Renewable Energy 30 (2005) 1635–1647

www.elsevier.com/locate/renene

Evidence from RD&D spending for renewable

energy sources in the EU
Mario Ragwitza,*, Apollonia Miolab,1
a
Fraunhofer Institute for Systems and Innovation Research, Breslauer Strasse 48, 76139 Karlsruhe, Germany
b
IEFE, Università Commerciale Luigi Bocconi, Viale Filippetti 9, 20122 Milano, Italy
Received 22 October 2004; accepted 23 November 2004
Available online 29 January 2005

Abstract
This paper aims at giving a critical picture of the expenditures in research, development and
demonstration (RD&D) for renewable energy sources (RES) in the EU-15 Member States. By
providing this objective a number of performance indicators are proposed, evaluated and discussed.
RD&D performance is measured in terms of RD&D intensity, e.g. spending per unit of GDP, as well
as with regard to RD&D output such as the number of patents in the different sectors of technology.
The evaluation of the funds spent can help the rationalisation of the efforts made to support
renewable energy RD&D and facilitate the joint investments in RD&D activities. This perspective is
essential for facing the increasing competition that the EU industry meets in the international markets
for RES. The knowledge and rationalisation of the RD&D spending in research activities is the starting
point for a common approach to strengthen the EU industry in this field of expected strong growth.
q 2005 Elsevier Ltd. All rights reserved.

Keywords: R&D expenditure; Innovation system; Research policy

1. Introduction

The key issues for increasing the use of renewable energy actually relate to making
these technologies cost-competitive and integrating them into the existing system.

* Corresponding author. Tel.: C49 721 6809 157; fax: C49 721 6809 272.
E-mail addresses: mario.ragwitz@isi.fraunhofer.de (M. Ragwitz), apollonia.miola@uni-bocconi.it
(A. Miola).
1
Tel.: C39 2 5836 3808; fax: C39 2 5836 3890.

0960-1481/$ - see front matter q 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.renene.2004.12.001
1636 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

In absolute figures, the renewable business sector is still small. It is at least partially
a high-tech sector with emerging technologies depending on the results of research,
development and demonstration (RD&D). The RD&D effort in the field of RES in
accordance with national and European policies on energy, and EU Framework
programmes have made available considerable funding allocated for developing RES
technologies. Complementary national RD&D programmes exist, with emphasis on
different RES topics, according to national resources and preferences. The future success
of renewable energy technologies can only be assured if efforts in research, development
and demonstration are maintained or strengthened for the next years with emphasis on an
improved co-ordination of different programmes.
Today’s most promising RES technologies with regard to future potential are based on
solar energy, biomass, wind, hydro power and geothermal energy.
Photovoltaic solar energy conversion is the most expensive form of renewable energy
at present but exhibits the highest learning rates. It holds the largest long-term potential,
and can be easily integrated into existing electricity systems. Many national and
international research programmes in photovoltaic technology set out goals to achieve a
certain cost and efficiency target within a certain time. The research is focused on
materials development, production technologies and integration into buildings.
For biomass, the priority is the development of integrated approaches from sustainable
biomass procurement to fuel production and use. Further needs for R&D exist in the entire
chain of biomass use, from the resource production, supply, upgrading to a fuel, the
storage of the fuel, the feeding system to the conversion reactor and the energy recovery
for heat and/or electricity. With regard to the conversion systems, thermochemical
processes like combustion, gasification and pyrolysis as well as biological processes like
fermentation and anaerobic digestion will have to be further developed.
At present, wind energy compared with traditional energy sources is competitive at
very good sites, even without the compensation for the environmental advantages. In this
context, the role of R&D concerns developing and evaluating participation models and
policy instruments, development of new materials for rotor blades and innovative control
algorithms, tackling the challenges of the large-scale off-shore application of wind
technology, reducing acoustic noise emission, gradually extending or modifying the
existing distribution grid so it can absorb a large amount of electricity generated at a large
number of locations distributed over a large scale.
Hydro power holds the largest share of renewable electricity production. Large-scale
hydro power is technically mature and its R&D requirements are generally being well
taken care of. In the case of small hydro power, the main technical thrust is to improve the
cost-effectiveness of the technology for use on the more common low-head sites.
With regard to geothermal energy, the major efforts in research and development relate
to the application of new technologies such as hot-dry-rock techniques for electricity
production.
Finally, it is widely recognised that technical progress is a necessary, but not sufficient
condition for the large-scale integration of RES.
Non-technical parameters play a major role in the process of their market penetration
and in many cases they are supposed to be the most important barriers for RES
development. They are either of a political and legislative nature or relate to institutional
 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647 1637

aspects as well as to the limited knowledge about technical, economic, and social
advantages of RES. With regard to the costs of renewable technologies, existing market
imperfections still limit the establishment of fair competition with conventional systems.
Socio-economic research is necessary to overcome these barriers.

