Renewable Energy 66 (2014) 140e149

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Renewable Energy
journal homepage: www.elsevier.com/locate/renene

The role of sources of finance on the development of wind technology

Teodora Diana Corsatea a, *, Sergio Giaccaria b,1, Roberto Lacal Arántegui a, 2
a
Energy Systems Evaluation Unit, JRC e Institute for Energy and Transport, European Commission, PO Box 2, NL-1755 ZG Petten, The Netherlands
b
Energy Security Unit, JRC e Institute for Energy and Transport, European Commission, PO Box 2, NL-1755 ZG Petten, The Netherlands

a r t i c l e i n f o a b s t r a c t

Article history: This paper contributes to the debate on the competitiveness and maturity of wind technology by carrying
Received 5 April 2013 out an analysis on research investments and sales of a panel of 10 wind manufacturers over the period
Accepted 25 November 2013 2002e2011, examining the extent to which public and private funding affect the competitiveness of
Available online
these wind corporations. A group of major manufacturers of wind turbines with production in 2006
totaling more than 70% of the global supplied capacities is considered a representative cluster of green
JEL classification:
innovative industry for this study. Public support for research, development and demonstration (RD&D),
O31
incentives for the production of wind energy and access to credit are the three main sources of finance
G32
G38
addressed herein. Corporate debt is the primary factor supporting both wind technology research in-
Q42 vestment and sales of wind turbines, whereas other sources of finance play a limited role. The reduction
Q48 in that source of finance has important repercussions for the development of wind energy. The econo-
Q55 metric analysis suggests that regulatory risks play a key role for the development of wind technology,
even stronger than the financial risk. Thee former originate in unexpected decisions to stop subsidies
Keywords:
(e.g. deployment ones), whereas the latter arise from restrictive access to credit.
Wind energy
Finance
Ó 2013 Elsevier Ltd. All rights reserved.
Governmental policy
Research and development

1. Introduction Public support to technology development has been extensively

This article investigates the role of different sources of public
and private finance that support the development renewable en-
ergy technology, focusing on wind energy. These sources refer to a
combination of technology push policies, such as public research,
development and demonstration (RD&D) investment, and market
pull policies, such as deployment subsidies and feed-in tariffs. The
access to credit from financial institutions, as judged by the level of
corporate debt, is also considered as significant support mecha-
nism. The weight of the latter item is expected to increase in
particular for offshore wind, as the risks of the technology decrease
with maturity.
* Corresponding author. Tel.: þ31 224 56 5024.
E-mail addresses: teodora.corsatea@ec.europa.eu (T.D. Corsatea), sergio.
giaccaria@ec.europa.eu (S. Giaccaria), roberto.lacal-arantegui@ec.europa.eu (R.
L. Arántegui).
1
Tel.: þ31 224 56 5325.
2
Tel.: þ31 224 565390.
3 fundamentally support the funding of research upstream in the
International Energy Agency (IEA) RD&D Statistics, Data services, Detailed
country RD&D budgets, consulted November 2012, http://wds.iea.org/WDS/
Common/Login/login.aspx.
researched [1e3] and proved to trigger clean energy innovation.
According to the International Energy Agency statistics,3 invest-
ment supporting research, development and demonstration activ-
ities in wind technology (RD&D) in European Union Member States
have more than doubled in the last ten years, growing from V 60.11
million spent in 2001 to V 174.53 million in 2010. Many member
states have intensified their support for research, seeking to sup-
port private RD&D investment, which is suboptimal in the presence
of environmental and technological market failures [4]. Environ-
mental support schemes could therefore complement and rein-
force private investment, acting also as a driver of patenting [1].
Other public instruments, such as public loans, have also been
demonstrated to be effective sources of financing for the deploy-
ment of renewable energy [2].
Wind energy technology has matured and has shown the po-
tential to compete on the cost of generation with some fossil fuel
technologies and most other renewable energy technologies. The
presence of policy stimuli for energy production is found to be a
further driver of technological progress [1]. Our intuition is that
alternative sources of finance, complementing public subsidies,
wind energy supply chain. According to Kalamova et al. [3], the
companies playing a key role in the development and stabilization

