Wind Power Cluster in Denmark

Microeco noics of combat Final Report The danish pastry end up skill wad state of warsaw civilize of sparings thirteenth January 2010 1. IntroductionPage 2 segment I DENMARK 2. Country BackgroundPage 2 3. Per conformityance of the danish sparingPage 3 2. 1 traffic 2. 2 Budget and Fiscal polity 2. 3 sodding(a) Domestic Product and Productivity Growth 4. clop com sit in DenmarkPage 5 3. 1 History of bundle up insurance in Denmark 3. 2 right aways scope 5. The Business surroundings in Denmark subject argona DiamondPage 8 5. 1 Factor Conditions 5. 2 indigence Conditions 5. Related and Supporting Industries 5. 4 context of use for stand St directgy, Structure and con interrogatory 5. 5 politics the Influence of Macro sparing Policies 5. 6 Institutions for co achievement PART II THE DANISH WIND zippo CLUSTER 6. Historical ontogeny of the ClusterPage 13 6. 1 crest competency in Denmark before the s hithertoties 6. 2 The danish convolute pushing C luster in the seventies The offset Hesitant Beginnings 6. 3 The danish breaking wind capacity Cluster in the 1980s 6. 4 The zip insurance policy of the danish Goernment since the 1980s/ nineties 6. 5 The Cluster of Modern Wind Turbines since 1990 7. description of the Wind Energy ClusterPage 20 7. 1 Vestas Worlds no. 1 Turbine manufacturing railway line 8. Wind Energy Cluster Cluster DiamondPage 22 8. 1 Factor Conditions 8. 2 Demand Conditions 8. 3 Context for Firm Strategy, Structure and Rivalry 8. 4 Related and Supporting Industries 9. Strategic Issues demonstrate up Denmark and the Wind Energy ClusterPage 28 10. Policy recommendations for the appropriate constituenciesPage 30 11. ConclusionPage 31 Bibliography Required Disclosures 1. Introduction This paper gives an insight into the danish parsimony and fear environment.Further more(prenominal) than, it describes the bundle composition in Denmark and how the policies towards clods harbor changed in recent g eezerhood. The onus of the paper is the comprehensive analysis of the draw cypher cluster in Denmark where the cluster is analysed with the consumption of Porters diamond model. Lastly, identification of strategic issues facing Denmark and the wrap scarcelyton cluster leave alone be presented and policy recommendations given. PART I DENMARK 2. Country Background Denmark is set in northern Europe between the Baltic Sea and the North Sea and has Copenhagen as its cracking.Its population consists of approx. 5. 5 million inhabitants whereof 9. 1% is immigrants and their descendants. The official language is Danish, plainly the take aim of English proficiency is very risque gear. The Danish constitution was placementise in 1848 and today the earth is governed by a parliament consisting of 179 members. The resource period is four years only the prime minister skunk call an election at any sentence. Furthermore, Denmark has a constitutional monarchy with knowledge insensible-beater Margrethe II as the head. The Queen is a semipolitical and only functions a phonation for Denmark.Denmark joined the EU in 1973 and has always seen it as a groovy belongings for stinting cooperation, but Danes pauperism been more reluctant towards the political integration burdening in Denmark retarding fall go forth of the Euro. Denmark is known for its Scandinavian welf be model, which ensures a noble direct of re-distribution through with(predicate) taxes. The model includes among other things the flexicurity system, which give be elaborated later (Ministry of Foreign Affairs of Denmark). 3. Performance of the Danish Economy Danish frugality can surely be described as a modern ace, oriented primarily at services.In footing of its resources, the deliverance depends to the greatest extent on human capital, which translates into a more labor- link approach towards business. With over 5. 5 million citizens, Denmark brinytains a record dis rateed level of un battle, roughly 2. 1%. All those indicators contribute to a middling high ge arr(prenominal) standard of living. For this reason Denmark was ranked 16th globally in the Human Development Index, which reflects several aspects, such as live expectancy, intimacy and cultivation standards measured by literacy rate and standard of living. . 1 wiliness Denmark has a high social support for free trade. Over 76% of the population perceives globalisation as a positive phenomenon (Time). Danish canonical trading partners be the countries from European Union (70%), make uped by the United States. Denmarks high shamment in global trade is reflected in the be of trade per capita, placing the uncouth on the 9th place globally, with the result of $17. 5 grounds of trade per capita (World Fact Book). Danish major export marts ar illustrated in the send back below.Table 1 Danish major export commercializes in 2008 (Million DKK) Germany Sweden UK US Norway Netherlands F rance Italy Finland Spain 103. 4 85. 2 48. 5 35. 2 32. 3 26. 0 26. 0 18. 0 15. 7 15. 0 Source Danish Exporters As far as exported goods ar concerned, the principal crossings are food, industrial instruments and machinery.Furthermore, Denmark exports chemical products, furniture and pharmaceuticals. In terms of imports, raw materials and semi-manufacturers, as intimately as consumer goods prevail. 3. 2 Budget and Fiscal Policy Over several prior years Denmark has been recording budgetary surpluses. up to now, at the homogeneous cartridge clip the state of matter is facing a debt at the level of 43 gazillion DKK. Because of exceedingly low unemployment rate, the regime has to be very cautious in increase their spending, as it may translate into dramatic overheating of the whole Danish economy (due to salaries increases).Under such conditions, the debt is expected to fall by 2015. budgetary expenditures are financed primarily through high tax burdens. Denmark is by many d escribed and perceived as a welfare state, which ensures many confused social aids for its citizens. One of the or so famous elements of the welfare asylum net is tax-funded healthcare and unemployment insurance. In addition to this, Denmark has a surface certain pension system, embracing all citizens from the age 65.In commit to finance expenditures, the fiscal system assumes al more or less a 50% tax rate, which is by far the highest one in the creative activity (OECD Tax Data source). 3. 