**8. Socio-economic drivers, energy policies and measures**

ty generation process due to less use of wind energy. In this case, idle capacity would be

Further regarding conventional energy sources, nuclear power is not statistically significant in wind overcapacity, despite its relevance in Europe. Nuclear power is not an intermittent source and its widespread use in Europe is mainly due to its own characteristics: it is cheap‐ er than oil, with a greater capacity to generate power in a single power plant but is inflexible in providing backup for renewables due to its low startup times. Nuclear power works bet‐ ter in full-power operation than on demand (Dittmar, 2012). It is therefore understandable that nuclear is not significant in explaining wind overcapacity. Ultimately, this result can be

The contributions that renewable energy sources, other than wind, make to explaining wind overcapacity are also discussed. Similarly to results obtained for nuclear, hydropower is not statistically significant. It is a well-developed renewable energy source, with widespread use in Europe for electricity generation (Balat, 2006), which is relatively stable and mature. Its own characteristics imply its use in base load generation. However, recent developments in this source have involved engaging hydropower with wind power. Indeed, wind power combined with pumped hydro power stations can be useful in meeting electricity demand in peak-load periods. In off-peak, wind overproduction can be used to pump water to an elevated reservoir to later be re-used back in the lower reservoir (Dursun and Alboyaci, 2010). This new technology adds storage capacity, not in terms of energy storage but rather in terms of energy generation storage, thereby giving wind energy a new role as a backup to

Solar energy merits our attention since it is an increasingly common renewable energy source in Europe. The results show that solar energy does not prove to be statistically signif‐ icant in explaining wind overcapacity. Nevertheless, a popular and advantageous solution, stated by Nema et al. (2009), is the mix of wind and solar considering that their integration makes them less exposed to intermittency. Supporting such systems, more especially in re‐ mote areas, may be a solution to reducing overcapacity. It can be followed by European partners, namely in regions where land space and natural resources allow this investment. A case in point is the recent investment in southern Spain in solar thermal plants with a ca‐ pacity of 300MW at their completion in 2013. Solar thermal power plants use several availa‐ ble technologies such as power towers, parabolic troughs with heat storage, sterling dishes and concentrated/non-concentrated solar power. Consequently, by combining this mix of technologies, the power plants can operate without sunlight at total capacity for 7.5 hours. When there is more wind installed capacity, the number of intermittent wind power plants also logically increases. Our results support this assumption since the growth rate of wind

hydropower. In the future, this could help to mitigate overcapacity effects.

seen as additional proof of the robustness of the results.

**7. Other renewable energy sources**

greater.

72 New Developments in Renewable Energy

The spatial dispersion and, in other words, the efficient installation of wind parks should be discussed further. Population density was applied as a proxy for spatial dispersion of wind farms to assess the impact of countries with higher or less population density. These coun‐ tries tend to have less land space to install wind farms properly. Furthermore, continental areas have lower wind speeds than countries with coastlines. Overall, the results support this assumption. Overcapacity is larger in more populated countries. Accordingly, policy makers and players should pay extra attention to this issue in order to support the diversifi‐ cation of wind turbines. To overcome the constraints caused by highly populated countries, offshore technologies can be a better way due to their steadier characteristics mainly driven by higher wind speeds. It also allows the use of higher power generation turbines. In short, offshore wind farms can help to overcome the population density effect on the creation of overcapacity.

In the literature, the role of economic growth as a driver toward renewable energy is far from consensual. Marques et al. (2010) argued that the effect of GDP on renewables de‐ pends on the share level of renewables. In their turn, Chang et al. (2009) conclude that economic growth and renewables' development are not directly related. Nonetheless, countries that are in an upward trajectory with high growth rates can support prices of in‐ vesting in renewables. Despite increased prices for the final consumer, developed coun‐ tries tend to invest more in renewable energy sources. In this chapter, we focus on the effect of the logarithm of GDP *per capita.* Our results are consistent and reveal that coun‐ tries with the highest living standards benefit from more advanced and efficient wind power plants which reduce idle capacity.

With the goal of increasing the share of energy from renewable sources, energy policies are stated as an effective instrument for European countries to implement (EU directive, 2009). Several authors (e.g. Gan et al., 2007; and Johnstone et al., 2008) found that incen‐ tive taxes, feed-in tariffs, voluntary programs and R&D policy support are the main driv‐ ers supporting renewables. Our results allow us to analyze individually and jointly the energy policies adopted in the European context. In our models, the total of accumulated energy policies over the years increases overcapacity, showing that the impact of these policies is sometimes inefficient, taking into account only the players' political will to reach European guidelines. Table A.1 of the appendix shows results from disaggregated energy policies. Normative regulation and efficiency in building policies create wind pow‐ er overcapacity. Indeed, these policies imply better efficiency and consumption savings. Reducing energy consumption in buildings contributes to aggravating idle capacity. More‐ over, fiscal and tariff policies, including tax reduction in retrofitting investments, promote investments in new power plants, replacing old equipment with technologies that gener‐ ate higher power and are more efficient. Retrofit investments help to upgrade the electrici‐ ty system and reduce idle capacity.

