficulties in accessing the grid and the costs of interconnections: The larger existing
technological infrastructure and institutional frameworks create important barriers. Even
though article 26 of the Law 54/1997 gives wind energy generators the right to feed power
into existing power lines, actually gaining access to the grid is the major obstacle:
Limitations and weakness of the grid infrastructures: Wind farms are usually located in
low-density rural areas where grid infrastructure is often weak. Investments to improve or
extend the existing electricity infrastructure are required, but the costs fall on project
developers, who must make large investments in the connection line.
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Costs of deviations and tension hollows: The Spanish system penalises individual
generators for deviations from scheduled production (approximately at 5 h/MWh), a cost
paid to distributors. Wind energy is penalised compared to more predictable conventional
electricity because wind energy deviations are treated in the same manner as conventional
electricity.
Grid access procedures: There is a certain conflict in the Spanish regulation between
favouring the access of renewables to the grid and protecting grid security. On the one
hand Spanish legislation guarantees obligatory and free grid access to renewables and
requires the grid operator, Red Eléctrica de España (REE), to take all wind generation
onto its grid. On the other hand, in 2001, REE calculated in 13,000 MW as the amount of
wind electricity it was prepared to handle by 2011 and the basis of grid security and
reliability. However, wind generators defend a total installable power of 40,000 MW as a
limit which is supported by grid integration studies in other countries [26].
There are improved methods for predicting output from wind power installations. But
wind forecasting is also an issue of debate between the wind industry and REE. The latter
is demanding better forecasting while the former ask for increases in production subsidies
if generators have to pay the costs of forecasting.
To sum up, the lack of infrastructures along with systemic and institutional difficulties
of grid connection has led to uncertainties and additional costs, delaying the installation of
wind farms. Going forward there is concern that costs may increase, due to the price of
more complex wind turbines and the rising costs of grid connection and of administrative
procedures [24,27]: Furthermore, although significant high-quality wind resources still
exist in Spain, the best places have already been taken, possibly driving up costs in the
future.

3.2. Solar

Even though they started with similar initial conditions, solar PV electricity is a very
different case from wind. PV has not yet taken off in Spain despite the excellent solar
resources of the country. For PV, the PFER (National Renewable Energy Promotion
Plan) includes a target of a total installed capacity of 144 MWp (115 grid-connected) in
2010. By the end of 2003, only 28 MWp had been installed (Table 4).

Table 4
Cumulative installed PV power as of the end of 2003

Country Cumulative Cumulative Total installed Total installed Power installed Grid-connected
off-grid PV grid-connected PV power (kW) per capita 2003 (kW) power installed
capacity (kW) PV capacity (W/capita) in 2003 (kW)
(kW)

Spain 18,820 9180 28,000 0.68 8000 6500

Germany 19,700 390,600 410,300 4.97 133,000 130,000
Japan 78,893 780,730 859,623 6.74 222,781 216,535
USA 161,600 942,330 275,200 0.94 63,000 38,000
Estimated 407,316 1,401,648 1,808,964 475,887 428,486
total

Source: Downloaded from IEA-PVPS (http://www.iea-pvps.org).

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Table 5
Cumulative installed PV power (kW)

Country 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1994–2003 (%)

Spain 5.7 6.5 6.9 7.1 8.0 9.1 11.6 16.0 20.2 28.0 19.3%
Germany 12.4 17.8 27.9 41.9 53.9 69.5 113.8 194.7 277.3 410.3 47.5%
Japan 31.2 43.4 59.6 91.3 133.4 208.6 330.2 452.8 636.8 859.6 44.5%
USA 57.8 66.8 76.5 88.2 100.1 117.3 138.8 167.8 212.2 275.2 18.9%
Estimated total 164 199 245 314 396 520 728 990 1333 1809 30.5%

Source: Downloaded from IEA-PVPS (http://www.iea-pvps.org).

When put in an international comparative perspective (Table 5), Spain is still far behind
the world leaders in PV installation, some of which have much lower solar radiation. For
example, there are 10 times more PV panels installed in Germany than in Spain, indicating
that insolation is not the only explanatory factor [28]. The rest of countries have also
experienced significant growth rates. The deployment of solar PV differs per region and
four regions (Navarra, Madrid, Castilla-La Mancha and Cataluña) concentrate 80% of
total installed capacity.

3.2.1. Barriers and drivers

Solar PV can be installed as stand-alone or grid connected systems with multiple
applications within these two categories. Although some drivers and barriers are common
to all types of applications, others are category specific. In this paper we focus on grid
connected applications (integration in buildings and PV electricity production plants) [29].