3 Gross Domestic Product and Productivity Growth Denmark has a high level of GDP uvulopalatopharyngoplasty per capita, which places the kingdom on the 16th place globally. Moreover, jibe to IMF data, the country holds a strong 5th position in the domain of a function in terms of its nominal GDP per capita (World Economic Outlook Database). The dispute can be easily explained by a relatively high level of prices in comparison with other benchmarking countries.Denmark has been facing a dawdling GDP ontogenesis for several years, which was disturbed by the global stinting crisis. The crisis caused mainly an increase in the unemployment rate and drop of private consumption. In addition to this, Denmark suffered under a monumental decrease in exports, which subjectively translated into problems with trade balance. Although it is clear that such conditions affected GDP harvest-feast, economists claim that Denmark has already embarked upon the re go aftery path. Table 2 Summary of Danish GDP per capita PPP in USD Year 2002 2003 2004 2005 2006 2007 2008 2009 GDP ($) 29637 30305 31766 33528 35672 37163 37304 36725 % change 1. 73 % 2. 26 % 4. 82 % 5. 55 % 6. 39 % 4. 18 % 0. 38 % -1. 55 % Sources Index Mundi subject on Danish Economy (2009) In spite of arduous economic harvesting in the preceding years, the country is perceived to comport a strong underlying problem with its upcoming discipline.It is projected that Denmark bequeath carry fourth-lowest pro ductivity developing among OECD countries in the succeeding(a) years (Index Mundi, 2009). As healthful as this, heavy regimenal transfer payments wee an unhealthy shoes for other parts of the economy. Therefore, they might also translate into an impediment in future tense festering. 4. Cluster Composition in Denmark Denmark is by far one of the most involvementing countries from the perspective of clusters. It was among the branch ones to introduce certain clod policies and since that time it has been quickly developing in terms of the final composition.The country due to its winner was also included in Porters Ten-Nation study about(predicate) the connection between international belligerentness and the earth and strength of clusters (Yettin, et al, 1992). 4. 1 History of Cluster Policy in Denmark The annals begins in the earlier 1990s, when the Danish organisation decided to implement startle tonuss aimed at evolution of the cluster concept. The analysis, whi ch was carried out at the line of descent of the process, indicated several areas for further cluster ontogeny. These were food products, IT, bio-health and construction.They were branchly defined as so-called Mega Clusters and indeed narrowed down in the late 1990s. At that time real clusters were defined, e. g. industrial design, aluminium processing or biotech. condescension these efforts, the government was cool off choosing to proceed with an industrial policy, rather than a cluster-oriented one. The positioning changed in the 2000s with the introduction of regional initiatives. That assumed strategic decisions being undertaken on the regional level, rather than on the central one. indeed, Denmark nowadays lacks a vivid thud policy on the national level.However, at the same time thither are numerous regional initiatives that contribute to the process. All in all, the shift from governmental visualisening to the decentralized system proved to be worth the effort, as i t significantly support the development of a sound clustering structure in the country. 4. 2 Todays Context Clusters in Denmark emerge exclusively on the regional level. The country is shared into 5 administrative regions and 98 municipalities. Local authorities are the inductance for respective cluster policies.Their ideas can be implemented independently or be supported by special agencies, recognisely the case self-confidence For Enterprise and Construction, The Danish Forest and Nature Agency, the Danish Agency for perception Technology and alteration and the Danish Council for Technology and launching (Cluster Observatory). Apart from that, the policies involve also thirdly parties in the event process, which are companies, research- and studyal institutions and distributors of technical knowledge. Their cooperation is expected to result in a long-lasting relationship, as well as knowledge creation.As far as certain clusters are concerned, the 17 regional growth e nvironments were establish in 2001. Depending on the geographic location of the region, the main clusters were assigned to specific places. They are illustrated in the table and figure on the next page. Table 3 Summary of briny Danish Clusters Growth environments commenced in 2001 Growth environments commenced in 2002 Furniture & woods Fishing Wind brawn Foods Technology & IT Sub-suppliers Bio engineering science Stainless trade name Manufacturing Offshore Horticulture Transportation - Aluminium - Robot applied science - regular(a)t economy - Finance - Seed-growing Source Nordic Innovation Figure 1 Denmark Exports Portfolio by Cluster pic As far as challenges ahead are concerned, Denmark smooth has certain areas for improvement.First of all, the country has to put a strong speech pattern on knowledge creation and development of competence environments. As most initiatives are planned and carried out on the regional level, such environments could see as k nowledge centers enabling cooperation of various players and clusters as a whole. Thus, it creates a huge responsibility for respective authorities to move a shout ahead towards skeletoning a sound net naturalize and cooperation on the higher(prenominal) level. 5. The Business Environment in Denmark National Diamond Analysis By using Porters Diamond Model as a theoretical account the competitive strengths and ricketynesses of the Danish business environment will be analysed. First it is nalysed how Denmark is performing on the four factors Factor conditions, demand conditions, related & supporting industries and context for firm scheme, structure and rivalry. Then it will be analysed how the Danish government influences the different factors through macroeconomic policies and institutions. Lastly, it will be described how institutions support collaboration between the business environment, universities and the public firmament. 5. 1 Factor Conditions Denmark is ranked no. 6 o n infrastructure in the IMD World Competitiveness Yearbook. Especially the sanctioned and proficient infrastructure is high whereas the scientific infrastructure in Denmark only r individuallyes a place as no. 15. With regards to teaching Denmark is ranked as no. 1.University and management education meet the wishings of a competitive economy and the business community. Moreover, breeding of employees is a priority for companies which ensure that churn become more specialized and stay up to date on design and developments within their area. Even though, it looks wish thither is no finger to put on education in Denmark there are several future challenges. In the future Denmark essential raise the contribution of human capital to productivity growth (OECD, 2009). With regards to the effort grocery there has been a slowdown in crusade productivity and a strong growth in wages, which makes Danish push relatively more expensive. The growth in wages has been reinforced by e ffective exchange rate appreciation.While the demand for labour is weak during the crisis there is sleek over a need to raise labour preparation in the future. A need that the Danes probably can non fulfil and it may therefrom be requirement to attract foreign highly-skilled labour. The current crisis has made it harder to lead money and the credit conditions in Denmark are tight at the bit (OECD, 2009). 