0960-1481/$ e see front matter Ó 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.renene.2013.11.063
 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
of the clean energy market, are large multinational corporations.
The companies taken into account in this study, namely Nordex,
Vergnet, Siemens, Vestas, Acciona, Alstom, Gamesa, Enercon, REpower
and Areva, reveal a large extent of the recent evolution of the wind
industry. In 2006, seven of these companies were listed among the
global top-10 wind technology manufacturers [5,6]. Due to
increasing international competition, only five of them remained
in the global top-10 in 2011. However, they remain important
stakeholders in the wind energy industry because their research
accounts for 76% of European research investment [7]. Large Eu-
ropean wind companies register a non-negligible research
investment-to-sales ratio of 2.87% [7], enjoy easier access to
finance, and subsequently are expected to contribute significantly
to the evolution of the wind energy industry. In the upstream of
wind energy technology the term debt is here used referring to all
the sources of finance other than equity, included in the current
and non-current liabilities present on the balance sheet of the
technology suppliers. In the downstream of wind energy sector,
other types of debt such as non-recourse project debt have been
identified as key sources for wind deployment. As such, [8e10]
report that between 50 and 80% of the investment needs of
wind deployment rely on debt (at an interest rate of approxi-
mately 6e9%) [3]. Wind projects are mainly financed through debt
[11], because debt service costs tend to be lower than equity
payments [12].
Third-party finance availability is a function of the uncertainty
with regard to the market potential of the technology, which is
influenced by the (perceived) maturity of the technology [13]. The
more mature the technology, the lower the level of financial risk
associated with that technology will be. Moreover, uncertainty
regarding the market potential of wind energy technology depends
on the design of the public intervention. For example, a strong
environmental governmental policy targeting the increased
deployment of wind technology indirectly reduces the financial
risk associated with wind technology [14] and results in higher
availability of cheaper debt for the more established (mature)
technologies. Thus, these interdependencies between public
intervention and private finance affect the cost of financing wind
technology. Finally, risks associated with wind technology which
can arise from technology maturity, public intervention or the level
of private finance available mark out the level of diffusion of the
technology [15] and the level of RD&D investments in wind
technology.
To distinguish the types of risk associated with wind technology,
a panel analysis from 2002 to 2011 has been conducted. Recent
econometric studies on innovation processes in renewable energy
[1,16] make use of panel analysis at the country level, exploring the
relationship between innovation patterns and financial resources.
Moreover, country level studies [17] explore the presence of envi-
ronmental policy spillovers upon innovation patterns. Building on
this stream of literature, this analysis focuses instead on a firm-
level perspective. The adoption of such a level of analysis is an
element of originality that fits the purpose of investigating the
contribution of financial and institutional (domestic and foreign)
players as key determinants of the performance of multinational
economic entities. The paper examines the role of three different
sources of finance, as determinants of the innovation and produc-
tion activities of wind turbine manufacturers: (i) the private
research investment; (ii) reimbursable private loans to private en-
tities (banks or other creditors) and (iii) non reimbursable public
subsidies (e.g. for RD&D) and energy and climate change deploy-
ment policies (e.g. financial incentives for electricity production).
The paper is organized as follows. Section 2 reviews the main
sources of finance that accompany each stage of the wind tech-
nology life cycle. Section 3 presents the data and Section 4 provides
141
an overview of the research activities and sales of European wind
turbine manufacturers. Section 5 estimates the contribution of the
three sources of finance to the research and sales of wind tech-
nology. Section 6 presents the consequences of reduced finance
availability and discusses the risks emerging from these limitations.
Finally, Section 7 concludes the paper.
2. Review of sources of finance by technology life cycle
The mobilization of private funds in the early stages of a tech-
nology life cycle is challenged by the uncertainty related to the
market potential of the new technology [18]. Accordingly, private
funding is lower in the early stages and increases in the final stages
of the innovation process, when the technology is closer to market.
Complementary public funding is therefore needed, and varying
along the life cycle of the wind technology.
Public funding represents an important driver of the early stages
of the innovation process [19,20] and accompanies private initia-
tives through the demonstration stage, also called the “valley of
death”. National or laboratory funding and additional grants are set
in place to address the high risk of the level of future revenue from
these innovative activities, which discourages private R&D initia-
tives. Among the variety of policy instruments, subsidies specif-
ically aimed at research, development and demonstration act as
primary support for renewable energy patenting [1]. In addition to
subsidies, public loans, equity investment, prizes and tax credits
stimulate innovation processes [2]. In the later stage of market
diffusion, public policy instruments, such as feed-in tariffs act as
drivers of innovation and diffusion processes for wind technology
[21,22]. Deployment subsidies are more abundant than public
RD&D support for wind technology. Based on conservative esti-