3.2.1.1. Barriers to PV energy. High initial costs: Although technological component

costs are constantly declining, PV investments are still expensive relative to alternatives,
which discourages its deployment. High cost limit diffusion and create a negative
reinforcing effect by not allowing the scale economies that are needed to generate cost
declines that could make PV competitive with conventional electricity. The result is a
vicious circle where the technology is not adopted because it is expensive, and it is
expensive because it is not adopted. This is compounded by system factors that make it
costly to retrofit PV systems into buildings which are not PV ready. Switching costs in
these cases are much higher than if the buildings were prepared from the beginning to
integrate PV.
Lack of an accurate legal framework and insufficient support: The institutional framework
for renewables discussed in the previous wind section also applies to PV. However, in
addition to the basic feed-in tariff there are other relevant instruments supporting PV
deployment:
The Royal Decree 2818/1998 set an incentive of 39,668 hcents/kWh for PV installations
connected to the grid with a capacity lower than 5 kW and 21,634 hcents/kWh for
installations above 5 kW (this included the price of the electricity sold to the grid,
3.6 hcents/kWh). This feed-in tariff is significantly lower than in most other European
countries (see [11]). Those with a capacity above 100 MW are ineligible for funding
generating an extended payback period of 13 to more than 25 years [30].
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The National Government provides investment subsidies and soft loans, while regional
authority subsidies can cover between 15% and 50% of total investment [31]. However, PV
generators claim that subsidies are not always granted or that the granting is arbitrary and
varies by region. The total subsidies budgets are limited and given on a ‘‘first-come–first-
serve’’ basis, creating institutional uncertainty for investors.
Administrative barriers: Administrative procedures to install the PV modules and receive
support (subsidies and feed-in tariff) are often complex, cumbersome causing costly delays
and long lead times [32].
Financial barriers: Funding conditions are not as favourable compared to wind and
generate disincentives. The above factors create higher investment risks and longer
payback periods.
Companies in the conventional electricity sector: The Spanish solar PV association (ASIF)
claims that conventional utilities regard PV as a threat and create barriers by exploiting
their dominant position in the system. The opposition of existing firms to new technologies
is a common in the history of technological change [1].
Training and skills of equipment installers: Failed installation has a negative
demonstration effect and discourages the adoption by others. This makes experienced
installers and suppliers very relevant actors in the change of technological regimes.
Installation needs to be carried out by well-trained specialised suppliers. Only if the
installation is carried out properly will solar systems work properly and expectations on its
performance will be met. The Royal Decree 1663/2000 requires that PV installers have
certain qualifications and specifies the knowledge skills required to carry out these
installations. However, ASIF claims that this Royal Decree, which has entered into force,
is not applied in practice.
Lack of information: Technological diffusion research demonstrates that dissemination
of information is a crucial factor in the widespread adoption of a technology. According to
ASIF, grid-connected PV suffers from lack of information in several issues (feasibility and
costs of the technology and existing subsidies, difficulties and regulatory vagueness
regarding grid connection and rights of solar PV generators), which dissuades potential
adopters who are initially in favour of installing PV.
Connection to the grid: According to PV generators, before 2000 there were no grid
connection regulations, which allowed utilities to set exorbitant charges [33]. The Royal
Decree 1663/2000 set technical conditions for connection of PV systems to the low-voltage
grid. However, barriers remain. Most PV generators have a medium voltage grid
connection and are obliged to install a transformer, substantially raising the cost of the PV
installation. Investments in grid reinforcement further discourage PV projects. Generators
claim that grid access continues to be discriminatory and at unfair fees and directly accuse
the grid operator and utilities of preventing PV access. Again, this is a problem of
intersystem competition with interests using market power to block the introduction of a
new technology.
Integration in buildings: Grid-connected installations are mostly integrated into building
roofs or facades. Spain has undergone a housing and construction boom in the last years,
which is expected to continue in the near future. Half a million new buildings have been
constructed every year without including conditions for future PV installation. This has
created an installed base of buildings that are not PV ready. By not preparing the buildings
for future PV installations, they have made PV installation less attractive, because of the
retrofit cost discussed above.
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3.3. Drivers for PV energy