2. Measurement of RD&D performance

The aim of this paper is an analytical survey of the expenditures in research,

development and demonstration (RD&D) for renewable energy sources (RES) in the
EU-15 Member States trough the elaboration of performance indicators to highlight the
success factors in this field.
Before analysing the proposed indicators, it is necessary to emphasise that the
measurement of RD&D performance poses many problems. This can be related to the
nature of the RD&D activity: first, the degree of uncertainty of an RD&D activity is hardly
definable and, thus, measurable only with major difficulties; secondly, the ultimate result
of RD&D activity can often be viewed only after years [1,2]. Therefore, measuring
temporal correlations between RD&D spending and the corresponding output is difficult.
Traditionally, performance measures of the RD&D function have more frequently been
related to RD&D input than output [3].
RD&D spending is an input factor, which should strengthen the economic growth
and competitiveness. In this context, the questions arise, whether the RD&D spending
contributes to the growth and competitiveness2 of a sector and enlarges the welfare of
societies. An analysis of these questions requires an identification of input-output
relationships between RD&D activities and their results. Typical results can be the
number of patents in a sector, the turnover of the corresponding industries and their
market share. One expects a positive relationship between the resources allocated to
RD&D and RD&D output and therefore, the higher RD&D expenses, the more
effective the output.
The impact of RD&D on business performance can be measured based on measures of
profitability or market share and implicitly lie on the assumption that there is a relationship
between RD&D success and market share or profitability without eliminating the effects of
other factors.
Some studies [4] propose breaking down the contribution of technology to the
corporation success and identifying those that are the most dependent on the RD&D
performance. RD&D return (defined as the ratio of the profits to RD&D investment)
is viewed as the result of two major factors: RD&D productivity, that is the ratio of
technical progress to RD&D investment, and RD&D yield, that is the ratio of profits
to technical progress. Although it is a valuable attempt to identify quantitative
measures of RD&D performance, how to measure the above variables remains
highly fuzzy [1].

2
The competitiveness is a relative concept; RD&D programmes often operate in the pre-competitive area and
the time needed for the application of its results may be long.
1638 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

Finally, in the analysis of the RES RD&D performance, the confluence of several trends
have to be considered to understand the choice of amount of investments in the RD&D of
the energy sector.
First, low prices for conventional fuels have a direct effect on market interests in
technological advances: new alternatives must compete with established technologies that
provide cheap energy using conventional fuels. RD&D expenditures are also affected by
energy prices: the energy-technology RD&D budget after reaching in response of the oil
shock of the late 1970s and early 1980s, have since declined and stabilized [5,6]. At the
same time the energy sector is also ‘altered’ by a number of factors: the deregulation and
restructuring of the energy markets; the privatization of the energy sector; the impacts of
air pollution and the GHG emissions [7].

3. Analysis of the performance indicators

3.1. Definition of the indicators

In these sections some performance indicators for RES RD&D expenditure in the EU-15
Member States are shown. They have been elaborated on the basis of the data collected by
the REDS project [8] through a questionnaire and a database specifically designed. REDS
(Research & Development Spending: a survey of RD&D spending for renewable energy in
the EU countries) is a research project funded by the European Commission within the fifth
RTD framework programme.
Predominantly, indicators relating to RD&D input will be shown. Only for the sectors
of wind power and photovoltaics we will analyse the relationship between RD&D
expenditure on the one hand and corresponding outputs, e.g. patents and turnover of
industries, on the other hand. For the other sectors, the results on RD&D output turned out
to be statistically insignificant due to the lack of data or to the fact that, for example, the
number of patents in a specific sector was too low. More specifically, the following
indicators have been analysed:

1. RD&D intensity, defined as the ratio of RES RD&D expenditure and:

† the Gross Domestic Product (GDP);
† the total governmental budget;
† the number of capita;
† the general RD&D budget for energy;
† the total national RD&D budget.
2. Correlation between governmental and private spending;
3. RES RD&D expenditure and human resources involved in RES RD&D;
4. RES RD&D expenditure and number of patents in a specific technological sector.