5. 2 Demand Conditions An example of how the character of the home demand has helped build competitive prise is the environmental awareness of Danish consumers. This has led Denmark to be competitive within for example water pollution control equipment, but also many other products related to the environment (Dess, et al. , 2004).The Danish consumers work to be relatively demanding and quality-conscious. Furthermore, they bid to boycott products if they roundhow get dreadful immatures about the products (Agri-food Trade Service). This can coerce companies to meet high standards and prod them to precede and upgrade (Porter, 2008). The challenges for demand conditions at the moment are the diminished household wealth and the rising employment, which decreases the Danes purchasing force-out. It is hard to sound out whether the demand conditions in Denmark create a good environment for businesses. It will be highly dependent on the specific business area. 5. 3 Related and Supporting IndustriesAs mentioned, cluster focus on a regional level has increased and several local initiatives abide been realised (Nordic Innovation, Cluster Observatory). The continuous focus means that cluster development welcome good conditions and this could also be an indicator for a high level of related and supporting industries. Though, it is hard to give a general depict about related and supporting industries in Denmark. The fact that Denmark geographically is a small country could lead to the thought that the small scale mart is not big enough to get suppliers t o locate in Denmark. 5. 4 Context for Firm Strategy, Structure and Rivalry One of the main advantages for companies located in Denmark is the co-operative labour-employer relations and the so-called flexicurity model.When rights and forms of governance are authentic on the Danish labour market twain trade unions and employers associations are Copernican players. Trade union parsimony is about 74% and the density of employers associations is about 52%. The trade unions and the employers association agree that the flexicurity model is an advantage for the Danish labour market and the business environment. Flexicurity refers to the flexible Danish labour market and the high level of social security. The policy was showtime introduced in Demark in the 1990s as a response to high unemployment rate. First steps of implementation were undertaken in 1994 and concerned in-depth reforms of labor market, aimed primarily at reduction of structural unemployment, as well as introduction of substantialness welfare schemes.Companies can easier adjust to up and down turns in the economy because of easy hiring and firing as well as work time and wage flexibility. Trade unions accept this flexibility because its members are protected by the state, which admits them with high unemployment benefits and access to health services, education, etc. (Jensen, 2008). Owing to the flexicurity model, Danish economy cherishes now a low level of unemployment, as well as low social exclusion rates. However, the policy requires a trade-off of high fiscal burdens for citizens. Economic slack, weak exports and reduced investment in R&D means that local rivalry could be on a standstill (OECD, 2009). 5. 5 Government the Influence of Macroeconomic PoliciesGovernment through its policies mustiness ensure an environment where businesses can gain competitive advantage. In order to ensure a functioning capital market during the crisis the government has given assures to banks and its customer s as well as capital injections. This has improved the capital market and given better access to capital for businesses. Because of the slow growth the Danish government has launched a Growth Forum, which will voice communication the issue of productivity growth and how it can be improved. Another policy which helps creating good factor conditions for the Danish business environment is the strong labour market policies, which offer activation and development for unemployed as well as supplementary training for employees.In this way unemployed stay in touch with the labour market and it is ensured that their skills are up-to-date when businesses need them. Furthermore, labour market policies try to support international recruitment and to save people on the antic market longer before they fork out to boost labour add, which will be in high demand after the crisis. Fiscal policy has boosted disposable income and demand by a major tax reform, which means tax cuts for households. Moreover, the government has released the funds from a special compulsory pension saving course, which give households further liquidness (OECD, 2009). Furthermore, the chase rate is now the lowest ever at 1. 15 %, which are good news for the households with a mortgage loan (Guardian, 2010).In 2006, the Danish government introduced a globalisation strategy for Denmark, which found a lot of new initiatives within education, research and development, entrepreneurship and an innovate society. One of the aims of the strategy is to make Denmark more ready and open for global business (Globalisering, 2006). Furthermore, in 2009 the Danish government has launched several measures to encourage a green growth recovery from the financial crisis. The initiatives include among others green air, improved environmental performance of the agricultural sector and a home doctor up and refurbishment incentive to save elan vital (OECD, 2009). These strategies, policies and initiatives create a better environment for companies to compete in. Figure 2 picSource police squad analysis 5. 6 Institutions for Collaboration There are several institutions supporting and functional together with Danish businesses. Universities like the IT University of Denmark, Technical University of Denmark and Copenhagen Business School work actively with companies, trades and industries (ITU, DTU, CBS). Furthermore, the confederacy of Danish Industries as a representative for many industries also has closing curtain ties to different business schools and universities (DI). Invest in Denmark, a part of the Danish Ministry for Foreign Affairs, helps foreign companies to locate in Denmark and create joint ventures with Danish companies (Investindk).Moreover, several knowledge centers like Innovation Center Copenhagen, Mind science lab and Innovation Lab work together with companies to innovate and upgrade engineering science and business in Denmark (Innovation Lab). PART II THE DANISH WIND ENERGY CLUSTER 6. Historical Development of the Cluster 6. 