**9. Conclusion**

term energy guidelines.

This chapter is centered on a panel dataset of 19 European countries for the time span 1998-2009 in order to understand and analyze the causes of wind overcapacity that may arise from non-constant electricity generation from renewables. To the best of our knowl‐ edge, this approach had never been made through panel data techniques and it is a new method in the renewables' intermittency literature. Some light is shed on overcapacity of wind energy and its interaction with conventional energy sources, other renewables, socioeconomic drivers and energy policies in the context of an economic bloc with common long-

On the Public Policies Supporting Renewables and Wind Power Overcapacity: Insights into the European Way Forward

http://dx.doi.org/10.5772/52159

75

Results from our models reveal that fossil fuel power plants, such as coal-based and gasfired, are actually used to backup wind power. Oil and nuclear do not appear to be signifi‐ cant in explaining wind overcapacity. These results may highlight the robustness of our model, considering that oil and nuclear power are generally used for base load energy gen‐ eration and therefore have no direct effect on wind overcapacity. As further robustness as‐ sessment, the robust regression estimator was performed to deal with possible outliers from

our panel. Overall, the robust regression supports the main results of the estimations.

be reconsidered or even abandoned and replaced.

session of fossil resources, such as coal or oil reserves.

Renewables such as hydropower and solar photovoltaic seem to make no apparent contri‐ bution to explaining wind power overcapacity, unlike industrial and municipal waste. Moreover, the results indicate that population density is a factor in greater wind overcapaci‐ ty, while countries with a higher standard of living are associated with less overcapacity. The results for public policies and measures suggest that a positive effect on increased over‐ capacity may be due to inefficient incentives for deployment of wind power. The promotion of renewable energy is a crucial decision because it deals with one of the central inputs of economies and societies in general. In order to gain a full understanding of the appropriate ways in which to promote the paradigm shift from fossil to renewable sources, objectivity is needed in analyzing both the advantages and disadvantages associated with the path that has already been trodden. This cumulative experience should support the intensification of measures that have had a positive impact on the development of renewables and have not added significant distortions to the economy as a whole. Other measures which do not pro‐ duce the desired effects, or fail to contribute to an egalitarian distribution of benefits, should

Policy measures, particularly incentives, should be largely dependent on the level of effi‐ ciency achieved by the players. These measures should be oriented towards the market, avoiding distortions between the different players acting in the energy market. Such meas‐ ures should not result in costs for the economy that endanger the prosperity levels of society in general. In fact, we are dealing with a non-cooperative game played between internation‐ al players, including countries or economic blocs, where the competitive advantage of this technology domain is more quickly surpassed than the comparative advantage of the pos‐

Overcapacity of renewables is another aspect of the intermittency phenomenon. Wind ener‐ gy has been a very common and widely accepted instrument in reaching the 20-20-20 tar‐ gets. It merits a review of the implicit economic consequences. Policy makers should pay more attention to the advantages and consequences of their policies and measures focused on renewables in order to avoid a blindly ill-considered decision-making process. The de‐ ployment of wind power installed capacity has implications for the energy grid as a whole and creates economic distortions. To balance conventional energy sources with all renewa‐ bles is a challenging task that requires enlightened political and scientific intervention. Poli‐ cy makers should bear in mind that the growth of renewables has to be in line with energy consumption patterns. To mitigate this problem, micro-production incentives seem to be a solution to balancing domestic consumption with network energy supply. Furthermore, in‐ stalled players should not resist investment in new technologies in order to maximize wind capacity factors. Off-shore sites are a good alternative for countries with coastal areas be‐ cause in addition to having higher power generation, wind farms can make more efficient use of installed capacity.

Coal-based and gas-fired power plants are actually used to backup wind power. However, this imposes an extra cost on the final consumer since the non-use of conventional power plants is subsidized. Regulatory authorities should be aware and take measures to prevent the price escalation that combines the contribution to investment in renewables with these subsidies for energy industry lobbies. The implementation of mixed systems based on re‐ newable energy in regions with available natural resources can both improve the energy supply economically and supplant the needs of the area (Erdinc and Uzunoglu, 2012). With the opening of energy markets to the private sector, stronger regulation of the market may be an instrument in monitoring immoderate investments.

Generally, there are no incentives to increase the efficiency of renewables' technology. For example, in some countries such as Portugal, there is an incentive based on feed-in tariffs for the solar photovoltaic micro-generation system. The incentive to improve efficiency is nonexistent given that the maximum electricity generation that could be sold to the player dis‐ tributer is bounded. In general, the feed-in tariffs guarantee the price for kWh regardless of whether it is generated by a very efficient device or not. This form of intervention merely ensures income for the players. Policymakers should consider implementing measures that will add competition to the renewables industry, particularly in solar and wind industries, and thus promote patenting and R&D activities.