mates, Laleman and Albrecht [23] point out that for every Euro
spent on future technologies RD&D additional V35e41 are spent on
the deployment of existing technologies. This imbalance is esti-
mated to increase three fold by 2020 if current RD&D budgets
remain unchanged [23]. The amount/type of public intervention
should be carefully weighted, as an over stimulation of a specific
technology potentially limits the development of other renewable
technologies, as public money availability is limited. Additionally,
public support for innovation should complement rather than
replace private investments; publicly-conducted innovation reveals
to be cost inefficient compared to privately conducted innovation
which turns out to register a higher rate of success [2].
In the early stage of the innovation process, private research
investments focus on market needs, such as those triggered by
globalization and the expansion in new markets [19]. Accordingly,
companies introduce products and process innovations rather than
new technologies, which, in most of cases, constitute customer-
driven market development [19,20]. However, the more mature a
wind technology is, the smaller the risk associated with it, the
smaller the uncertainty related to market revenues from its
exploitation, and the greater the research commitment in further
developing the technology will be (see Fig. 1).
The proportion of revenues that can be invested in a technology,
which is approximately 2% [23], determines the slope of the
learning curve [24] and consequently the diffusion of the technol-
ogy. Through learning effects, wind turbine manufacturers can
reduce the cost of energy to ensure that wind technology can be
competitive with traditional sources of energy [6]. As a result, they
also get involved in the validation of the technology which con-
stitutes early-stage research. Such a commitment would enhance
the limited role that has been attributed by earlier studies [19] to
private funding in the early stages of the innovation process.
As the level of uncertainty decreases, the financial institutions
increase their investment in wind technology research.
142 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
Fig. 1. Sources of financing wind technology by stages of technology development.
Inspired from Refs. [3,19,20].
Traditionally, private loans are not able to trigger innovation in
renewable energy sources if the public sector is better informed
about the risks associated with innovation activities [2]. As
mentioned above, these financial institutions seek to reduce their
financial risks and thus they tend to invest in close-to-market
technologies, able to produce market revenues already in the
short-to-medium term [2]. “Banks will always be the first in line to
finance your second project” [25]. Banks are reluctant to make large
investments in technologies that have not passed both the tech-
nological and commercialization phase.
Financial institutions can overcome the lack of important in-
formation for risk assessment of both debt and equity investment
by considering the relative knowledge of the firm and its previous
borrowing history. In general, in the case that little is known about
the market potential of a technology, the size of the innovating
entity is taken into account for the use of loans [26e28]. For
example, in the case of a large multi-technological company, the
size and the reputation of the firm could represent a guarantee of
good investment. More difficult is the situation where little is
known about the technology and the firm asking for private loans.
In this case, access to private finance is facilitated through collat-
eralized loans to secure debt [29]. However, long-term relationship
with a bank can reduce the need for collaterals [30,31]: the prob-
ability of collateral being pledged decreases from 53 to 37 percent
every 10 years of a bank-borrower relationship. Finally, a bank-
borrower relationship could ease access to private loans, the
contribution of which are important in the early and final stages of
wind technology development (see Fig. 1).
The level of risk associated with the economics of wind energy is
reflected in lower gearing ratios and shorter lending periods [32].
Such was triggered by the recent financial and economic crisis of
2007, which affected the
“.traditional modes of corporate financing, such as commercial
paper, bond placements, bank loans, and secondary equity issu-
ance. In such an environment, soon-to-mature debt can effectively
reduce corporate investment, as firms find it difficult to substitute
across alternative funding sources, while at the same time trying to
avoid defaulting on their debt payments” [33, p. 7].
Studying the effect of the 2007 crisis, Almeida et al. [33] find that
firms reduced their investments on average by 5.6%. Similar cau-
sality is studied by Duchin et al. [34] who compare corporate in-
vestments before and after the crisis as a function of their internal
financial resources (cash reserves and net debt), their external
financing constraints and dependence on external finance. The
latter assessment finds that the unconditional mean of corporate
investments decreases by 6.4% following the onset of the crisis. Due
to a shift in the supply of credit, the latest financial constraints had
important repercussions on the corporate activities.
Additionally, the design of the public intervention, targeting
wind deployment could reduce the risk associated with this tech-
nology, which is finally reflected in capacity to rely on debt [14].
In brief, the presence of public subsidies is fundamental in the
valley of death of technology, acting as a complement to corporate
investments. Moreover, private investment is unlikely to increase in
the future in the same proportion as public funds, and the financing
gap should impose greater pressure, especially for public invest-
ment [2]. Better access to finance could support and stimulate
corporate initiatives and determine their future rhythm. Finally, a
strong relationship between corporations and financial institutions
could enhance and endorse the development of wind technology.