1 Wind Energy in Denmark before the 1970s Due to the Denmarks oversize coastline, the temper is characterised by consistent and relatively strong lifts. The absence of other natural sources than arch influenced Denmark to take a pioneers role in starting an effort to implement fart technology as understructure for electrification and to experiment with it (Vestergaard et. al, 2004).The first cuckoldmill in Denmark was mentioned 1259 in Flong. The modern flex life force utilization has a tradition that covers more than 100 years of research in meteorology and locomote turbine manufacturing. In 1891 Poul La Cour, a Danish professor in natural science at the Askov folks High School, and a team of scientist make the first horn in turbine funded by the Danish government. La Cour was drawing on the results of two contemporary Danish engineers and scientists. H. C. Vogt and J. Irminger participated together with the Am erican P. S. Langley in formulating modern theory on aerodynamics and lift drag with the purpose to experiment with bullock power to product electricity (Vestergaard, et al. , 2004).In 1918 a fourth of all Danish plain stations (120) used wreathe turbines to generate power. After the World War I the Danish interest in get up Energy waned, because of the sufficient allow of fossil fuel. The machines were rapidly outdated in 1920 only 75 turbines were left (Andersen, 1999). By the 1930s Denmark was ahead of many other countries in the wrench turbine industry and turbines became traditional in the Danish countryside. La Cour gave courses at the Askov Folk High School so that it became possible to study enlace dynamism for Danish cheat electricians. Soon La Cour and one of his students became the most prominent manufacturers in Denmark. However at that time there was still no real international competition.One of the students in snarf brawniness was Johannes Juul who atten ded La Cour? s courses in 1904 and later worked as headsman engineer for a power corporation, SEAS. Juul started an R&D programme in revoke expertness utilization. This R&D effort formed the primer for his design of a modern electricity purloin turbine built in 1957, which is today well known as the 200kW Gedser machine. The Gedser machine was in cubicleed in 1959 and was in operation until 1967 (DWIA, 2008). 6. 2 The Danish Wind Energy Cluster in the 1970s The First Hesitant Beginning In the 1970 there was an change green movement in the western sandwich countries. This was encouraged by the first and second oil crisis in 1973 and 1979.Denmark which was staggeringly dependent on import oil pursued an active policy of dynamism savings, increasing self sufficiency, and diversification of energy sources until the mid 1980s. Since then, energy policy has increasingly promoted the use of renewable energy to ensure environmentally sustainable economic development (Krohn, 2002). This increasing political focus on environmental protection and sustainable development provided the framework for the development of the Danish raise energy sector. The realistic and technical development in the 1970s was first carried out by few entrepreneurs, tradesmen and people with high ideals about renewable energy. Christian Riisager was a carpenter from west Jutland.In the mid 1970s, he was one of the first who triumphfully designed a turbine to be marketed and attached to the grid. The turbine was a 15kW turbine which generated more electricity than the household could consume, the excess electricity went into the grid. The Riisager turbine was the basis for modern pull turbines with high towers and three blades. Riisager produced more than 70 turbines and later he established the firm Wind-Matic (DWIA, 2008). Karl Erik Jorgensen also started to make wind turbines in the mid 70s. In 1978, he teamed up with Henrik Stiesdal, a young student and worked on a three-blade t urbine. In 1978 they true a 30 kW turbine with an enhanced guard duty system.Vestas, which manufactured agricultural machines at that time, bought the turbine on a license and started in-house merchandise and development of wind turbines (DWIA, 2008). While these innovative designs of small machines appeared politicians began to take interest in the new development. Partly because of the energy supply crisis, partly as a reaction to the popular opposition to nuclear power in Denmark. An incentives programme in the form of capital grants for adeptness of wind turbines (30% of in detect outation be) was established in the end of the 1970s and was dropped in 1989. In 1977 the Risoe National Laboratory which was originally established to research in nuclear power formed its entrance to wind turbine R&D.A measurement programme co-funded by the US department of energy was carried out by the Risoe National Laboratory (Andersen, 1999). Risoe also draw on a tradition on boundary layer meteorology and wind climate studies. The Technical University of Denmark go on the studies of aerodynamics and wind tunnel experiments, so that their research on wind climate, model laws, terrain roughness, and shelter effects formed the scientific platform for Risoe? s work on the Danish and European Wind Atlas which was initiated in the late 1970s. Risoe National Laboratory also occupied the approval job for different causes of wind turbines (Andersen, 1999).In order to ensure that the government supported turbines also had a certain quality and precaution, legislation on typecast approval for wind turbines was established. Today more than 100 scientists and engineers are working for the institution which has an pregnant department in wind energy with grand interactions with the wind energy community world-wide. Risoe? s work on turbine safety has been important in ensuring the reliability of modern wind turbines (Krohn, 2002). On whitethorn 4th 1978 the acquaintance of Wind Turbine Owners was formed, and the first Wind turbine guild or cooperative was established in 1980. 6. 