Institutional Constellations and Policy Instruments for Offshore Wind Power Around the North Sea

Abstract

This paper analyses how institutional constellations and their associated mode of risk allocation were reflected in the choice of policy instruments for the promotion of offshore wind power in Denmark, the United Kingdom, Germany and the Netherlands between 1990 and 2020. New technologies like offshore wind require large capital investments, exposed to a higher-than-average downside risk and an uncertain market upside. Research confirms that investment risk is of key importance in policy instruments ([Polzin et al(2019)], [Egli(2020)], [Dukan&Kitzing(2021)]) but it doesn’t address whether the national choice of policy instruments and risk sharing patterns between government and project developers is random or if this choice is guided by certain existing national socio-economic institutions. The qualitative analysis in this paper confirms the existence of matching patterns as history shows that the deployment of offshore wind over time across the four nations is significantly influenced by nations’ institutional constellation. We suggest that the results are not merely of historic interest regarding offshore wind power, but have generic relevance and can therefore also be used to inform future national strategies and policies for deploying new low-carbon technologies, such as electrolysis for green hydrogen, which face similar risks and challenges.

Keywords: Institutions, climate and energy policy, policy instruments, energy transition, offshore wind power