Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.

edu/electricity

Learning from wind: A framework for effective low-carbon energy

diffusion

Constantine T. Samarasa
a
Climate Decision Making Center, Department of Engineering and Public Policy,
Carnegie Mellon University, Pittsburgh, PA 15213 USA
Email: [email protected] Phone: +1.412.268.5847

Abstract
Over the past twenty-five years, wind power has evolved from an emerging alternative
energy source to a commercially viable utility-scale technology that can play a role in a
low-carbon future. Wind turbines have matured technically from simple machines
constructed with off-the-shelf motor components to carefully optimized advanced power
generation systems with a worldwide manufacturer and supplier base. Advancements in
wind power occurred through actions in both the engineering and public policy
institutional arenas. This research examines the technologies, policies, and inter-industry
spillovers that have enabled the exponential growth of installed wind power from 1999
through 2005 and analyzes the relative efficacies of the various policies and actors that
comprise the wind innovation system. It provides engineers and policymakers a program
management and policy design framework for continued development of wind energy as
well as for other emerging low-carbon energy technologies. Spillovers from technical
domains outside of wind energy are found to have played a critical role in enabling wind to
achieve significant levels of penetration into the energy system. This suggests that energy
policies designed to leverage spillovers across interdependent industries may be more
effective at encouraging low-carbon energy adoption compared with policies tailored
toward promoting a specific technology.

Keywords: wind power, innovation, diffusion, research and development, public policy

played by institutional research and

1. Introduction development (R&D), incremental
Wind power has evolved from its innovations, and advances in and transfers
mechanical "windmill" roots to become a from industries outside of wind energy in
viable zero-emission utility-scale energy bringing wind to its current status. By
source in the 21st century, with costs that analyzing wind in this context, a
are now close to competitive in framework is proposed to encourage
commercial power markets. The nexus of innovation and adoption in low-carbon
concerns about energy security, high energy technologies.
fossil fuel prices, and carbon dioxide As with other technologies that provide a
emissions has made wind power a focus societal benefit not currently valued in the
of great interest. This research marketplace, wind power has benefited
investigates how wind power got to the from both favorable public policies as
point that it may be poised to become a well as a diversified R&D agenda
serious player in supplying electricity. conducted by both government and
Specifically it explores the relative role public-private partnerships. While there is

C.T. Samaras │ Learning from wind: A framework for effective low-carbon energy diffusion 1
Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.edu/electricity

little doubt that the growth of wind has 2. Wind turbine installation
benefited from public policy, such as expansion and capital cost decline
feed-in tariffs and production tax credits, With only nominal capacity in 1970, total
the sources of technical innovations in 2005 world installed capacity for wind
design and manufacturing which have power was more than 59,000 megawatts
contributed to cost reductions are less (MW) [7]. Installed capacity has grown
clear. Loiter and Norberg-Bohm (1997 by an annual average growth rate of more
and 1999) have argued that the majority than 26 percent from 2000-2005, and the
of radical advances in wind energy industry has experienced five doublings
originated from transfers from other of installed capacity since 1986 [7, 8].
industrial sectors and not from
governmental research in advanced wind Current estimates for an installed wind
turbine designs [1, 2]. turbine distribute capital costs to
approximately 70 percent for the turbine
Through both a careful review of the itself and 30 percent for the planning,
academic literature, governmental and installation, and interconnection, termed
institutional reports, conference Balance of Station (BOS) [9-12].
proceedings, and trade publications, as
well as interviews with officials, both in 60000

government and across the wind industry,

Installed Capacity (MW)
50000
this research confirms this finding and
examines recent advances in industries 40000

outside of wind energy that have been a 30000

primary driver for continued cost Europe
reductions in the cost of wind generated 20000

electricity. 10000
USA
Previous research in this area includes the 0 Other

aforementioned work of Loiter and 1986 1989 1992 1995 1998 2001 2004

Norberg-Bohm, as well as Sawin (2001) Year

Figure 1: Growth and Regional Share of
who both included the United States Worldwide Wind Power Installed Capacity (MW)
(U.S.) in their analyses, and Kamp et al.
(2004), Astrand and Neij (2006), Buen Sources: [13-15]
(2006) and others who examined
Without a fuel price input or risk, the
European nations exclusively [3-6]. The
relatively high capital cost of wind
indicators used to evaluate the
turbines has been the primary financial
relationship between R&D, public policy
barrier to entry into the electricity
and wind power include technology cost
markets. Capital costs for wind turbines
and performance-based metrics, as well as
are defined as the installed cost per
technology adoption rates. This work
kilowatt (kW) of rated capacity. Installed
adds to the current literature by further
capital costs per kW for wind turbines
examining these relationships from the
have fallen in real terms from
perspective of the U.S. experience, and
approximately $7500 (USD)/kW in 1982
analyzes the recent significant impacts of
to between $1000 and $1300/kW in 2003,
inter-industry spillovers on the adoption
as shown in Figure 2 [9, 12, 16].
of wind energy.