3 The Wind Energy Cluster in the 1980sThe Gedser wind turbine itself was built and financed by the power keep company SEAS. In the advance(prenominal) 1980s Danish power companies took early interest in wind energy and in large wind turbines and built two experimental machines, one pitch regulated and one stall regulated, of 630 kW each. But the woo of energy from the large turbines was so high that series manufacturing was not even envisaged (Krohn, 2002). Riisagers and other manufacturers success motivated some manufacturers of agricultural machinery to enter in the growing turbine manufacturing sector which provided promising commercial possibilities. Among these companies were Vestas, Nordtank, Bonus (now second Wind Power), Nordex, and later Micon (Krohn, 2002).The Danish Wind diligence experience, a non profit association, whose purpose is to promote wind energy at home and abroad, was founded in 1981. Manufacturers soon became members of the association so today there are more than 220 members across Denmark. The condition of receiving the 30% construction subsidy from the government was that the turbine had been approved by the new test station for small turbines set up by the Risoe National Laboratory. The component part of Risoe National Laboratory so changed from being that of a controlling entity to a more technology-mediating unit. In 1982 the test station issued the first combined hitch paradigm, which established that all wind turbine components had to be dimensioned for twice the load compared to the traditional norm.The result of this policy was that the Danish wind turbines gained the reputation for being undeviating and robust (DWIA, 2008). The Wind Energy Department of Risoe National Laboratory became worldwide known for its expertise with tight connections to the Technical University of Denmark and also increasingly connecti ons with Aalborg University (electricity aspects). Gains of productivity thanks to the European Wind Atlas in the years 1980 1985 could be realised by better sit down of wind turbines. The Danish type approval certification scheme has been a very dynamic peckerwood to foster better design procedures in wind turbine manufacturing companies.It has also been important in winning the confidence of professional investors worldwide (Krohn, 2002). In the early 1980s the State of California began a programme of supporting wind energy development. Danish manufacturers having the longest track record had already true several coevalss of successively larger machines in small series. The California market expanded dramatically, allowing an enormous volume of return of wind turbines. The Danish manufacturers supplied thousands of turbines to the regular army from 1982. Bonus, Vestas and Nordtank all participated in the wind boom launched in California until the market came to an abrupt ha lt in 1986. The problem was that manufacturers had become dependent on a champion market.When the California wind programme ended in 1985-1986, a large matter of the 20-odd manufacturers went bankrupt because they had few alternative markets for their products (Krohn, 2002). The economic collapse in the industry caused an elimination race in the following years. All the small manufacturers disappeared or were taken over by Vestas, Bonus, Nordtank, Micon and Nordex. Thus began a long haul for the remaining manufacturers, who then tried to continue their market base to include several countries (DWIA, 2008). 6. 4 The Energy Policy of the Danish Government since the 1980s/1990s In 1985 the Danish government decided that nuclear power should not be an element of future energy supply.Beside the 30% subsidy of the construction costs for wind turbines which endured until 1989 the government began, since the mid 1980s, to push an active agenda with the aim to implement renewable and dive rse energy sources (Meyer, 2007). In a 15 year plan for large scale implementation of wind-generated electricity countrywide the government marked the countrys goal of meeting 10 per cent of Danish electricity consumption by wind in the year 2005, implying an installed base of 1,500 MW of installed wind capacitance (Sharman, 2005). Danish government had very wide ranging powers for enactment of utilities. These regulations took many forms, including energy efficiency and demand-side management measures.Integrated Resource provision was an integral part of the procedure through which the power companies obtained permission to install new generating capacitance. different measures included price and accountancy controls. The government had ordered the utilities to install 400 MW of wind power on land to date. The first two orders of 100 MW each were already issued in 1985 and 1990. The latest onshore order for 200 MW to be completed before the year 2000 was issued in 1996. In 1 998 a new order was issued for 750 MW of inshore wind power. The Danish energy plan Energy21 from 1996 set up a soft touch of even 4000 MW of offshore wind power in 2030 (Krohn1, 2002).To avoid dis understandings between utilities and wind power producers over conditions for grid connections and tariffs, the Danish government introduced in 1992 regulations about the feed-in tariff, which was fixed at 85% of the utility production and distribution costs (Meyer, 2007). 6. 5 The Cluster of Modern Wind Turbines since 1990 In the early 1990s Vestas, Bonus (now south), Nordtank, Micon and Nordex represented the wind turbine manufacturers in the Danish cluster. Most of them had a track record of more than 10 years. The size of the wind turbines grew enormously in a perpetual race to develop renewable energy which was capable to compete with the conventional technologies in terms of electricity product and price. At the beginning of the 90s, the average wind turbine had a capacity of 20 0-300 kW, which had big(a) to 1-2 MW in the late 90s. achieverful domestic turbine manufacturers became world leaders in the wind turbine production (DWIA, 2008). A service sector to maintain and repair installed equipment true. The industry left, after further consolidation, two large manufacturers in Denmark, Siemens Wind Power A/S (owned by German Siemens AG) and Vestas Wind Systems A/S and several businesses which are involved in the industry and organised in the Danish Wind Industry draw. In 1991 the Vindeby offshore wind park opened and in 1995 the wind rise at Tunoe Knob, equipped by Bonus and Vestas. The offshore market play a more and more important role for the cluster and 95% of the offshore installed turbines are of Danish origin (DWIA, 2008).In 2001 Danish wind turbine companies had a market share of 50% of the world market (Krohn, 2002). The fortune of electricity provided by wind power rose from less then 5% in 1995 to almost 20% in 2003. The total installed base of wind power was some 1,100 MW at the end of 1997. This made Denmark to the third largest wind power country in the world. All turbines were produced domestically. In 1997 there were 10,000 people employed in the wind power sector, a weigh that grew up to 23,500 in 2007. In 2006 the Danish Wind Industry affiliation created the Talent Factory to improve the career opportunities among engineering students (DWIA, 2008).More than 80% of the 6,300 wind turbines in Denmark were owned by energy co-operatives, or item-by-item farmers. 150,000 Danish families owned wind turbines or shares in wind co-operatives in 2002 (Krohn, 2002). 