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2. Literature Review
According to data from 2005, about 90% of the EU-27 territory is considered rural (predominantly rural and intermediate regions) where 54% of the population lives (EU, 2008). Hence, that the EU has constantly developed different policies orientated to these particular regions.
Large amount of studies have been done over the years about sustainable development in rural areas, originating different socio economics theories, policies and systems, even some of them have been put in practice with more or less success in different countries.
This review will therefore highlight some works which have been done with the aim of achieving a development in so difficult areas mainly dependent on agriculture and farming economies. Due to the big number of studies done over the years, it would be very difficult to include all of them in this study. Consequently, this review is mainly focusing the attention to those European, national or regional policies that concern the topic of this thesis. Principally, this chapter will review those works about development of rural areas; farming co-ops as an important tool for this objective; Common Agricultural Policy and its positives and negatives influences; and the use of renewable energies for a sustainable and local development in rural areas.
It is not the aim of this review to analyse all the studies done about sustainable development in rural areas, cause it would be out of the scope of this thesis, or at least it would be too wide subject, and it would need its own study. Consequently, the literature has been reduced to those policies about rural development and renewable energy done by public institutions such as European Union, Spanish ministries and regional administrations.
Neither is it the objective of this thesis to do a study about community benefits from renewable energies as a whole, therefore the range of studies treated in this chapter are merely those more related with the topic of this work.
As there are different areas in which it is necessary to concentrate on, the review will be divided in different sections according to the field under study: farming coops as and their role in the development of rural areas; Common Agricultural Policy; Rural Development Policy; and Renewable energies in rural areas.
2.1. Farming cooperative systems.
There is a large amount of studies done over the years showing the important role that the cooperative systems can play in the development of rural areas or even poverty alleviation (de la Jara y Ayala, 1992; Lele, 1981; López and Marcuello, 2005; Monasterios, 2009; Morales, 1995; Nevares, 1963; Novkovic, 2008; Simmons and Birchall, 2008...). These model of company contributes to the rural development not only theoretically but also from the reality.
The International Cooperative Alliance (ICA) (2007) defines co-operative as “autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. They are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others”.
López and Marcuello (2005) not only assume the obvious role that the co-operatives play as an organizational reference, but also, they could not neglect the value of this model as a socio-economic actor. Accoring to their study, joining this two functions co-operatives can be one the pillars of the economy and society, becoming in a fundamental factor of development in rural regions.
Simmons and Birchall (2008) used the same reasons exposed to propose the use of cooperative societies by developing countries as an essential tool to achieve a sustainable economic growth and alleviate the poverty.
However, not only developing countries are using these models, but also the developed countries do, and try to protect, reinforce and increase the creation of co-operatives.
For instance, Spain has put a great effort throughout the years in the growth of the cooperatives, even the article 129.2 of the Spanish Constitution (1978) says that “the public authorities shall effectively promote the various forms of participation in enterprise and facilitate cooperative enterprises by means of appropriate legislation”.
Consequently, Spain count with the law 27/1999 of cooperatives (1999) that foments the creation of this type of organisations as a key to impulse the growth of the economy and employment, highlighting the ethical values that the cooperative principles such as solidarity, democracy, equality and social vocation, have, considering them indispensables to build an enterprise where the members feel identified with.
Proof of the investment made in the cooperatives is that they are very well established in different sectors, especially in the agriculture, in which, for instance, in the European Union and North America imply between 30 and 70% of the market (Cropp & Ingalsbe, 1989; van Bekkum & van Dijk, 1997; Nilsson, 2001). Besides, there are different international organisations that represents this type of societies joining forces in terms of defending their interests out of the local level.
Such as the case of COGECA (General Confederation of Agricultural Cooperatives in the European Union) (2009), which it was created in 1959, and nowadays represents about 40,000 farmers' cooperatives, employing 660,000 people. COGECA (2009) recognised the importance of the agricultural cooperatives in the rural regions, being the most important development operators and becoming the connexion of the socio-economic in rural regions. COGECA (2009) shows how the figures originated by the agricultural cooperatives in the European Union, such as more than 50% of the share in the supply of agricultural inputs; more than 60% in the collection, processing and marketing of agricultural products; and a global annual turnover of three hundred billion euros; speak by themselves.
Going to a more local scale, de la Jara y Ayala (1992) studied the influence of the agricultural cooperatives in the development of the rural region of Extremadura (Spain), taking advantage of his experienced in the area, creating and working with cooperatives since 1975. The study reveals that, in a region affected by the significant emigration of the population to the cities between 1960 and 1981, clearly dependent on the agriculture from the economic and social point of view with a 27,2% of workforce and generating the 20,24% of its GDP by 1987 (while the figures for the whole country were 13,8% and 5,43% respectively); the different policies accomplished by the national or regional authorities, promoted cooperative societies to develop the region and create stable employment. With especial mention to the plan elaborated in 1982, PECOEX (Cooperative Experimental Plan of Extremadura), on the bases of which 98 new cooperatives were created employing more than 1,000 people. All the trust deposited in this kind of socioeconomic system, made that the 24,71% of the working population in Extremadura was directly linked with farming cooperatives in 1992.