C.T. Samaras │ Learning from wind: A framework for effective low-carbon energy diffusion 2
Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.edu/electricity

10000
science and testing. Appropriate products
Installed Capital Costs per kW and processes in these endeavors were
imported to the wind industry and have
enabled large advances in wind power
($2004)

1000 [21].
Loiter and Norberg-Bohm (1999) argue
that innovation in wind energy was
achieved incrementally, by benefiting
from technological advances from outside
100
1980 1985 1990 1995 2000 2005
Year
industries and using public and private
Figure 2: Estimates of Installed Capital Cost research for specialized adaptation of
of Wind Power per kW of Nameplate Capacity
these borrowed advances. Several key
Sources: [9, 12, 16-19] exceptions, such as advanced airfoils,
were developed directly, and were
Decreases in the cost of energy from wind essential in the success of commercial
power can result from improvements per wind power. This research is largely
kW of capacity in one of three areas: consistent with this earlier hypothesis and
decreased capital costs, decreased O&M also finds that spillovers became even
costs, or improved annual energy capture more important in the wind industry from
[12]. 1999 to 2005.
3. Sources of innovation One of the most significant wind
Wind power has benefited significantly technologies to advance from 1999 to
from adapting technology and innovations 2005 was the variable speed wind turbine
that were researched and developed enabled by power electronics. As shown
outside of the wind energy field. These in Table 1, spillovers and adaptation
borrowed innovations, or technology played an essential role for these
spillovers, allow the user to reap the technologies. Variable speed wind
benefits of a new technology without the turbines with partial frequency conversion
full cost of development1. Many initial became the dominant wind turbine by
product spillover technologies in wind annual sales in 2001 [22].
power included components of motors The traditional design of allowing the
and generators commonly available off- wind turbine rotor to only operate at a
the-shelf during the early development of constant speed and fixed frequency, limits
the modern wind turbines in the 1970s operation to a very narrow range of wind
and 1980s. These included gearboxes, ball speeds. By allowing the rotor speed to
bearings, and automotive brakes [20]. The vary with wind speed on a variable speed
evolution of modern wind power occurred turbine, the optimum tip speed/wind
concurrently with vast improvements and speed ratio for maximum efficiency can
advancements in computing and be maintained across a distribution of
communications power, power wind speeds, yielding greater energy
electronics, aerodynamics, materials output. Traditional wind turbines
without power electronics for frequency
1
Although the technology is developed in other conversion utilized capacitor banks to
industries, R&D for adaptation is often required reduce the reactive power consumed and
for beneficial use in the borrowing industry. See had limited controllability [23].
Loiter and Norberg-Bohm (1999).

C.T. Samaras │ Learning from wind: A framework for effective low-carbon energy diffusion 3
Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.edu/electricity

Table 1: Spillover technologies into the wind industry and their effects
Spillover into Wind Industry Original Industry Reduces Reduces Increases Annual
Capital Cost O&M Cost Energy Production
Megawatt power electronics Traction power, utilities Ùl Ùl

Variable speed drives AC motor control Ùl Ùl

Advanced blade manufacturing Boatbuilding, aerospace Ùl Ùl Ùl

Direct drive generator Low-speed hydropower Ùl Ùl

Sources: [1, 10, 24]

Wind turbines utilizing power electronics can of power electronics.

