Analysis of productivity in the Spanish wind industry

Abstract

This paper provides an empirical analysis of the evolution of total factor productivity (TFP) among Spanish wind farms. The Malmquist productivity index (MPI) is used to measure how productivity evolves. The index makes it possible to break down total productivity performance into the components of technological change and changes in technical efficiency. Technical efficiency is then further broken down into changes in purely technical efficiency and changes in scale efficiency. The analysis is carried out by estimating two alternative models, enabling the assessment of the impact of the different kinds of technology used on the wind farms. From the results, it may be concluded that it is important to model the way in which the farms use different kinds of technology. Including technology as an additional input allows makes it possible to correct the estimations of changes in productivity and its components. Once these estimations have been corrected by including the different technologies utilized, the results indicate that growth in productivity (around 2% annually) is mainly due to changes in the technical efficiency growth rate, specifically in the component of pure technical efficiency. In contrast, the technical change component does not contribute to growth in productivity, indicating that technological capacity has not been optimized on most wind farms. It should be highlighted that, while the results of productivity are fundamentally conditioned by the technology variable, they are also affected by variables that are exogenous to the productive processes. In light of these results, policy implications are discussed.