3.2. RD&D intensity

One typical RD&D intensity measure is defined as the percentage of RD&D

expenditure of Gross Domestic Product (GDP). Other RD&D intensity measures consider
 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647 1639

Fig. 1. RD&D intensity (%) and RES RD&D intensity (%) in the year 2000.

the ratio of RES RD&D expenditure to the total RD&D expenditure of a country or to the
RD&D spending of the energy sector.
In this section we will show different quantities that express the RD&D intensity of a
country in the sector of renewable energy sources. We will start with the RD&D
expenditure for RES as ratio of the GDP and will then show the RD&D expenditure in
relation to the total governmental budget and in relation to the number of capita.3
Fig. 1 shows the overall RD&D intensity and the RES RD&D intensity in terms of GDP
for the year 2001. Most of the EU-15 countries spent in the order of 0.01% of their GDP for
research and development in the field of renewable energies. For many countries the RES
RD&D intensity correlates to the countries’ overall RD&D intensity. Only in France and
Ireland the RES RD&D intensity appears to be at a lower level. In Denmark and The
Netherlands the RES RD&D intensity is the highest of the EU countries and in addition
this level is proportionally higher than the overall RD&D intensity. Please compare to
Fig. 2 for the ratio of RES RD&D and general RD&D budget.
Fig. 2 confirms the fact that RD&D for RES is underrepresented in France and Italy. In
these two countries, the ratio of the budget for RD&D of RES to the RD&D budget for the
energy sector is the lowest, below 10%.

† In Italy, the low share of RES RD&D with regard to energy RD&D is somewhat
compensated by the fact that the energy sector is the main part of all RD&D activities,
as the ratio of the budget of RD&D for RES to the total RD&D budget is in line with the
European average.
† On the other hand, this ratio in France is again the lowest with a value below 0.06%.

3
General data such as number of capita, GDP and total R&D expenditure are taken from EUROSTAT. Data on
energy R&D are taken from the IEA (OECD) database.
1640 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

Fig. 2. Ratio of the budget for RD&D of RES to the RD&D budget for the energy sector (blue) and ratio of the
budget for RD&D of RES to the total RD&D budget (red). (For interpretation of the reference to colour in this
legend, the reader is referred to the web version of this article.)

For Ireland the same conclusion seems valid, still it has to be mentioned that both the
budget for RES RD&D and for energy research are very small.
Denmark, the UK and Portugal spend even more than half of their budget for energy
research for the RES. In most other EU countries, the RD&D for RES is funded with
20–40% of the total energy research budget.
Table 1 shows the budget per inhabitant for RD&D of RES of each country split into the
different sectors.

† The sector, for which the highest amount per inhabitant is spent of each country is
printed bold;
† The country, which assigns the highest budget per inhabitant for RD&D for a specific
RES-sector (of all EU-15 countries) is highlighted green.

Comparing the absolute amount of money spent per inhabitant in a specific sector one
observes large differences. While Denmark, Finland, and Sweden spent more than one
Euro per inhabitant for the RD&D of biomass use and the Netherlands spend more than
one Euro per inhabitant for RD&D of photovoltaics, countries like Spain, France, Ireland
and Portugal spend only a few cents per inhabitant for the RD&D in their main sector of
renewable energy. RD&D in the field of wind energy finds the strongest funding per capita
in Denmark and the Netherlands.
Besides analysing different RD&D intensities like the per capita expenditures for
RD&D, the correlation between the public RD&D spending and related quantities can be
assessed. For some quantities such a correlation will naturally exist, e.g. between the
Table 1
2001 budget for RD&D for RES per capita and sector for the European Union

M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

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1642 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

Fig. 3. Correlation of the governmental and non-governmental expenditures for research and development of
renewable energies.

public and the private funding for RD&D since many public funds are directly linked to
a certain amount of private contribution. For others such a correlation will be rather
hypothetical as, for example, between the public RD&D funds and the turnover of the
respective industries. The latter kind of dependence will be discussed later for individual
technologies.
The correlation between the governmental and private expenditures for research and
development for renewable energies is shown in Fig. 3. Generally, a positive correlation is
found between public and private funding. Public budgets for RES RD&D attract private
investment in RD&D of the same range. Still the figure shows that some countries are
more successful in creating a leverage effect to the private market than others. Generally, it
is very difficult to collect reliable data on private funding, therefore data only for selected
countries are shown.