3. Data considerations
Some of the companies involved in the manufacturing of wind
technology are listed on the stock markets and publish their annual
reports and financial statements. For this research, the level of
supplied capacities (MW), which of crucial importance for under-
standing the evolution of the European wind industry, is collected
from Eurobarometers and annual reports. In addition, detailed in-
formation about their wind sales and the level of debt is provided
by Amadeus database,4 in which the level of debt includes non-
current and current liabilities: the long-term debt, current loans
and creditors. For specific multinational, multi-technology com-
panies (i.e. Siemens and Alstom) the data pertaining to sales and
the level of debt are collected from the balance sheet of the sub-
sidiary that concentrates the majority of production and research
activities in wind technology.5
Some of the firms are involved only in the development of wind
power technologies (Nordex, Vergnet, Vestas, Gamesa, Enercon and
REpower). Other companies in the sample (such as Siemens, Alstom
and Areva) are involved in the development of several technologies,
from energy technologies to home appliances. When reporting the
level of research investment, the total RD&D amount is not speci-
fied by technological field. This missing breakdown by technology
constitutes a major challenge in assessing the level of research in-
vestment for multi-technological companies [35]. Alternatively to
Wiesenthal et al. [35], a variable measuring wind corporate
research investment has been specified as follows:
4
Bureau Van Dijk, Amadeus database accessed from University of Amsterdam,
https://amadeus.bvdinfo.com/version-2013910/home.serv?product¼amadeusneo.
5
The subsidiaries in question are the former Bonus Energy A/S for Siemens and
former Spanish Ecotecnia for Alstom. For Enercon, a pure wind company, data was
not available and therefore we recovered the information from its mother company
UEE Holdings.
 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
Patents_windi;tþ1
Corporate_R&Dit ¼ *Research_budgetit ;
Total_Patentsi;tþ1
(1)
where i is the innovating entity and t is time. Formula (1) expresses
the research commitment at time t, where a lead-lag structure of
the variable accounts for the delay between the occurrence of the
research and the filling of the patent application. For the scope of
the analysis, patent applications from the WIPO e World Intellec-
tual Property Organization are used.
Public funding reflects the specific research investments of the
European member states which are available from the IEA RD&D
statistics database.
The role of public subsidies for wind deployment has been
approximated by the wind installed capacities in Europe, the
United States and Asia. Data was recovered from Wind turbines and
wind farm database.6
4. Description of data: evolution of wind companies
performance
The industrial strategies of the main wind companies and their
economic performance are supported through research efforts and
favorable business conditions (easier access to credit). Much of the
research of these companies is performed in-house, is character-
ized by intensive patenting activities and ‘technology races’ that
push the frontier of knowledge production. This research aims at
enhancing product variety, e.g. adapting technologies to different
natural contexts, and at improving the efficiency of existing tur-
bines, with expected results in terms of cost reduction and higher
energy production efficiencies. To achieve the social objective of
the reduction of greenhouse gases, the research capacities of wind
turbine manufacturers are likely to play an important role in wind
deployment: local market and natural endowments may affect both
the level of renewable energy production [36,37] and the related
innovation patterns [38]. An example of adaptation to the local
context are the wind turbines invented and produced in Denmark
that need to be adapted to the local wind intensity and variability
when installed in other countries [38]. Because wind power output
is proportional to the cube of wind speed, the adoption of tradi-
tional European turbines in new markets would have been a failure
if technology were not adapted to account for the lower intensity of
winds [38]. Companies’ strategic adjustments are reflected in re-
considerations about the direction of research and technological
improvements in new markets. Because 75% of world winds are low
speed, wind manufacturers were likely to redirect their research
efforts to enter new markets. New solutions include seeking larger
rotor diameters that make wind machines more efficient by
increasing the area “swept” by the turbine, and consequently
increasing the power output: for example, Vestas introduced a rotor
diameter of 112 m and Gamesa introduced a rotor diameter of
114 m. The recent trends of research in wind technology [39] also
accommodate the lower wind speeds areas that are present in the
United States, China and Central and Southern Europe.
Market size and market dynamics are able to stimulate the
innovation activities of wind manufacturers and the regional dis-
tribution of their research and development investment. Proxied in
the analysis by installed capacities, European low-carbon energy
deployment policies have been able to stimulate private research
efforts in wind technology: the correlation coefficient between
6
The wind power, Wind turbines and wind farm database, accessed September
2012 http://www.thewindpower.net/statistics_countries_en.php.
143
corporate research investment in wind technology and European
countries installed capacities is 0.42. Regarding market dynamics,
the increase in installed capacities in China has had an inducement
effect on the innovation activities of companies, with the correla-
tion coefficients between the number of patent applications and
installed capacities varying between 0.5 and 0.6. For example, from
2005 and 2010 Vestas invested V 2.3 bn, focusing especially in its
two largest markets, the USA and China. In addition, a significant