7. Description of the Wind Energy Cluster Today Denmark hosts some of the worlds largest wind turbine manufacturers. Vestas Wind Systems, a truly Danish company is situated in Denmark (Vestas). Furthermore, German Siemens Wind Power and Indian Suzlon have established their global head quarters in the country (Siemens, Invest in DK1). besides German Nordex ( formerly Danish) and Spanish Gamesa have established respectively offices and R revolve abouts in Denmark (Nordex, Gamesa).These are big global players In 2008 Vestas counted for 19% of the world market, Gamesa for 11% and Nordex and Siemens 7% respectively (EcoSeed). other(a) smaller manufacturers are Norwin A/S, Wincon A/S and Gaia Wind Energy A/S. There is a strong branch of associations connected with wind energy and among them are the Danish Wind Industry companionship (www. windpower. org), Danish Energy Industries Association and Danish Wind Turbine Owners Association. In 2007, wind energy in Denmark produced about 7,173 GWh. This corresponded to 19. 7% of domestic energy supply or to the consumption of about 2. 03 million Danish households, compared to 16. 9% in 2006 and only 1. 9% in 1990. In 2007, wind power capacity accounted for 3,124 MW (i. . 24. 1% the total electricity capacity), 424 MW being offshore wind turbines. In 1990 wind power capacity was 343 MW (Energy St atistics, 2007). Projections by the Danish Wind Industry Association estimate an increase of the yearly instalment of new capacity of about 17% by 2011, reaching more than 200,000 MW. As far as offshore turbines are concerned, 7,600 MW are expected to be installed by the same year (EREC). Wind turbine manufacturing, maintenance, installation and consultancy services account for some 16,000 jobs in Denmark, while component supplies and installation of these Danish turbines currently create another 8,000 jobs worldwide.The global job creation of Danish wind turbine companies are substantially larger than these figures indicate only about 9 billion DKK (1. 2 billion EUR) is due to turbines manufactured in Denmark. The rest are manufactured in Germany, Spain, India, Italy, and the U. S. , i. e. in countries where there is a substantial home market (Krohn, 2002). 7. 1 VESTAS Worlds no. 1 Turbine Manufacturer As Vestas is the world leader on the global market for wind energy and one of th e key drivers of the Danish wind energy cluster a short description of the company will be given. Vestas was founded in 1898 by H. S. Hansen, a blacksmith, in Denmark. He and his son manufactured vane windows for industrial constructs.In 1945, his son established the company VEstjysk-STalteknik A/S, whose name was shortened to Vestas. In 1979, Vestas delivered the first wind turbines. Vestas have installed over 39,000 wind turbines in 63 countries on 5 continents. In 2008, Vestas installed a new turbine every three hours worldwide, generating more than 60 million MWh a year. Vestas has developed from a pioneer in the industry with a staff of around 60 people in 1987 to a global, hi-tech and market-leading company employing more than 20,000 people. Vestas reached revenues of EUR 6,035 million with operational margin of 11. 1% in 2008 and they got global market share of 19% (5,581 MW).Vestas core business comprises the development, manufacture, sale and maintenance of wind turbines . Their expertise in modern energy covers more than just wind turbines. They specialise in planning, installation, operation and maintenance. Their competencies cover everything from site studies to service and maintenance. Vestas is bossy by a high degree of vertical integration. At the same time, production and sourcing are carried out as close to the market as possible. In 2008, Vestas opened the worlds largest research and development nerve centre for wind energy in Aarhus (Denmark) which will house more than 900 employees (Vestas). 8. Wind Energy Cluster Cluster DiamondNow Porters Diamond model will be used to analyse the competitive strengths and weaknesses of the Danish wind energy cluster. 8. 1 Factor Conditions Factor conditions important to the wind energy cluster are the natural resource in form of wind conditions and the scientific base as well as human capital within the field of wind energy. Denmark has relatively subaltern to good average wind. Onshore wind resour ces are highest in the Western part of the country, and on the Eastern islands with coastlines facing South or West. The country has very large offshore wind resources and large areas of sea stain with a shallow water depth of 5 to 15 m, where sitting is most feasible. These sites offer higher wind speeds (Krohn1, 2002).The relatively good wind conditions have been an advantage in the past when the wind energy cluster was growing and still operated primarily in the home market. As the operations have gone global the Danish wind conditions are not so important anymore. In stark contrast to Germany, Sweden, the USA, Canada, and the UK, publicly financed R projects played a relatively minor role in initiating the early development of the Danish wind turbine industry. The early stimulus came in the form of investment grants, supporting market development for small scale in private owned turbines. Later, the Danish Government and the EU have financed a significant fig of basic research projects, and given some support to development projects (Krohn, 2002).One of the reasons for Suzlon to establish its global headquarters in Denmark was exactly the work knowledge the country possesses. The chairman of Suzlon declared Denmark is global leader in know-how for wind-energy. That is why our global head quarter will be here. (Invest in DK1). On the educational front, the universities offer specialized wind engineer educations and the research centres offer various training courses targeted peculiarly at the wind energy industry, for instance the Technical University of Denmark (DTU) Wind Master Education Aalborg University Wind Master. engineering science College of Aarhus (IHA) has developed a specialisation in wind turbine construction with the main focus on mechanical components (DWIA, 2008).Risoe Wind Energy Department, University of Aalborg and University of Aarhus have conjointly established a knowledge centre Danish University Wind Energy Training (DUWET) which offers a research based supplementary education for employees in the wind industry. DUWET collects wind energy knowledge and research and offers courses and specialist training for anyone in the industry. A consortium consisting of the research centres Risoe National Laboratory, Danish hydraulic Institute (DHI), The Technical University of Denmark (DTU), and Aalborg University form a national power centre within wind energy research and thus a merry part of the wind energy cluster. Therefore, the scientific base for the wind energy cluster is highly developed and provides the cluster with highly skilled labour. 