**2. Renewables' intermittency context: The debate**

The expansion of renewables is the subject of hot debate in the literature regarding the im‐ plications of these energy sources, namely their advantages, consequences and prospects for growth. The implications of the unpredictability and inconstancy of wind energy generation prove relevant. In fact, this intermittency in generation makes it increasingly important to combine different energy sources, including fossil fuels, to backup energy supply. A rele‐ vant role is merited not only for conventional energy sources, but also for the mix of renew‐ ables. Moreover, it is crucial to understand the role that public policy and measures have played. Wind power installation has been strongly stimulated by public guidance and high‐ ly subsidized, namely by guaranteed prices under feed-in tariffs which will last for more than 25 years, as stated by Moreno and Martínez-Val (2011). Together with other drivers that promote renewables on a large scale, this creates distortions and increased costs for con‐ sumers (Gómez et al., 2011).

### **2.1. Intermittency and wind power overcapacity**

Although the issue of renewable intermittency is far from new in the literature, the rele‐ vance of this topic together with the phenomenon of overcapacity requires much more re‐ search. The main reasons and impacts of non-constant generation of wind energy are analyzed by authors such as Albadi and El-Saadany (2010), and Green and Vasilakos (2010). Gonzalez et al. (2004) focus on Ireland, Gül and Stenzel (2005) on Scandinavia, the United Kingdom and the United States, Caralis et al. (2008) on Greece and the Chinese case is tar‐ geted by Yang et al. (2012) and Zhang and Li (2012).

through the electricity transmission grid, wind farms behave more similarly over time as a single wind farm with constant wind speed, providing a constant and secure energy supply.

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

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

55

As regards the impact of energy policies and measures on the deployment of renewables, a few studies have provided empirical evidence. Carley (2009) uses the fixed-effect vector de‐ composition, which is a variant of the fixed-effects model, and finds that the sum total of United States energy policies does not contribute significantly to more electricity from re‐ newables. However, the growth of renewables is promoted by each additional year that a State maintains a policy. A positive relationship between the expansion of wind energy and the adoption of energy policies that promote investment and subsidies is found by Menz and Vachon (2006). Regarding European countries, Marques and Fuinhas (2012a) prove that policies subsidizing the promotion of renewables have been effective in doing so. Overall, they argued that this process is driven by political willingness rather than by economic ra‐

**3. Wind capacity, energy sources and European public policies**

Wind energy growth in the last decade in Europe was mainly driven by several factors such as: energy demand growth; the commitments made to greenhouse gas reduction under the Kyoto protocol directives; improvements in renewable energy technology; and the reduction of the marginal cost of wind power generation over the past 15 years, approaching the cost of conventional energy sources (Pechak et al., 2011). For these reasons, wind power has reg‐ istered a strong impulse since the late 1990s and early 2000s. As a consequence, due to the lack of data before 1998 for almost all European countries, this study uses panel data for the time span 1998-2009, for the following countries: Austria, Belgium, the Czech Republic, Den‐ mark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, the Netherlands, Norway, Poland, Portugal, Spain, Sweden and the United Kingdom. These countries are part of a group that is driven by long-term energy goals under European directives (EU di‐ rective, 2009). Not all countries have the same number of observations due to sporadic miss‐ ing values, which leads to an unbalanced panel. The remaining countries of the EU27 did not provide available data for wind power installed capacity in the considered time span.

Panel data techniques have several advantages, such as: (i) they allow a more accurate statis‐ tical inference; (ii) they provide more informative data and variability; (iii) they increase the number of observations and degrees of freedom; and (iv) they allow for controlling individ‐ ual heterogeneity and unobserved characteristics of errors which are not detectable in time-

For a better approach to the issue of intermittency and overcapacity, it proved necessary to make the concept of overcapacity operational. To do so, a variable which emulates wind

series or cross-sectional models (Baltagi, 2005 and Hsiao, 2006).

tionality.

**3.1. Wind capacity**

overcapacity (*WOCAPc,t*) was created.

Intermittency in renewables can be analyzed by using the capacity factor. This is the ratio, for a certain period of time, of the energy generated to the energy that would have been gen‐ erated in operation by operating total continuous power during the same period (Denholm et al., 2005). Boccard (2009) summarizes that capacity factor depends on: (i) wind variability; (ii) the shadowing phenomenon; and (iii) the intensive focus on subsidy policies. The shad‐ owing phenomenon comes from installing too many wind turbines in a limited area to save costs on land use. Moreover, the short distance between wind farms compromises the indi‐ vidual performance of each farm. The vast use of public financial support policies may have led to fast, but inefficient, wind energy deployment.

Acker et al. (2007) noted that a seasonal influence in the capacity factor can be observed. Caralis et al. (2008) analyzed the capacity factors in Greece and suggest that spatial disper‐ sion of wind farms benefits the wind power capacity factor. They concluded that the accu‐ mulation of too many wind farms is not always the optimal solution because it may impair the efficiency of each individual wind farm. More recently, Yang et al. (2012) and Zhang and Li (2012) assessed wind power growth in China, which was driven by three main factors: (i) the perception that China benefits from large wind resources; (ii) the adoption of incentives and subsidies that support the investment in wind power; and (iii) the reduction in wind capital costs. The authors note that more attention to the efficiency of wind turbine alloca‐ tion in China is needed. In fact, one-third of wind turbines were idle, causing a capacity fac‐ tor of 16.3% between 2007 and 2010 (Yang et al., 2012).

#### **2.2. Backup and energy storage**

It is important to seek new ways to deal with wind speed variability, both in the short and long term. Examples could be additional energy sources to backup power in windless peri‐ ods or energy storage devices (Purvins et al., 2011). To ensure a secure energy supply, it is necessary to mix wind power with other energy sources, including fossil fuels. Pearce (2009) suggests a solar photovoltaic system mixed with combined heat and power to overcome in‐ termittency in California without resorting to energy storage. Moreno and Martínez-Val (2011) argue that thermal power plants are no longer so important in base load energy gen‐ eration, turning them into backup sources to substitute renewables. These authors support that by 2020, backup with combined cycle gas turbine plants needs to grow to 8 or 9 Giga‐ watts. The literature (e.g. Archer and Jacobson, 2007) also mentions another method to smooth wind variability. These authors found that by interconnecting multiple wind parks through the electricity transmission grid, wind farms behave more similarly over time as a single wind farm with constant wind speed, providing a constant and secure energy supply.

As regards the impact of energy policies and measures on the deployment of renewables, a few studies have provided empirical evidence. Carley (2009) uses the fixed-effect vector de‐ composition, which is a variant of the fixed-effects model, and finds that the sum total of United States energy policies does not contribute significantly to more electricity from re‐ newables. However, the growth of renewables is promoted by each additional year that a State maintains a policy. A positive relationship between the expansion of wind energy and the adoption of energy policies that promote investment and subsidies is found by Menz and Vachon (2006). Regarding European countries, Marques and Fuinhas (2012a) prove that policies subsidizing the promotion of renewables have been effective in doing so. Overall, they argued that this process is driven by political willingness rather than by economic ra‐ tionality.