Besides, de la Jara y Ayala (1992) made some case studies in populations between 3,000 and 10,000 inhabitants, revealing a significant influence of the farming cooperatives, especially in the smallest villages, as generators of wealth and stable employment. Actually, in the cases studied the workforce dependent on farming coops was between 52 and 83%. And as consequence of the growth of the cooperative societies, the villages have seen the increase of other commercial activities, agricultural industry and standard of living, remarking the role of the agricultural cooperatives as driving force of the development of their communities.
However, there is a significant number of studies arguing the efficiency of this kind of organisations. Among others, Katz and Boland (2002); Lele (1981); López and Marcuello (2005); Nilsson (2001); Ortmann and King (2007); suggest that cooperatives suffer from technical, scale and allocative infficiency. Basically all these studies have been done analysing mainly the economic point of view, seeing the cooperatives societies as businesses and leaving on the side the social consequences of this kind of organisations in their community.
Nevertheless, cooperatives are still competing in different markets prospering and growing. If they were truly uneconomic they would be eliminated of the markets. Nilsson (2001) and López and Marcuello (2005), recognised that one of the possible options of the survival of the cooperatives could be the public support that they have. Usually, due to the important social role of the cooperatives, the different governments compensate this organisations with lower taxes and/or interest subsidies, for instance.
López and Marcuello (2005) analysed the situation of different agricultural cooperatives, trying to identified the link between their economic situation and the subsidies they were getting from the European Union through the CAP (Common Agricultural Policy). The study did not discovered that due to the grants that they received from the CAP the cooperative societies are becoming more inefficient, however, it revealed that these subsidies are allowing some inefficient cooperatives to survive in the market, making them dependent on the European financial support. Consequently with a reduction in the CAP could cause the decease of those inefficient organisations.
2.2. Common Agricultural Policy. CAP.
The Treaty of Rome (1957) commence the Common Agricultural Policy in terms of protecting a sector that, by then, employed one third of the population generating the 20% of the GDP (Bureau and Matthew, 2005). The objectives of the CAP set in the Treaty of Rome (1957) were:
- to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
- to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
- to stabilise markets;
- to assure the availability of supplies;
- to ensure that supplies reach consumers at reasonable prices.
Bureau and Matthew (2005) exposed that the main measure implemented to achieve these objectives was through prices intervention, achieving a stabilisation of the prices and a rapid technological evolution. Consequently, the costs decreased and the production increased significantly, reaching some of the goals. However, the actual consequences were that the population in rural areas decreased due to the low income, and the consume grew, but at a lower rate than the production, generating a surplus disposed in domestic and international markets with almost no competition due to the subsided exports.
Nevertheless, the CAP remained untouched until its first great reform, the MacSharry reform that was implemented in 1994. This reform tried to reduce the surplus cutting the intervention prices and compensating the farmers with a direct payment independent of the quantity produced. At the same time it introduced some social policies such as early retirement and agri-environmental scheme (European Parliament, 2001; Fennell, 1993).
It would be with the necessity of preparation for the incorporation of the new members to the EU, when the CAP was further reformed with the Agenda 2000 (1999), which introduced new price cuts and reinforced a second pillar of the policy to support environmental and social services and the quality of the products creating a Rural Development Regulation for the following six year.
However is in the mid-term CAP reform (2002) when appeared the decoupled payments, called Single Farm Payments (SFP), which depend on the commodity not affecting the production. With this reform, the subsidies do not depend on the volume of production and, to get access to them, it is required to follow the EU regulations regarding environment, food safety and quality, and animal welfare. The SFP and the new cuts in intervention prices started in between 2005 and 2007, depending on the country. Other measures of the reform were, first, to fixed the budget of the CAP for the period 2006-2013, so the nominal quantity would be the same, even with the introduction of Romania and Bulgaria by 2007; and second, to strength the second pillar of the CAP, creating a rural development policy which began to be applied in 2005.
All the CAP reforms have been worked out with the aim of reducing the direct subsidies to the prices or volume of production. As Bureau and Matthew (2005) exposed that, after 12 years of reforms, the intervention prices had been cut in more than a 45%, so the support is not being linked to the quantity and to increase the income of the farmers, they will need to do it through the marketplace, and not thanks to the subsidies. Besides, 5% of the SFP was transferred to rural development measures.
Although, the scope of the SFP were to reduce the incentives for intensification, this achievement is still unknown. And another issue detected is that the decoupling differs across the different states, and actually, they are allowed to keep part of the previous payments, hence that some countries, like France, still make them, because of the fearing of land abandonment.
Despite the attempts of the EU of reforming the CAP to solve the problems caused in the international markets and developing countries, and at the same time maintaining the main objectives within the domestic markets, there are different organisations and studies made, claiming for a further reform of the CAP (Bureau et al., 2005; Redclift et al., 1999; FAO, 2009; Rice, 2003; Butault et al., 2006; WTO, 2006; WTO, 2008).
Bureau et al. (2005) summarized the different causes for a further reform of the CAP. Among those are economic, because 40% of the EU budget is going to the CAP, however 50% of it is going to only the 7% of the beneficiaries. Besides there is a growing feeling of spending the money on other sectors like research and development or education. Other reasons are environmental, so making a more ecological CAP, it would be possible to decrease the production farming and intensification.
On the contrary, the reality of the EU-27 agriculture, reported by the Directorate-General for Agriculture and Rural Development (2008), is that it represents 6,2% of employment, varying from 1% to 33% in United Kingdom and Romania respectively, while accounting for 1.8% of GDP, differing from 0.4% to 9.5% in the different countries with Luxembourg at the bottom of the list and Romania at the top. It is evident that the importance of this sector is decreasing in EU-27, although there is still a strong and very important agrifood industry.