3.3. Technology specific assessment

3.3.1. Photovoltaics
Since about the middle of the 1990s, a strong increase of the installed capacities of
photovoltaic cells can be observed in many European Union countries with Germany
clearly dominating the market. The average growth rate of the photovoltaic power
production reached about 40% annually during the last decade. Major production facilities
have been established in Germany, Italy, Spain the UK and France. Despite this success it
has to be kept in mind that electricity production costs of photovoltaic installations are still
much higher than conventional electricity prices. Therefore, significant R&D efforts are
required in the near future in order to bring the costs of photovoltaic technology down
 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647 1643

Fig. 4. Funding of RD&D of photovoltaic technology in the European countries, which produce photovoltaic cells
(for UK no data before 2000 available, for Spain no data for 1996 available).

and to reach a self-sustaining growth of this sector. As shown in Table 1 considerable

differences regarding the amount of money spent for RD&D of photovoltaic technology
can be observed. Leading in the funding per capita are the Netherlands and Germany, in
2001 they spent 1.12 and 0.76V per capita for research and development in the
photovoltaic sector, respectively. In the second group are Denmark, Italy, Sweden and the
UK with spending between 0.20 and 0.50V per capita. Other countries spent considerably
less than 0.20V per inhabitant, even though some of those countries have large potentials
for photovoltaic electricity production and have in some cases also established
photovoltaic cell production capacities.
The RD&D spending for photovoltaic technology during the period 1996–2001 is
shown in Fig. 4 for the six European countries with the highest spending in absolute
figures. A crucial question is how the public RD&D spending correlates to the industrial
production of photovoltaic equipment. Generally, it can be shown that this correlation
exists in qualitative terms, however no one to one correspondence can be found between
the RD&D and the market share of the different countries. German companies are leading
the photovoltaic cell production in Europe (as for the RD&D spending) followed by the
UK, the Netherlands and France. The level of the Italian industrial cell production was at
less than halve of the French value, whereas Spain had the fourth highest value despite the
low RD&D focus in the photovoltaic sector. In all countries except Germany the market is
dominated by only one or two companies, whereas in Germany about eight companies
with significant market share exist.
Off course RD&D is not the only and perhaps not even the major driver for the
establishment of a prospering photovoltaic industry on a country level. RD&D efforts have
to be supplemented by market incentive programmes like investment incentives for
private costumers or feed-in tariffs as is the case for example in Germany. Furthermore,
1644 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

the learning system for photovoltaic technology is global and the major fraction of
the photovoltaic cells is produced by globally operating companies like BP Solar, Shell
Solar or Sharp. Therefore, these companies do not primarily depend on the RD&D
spending in their home countries, but normally operate production lines in countries that
offer favourable conditions for this technology. In some cases a company from a country A
produces photovoltaic cells in a country B with relatively low labour costs and sells the
major part of the final products in a country C, which offers high market incentives, e.g. BP
Solar as a British company has production lines in the United States, Australia, Spain, the
UK and France and a large market share in Germany. For the reasons given above no direct
link between the efforts of a country for RD&D for photovoltaic technology and the
establishment of related industries exists.
Finally, we would like to discuss the number of patents for photovoltaic technology as
compared to the RD&D spending in this sector. In a major part of the economics literature
patents are generally accepted as one of the most appropriate RD&D performance
indicators. An application for a patent indicates that there has been a production of new
knowledge linked to an invention, and more importantly, that this knowledge may have
potential economic returns. As public information, patents are also an important vehicle to
transfer of technological knowledge. Interpreting this indicator there are some limitations to
it that have to be kept in mind: not all the inventions are patented (firms can choose other
strategies to protect inventions); some sectors have much higher propensity to patent than
others.
In Fig. 5, we show the number of patents for photovoltaic technologies filed at the
European Patent Office in 2001 as a function of the RD&D spending of the corresponding
countries. It can be seen that countries with high expenditures for RD&D also tend to have
a higher number of patent applications. However, due to the generally low number of
patents no statistically reliable relation can be obtained.