amounts of capital expenditures (V 579 million) in the energy
sectors (including wind) has allowed Siemens to seek the expansion
in those strategic markets. The bundle of intertwined environ-
mental and market conditions seems to direct large manufacturers
toward the delocalization of research facilities, as is the case of the
Asian research centers of Vestas and Gamesa.
Despite increasing their investments to assure penetration into
new competitive markets, wind turbine sales of the sampled
manufacturers have slowed in recent years (Fig. 2). Fig. 2 displays
an S shaped curve of wind technology sales, both in physical (MW)
and monetary terms (V). Beyond the financial crisis, European wind
turbine manufacturers faced increased competition from Asian
companies. In 2006, Europe accounted for 65% of the global
installed wind capacity, a share that decreased to 41% in 2011 (see
Appendix A.1a and A.1.b). A declining trend it is also observable in
the sales of the analyzed wind companies: their cumulative share
in the worldwide supplied capacity (MW) declined from 77% in
2006 to only 40% in 2010.
An examination of companies’ liabilities reflects stabilization of
the debt ratio7 (Fig. 3a) accompanied by growth in the total debt
(Fig. 3b). Most of the observed companies increased their use of
currents liabilities, featuring shorter lending periods. The support
of creditors and financial institutions for the wind energy sector is
significant and continuously increasing (Fig. 3a and b), as reflected
by the cumulative increase in the total debt of the corporations in
this study.
The main characteristic of financing wind energy is based on the
risk profile of the company as a whole. With a lower risk profile,
multinational companies enjoy access to cheap capital and invest in
renewable energy technologies [3]. For wind energy manufac-
turers, the level of debt has increased since 2003 (see Fig. 3).
However, private wind energy research investments clearly
increased from 2002 to 2011. The evolution of their research and
development expenditure displays an annual average increase of V
90 million, a trend mainly attributed to Vestas (with an annual in-
crease of V 51 million). Pure wind companies8 that disclose their
research investments have displayed increases in their research
budgets and in their wind patent applications. From 2002 to 2011
the declining ratio of patents per millions of Euro of R&D in-
vestments (from 6 to 0.54) confirms the presence of diminishing
returns for research investments.
Public support is needed to reinforce private initiatives in wind
technology. Within the European Union, over the last ten years, a
significant increase in the public commitment toward the devel-
opment of wind technology can be observed (Fig. 3): from 2002 to
2011, public European wind RD&D investments rose by an annual
average of V 10.4 million, reaching V 0.174 billion in 2010 [7]. In-
vestments are higher in Denmark, the United Kingdom, Norway
and the Netherlands (Fig. 4).
7
The debt ratio is defined as current and non-current liabilities over the total of
shareholder funds and liabilities. Due to data availability, access to credit is proxied
by the total debt, which includes long-term debt as well as current loans.
8
The subsequent analysis is done only for pure wind companies which display
their R&D, and not for companies for which the wind R&D has been calculated
using the wind patent share.
144 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
Fig. 2. Evolution of performance supplied capacities (MW) versus turnover (millions of euro) in wind technology from 2002 to 2010 for main European turbine manufacturers.
Although public RD&D investment barely represents 15e20% of
private research investments, national subsidies have played an
important support role for private initiatives. For example, despite
the intense strategy of globalization, the Danish company Vestas
remains very sensitive to the European subsidy programs: the
correlation coefficient between its wind patent application and
European RD&D is 0.99. The patenting activity of the other Euro-
pean wind manufacturers is still highly correlated with the
magnitude of European RD&D programs (between 0.75 and 1),
higher than to Asian and American programs.
5. Model specification and results
With respect to research activities, the econometric strategy
rests on a panel analysis of 10 wind manufacturers over the period
2002e2011. The theoretical framework rest upon the concept of
knowledge production function (equation (2)), where the level of
innovation (measured as patents or research and development
expenditure) depends on the level of public subsidies for research
and deployment and on the access to private finance. Installed
capacity is commonly considered as a proxy for the public subsid-
ization of wind electricity production in the literature. Its aim is to
understand the extent to which private research efforts explained
in terms of input (research and development expenditure) or
output (wind patent applications at WIPO) are sensitive to the
sources of finance described in Section 3. The methodology has
been previously used by Ref. [1] in analyzing the effect of public
policies in inducing environmental innovations. A linear panel fixed
effect model [40] is used to estimate the following knowledge
production function:
Researchit ¼ b1 Debtit þ b2 RDD_incentivesEurope;t1
þ b3 Growth_Installed_windcapacitiesEurope;t
þ b4 Growth_Installed_windcapacitiesChina;t
þ b5 Growth_Installed_windcapacitiesUS;t þ mi
þ 3it ;
(2)
where i is the innovating entity (wind turbine manufacturer), t
ranges from 2002 to 2011, 3it is an idiosyncratic error, and mi is an
unobserved firm-specific parameter. To take into account the delay
between the allocation of public subsidies for research/deployment
(time t  1) and their impact on corporate research investment
(time t) the variable RDD_incentives has a lagged structure. A fixed
effects approach is used to control for the average differences
across manufacturers, such as unobserved fundamental disparities
 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149 145