There is a significant number of farmers and agri-cooperatives associations, represented at EU level by COPA-COGECA (2009), that defends the CAP as a measure to ensure food stability and quality; moderate price for consumers and fair earnings for farmers; employment and public services.
It is still soon to have clear evidences of the consequences of the last reforms of the CAP, and even more difficult to associate the changes in the agri-food sector exclusively with the modifications of the CAP, cause, as any other sector, it has been affected by the difficult economic situation of the last few years.
On the other hand, the consequences cannot be analysed in a European level and it is much clear at a national or even regional level. In this section, several transformation that the Spanish agricultural sector has suffered in the last few years and, predictably, could be linked to the several CAP reforms, are highlighted.
The coordinator of farming organisations, COAG, (2003) predicted some of the impacts of the PAC reform done in 2003. Among them, it brought out the possible reduction in the agrarian exploitations incomes and with it the farmers' income between 10% and 50% depending on the cultivated crop. It would imply the abandonment of the farming activity estimating the disappearance of about 1.77 million jobs.
In terms of the reduction of the cultivated area, the COAG (2003) made an estimation of the area that would not be cultivated depending on the product (2.1) accounting a total area of 1,757,250 ha.
More recently, the National Commission of Agriculture, Environment and Fish (2008) showed that the agrarian working population has decreased in an 8% for the previous four years, and at the same time, the agrarian income is about 65% of the average.
Also the COAG (2009) has just reported a decrease in the Spanish agrarian income of 26.3% since 2003, the second worst figure for the last 20 years only overtaken by the registered data from 1992, associating the PAC as one of the causes among others.
Nevertheless, due to the pressures, the European Commission, Fischer (2009), started to work on the next reforms of the CAP which should come after 2013, recognising the importance of reducing the direct payments dramatically after 2013. But, due to the high value of the sector and the significant number of population dependent on it, or at least living in rural areas, Fischer (2009) also emphasized the importance of reorientating the CAP to its second pillar, rural development.
2.3. Rural Development Policy.
The OECD (2009) defined rural local units as those whose population density is less than 150 inhabitants per square kilometre. But also classifying in three different categories:
- “Predominantly Rural region” (PR): more than half of the dwellers of the region lives in rural communes.
- “Intermediate Region” (IR): between 15% and 50% of the inhabitants live in rural local units. And those regions with an urban centre with more than 200.000 inhabitants representing more than 25% of the population in a “predominantly rural” region.
- “Predominantly Urban region” (PU): the population living in rural local units is below 15%. Or when having an urban centre of more than 500.000 inhabitants, this represents more than a quarter of the total population of an “intermediate” region.
According to the Directorate-General for Agriculture and Rural Development of the European Union (2008), about 90% of the EU-27 territory is considered rural (predominantly rural and intermediate regions) where 54% of the population lives. However, rural areas are not only important because of their extension, but also because they offer 53% of the workforce and 42% of the GVA in EU-27 (83% and 74% respectively for the new members). In those terms, the primary sector in the EU-27 provide 6.2% of employment (varying from 1% to 33% in UK and Romania) and 1.8% of GDP (from 0.4% in Luxembourg to 9.5% in Romania). Nevertheless, the socioeconomic indicators of these regions are much lower than those in non-rural areas as it can be observed in the figures of appendix A.
Due to the consecutive reforms of the CAP, as it was explained in previous sections, the agriculture was going to suffer significant changes, specially in those situations where it has been clearly dependent on the European subsidies. Being the agriculture the main source of employment and economic development in rural areas, the problems affecting the sector could have repercussions on the entire rural society. In an attempt to compensate the lack of funding on the agriculture, the EU developed a program to support the rural areas.
Agenda 2000 (1999) constituted rural development policy as the second pillar of the CAP creating a unique regulation for the whole EU between 2000 and 2006. Although, it would be in the Mid Term Reform of the CAP (2002) where it was decided to completely reinforce the rural development policy transferring funds from the first to the second pillar of the CAP.
The Council Regulation (EC) No 1698/2005 (2005) originated the European Agricultural Fund for Rural Development (EAFRD), allowing to regulate the rural development policy through one fund, one management and control system. This regulation along with the Council Decision 2006/144/EC (2006) defined the priorities and measures for rural development as well as the objectives and the strategic to follow for the period 2007-2013. The objectives of the new rural development policy are:
- improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation;
- improving the environment and the countryside by supporting land management;
- improving the quality of life in rural areas and encouraging diversification of economic activity.
To achieve these objectives, the Council Regulation (EC) No 1698/2005 (2005) and the Council Decision 2006/144/EC (2006) specified different key actions acting in diverse fields. Those strategies and plans were divided in four axes according to the objective they are aiming to cover:
* Axis 1: “Improving the competitiveness of the agricultural and forestry sector”
The agriculture is losing importance as the main activity in the rural areas. However, the value of the agrifood sector in the rural economy and its role as food and services supplier, it is fundamental to preserve it. The growth of the market due to the enlargement of the EU is also increasing the competitiveness. Hence that factors such as efficiency and innovation are keys for the survival and development of the sector. Increasing competitiveness means reduction of costs production, improvement of food quality, value-added products, less pollutant and more environmentally friendly production technology, for instance.