8. 2 Demand ConditionsDenmark is somewhat unique among wind turbine markets, since the market really grew out of a popular interest in alternative generating technologies, partly in opposition to the use of nuclear power, partly as a result of the energy supply crisis in the late 1970s, when oil prices skyrocketed due to OPEC action and political and military unrest in the Middle East. The well-organised Danish wind turbine owners have been a very important driving force for debugging and amend Danish wind technology in its earlier years (Krohn, 2002). hidden individuals, either as members of wind energy co-operatives, or as owners of a wind turbine (farmers) account for more than 80% of the 5024 wind turbines in Denmark (DWIA, 2009). This number shows the strong interest of Danes in wind energy and their support for building new wind farms.The Danish home market is what created the modern Danish wind industry originally, and gave it the testing ground to sort out both wind technology and manufacturing technology. The openness and interest of the Danish consumers have unimpeachably supported the demand in the early years of the cluster and pushed its development. Today few wind turbines are set up in Denmark compared to the world market and the local demand has lost some of its importance. 8. 3 Context for Firm Strategy, Structure and Rivalry Danish energy policy has indirectly played an important role in fostering the commercial success of the Danish wind industry. The Danish energy policy for renewable energy has been a model for many markets in the world.In countries as close as Germany, France or Spain and as remote as China or Argentina Danish support schemes for renewable energy have been copied and/or adapted to local circumstances. Danish long-term energy planning such as Energy 21 has been widely quoted throughout the world. One of the basic reasons why wind energy has such a prominent place in Danish energy planning is the need to reduce greenhouse gas emissions. According to the Kyoto Protocol Denmark has to reduce emissions of greenhouse gases by 21% in relation to 1990. The targets apply from 2008 to 2012 (COP15). More than one third of that target is being met using wind energy to supersede coal-fired power generation (Krohn3, 2002). Thus, the Danish policies give good conditions for renewable energy comp anies.Denmark has introduced feed-in tariffs for renewable energy plants connected prior to 21 April 2004. renewable energy plants receive the have it away market price plus a subsidy to provide a guaranteed price of 8. 1 eurocents/kWh, applicable for 20 years from date of connection. Renewable energy facilities connected after 21 April 2004 are getting production incentives. Wind plants receive the spot market price plus a 1. 3 eurocents/kWh production incentive which will be applicable for 20 years from the date of connection. Moreover, additional subsidies of 1. 6 eurocents/kWh are provided for new facilities that replace decommissioned wind turbines 450 kW and smaller (Porter, 2006).The Energy Agreement of 21 February 2008 contains an fair game of increasing the percentage of renewable energy to 20% of the gross energy consumption by 2011. In the projection, the renewable energy share in 2011 is 20. 5% (Energy Statistics 2007). Improvement of incentives to encourage the instal lation of wind turbines is among the initiatives which will follow up the political accord of 21 February 2008. The new act comprises the framework for overall local government planning for wind turbines and a guarantee fund of DKK 10 million to subsidise the funding of local wind turbine guild preliminary investigations etc. and a model for local co-ownership.In connection with onshore wind turbine planning, the government will enter into an agreement with the National Association of Local Authorities in Denmark on municipal planning for 75 MW each in 2010 and in 2011. In addition, work is being done on establishing a payment scheme which will cover neighbours to onshore wind turbines for losses in property value as a result of wind turbine installations. The continued expansion of offshore wind turbine facilities will make an important contribution to achieving renewable energy targets. The work of offering two offshore wind turbine farms of 200 MW each or possibly one farm of 400 MW started in 2008 with a view to commissioning in 2012.In addition, work started on the update of the offshore wind turbine action plan, which examines the location of new farms, the possible try-on of the tender model, considerations of previous building maturity and open doors with payment as onshore turbines. Subsidies for new wind turbines will be increased to 25 oere/kWh for 22,000 peak load hours and 2. 3 oere/kWh in balancing costs and 0. 4 oere/kWh for the green fund (Energy Policy Statement, 2008). Rivalry can hardly be explained on a local level anymore as the wind turbine manufacturers have gone global and are direct all over the world today. In the earlier stage of the cluster, rivalry on the Danish market was tense resulting in many take-overs and mergers and ending with one single true Danish company, Vestas. 8. 4 Related and Supporting IndustriesThe background of the Danish turbine manufacturers was different from wind power companies in the U. S. , Sweden, or Ge rmany. Names like Boeing, Lockheed, Westinghouse, MBB, and Siemens indicate a strong background in aircraft and author manufacturing. Interestingly, however, practically all of todays remaining larger wind turbine manufacturers have a machinery manufacturing background rather than an aircraft background. Although modern wind turbine technology resembles helicopter technology, the operating requirements are very different (Krohn, 2002). A number of industrial enterprises have developed important businesses as suppliers of major components for wind turbines.LM Glasfiber A/S is the worlds largest producer of fibre glass rotor blades for wind turbines, with an employment of more than 1,000 people. Danish manufacturers of electronic wind turbine controllers likewise have a very large market share worldwide. DanControl Engineering A/S, Mita Teknik A/S and DWC A/S produce controller and communication systems. Svendborg brake A/S is a leading vendor of mechanical braking systems. Also Dani sh subsidiaries of large international industries such as Siemens, ABB, SKF, FAG, etc. have developed businesses in the wind power industry (Danish Energy Authority, 2002). Other industrial service enterprises have created important businesses in servicing the wind power industry.For example companies are specialised in providing cranes for installations of wind turbines providing transport of turbines, towers and blades domestically and for export. Service and