Fig. 3. (a) The cumulative level of private R&D investment versus the total debt of major wind manufacturers. (b) Evolution of debt ratio of major wind manufacturers.

in renewable energy innovation patterns. Such a choice is
confirmed by the Hausman test [41], which tests the null hypoth-
esis that the differences in coefficients are not systematic.
A second linear panel fixed effect model estimates the contri-
bution of different sources of finance over the performance of wind
manufacturers in terms of sales of capacities (MW) or turnover (V).
Previously employed by Popp et al. [16], the model estimates the
level of technology diffusion as a function of gross domestic
product (GDP), growth in electricity consumption and the growth
in energy prices. These additional variables do not contribute to the
explanatory power of the model, as they are not found to be sta-
tistically significant. A similar result is also found by Johnstone et al
[1]. Accordingly, the activity of wind manufacturers is not deter-
mined by the evolution of global market conditions (oil prices) but
by the dynamics of specific markets in which support subsidies
have been set in place.

Fig. 4. Evolution of the European members states public RD&D funding from 2002 to 2011.
146 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149

Table 1
Determinants of wind development and deployment for main wind turbine manufacturers. Fixed effects model, linear estimation.

Model A B C D E

Research & development Patents (logged) Sales euros (logged) Supplied MW (logged) Sales euros
(logged) (logged)

R-square 0.67 0.49 0.58 0.73 0.79

Within 0.72 0.49 0.56 0.73 0.52
Between 0.71 0.62 0.68 0.71 0.81
Research & development (logged) e e e e 0.33 [0.14]**
Debt (logged) 1.21 [0.19]*** 1.12 [0.39]*** 0.42 [0.15]*** 0.63 [0.18]*** 0.46 [0.24]**
RD&D in headquarters countries 0.62 [0.36]* 0.69 [0.73]n.s. 0.64 [0.36]* 0.198 [0.48]n.s. e
(DE, DK, ES, FR) (logged)
Growth installed capacities in EU 0.16 [0.23]n.s. 0.21 [0.46]n.s. 0.637 [0.25]** 0.48 [0.36]n.s. 0.56 [0.25]**
Growth installed capacities in China 0.81 [0.25]*** 0.39 [0.49]n.s. 0.60 [0.26]** 0.58 [0.36]* 0.67 [0.25]***
Growth installed capacities in the United States 0.565 [0.56]*** 0.44 [1.0]n.s. 0.64 [0.56]n.s. 1.15 [0.78]n.s. e
Constant 6.47 [0.97]*** 7.48 [1.92]*** 1.18 [0.97]n.s. 1.53 [0.78]n.s. 2.01 [1.18]*
sigma_u 0.86 0.83 1.4 1.12 1.01
sigma_e 0.44 0.79 0.48 0.71 0.41
rho 0.79 0.52 0.90 0.71 0.85

N.B. Standard errors are displayed within brackets. ***, **, *, n.s. denote significance levels of 1%, 5%, 10% or else not significant, sigma_u represents sd of residuals within groups
ui and sigma_e represents sd of residuals (overall error term) ei, ‘rho’ is known as the intraclass correlation.