* Axis 2: “Improving the environment and the countryside”
Involve all those measures orientated to preserve the EU's landscapes and natural resources guaranteeing a sustainable use of the land. These actions included in the axis 2 should contribute to the fight against climate change, improvement of water quality and biodiversity.
* Axis 3: “The quality of life in rural areas and diversification of the rural economy”
The aim of this axis is to help to create new employment possibilities with the diversification of the activities to those non-agriculture related. All those measures associated to improve the access to infrastructure, better environment and basic services, are also included in this axis.
* Axis 4: “Leader”.
The leader axis is a continuation of previous programmes implemented by the EU. Basically it contributes to the achievement of the priorities gathered in the axis 1, 2 and 3, by supporting the execution of local development strategies. This axis is created to reinforce the rural development in the long term encouraging actions leaded by local actors. These actions could ascent environmental consciousness, and invest in renewable resources and energy.
The Council Regulation (EC) No 1698/2005 (2005) also established that each member state should create its own strategy plan and programme according to its situation and characteristics.
Consequently, the Spanish Ministry of agriculture, fisheries and food (2007a) (2007b), recently renamed Ministry of the environment, rural and marine affairs (2008), did its job and created the correspondent documents in terms of establishing the new European policy.
Besides, the law 45/2007 (2007) approved by the Spanish parliament, establishes and regulates the diverse measures to support the sustainable development in rural areas. The law takes as a reference the European policy adapting it to its particular social, financial and environmental situation. As the Council Regulation (EC) No 1698/2005 (2005), the Spanish law include measures to improve the diversification of the economy, the quality of life and to protect and recover the natural and cultural resources of the rural environment.
2.4. Renewable energies in rural areas.
In terms of establishing a plan to comply the Kioto protocol and create new commitments after 2012 for the reductions of carbon emissions, the European Union (2009) fixed an objective of 20% of the overall energy generation from renewable sources by 2020. The European Union also highlighted the importance of the development of renewable energies to guarantee the energy supply in the Community; to create new employment opportunities; and to produce a regional development, especially in rural areas.
At the same time, the European Union (2009) emphasized the value of boosting investment at regional and local levels to promote the renewable energy installations and with it also promote the creation of employment; regional and local development; and social cohesion.
In the case of Spain, in its renewable energy plan (2005) acknowledged the importance of investing in those areas where the resources are located according to achieve its renewable energy targets. It assumed that those resources are mainly in rural areas, creating a socio-economic benefit increasing the employment and stimulating the economic development in these specific areas which are suffering from depopulation, contributing to develop sustainably the rural areas.
The Spanish renewable energy plan (2005) also expressed the necessity of promoting the renewable energy development taking into account other European policies, especially the common agricultural policy and rural development.
Congruently, the Spanish Royal Decree 1578/2008 (2008) recognised the advantages that photovoltaic installations integrated in the buildings may offered as distributed generation and social diffusion of renewable energies, extending this advantages to the farming installations being consistent with the Law 45/2007 of rural development mentioned in previous sections.
2.5. Defining the gap.
As it has been described, the CAP has generated positive and negative consequences in external as well as internal markets for years. Hence that the European Union has been trying to correct the problems with consecutive reforms. It seems to be evident that the CAP needs a deep reform in terms to avoid the disruption that it has generated in the international agri-food markets, especially to developing countries.
However, the reforms of the CAP have also favoured an intensification in the production and with it to the larger producers whereas the small farming co-ops, family farms or any other small producers have it difficult to survive without any external support.
It looks as though there is the challenge of the CAP reform, to adapt the agri-food industry to the world trade liberalisation and at the same time avoid the environmental impact of the intensive agriculture, not forgetting the preservation of the quality of the products.
On the contrary, it is the situation of the farmers. Nowadays they have the conflict whether becoming a specialised producer to compete in the market or assuming a function of environmental manager.
Nevertheless, it has to be taken into account that about 90% of the European territory is considered rural areas where more than half of the population lives and the agriculture is the base of the socio-economy. Agriculture employs directly more then 12 million people (DG AGRI, 2008). However, it has already been shown in previous sections, how agri-food cooperatives may develop their surrounding community making much more citizens indirectly dependent on the agriculture.
According to the last CAP reforms, it seems that the European Union is trying to diversify the economy in rural areas boosting the second pillar of the CAP, rural development, consequently the population it would not be so dependent on agri-food markets. One of the measures to achieve this, it is through renewable energies. Bearing in mind that rural areas are about 90% of the territory and it is there where the resources are located, it seems to be logic the investment in renewable energies, especially if the European Union is aiming to achieve its targets in this field.
It is at this point where the agri-food coops and family farms could have a chance, not only of maintaining the production, but also of increasing the incomes that it would allow them to pay attention to the quality of their products. Although it could even create and independence of the agriculture from the subsidies of the CAP.
If the farmers use part of their fields, or even the roofs and facades of theirs agri-food industry facilities, to generate electricity thanks to renewable sources, and then, they could sell it to the national grid, it would give them that extra income completely independent on the European Union.
It is the scope of this study to analyse the options that small farms could have to substitute the CAP subsidies for the profit they could get becoming also electricity generators using renewable energy systems.
In the case it would be possible for the farmers to become independent of the CAP, it would allow to the European Union to invest that 40% of the budget that it is spending in the agriculture in other fields such as education or research and development. And consequently that investment would also go, directly or indirectly, to the rural areas and agriculture. Because if it is possible to maintain the agri-food coop system in rural areas, it would be also possible to maintain the community benefits that this kind of organisations generate.
