The public promotion of renewable energies sources in the electricity industry from the transaction costs perspective. The Spanish case

This paper analyzes the success of wind energy in Spain from 1986 to 2007. Certain special characteristics
have emerged in Spain that provide credibility to the feed-in tariff (FIT) device to promote this energy
source. To explain this success, the analysis will focus on the intrinsic characteristics of FIT using the
concepts of the transaction cost theory (TCE). Nevertheless, in this framework, special attention is placed
on the role that specific political and institutional factors have played in providing stability to this
instrument. Thanks to an early start and an on-going and generous FIT device, wind energy promotion for
electricity has become a political success story in Spain. The main implication of this analysis is that this
success is mainly due to the trade-off between stability and flexibility in the use of Spanish FIT.