The second regression is structured as a production function
that explains the output of a firm, expressed in term of sales, as
follows:
Salesit ¼ b6 Debtit þ b7 RDD_incentivesEurope;t1
þ b8 Growth_Installed_windcapacitiesEurope;t
þ b9 Growth_Installed_windcapacitiesChina;t
þ b10 Growth_Installed_windcapacitiesUS;t þ mi þ 3it ;
where i is the wind manufacturer, t ranges from 2002 to 2011, 3it is
an idiosyncratic error, and mi is an unobserved firm-specific
parameter. A lag structure accounts for the delay between the
public subsidies for deployment that have taken place, and its
impact on the sales of wind manufacturers. The public RD&D pro-
grams refer to the EU members states in which the selected com-
panies have their headquarters (Germany, Spain, Denmark and
France).
A final panel data model (4) with sales as the dependent vari-
able, includes the private research and development expenditures
(i and t defined above) among the explanatory variables:
Salesit ¼ b11 Private_researchit þ b12 Debtit
þ b13 RDD_incentivesEurope;t1
þ b14 Growth_Inst_windcapEurope;t
þ b15 Growth_Inst_windcapChina;t
þ b16 Growth_Inst_windcapUS;t þ mi þ 3it ;
The novelty of the present approach, with respect to Refs. [1,16],
lies in the choice of the unit of analysis, the manufacturers whose
research/production activity responds to external context variables
(energy and climate change policies) and access to financial sources
reflecting a firm’s specific strategies. In the presence of a globalized
market, wind technology corporations act on a variety of
geographical areas, capturing different dynamics. The covariates
referring to the growth of the installed capacities in Europe, Asian
and United States captures recent trends in wind market dynamics.
Estimates of equation (2) and (3) are presented in Table 1.
All the models use a typical logelog specification, with a loga-
rithmic transformation of these variables, according to which the
estimated parameters can be interpreted, as a percent variation in
the dependent variable linked to a percent variation in the
explanatory variables.
Within the regression models, debt acts as a main driver for the
research and sales of wind turbines. As described in Section 4, here
is considered the level of total debt recovered from the balance
sheet of the large wind turbine manufacturers. Debt acts as a lever
for research activities: according to the estimated models (A and B
in Table 1) a one percent increase of debt raises private research
investment by 1.21% and the number of patent applications by
1.12%. Furthermore, the leverage effect of the debt of operational
(3) activities and sales increases by 0.42%, and 0.64%, respectively (see
models C and D). Therefore, more active involvement by financial
institutions could not only stimulate economic performance, but
also help reinforce private efforts toward technology development.
Consequently, the level of investments of wind manufacturers de-
pends on their capacity to establish relationships with financial
institutions, and on the ability of banks to develop complementary
activities, e.g. getting involved in developing wind farms.
Our results confirm that public support for research activities
(RD&D programs) is effective in stimulating private research invest-
ment: a 1% increase in public RD&D investment leads to a 0.62% in-
crease in private research investments. Common forms of technology
push policies, such as grants/subsidies for research, are sometimes
accompanied by tax credit programs. The latter represent an effective
form of support that is able to trigger additional innovation for private
investors. The mechanism of deduction of research expenditures from
taxation is present in the countries in which the selected wind
manufacturers are developing their activities. For example, Denmark
(the home country of Vestas and Bonus) allows companies to deduct
research expenditure ex-ante (in certain circumstances) in the year in
(4) which they occur or over a four-year period. France (the home country
of Areva and Vergnet) allows a credit for research expenses (in-house
or outsourced, patent filing and patent protection) that can become
refundable. Germany is trying to improve state-provided aid for
research investment.9 Technology push measures are less effective in
stimulating patenting behavior, with the coefficients remaining not
significant (Table 1).
Growth of installed capacities is effective in explaining the
turnover of these companies: a 1% increase in the annual European
market leads to a 0.64% increase in their sales. A comparable
9
Tax and Global Guide to R&D Tax Incentives 2011/2012, http://www.taxand.
com/news/publications/Taxand_Global_Guide_to_R_and_D_Tax_Incentives.
 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
contribution to their turnover (0.605%) is determined by the growth
in Asian annual market (Table 1). Such results can be attributed to
the globalization strategies of wind manufacturers. However, the
level of research investment and access to credit are also important
drivers of wind manufacturers’ revenue, as discussed in further
detail in the next section.
6. Discussion of the results: globalization, access to funding
and potential risks
The reduction of public and private funding yields different
risks to the economic performance of wind manufacturers. Oxera
highlights [14] a high level of risk for wind technology associated
with the value of public subsidies, policy variability, public
perception, and a medium level of risk derived from the wholesale
electricity price level and deployment maturity. Other studies [13]
identify the technological and regulatory risks as low, and market
risk as medium for wind technology. To assess the magnitude of
various risks, the results of model 5 sketch specific risks intro-
duced by limitations in various sources of finance (public or pri-
vate). Limitations in early corporate research brings technology
risks, whereas limitations in public support for market deploy-
ment lead to regulatory risks. Limitations in access to credit lay
down financial risks in the economic performance of wind
manufacturers.
Wind technology risks are considerable: a one percent decrease
in corporate research investment diminishes sales by 0.33%, with
significant consequences on their competiveness. The technology