This measures would follow the objectives of the CAP reforms, allowing the EU to reduce its budget in agriculture, but at the same time improving the standard of living in rural areas. In addition, it would also do its bit according to the rural development policy. This measure would fulfil the four axis of this policy maintaining the agri-food sector, diversifying the economy and combating climate change.
3. A European rural region: Extremadura.
As it was commented in the previous section, the use of renewable energy could be an option for the rural areas to achieve its development. All the policies that are being recently formulated at European as well as national level, focused on the promotion of renewable energy and looking for a development in the most unfavourable areas, could be joined together, or at least some of its main points for the improvement of the standard of living in rural areas.
In terms of studying the possibility of substitution of the CAP subsidises for the income a farmer can get with a renewable energy installation, more concretely with photovoltaic, it is necessary to find an European rural region.
The rural region of Extremadura (Spain) has been selected for its rurality, highly dependency on the agriculture compare to the Spanish and European average and its high potential for photovoltaic systems installation.
In the following points this region and its characteristics will be presented analysing its rural condition; the agrarian sector and the consequences of the last CAP reforms; and its photovoltaic potential.
3.2. Rural Development.
Extremadura is one of the 17 regions of Spain. It is located in the mid west, bounded on the west by Portugal (figure 3.1.).
With a total population of 1,102,410 inhabitants, Extremadura is divided in two provinces, Badajoz (half south) and Cáceres (half north), and it is defined as a predominantly rural region according to the OECD criteria. Actually, Extremadura accounts with 41,634 km2, entailing a population density of only 26 inhabitants/km2 (INE, 2009).
Another peculiarity of this region is its economic structure. The primary sector plays a significant role in the GDP and employment, accounting 9.6% and 15.44% respectively, while the figures for the rest of the country are only 3.13% and 5.49%. In addition, the GDP per capita in Extremadura is only the 68% of the Spanish average and 64% in European terms (INE, 2009) (European Commission, 2008).
However, the distribution of the activities are slightly different if the diverse sectors are compared with the sized of the municipalities. In those small municipalities, predominantly rural, the agriculture represents about 30% of the activity. On the other hand, in those bigger, the structure is completely different and more similar to a more advanced economy (figure 3.3) (OECD, 2004).
It also needs to be taken into account the agri-food industry, which represents about 2.3% of the regional GDP and more than 32% of the workforce in the regional industrial sector. Besides, about 59% of the agri-food industries are located in municipalities with less than 10,000 inhabitants, being an important pillar of theirs socio-economy, and of the rural development. An important number of these businesses are constituted as cooperatives being registered about 310 farming co-ops which employ more than 30,000 farmers and have a turnover of 7.39% of the total Spanish agrarian (Junta de Extremadura, 2008) (UNEXCA, 2009).
As most of the rural regions in Europe, Extremadura has been suffering from the exodus of its population from the rural areas to the cities. Specially in the decades of the sixties and seventies, when the whole region population was reduced by 25% (figure 3.4.) (Gurría et al., 2009).
However, that trend has changed in the last decade. The global number of inhabitants in the region has slightly increased in about 1.6%, although in Spain the growth has been in more than 10%. Unfortunately, that increase has not occurred equally in the whole region. That growth has been mainly produced in the largest population while those with less than 5,000 inhabitants, in more rural areas, have decreased in about 7%. Bearing in mind that almost 37% of the population lives in municipalities of less than 5,000 inhabitants, it is a factor to be considered, because it can generate an ageing in the rural population with all its consequences (INE, 2009; OECD, 2004; Junta de Extremadura, 2008; Gurría et al., 2009)
In 1992 began the application of European programmes for the development of rural areas followed by the consecutive European plans in 1994 and 1999, and the Spanish programmes for the same periods.
About 47 municipalities participate in the first programme covering 9.2% of the population and 4.5% of the land and receiving 2,980 million of pesetas (about 17.91 million €) for diverse projects focus on the sustainable development of the area. With the continental and national plan for the period 2000-2006 374 municipalities, covering about 76% of the population and 91% of the territory, received some type of aid for their sustainable development in different aspects such as cooperatives, associations, administrations or collectivities, businesses, integration of women to the labour market and TIC.(Junta de Extremadura, 2008).
The policies formulated in Extremadura have been notably successful, although the achievement has not been homogeneous and the objectives not reached. For instance the employment for women and the population between 55 and 64 years old has been positive but achieving the 70% and 80% of the objective respectively.
However, thanks to the Agenda 2000 and its implantation in Extremadura has improved clearly the current situation in the region, although its situation is still far from the European expectation (Junta de Extremadura, 2008)
3.3. Agriculture and CAP.
After the previous section, where it has been highlighted the rurality of Extremadura, this one will described the agrarian situation in the region and its relationship with the European subsidies (CAP).
As it is was mention previously, the agrarian sector plays an important role in the economy of Extremadura, being the 9.6% of its GDP and more than 15% of its workforce in 2005 (INE, 2009). However, this figures are much bigger in those rural areas with municipalities of less than 5,000 inhabitants (figure 3.3.).
