Initiating a sustained diffusion of wind power: The role of public–private partnerships in Spain

Abstract

The literature on policy approaches for the market support of renewable electricity is dominated by narrow conceptualizations of policy, referring mostly to direct instruments for economic feasibility. Such approaches often led to unsatisfactory explanations of diffusion results. This is the case of wind power diffusion in Spain, the success of which is typically credited to the ‘feed-in-tariff’ instrument. This paper offers an alternative explanatory account for wind power diffusion in Spain. It is argued that diffusion can be explained by a less obvious policy of stimulating investments by means of public–private partnerships (PPPs). The three legal frameworks for economic feasibility applicable up to 2004 harbored high economic risks. Although projects could have high profitability because of generous investment subsidies, up to mid 1990s most investments were based on PPPs, to address the risk perceptions of early investors. Fully-private partnerships now dominate investments, though PPPs have not disappeared. Next to winning investors’ confidence, the PPP policy led to an investment culture whereby partnership investments dominate. By 2000, 95.7% of the installed wind capacity was owned by partnerships, and only 4.3% by individual companies. Partnerships invest in larger projects, have ambitious investment plans, and these lead to a high diffusion tempo.