Fig. 5. Number of patents in the photovoltaic sector as a function of the yearly funding of RD&D of photovoltaics
in 2001 by EU countries’ governments.
 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647 1645

3.3.2. Wind energy

Until 2001, in Germany, Spain and Denmark, wind energy plants with a total capacity
of more than 14.000 MW have been installed. The total installed capacity in these
countries has almost doubled every two years during the last decade. But also most of the
other EU countries and in particular the Netherlands, the United Kingdom, Austria,
Sweden, Belgium and Greece show increasing capacities. The growth of wind energy in
these nations is normally stimulated by effective market incentive schemes supplemented
by favourable regulatory conditions. Compared to the sector of photovoltaic wind energy
is already a rather matured technology. Whereas public RD&D plays a very important role
in the early process of technological development its relevance decreases as the companies
involved in turbine design develop their own RandD capabilities.
The per capita spending for RD&D in the sector of wind energy can be observed in
Table 1. Leading in funding are Denmark and the Netherlands spending 1.03 and 0.89V
per capita for the RD&D of wind energy systems in 2001, respectively. However, the
success in terms of industrial production of wind turbines has been very different in both
countries. Whereas Denmark has established leading industries in the field of wind turbine
engineering no such development took place in the Netherlands. The major differences
between the two countries with respect to the innovation system in the field of wind energy
have been extensively studied, e.g. in [9].
Only in Spain, Germany and Denmark, wind turbines are produced with significant
world market share. With respect to industrial output, the Danish companies are leading.
As can be seen in Fig. 6, Denmark produced in 2001 wind turbines with a total capacity of
3098 MW, considerably more than Germany (2444 MW) and Spain (840 MW).
Furthermore, Germany and Spain are mainly active on their home markets, whereas
export markets are of dominating importance for the Danish industry (besides the
domestic off-shore markets).
Even though Denmark assigns a significant amount of funding to the RD&D of wind
energy systems, the ratio of the turnover of the Danish industries to the RD&D spending is
by far higher than in the other two countries: Spain and Germany. Each Euro for

Fig. 6. Production and international market share of wind turbines in the leading European countries in 2001.
1646 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647

Fig. 7. Turnover of the wind turbine manufacturing industries and industrial production of wind turbines in
relation to the governmental funding of RD&D.

the RD&D in 2001 comes along with about 441V industrial turnover. In Germany, this
ratio is 163 and in Spain only 69—see Fig. 7. Denmark clearly benefits from its pioneering
role in wind engineering and from the establishment of a strong domestic market for wind
energy technology since the beginning of the 1970s. A highly interactive learning and
innovation system has developed in Denmark, which involves especially turbine
manufacturers, research institutes, technology users and turbine owners. Currently,
large industrial enterprises such as Vestas are the main drivers for the technical innovation
in the field of wind energy. The present public RD&D spending is only of minor relevance
compared to the activities of the dominant industrial companies in this sector.
The number of patents filed in the wind energy sector is generally rather low. Many
technological developments are characterised by a gradual change like the up-scaling of
the turbines rather than major technological breakthroughs (exceptions from this rule are
the change from stall to pitch controlled turbines, the introduction of gearless machines
or the introduction of the variable speed concept). Furthermore, most turbine
manufacturers developed from small and medium size companies at the beginning of
the technological development and these companies were not used to international patent
activities. Stronger focus on international patents can only be observed very recently.
Comparing the EU Member States with regard to the number of wind energy patents,
Germany clearly dominates the scene followed by the Netherlands, Denmark and Spain.

4. Summary and conclusions

RD&D for renewable energy sources constitutes a major share to the total energy
related RD&D spending in the EU Member States. All EU Member States have recognized
the importance of the integration of renewable energy sources in the energy sector for
 M. Ragwitz, A. Miola / Renewable Energy 30 (2005) 1635–1647 1647

reasons related to environmental protection, security and diversification of energy supply

and to social development [10].
Typically, countries spend about 30% of the energy RD&D budget for renewables,
however, large variations between the individual countries exist. The focus on the different
technologies varies widely between different countries as well. In 2001, Germany, France,
Italy, the Netherlands and the United Kingdom mainly funded research and development
in the field of photovoltaic technology, spending from 35% (NL, UK) up to 65% (IT) of
their total RES RD&D budget. Austria, Belgium, Denmark, Portugal, Sweden and Finland
are putting the greatest emphasis on the RD&D of biomass, using 30–80% of their RES
RD&D budgets for this purpose. In Spain, the RD&D of wind energy is receiving the
largest share of the governmental research and development budget for renewables
amounting to about 35%.
For research and development intensive technologies such as photovoltaics the effect of
RD&D spending on the generation of related international patents and on the
establishment of a prospering industry in this sector can be clearly seen. For these
technologies learning by searching is still the most relevant driver for technological
innovations. For other technologies like wind energy, the effect of learning by doing and
learning by using will be more dominant. Therefore, the development of leading industrial
companies on the one hand and public R&D spending on the other hand will show only a
weak correlation.

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