risk could be reduced through the diversification of products/ac-
tivities and the exploration of new business/market opportunities.
As the expansion into new markets is not free of risk, strategic al-
liances enable the development of large production capacities and
the realization of economies of scale. In addition, wind turbine
manufacturers show a growing tendency to cover the needs of large
customers. For example, large wind developers (EDF, E.ON and
DONG Energy) have signed strategic alliances with wind turbine
manufacturers (Vestas and Siemens).
Furthermore, power-purchase agreements are influenced by
unexpected policy changes (regulatory risk), which discourage the
diffusion of wind technology. An uncertain policy also affects the
level of investments in RD&D [42]. The transparency, predictability
and longevity of government programs represent keys for success in
the development and deployment of renewable energy [42]. The
present results note how a one percent decrease in the growth rate of
European installed capacities diminishes the wind turbine sales by
0.56%. Therefore, the predictability, reliability and longevity of
environmental policies determine firm revenue streams, and have
an important effect on investment decisions of wind manufacturers.
Responding to the phasing out of subsidies (e.g. in Germany) and
other stated changes in the European programs (e.g. in Denmark),
wind turbine manufacturers envisage their expansion in Eastern
Europe and toward India, Brazil and Egypt. The dynamics of the wind
market is partially captured in the results, as a one percent increase
in the growth of installed capacities in China increases wind turbine
sales by 0.67%. The interplay of European and foreign policies affects
the operational efficiency of wind manufacturers, with a potential
delocalization of investments outside Europe. For example, in the
last 5 years, Vestas has delocalized 25% of its research capacity
including a decrease in European researchers by 33% and an increase
in researchers in America (up to 24.25%), and in China (up to 8.9%).
Initially described as a sales strategy, meaning a greater proximity to
their clients, this process has triggered an intense relocation which
has important consequences for wind development.
Finally, financial risk is derived from limitations in the wind
manufacturers’ reliance on debt. A one percent decrease in the level
147
of debt of these companies diminishes by 0.46% their sales on
markets (model E). Such limitation might arise in periods of na-
tional (global) financial constriction or in the presence of specific/
targeted public policies. For example, government policy to support
nuclear energy might limit the development of renewable tech-
nologies. By affecting the level of risk perceptions related to wind
technology, this policies would influence the effort of raising capital
and render the process more costly. Statistically, such an argument
is not far from the reality: at the level of European member states
the correlation coefficient between RD&D investment in nuclear
and wind technologies in the EU Member States is 0.08. Therefore,
countries that invest in wind technology register a low share in
nuclear RD&D investment and vice versa [7]. A policy change which
increases the level of risk associated with wind technology (for
example causing a decrease in the returns of wind manufacturers
through the stop of the Production Tax Credit in the US) could
indirectly hamper also the access to private funding (banks), and
lower the resilience of wind manufacturers in financing their ac-
tivities through debt.
Summarizing all these limitations, regulatory changes have
greater consequences than corporate strategy and financial context
(model E) in wind energy development. As different governmental
policies affect the level of risk perception in the market potential of
the technology, private players (firms and banks) adjust their in-
vestment decisions. Corporations would likely explore new mar-
kets and financial institutions support other technologies.
7. Conclusions
In the current economic context, European Union member states
plan significant budget adjustments, having important consequences
toward the allocation of scarcer public funds to the wind industry. On
the private side, increased risk perceptions associated with changes in
governmental policies for the deployment of renewable energy, as
well as more restrictive access to private loans could limit the access to
private funds. Consequently, manufacturers face increased pressure
in assuring funding needs for the development of a technology.
The present analysis identifies public subsidies as a main driver
for the development wind technology, with significant regulatory
risks over the economic performance of wind manufacturers.
Tightly related with predictability and the longevity of public pol-
icies, access to private credit seems to concern the entire life cycle
of the technology. Contrary to the well-established belief that the
public support is specific to the early stage of the innovation pro-
cess, and based on the level of risk perception that governmental
policies induce, these results indicate that public policies affect all
stages of the life cycle of wind technology. Moreover, companies’
debt acts as a lever for operational and research activities of wind
manufacturers. This result seems important in the context of new
solution to fill financial gap for renewable energy sources. There-
fore, the mixing of public and private investment, as enhanced by
favorable loans from banks, could determine the future evolution of
the development of wind technology.
Disclaimer
The views expressed in this paper are purely those of the writers
and may not in any circumstances be regarded as stating an official
position of the European Commission.
Acknowledgments
The authors are particularly grateful to Evangelos Tzimas (JRC-
Petten) for his helpful comments on the paper. We thank two
anonymous reviewers for their valuable suggestions on the paper.
148 T.D. Corsatea et al. / Renewable Energy 66 (2014) 140e149
Appendix
Fig A.1(a). Level of installed capacities for European, Asian and American markets from 2002 to 2011 (b). Growth rate of installed capacities from 2002 to 2011 by region.
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