While barriers appear dominant at this time, there are existing drivers of PV energy in
Spain.
Resources: Spain has the best solar resources in Europe, particularly in the south and
east regions. Average radiation, according to [30], is 1600 kWh/year/m2.
Costs reductions: The costs of ‘‘ready to install’’ PV modules have been falling by 5% in
the last decades (a 75% accumulated reduction in the last 20 years) and most studies
estimate large potential for costs reductions in the next 20 years [34]. According to [11], the
learning rate of PV systems is expected to be around 20%, although for other sources [35]
they could be as high as 40% for grid-connected installations. The costs per kilowatt-hour
of PV in Southern Europe are projected to fall from 23 hcents/kWh in 2001 to around
7 hcents/kWh in 2020. These lower costs should enhance adoption.
Rural and regional development opportunities, reduction of unemployment levels and local
acceptance: Spain is still one of the OECD countries with the highest unemployment rates,
especially in rural areas. The installation of PV electricity production plants in these areas
is seen by the government as a development opportunity. Currently 4000 jobs are linked to
the PV sector in Spain (2500 are direct) and the socioeconomic benefits of PV make it
attractive for local communities, where acceptance is crucial for PV penetration.
Institutional factors: Several factors could lead to an institutional push for PV in the
future. Compliance with the Kyoto Protocol makes the increased deployment of RES-E
attractive. Spain, where the energy sector accounts for three-fourth of GHG emissions, is
one of the European countries farthest away from Kyoto compliance. PV and wind are
strategic sectors contributing to the minimisation of the country’s deviation from its Kyoto
target. Kyoto mechanisms like targets and the Clean Development Mechanism may
increase the size of the PV market worldwide, fostering the export of Spanish technology to
new markets. PV has also been discussed as a way to reduce the energy dependence on
foreign fossil fuels energy sources of the Spanish economy.
The socioeconomic and environmental benefits of PV, coupled with the high levels of
solar radiation, have fostered an institutional push both at the national, regional and
municipal levels in Spain. Many large cities in Spain have approved regulations requiring
the obligatory installation of solar PV on new buildings and some regional energy plans
prioritise the use of PV. As discussed, the Royal Decree 436/2004 substantially improves
the treatment of PV at the national level. Such measures are justified by the fact that PV is
much more cost-effective if installed during construction, where the impact on the total
building costs is low [11]. A recent law (the Building Technical Code) will require in 2006
that new and rehabilitated buildings install PV panels for water heating purposes.
Future technological improvements and costs reductions will reduce the financial burden
of publicly promoting PV. ASIF estimates that, to reach 2125 GWp in 2030, the total
support provided by the Spanish authorities should be around 1250 Mh (around 0.23% of
the total electricity bill in Spain and less than 1‘h/year/family) [36].
Spanish PV industry and science and technology PV system: The Spanish PV cell and PV
installation industry is highly competitive and recognised for its quality, flexibility,
innovativeness and commercial dynamism. It is the leading European manufacturer,
exporting 85% of its production, representing 40% of European and 7% of world
production. It is currently growing at a rate of 30% annually and lags only behind the
USA and Japan. The Spanish firm Isofotón is the top European cell producer and
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two other firms (BP Solar and Astra Solar) are among the top 8 largest producers and are
linked through 25 R&D PV centres.
Certain inherent technoeconomic characteristics of the technology itself may favour its
market penetration in the future: PV reduces transmission losses (compared to more
centralised alternatives), it is versatile, modular, user-friendly, fast and easy to install and
operate, it does not need large infrastructures, it has a long duration (the useful life of PV
modules is more than 30 years), minimum maintenance, low O&M costs (including low
fuel costs), it can be integrated into existing buildings, its implementation does not cause
environmental pollution and PV electricity is generated where it is consumed, thereby
reducing grid saturation.
The new Royal Decree (436/2004) may provide an additional stimulus to PV because it
increases the incentive to 41 hcents/kWh for plants smaller than 100 kW and 21 h/cents for
larger plants. The feed-in tariff also introduces a guarantee of 25 years from the date of
commissioning. This stability follows the highly successful German model.