produce real and reactive power up to the full
range of its operating capacity resulting in 4. Public policies and Institutional
smooth power with low distortions - making Framework
wind more appealing to grid operators. Because the production price of wind power
Although wind power supplies less than 1 was not historically competitive with
percent of total U.S. electricity generation, as traditional fossil fuel electricity generation,
wind power installations increase and reach policymakers sought to internalize the
higher penetration levels, utilities, system positive externalities of renewable energy
operators, and manufacturers have become through public initiatives. Policies designed
concerned with smooth integration and to promote wind power adoption are
improving the power quality of wind described, for example, in Bird et al. (2005),
generated electricity [12]. The Electric Power European Commission (2005) and
Research Institute (EPRI, 2004) contends that Patlitzianas et al. (2005) [25-27]. These
high power quality of wind power is essential policies primarily seek to use fiscal incentives
for continued adoption and grid penetration. and subsidies to narrow the renewable energy
This is especially true for weak grids, remote premium, or mandate a specified quantity of
areas, and areas without adequate renewable energy be purchased. As
transmission capacity, which often, as in the structured, these policies assume
case of the upper U.S. Midwest, possess some technological learning and advancement in
of the best wind resources and represent wind power to be endogenous, and will occur
significant opportunities for future growth as adoption rates increase. Where existing
[12]. Design of wind turbines has shifted in policies are deficient is nurturing and
response to the demand for cleaner power capturing exogenous change in the low-
away from cheaper, simpler fixed speed carbon energy sector, which have been found
machines, toward variable speed machines to play a major role in wind energy adoption.
with power electronic converters. The grid Policy is often designed with technology
benefits of variable speed drives have been a viewed as a “black-box”. Outcomes are
major factor in utility acceptance on a large projected from known inputs without
scale. Hence, their development, coupled adequate knowledge of intermediate paths or
with the adaptation of high power electronics processes [28]. To encourage wider adoption
were essential to wind’s success, and of low-carbon energy sources, the policy
potential higher levels of grid penetration in design and technology program development
the future. The interaction between the frameworks require substantial integration.
electricity grid and other intermittent or This will allow designers and end-users to
distributed low-carbon energy sources would identify near- and long-term technology
also benefit from increased development barriers and policymakers to invest the

C.T. Samaras │ Learning from wind: A framework for effective low-carbon energy diffusion 4
Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.edu/electricity

Policymakers and Institutions: Identify common and critical technical barriers and
construct diversified R&D portfolio designed to leverage spillovers

Agencies,
Industry, and Wind Designers Solar Designers Other low-
public/private and End-Users and End-Users carbon
partnerships: technologies
Conduct R&D on
spillover Identify barriers Identify barriers ...
technologies and
diffuse across
low-carbon Conduct R&D Conduct R&D ...
technologies

Adapt spillovers Adapt spillovers ...

Improve technology/lower cost Improve technology/lower cost ...
Outcome Goal: Reduce common technological barriers, encourage technology spillovers
and feedback, enable wider low carbon energy diffusion and adoption

Figure 3: Institutional framework for leveraging spillovers and encouraging low-carbon energy diffusion

necessary resources to remove these these types of critical technical barriers.

obstacles. R&D in renewable energy Continuous cost and performance
technology is often technology-specific, even improvements in power electronics will not
though spillovers such as power electronics only contribute to cost declines in wind
can encourage renewable adoption across power, these improvements are essential for
several technologies. An institutional intermittent and distributed resources to
framework for leveraging spillovers in low- become a serious player in utility-scale
carbon energy is shown in Figure 3. electricity generation.
The electricity generation sector is becoming
5. Discussion
increasingly dependent on high power
The importance of inter-industry spillovers electronics, information technology, and data
has become vastly more significant over the analysis. If exogenous emerging or existing
past several years as wider wind power technologies, at a lower cost and/or higher
adoption occurred. For example, the performance rating, would significantly
borrowed technology of variable speed drives increase the probability of wider low-carbon
and power electronics has removed some of energy adoption, then policy should be
the largest barriers to large-scale wind power designed to create inter-industry spillovers
penetration - the demand by utilities for clean from R&D and manufacturing in these
power, little or no reactive power sectors. Low-carbon energy policy should
consumption, and recently the ability to take a systems approach, leveraging
produce reactive power and to ride through investments and policies across
system faults. An OECD/IEA (2005) report interdependent industries to create feedback,
stated a lag has occurred between the innovation, and diffusion.
adaptability of electricity grids to
accommodate intermittent resources and the 6. Acknowledgements
exponential growth of installed wind power The author acknowledges the thoughtful
[29]. Spillover technology developments comments and suggestions of M. Granger
from other industries, such as power Morgan. This research was made possible
electronics, possess the potential to address through support from the Climate Decision
C.T. Samaras │ Learning from wind: A framework for effective low-carbon energy diffusion 5
Carnegie Mellon Electricity Industry Center Working Paper CEIC-06-05 www.cmu.edu/electricity

Making Center. This Center has been created European Wind Energy Association, 2006.
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