Hence that it is important to analyse the structure of the agriculture in Extremadura. More than 60% of the agrarian exploitations are family businesses. In fact, it can be considered that there are two types of holdings:
- The first kind are those smaller, economically speaking, with less than 16 UDE (Economic Dimension Unit. About 1,200€ gross margin), which it can be considered the profitable boundary in the spanish family agriculture context (Junta de Extremadura, 2008). The largest in number, but covering only 22.5% of the agrarian area.
- And those with more than 16 UDE. Only about 25.14% of the farms, however, these ones are much larger covering more than three fourths of the cultivated land (INE, 2009).
As it can be seen in figure 3.6., both types of agrarian structures employ almost the same amount of people although the land covered is completely different. According to the economic results (subsidies included), the structures highly differ from each other in favour of the more commercial ones.
An significant observation of the previos graph, is that the Gross Margin is including the subsidies received from the CAP. Consequently, the large difference between the economic results of both structures reveals that the CAP is not being received by those who need it the most, not helping to reduce the differences between them.
Due to the rural condition of the region, its clearly dependency on agriculture and its low economic situation comparing to the rest of the country and the EU average (68 and 64% respectively (INE, 2009; European Commission, 2008)), Extremadura has always received a significant amount of money thanks to European policies, basically through the CAP, to achieve a socio-economic development in the area.
The total amount of the received subsidies for the agriculture in Extremadura reached a 53.7% of the agrarian income of the region in 2008. The figures for Spain during the same period are estimated in about 31%.(UEX, 2009).
As a result of the European subsidies that Extremadura has been receiving for years, has allowed an economic growth in the regional economy and an improvement in the farmers income. However, they rely on them as an important proportion of their income, and it is implying relevant socio economic consequences with the reductions of the economic aids after the last CAP reforms.
The figure 3.7 shows how the employment has evolved in the whole region and more concretely in the agriculture since 2000. It displays how the employment in Extremadura has increased significantly whereas the agrarian workforce has suffered from a recession. Special mention has the decrease that the agricultural employment had after 2005 when the last CAP reform of 2003 was bound.
Although it is still soon to reach conclusions about the consequences of the mid term CAP reform, there have been some effects in the agrarian sector:
- Reduction in the financial aid that the farmers used to receive. And consequently, reduction in 10% average of the farmer income.
- Some of the cultivated crops have changed in the harvest of 2006 and 2007:
- Beetroot has disappear, when it used to be almost 500 Ha.
- 20% reduction in the cereal cultivation.
- Reduction from 95,000 to 23,000 Ha of Durum wheat.
- 88% reduction in proteaginous.
- 50% reduction in oleaginous.
(Junta de Extremadura, 2008)
It is obvious that in a region were between 40 and 60% of the farmers income depends on the CAP, a decrease of them had to affect to the socio economic structure of the rural areas. The final objective should be the extinction of those external incomes, however, it would be necessary to find alternatives for an agrarian transformation and a sustainable rural development. Hence that the Rural Development policy developed by the European Commission is becoming essential, introducing an employment diversification and incomes out of the agrarian sector.
Nowadays, it seems to be really difficult to promote the rural development exclusively through the agriculture. An economic structure more balanced between the different sectors is needed, taking advantage of the high quality agrarian products, the added value and the employment generated by the agri-food industry, rural tourism and the alternative technologies.
3.4. Photovoltaic Technology.
The energy production in Extremadura is mainly based on electricity generation from nuclear or hydro, over any other energetic resources such as coal or petrol. The Nuclear power plant of 1.9 GW in Almaraz and the 22 hydroelectric plants with a total power of 2.2GW are the pillars of its energy market.
The nuclear plant in Almaraz produces energy at a higher rate than the consume in the entire region, converting Extremadura in an electricity exporter. In terms of the hydroelectric plants, although the technology is considered as renewable energy due to its nil carbon emissions, the necessity of water for other uses such as agriculture and human consume in a region with dry weather, it is always complicated to have a stable generation (Junta de Extremadura, 2008)
The solar resource is highly abundant in Spain, and particularly in Extremadura, which has favourable conditions for photovoltaic energy installation, with high irradiation areas. In the figure 3.7. is shown an estimation of the irradiation (daily energy average per area unit) in Spain. The map presents the country divided in five zones according to the irradiation in the area. Paying attention to Extremadura (its location can be estimated using figure 3.1.), it is reflected that its territory it is considered zone IV and mainly zone V. It means that Extremadura has an estimated irradiation higher than 4.6kWh/m2 in all its territory.
In 2005 the Spanish government launched a Renewable Energy Plan for the period 2005-2010, with the aim of boosting the renewable energy sector. By then, Spain had photovoltaic power installed of 37MWp. Consequently, the plan fixed an target of 400MWp installed by 2010 (PER, 2005).
To achieve that target, the legislation that regulated the electricity generation under special regime (basically those power plants, which use renewable sources or not, with a capacity below 50MW) was modified to increase the feed in tariff in favour of the renewable energy installation systems.
In terms of PV, the photovoltaic installations were divided in three groups according to theirs power: those below 100kWp; between 100kWp and 10MWp; and finally those from 10MWp to 50MWp. The installations with a capacity over 50MWp are not considered special regime, so they would sell the electricity in the market and would not have access to the regulated tariff, although they could get a bonus per kWh sold, due to theirs renewable source (RD 661/2007, 2007).
Thanks to the regulated tariff fixed for each one of the groups, that in the best case would be 575% of the standard tariff (table 3.2.), the photovoltaic technology was promoted all around the country boosting the industry, allowing Spain to generate all the components in the chain and increasing significantly the PV power installed.