4. Discussion and policy recommendations

Evolutionary Economics shows that radical changes, like the shift from fossil to
renewable energy, are not frequent and often face many different barriers. Notwithstand-
ing, there might be windows of opportunity which may facilitate the introduction of
radical technological changes. The systemic and dynamic features of an Evolutionary
Economics approach can provide insight on the factors generating technological lock-out
in RETs and to suggest policy strategies to overcome this condition.
It has to be acknowledged that the electricity sector has become locked into centralised,
large thermal-based systems that have undergone increasing returns improvements in the
human, financial and institutional resources, which creates intense inertia. New technology
may not be compatible with the characteristics of the existing system, and are often
handicapped in competition. Furthermore, new technologies represent a threat for the
established technology and the firms that have invested in it. In contrast, RETs have not
undergone equivalent growth that will improve the technology and reduce their costs and
is assessed with the criteria used to evaluate the old technology. This can fail to take into
account the benefits of the new systems. Complementary technologies such as transformers
have to be adopted in order for the new technologies to integrate with the existing
technology. All of these create challenges for policy makers interested in supporting
promising new technologies.
However, windows of opportunity arise in the evolution of technologies that can favour
the exit from lock-in. As preferences change over time, existing technology might not be
able to meet the new social and market demands (i.e., environmental protection). Likewise,
some negative features of the old technologies and which were relatively hidden can
manifest and some positive features of the new technology can be given value. These
provide openings for the new technology.
This paper has applied an evolutionary economics framework to identify and analyse the
factors which are impacting the diffusion of solar PV and wind in Spain. The technologies
show some similarities, being intermittent, capital intensive but with low O&M costs. They
differ, however, in other respects that is demonstrated in their differential diffusion rates.
The case study on wind energy in Spain shows that several factors acting together,
simultaneously and in an interrelated way, allowed a widespread diffusion of the
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technology. These include excellent wind resources, substantial cost reductions, a high
technological level of the domestic wind industry, a highly supportive and stable
institutional framework providing certainty for investors and reasonable profit margins, a
society attaching high value to the benefits of wind energy and the role of several pioneers
whose investments showed the feasibility and reliability of wind energy deployment. As a
result of all those factors, financial institutions have been able to provide loans for
investments at relatively low interest rates (low risk premium).
However, some factors may stand in the way of future wind energy growth rates. These
include long lead times due to cumbersome authorisation procedures, difficulties in
accessing the grid and costs of connection, higher cost of wind turbines and increasing
scarcity of high-wind locations. These factors are related to a technology which has
reached a critical mass and which is really competing with the conventional technology,
being considered as a real threat by those with interests in the later.
As shown, PV is very different case. PV factors of importance are sometimes the
opposite of wind energy. They include high initial costs, low support levels and non-
guaranteed support (feed-in tariffs), administrative and financial barriers, lack of
professionality of some equipment installers creating a negative demonstration effect,
lack of interest by conventional companies, lack of information and problems in accessing
the grid and building integration. Drivers for an increased penetration of PV in the future
include the high solar radiation in Spain, expected cost reductions, its socioeconomic and
environmental benefits, recent public policy measures and a relatively strong domestic
industry and science and technology PV system.

4.1. Policy recommendations

The analysis of specific barriers and drivers should be the basis to propose public policy
measures that seek to foster the diffusion of RET. Several instruments currently exist to
promote renewable energy technologies in the electricity sector (tradable green certificates,
feed-in tariffs, etc.) and are relevant elements in a policy mix. However, by themselves, they
are unlikely to change the technological regime because they fail to address structural
barriers that are unrelated to financial support (for example, the issue of grid connection).
Thus a mix of instruments appears necessary, targeted at different facets of the lock-in
problem, which impact the supply and demand for technology and also the larger context
in which it will be embedded (see Fig. 1).

4.1.1. Solar PV
In the case of Spain, some of the lessons from the wind energy case can be used to
suggest policy measures which may help to foster solar PV diffusion. PV’s high costs is still
the major barrier and cost reduction should be a priority. Cost reductions create a self-
reinforcing effect by expanding the effective market and fostering scale and learning
effects. These encourage even greater cost reductions and further market growth. The
Royal Decree 436/2004, which increases support levels and guarantees the support for 20
years, and the Law requiring the integration of solar PV in new buildings are steps in the
right direction. As the German 1000 Roof Programme shows, stability and reasonable
support levels are crucial to ensure demand for PV modules. Higher support should be
considered that cover the difference between deployment costs and the price of the
electricity sold to the grid. However, support should be reduced every year as PV costs
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decline, which can be accomplished by as decreasing feed-in tariff. There are also social
benefits to the elimination of investment subsidies in favour of increases in the feed-in
tariff.
A reduction of lead times should also be a priority. This can be assisted by regulations
that ensure PV electricity access to the grid. Contrary to the case of wind, the amount of
solar PV electricity generated is very small and currently causes no problem to grid
stability. The problematic issue of PV investors having to install a transformer should also
be dealt with. Their acquisition could be partially subsidised. If the investment subsidies
referred to above were earmarked for this, the burden on the public budget would remain
constant.
Finally, effective enforcement of the Royal Decree 1663/2000 requiring minimum
competencies for PV installers should be enforced. Large-scale awareness-raising
campaigns on the benefits of solar PV and on the steps that individuals should take to
install this technology should be launched, including demonstration projects in public
buildings. Campaigns should be targeted both at the users and at professional groups such
as architects and the construction industry [11]. Greater R&D funding and more
interaction between industry and R&D centres should be promoted through R+D+D
programmes. This co-operation favours the adaptation of research to market needs and,
therefore, penetration of the technology.