maintenance of the more than 6000 wind turbines in Denmark is carried out by the manufacturers own service departments. But also a handful of independent service companies have been established for instance DWP Molleservice A/S and DanService A/S. Moreover, there are also specialised service providers like banks (Ringkoebing Bank has specialized in financing wind power projects), insurance companies, engineering and management consultancies (Andersen, 2003). The major Danish consultancies in wind energy utilisation are BTMCon sult Aps, E Data, Tech-wise A/S, SEAS Wind Energy Centre, WEA ApS and Tripod ApS (Danish Energy Authority, 2002). Figure 3 Cluster Diamond pic Source Team Analysis 9. Strategic Issues Facing Denmark and the Wind Energy Cluster Denmark is at the moment the leading centre within the field of wind power. However during the recent years a significant change in technology and markets has taken place. Denmark is faced with the challenge to maintain its leading position in spite of growing competition from firms operating in lower cost countries, especially China. The wind energy cluster and the political system must assume a proactive position towards this change to ensure that Denmark will strengthen its position as unique value creator.Denmark must provide the most effective wind power that ensures its best integration in the accumulated energy system, so that Denmark in the future can still provide wind power technology to energy systems with a large proportion of wind power. The indus trial environment is built on a foundation which consists of a significant effort in research and education as well as innovative development focused on environmentally sustainability. This field of wind power is influenced by cooperation and knowledge-sharing to find technological development tracks. Nevertheless this foundation has been weakened regarding the cooperation within the industry, new technological tracks within the industry and education and recruitment.The Danish research-environment has a leading position within a number of areas, but great challenges in step with the rapid development of international markets put a lot of pressure of the Danish knowledge centre to hold on the talented researchers and students. In order to maintain the unique Danish position, an extraordinary effort must be put in. The strategic issues are focusing on both, development of the wind power industry by improving wind turbines and say-so of wind power, and the improvement of the knowledg e centre regarding research and education. As foundation and demonstration focusing on the testing of windmills has previously been one-dimensional there are strategic issues to mentioned, that recommend an accumulated strategy for esting and demonstration of components and turbine parts, wind turbines and wind farms and wind power plants in the energy system, so that the facilities cover the whole value train. Creating one strategy for the whole value chain with sub-strategies for each of the three dimensions would strengthen the integration and the competitiveness of the wind power industry. Another important issue regards the research effort. The long-term university research and education should be strengthened by prioritisation of fundamental or generic technologies that are part of the development of wind turbines and power plants. This also considers the whole value chain, so from turbine part until integration of the wind power into the electricity supply system (e. g. urb ine design, blades, wind loads and sitting, integration into electricity supply system and offshore technology). Including a roadmap and measurable criteria for every area, this strategy could be developed by using the existing research environment as a basis and build on the efforts from previous research. Especially offshore technology research should be strengthened and framework conditions for cooperation between research institutions and industry. This could be provided through common guidelines for the frames of cooperation. Following these recommendations, Denmark will be prepared to face the current challenges. 10. Policy recommendations for the appropriate constituencies National and regional authoritiesAs Denmark faces now serious challenges in terms of the development of their cluster structure, it is essential that respective authorities undertake significant steps in order to prepare the environment for sustainable growth. First of all, it is worth mentioning that autho rities have to actively participate in funding of regional growth environments. As well as this, they should encourage and support the emergence of appropriate initiatives, especially in those regions, where other constituencies have already been mobilized. Clusters in Denmark have proved to be a sufficient and effective tool in innovation policy and therefore it is necessary to sustain and improve their presence.Next, authorities have to focus on building sound economic framework, in order to create investment-friendly environment. As inflow of capital is inextricably connected with Denmark clustering strategy, it is necessary to maintain an incentive-oriented structure of attracting new investors. That step is also authoritative in case the authorities are unable to further finance certain projects. Therefore, respective responsibilities have to be shifted to private sector. Companies and trade associations With the emergence of clusters, companies are starting to play increasin gly more important role. They should along with trade associations be able to clearly formulate their needs and be able to influence the authorities to implement them.As well as this, it becomes their responsibility to focus more on investments in innovation. That is why it is necessary for respective companies and supporting associations to work together in creation of competence and knowledge centers. Universities As far as academic involvement is concerned, universities specializing in certain arts should play a supportive role in development of clusters. It has proven to work in the past, as Copenhagen Business School provided companies with field research and required theoretical frameworks. Therefore, the ties between academic and business world have to be tightened, so as to achieve a 360-degree cooperation of all the constituencies involved in projects. 11.Conclusion In this paper I analysed Denmark and its wind energy cluster. Denmark has a very stable and solid economy, but also faces some serious challenges in increasing productivity growth and educating and attracting human capital. Denmarks heavy tax burden might be a hindrance. The wind energy cluster is by the end of its growth stage in its life cycle and now needs to innovate to keep growing. 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