The technology was so benefited with the new royal decree that Spain reached 85% of its 2010 target by August 2007, and in May 2008 had 1,000 MWp installed, achieving 3,461MWp at the end of 2008 (figure 3.8) (CNE,2009).
Extremadura, due to its special conditions being one of the regions with the highest irradiation in Spain, saw how in only four years an nonexistent technology was able to installed more than 400MWp at the end of 2008 (figure 3.9.)(CNE, 2009).
The target fixed by the Spanish Renewable Energy Plan for Extremadura was to install 12.85MWp during the period 2005-2010 reaching 13.39MWp by 2010 (PER, 2005), however, Extremadura built up the entire country capacity target by itself two years earlier.
Mainly, the photovoltaic installation that was being set in Extremadura, as well as all around the country, were the so called “huertas solares”, where different owners joined to share the construction, operation and maintenance costs creating large scale PV farms selling the electricity generated to the national grid (de la Jara, 2009)
However, each one of the owners of the “huerta solar” was in the possession of 100kW or less. Therefore, they were allowed to sell the kWh at the highest regulated tariff (table 3.2.) although the whole photovoltaic installation had more than 100kW (de la Jara, 2009)
In a region like Extremadura, with a very low density population, high solar irradiation, large open areas and with abandon agrarian fields due to the CAP reforms allowed that rapid photovoltaic development. In fact, diverse companies covering all the process of photovoltaic installations such as distribution, installation, promotion, engineering, fabrication of auxiliary components or research and development were created all over the region allowing Extremadura to build the PV farms with its own local brand new industry (AGENEX, 2009)
This unexpected overproduction made the Spanish government to review the feed-in-tariff policy for photovoltaic installations. Fearing that the photovoltaic was over subsidised and it could slow down the research and development of the technology, affect to the electric system costs and the medium and long term perspectives, the government reduced the regulated tariff for photovoltaic systems (Table 3.3) (RD 1578/2008, 2008).
Therefore, in September 2008, the Ministry of Industry, Tourism and Commerce, published a new Royal Decree establishing the new targets for the coming years as well as the new regulated tariff. In this case the photovoltaic systems were divided in different types:
- The type I: Those systems located in facades or roofs of residential, commercial or industrial buildings. Or those built on structures used as parking roof or for shading. This kind of installations are subdivided in two:
- Type I.1: With a power installed under or equal to 20kW.
- Type I.2: With a power installed over 20kW.
- Type II: All the installations not included in the type I.
The royal decree also fixed a maximum capacity installed per year by type, with 267MW in the case of type I (10% for type I.1 and 90% for type I.2) and 133MW for type II. At the same time specified a maximum capacity of 2MW and 10MW for type I and type II systems respectively (RD 1578/2008, 2008)
Although it was also set an extra additional capacity for the type II systems for the years 2009 and 2010 of 100MW and 60MW respectively (RD 1578/2008, 2008), the reduction in the growth of the photovoltaic installations was unavoidable. The maximum capacity per year was rapidly reached and consequently no more installations were built in that year due to the no economic interest of building a PV system that has not access to the regulated tariff.
This situation has generated a halt in the PV market of Spain and Extremadura with the construction of only new 39MW in the whole country and none of them in Extremadura, according to the, by the moment this thesis was being written, last report of the National Commission of Energy (CNE, 2009)
A whole industry recently created that was growing, probably at a very high rate, and generating benefits to the community suffered from a detention in theirs plans, producing a stop expecting a new reform in the PV legislation with the new Renewable Energy Plan for the period 2011-2020 that the Spanish government is going to release soon.
The economic situation, low density population, high dependency on agriculture and high solar irradiation become Extremadura in the perfect candidate for this study.
In this section has been shown that Extremadura is clearly a rural region that has been suffering from an exodus and ageing of its population in the most rural areas. Fortunately for the region, there has had a significant investment from the European Union and the Spanish government through different rural development programmes and policies. This has allowed Extremadura to grow and improve its situation reducing the difference between its welfare and the European average.
However, Extremadura is still with a GDP per capita of about 68% the Spanish average, being the lowest of the country. The work done so far has been quite successful, although there is still a long way to go to achieve a development in the rural areas of Extremadura.
In terms of the agrarian sector, it has been reflected the high dependency on the CAP for years and how the last reforms affected the sector heavily. At the same time, it has been revealed how the agrarian sector is structured with more than three fourths of the farms not highly profitable using a small share of the cultivated land. Also, according to the income of the different type of farms, the CAP distribution seems to be unfair, favouring the largest and most profitable farms.
Apparently the idea of this thesis could match perfectly with the necessities of the region and rural areas. The high solar irradiation on Extremadura and the recently created photovoltaic industry in the region could make possible the topic of this thesis.
Nevertheless, the Spanish government, with the introduction of a new royal decree exclusively for photovoltaic technology, justifying it because of the speculation, uncontrolled growth and the fears for the development of an unstable new industry, has completely stopped the photovoltaic industry, not only in Extremadura, but also in the whole country.
Even so, there is still a promotion of this technology thanks to feed-in-tariff for a rather small capacity target (compared to the previous years evolution of the sector). Although the main expectations of the industry are deposited in the proximately released new renewable energy plan for the period 2011-2020, that it is supposed to encourage again the photovoltaic installation.