4.1.2. Wind
The problem of grid connection is the primary barrier to the future diffusion of wind. As
with PV, reinforcements of the grid should be partially subsidised and procedures
prioritising access to the grid established. Better wind prediction methods and independent
studies on the amount of wind energy which can be fed into the grid would be useful. On
the other hand, streamlining of procedures to obtain administrative permits could reduce
lead times. A catch-all application process that allows all administrative procedures to be
reviewed and the issuance of a single permit could improve the process dramatically.
Finally, information and awareness-raising campaigns on the benefits of wind electricity
would favour public acceptance of wind turbines in the future, when their presence in the
landscape is widespread. This would avoid some of the social opposition problems
encountered in other countries.

References

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[2] Unruh GC. Escaping carbon lock-in. Energy Policy 2002;30:317–25.
[3] The terms ‘‘lock-in’’ and ‘‘lock-out’’ are really two sides of the same coin. The metaphor is a door to a house.
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renewable energy is ‘‘locked out’’ of the house and excluded.
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[10] A wind resource assessment made by the University of Utrecht (cited in [11]) shows that the technical wind
potential in Spain is 178 TWh/year (more than twice total electricity consumption).
[11] EREC (European Renewable Energy Council). Renewable energy in Europe. Building markets and capacity.
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[12] Of course, this is not only a feature of the Spanish system.
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[16] Nine out of the top ten companies are located in these three countries.
[17] In addition, regional plans have had a considerable positive impact on deployment.
[18] This is rejected by APPA. The Ministry estimates that average investment costs are around 780 h/kW, while
for APPA the figure is 955 h/kW.
[19] The lead time is the period between the beginning of the planning phase and the moment generation starts. It
includes the planning, construction and production phases ([20]). During this period no revenues are
obtained, many uncertainties exist and significant costs are incurred.
[20] Uyterlinde MA, Daniels BW, De Noord M, De Zoeten-Dartenset C, Skytte K, Meibom P, et al. Assessment
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Sweden. Blanke Meier Evers Attorneys. Bremmen; 2003. http://www.bme-law.de.
[22] APPA. The experience of Spanish Renewable Energy Developers. Special Edition EWEC; 2003. http://
www.appa.es.
[23] According to APPA, the average lead time for wind projects in Spain is 7 years ([27]). A recent study by
BCG-PEE estimates an average lead time of 4–5 years ([24]).
[24] BCG-PEE. Nuevos vientos para el desarrollo sostenible El reto de la energı́a eólica en España. Boston
Consulting Group/Plataforma Empresarial Eólica. Madrid; 2003.
[25] Financial compensations to local communities to eliminate this opposition may be involved.
[26] For example, in Denmark, wind generation has today reached spot penetration levels as high as 70% without
problems. However, REE retorts that Spain is a special case concerning wind integration because, unlike
Denmark, it has poor interconnection to its neighbours (3% of its capacity) and wind fluctuations have to be
absorbed with its thermal generating base.
[27] de Delás M. The regulatory framework for wind energy in Spain. Madrid: APPA; 2003 [in Spanish] http://
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and Italy.
[29] The main reason is that ‘‘only strong development of this grid-connected market in industrialised nations,
including Europe, will allow the industry to reach critical mass and realise economies of scale’’ (EREC 2004,
p. 126).
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greenpeace.es.
[31] National and regional subsidies are compatible, but their combination is limited to 40% of total investment.
Greenpeace; 2003.
[32] According to Greenpeace, these lead times might be between 6 months to more than a year; 2003.
[33] Sawin J. National policy instruments. Bonn: International Conference for Renewable Energies; 2004.
[34] According to EPIA/Greenpeace ([37]), these costs will fall from 3 h/Wp in 2001 to around 0.9/Wp in 2020.
[35] CCM. Energı́a Solar Fotovoltaica en la Comunidad de Madrid. Madrid: Madrid’s Chamber of Commerce;
2003.
[36] ASIF (Spanish solar PV association). Hacia un futuro con electricidad solar. Madrid. http://www.asif.es;
2003.
[37] EPIA (European PV Industry Association)/Greenpeace. Solar generation—a blueprint for bringing solar
electricity to 1 billion people by 2020. Brussels: EPIA/Greenpeace; 2001.