The Role of Institutions in the Implementation of Wind Energy

Given the threat of climate change, the 2010 Deepwater Horizon oil spill, volatile natural gas prices, and unrest in the Middle East, implementing clean alternative energies is urgently needed. What drives the adoption of these energies, however, has yet to be fully determined. Neoclassical economists suggest that implementation would be accelerated by reducing regulations and establishing free markets, in which resource scarcity would drive deployment. Others argue that technology propels alternative energy use. North (1990) maintains that markets lead to institutional changes as firms and politically motivated interests induce changes in institutional structures (see also Sened, 1997). What then are the roles of resource availability, technology, and institutions in driving alternative energy utilization? We examine this question by focusing on wind, thereby avoiding controversies surrounding other alternative energies, such as the extent to which they are “clean” and the costs associated with their large-scale production, for there is a consensus that wind is clean and economically viable. We analyze the role of institutions in wind power implementation, comparing its adoption in Minnesota and Texas and then broadening our perspective with a global comparison among Spain, Germany, and the United States. In accord with North (1981, 1990), we maintain that market forces are not the only, or the most important, determinants of wind’s performance. Rather, the institutions that govern and regulate wind implementation have a very large impact.