4. Data Analysis.
As it has been analysed in the section 2, there is an option for the farmers and rest of the population who lives in rural areas, to be independent from the European subsidies to the agriculture. That option could be using renewable energy installations to substitute the CAP. So the significant percentage of the European budget, that used to go directly to incentive the agri-food production, could be invested in other resources to also improve the standard of living in the European rural areas and at the same time maintain an agri-food industry, even allowing it to improve its quality, which is so important for the whole European population.
It is the scope of this study to analyse that possibility using mainly photovoltaic technology. The aim is to examine how many hectares of cultivated land would be needed to “sacrifice” for setting a PV installation in terms of substituting the income that the farmers received from the CAP with the income that they would earn thanks to becoming electricity generators.
Nevertheless, it is not the objective to convert the land use from farming to energy generation. So it is equally important to study, how big the PV systems would be, and therefore the sacrificed food production, because it could create a significant impact not only in the agri-food industry, but also in the rural areas landscape.
On the other hand, with the last changes in the photovoltaic regulations in Spain, the total PV capacity in the country is very low. This situation needs to be remembered, because the possibility of building a large scale PV farm seems to be rather difficult for the coming years compare as it used to be.
For the execution of this study has been necessary to gather diverse information related to agriculture, the subsidies that it receives through the CAP, and the solar irradiation in Extremadura. Once that information has been collected it was required to express them in terms of economic units per area, so they can be compared and analysed.
In this section is going to be described where the different data has been gathered from and what are theirs limitations. The following points will comment the different agrarian and solar data in Extremadura sources, necessary for the complete understanding of the results
The data collected will be analyses defining the most important crops in Extremadura and which one is subsidised. At the same time, an estimation of the benefits that could be earn thanks to a PV installation in Extremadura will be also calculated.
Once the data has been adapted to be compared, an analysis will be made trying to estimate figures for the entire region and for particular farms by crop cultivated.
4.2. Agrarian Data.
In terms of the agrarian information, diverse sources has been consulted:
- Spanish National Institute of Statistics (INE): Since the statistics studies began in Spain in 1856 with the Statistics Commission of the Kingdom for the execution of population census, it has evolved to become in a reference for any statistical study at national or regional level. It integrates its own studies as well as those elaborated by other institutions in a database called “Inebase”. Among all the demographic, economic and social statistics, it can be found complete statistic compendium for each one of the sectors such as agriculture. One of the surveys conducted by the INE every two year is about the agrarian exploitations structure, which collect data about the diverse exploitations, agrarian area, farms, works in the exploitations and cultivation apart from others. The information offered by the INE can be selected according to different variables and can be easily downloaded in different formats to work with and analyse them(INE, 2009)
- Yearbook of Agri-food Statistics carried out by the Ministry of the Environment and Rural and Marine Affairs. This report is a compilation and diffusion of the statistical data related with the all the ministry activities. The report is divided in four section, and one of them collects the statistics about the rural environment with a chapter dedicated to the areas and productions of the cultivations. As the data accessible in the database of the INE, these statistics can also be downloaded in different formats to make possible the analysis of the data using a spreadsheet file. (MARM, 2009)
- “INFORME 2008”. The agriculture and livestock in Extremadura. Report carried out by the Faculty of Economics and Businesses Science and the School of Agrarian Engineering dependant of the Universidad de Extremadura. These reports are published annually since 1987 using the data from the General Secretary of the Regional Ministry of Agriculture and Rural Development, being considered the best, if not the only one, source of information about the agriculture and livestock in Extremadura and its economy. It has been only in this document where it has been possible to find a relation between the different crops and the subsidies received (UEX, 2009)
Thanks to this three sources it has been possible to find the necessary data for this study such as main crops cultivated in Extremadura, production rate, production, total farmers' income, area cultivated and subsidy for each crop.
However, some of this data needs to be treated carefully because the data is annual statistics at regional or provincial level, consequently, the application of any conclusion at a local level can only be treated as an estimation.
Besides, the subsidies that the farms received exclusively from the CAP is very difficult to define. After the last CAP reforms, the subsidies are not given has a help to product but to the producer. The direct payment of the exploitations are based in the average of hectares cultivated by the farmer during the reference period (2000-2002) and the crop produced by then. Consequently the quantity that receives the farmer is independent from the land production since 2006.
However, Spain is maintaining some of the payments to the products and when gathering the data, they always appeared mixed with the Europeans. With no options to separate them, but having the total amount received by each crop in 2008 thanks to the “INFORME 2008”, it has been possible to relate the data and obtain an estimation of the subsidies received per crop and per tonne or hectare.
Table 5.1 shows the main crops cultivated in Extremadura with some information about each one such as:
- Area cultivated in hectares.
- Production expressed in tonnes, except from the products in liquid form like wine or olive oil, and the plants and flowers that appear per unit.
- Producer price, the total amount of money that farmers that cultivated the crop received for its commercialisation (in thousand of euros).
- Subsidies, the total amount of money that those crops or the farmers that cultivated the crop received. These subsidies include the CAP and those given by the Spanish or regional Ministry. (in thousand of euros)
- Basic price, the final total income for each crop including subsidies (in thousand of euros).
It is presented that the cereals are the main type of cultivation in Extremadura in terms of area cultivated, quantity produced and financial benefits. Paying attention to total income, the cereals are followed by the group form by vegetables, potatoes, plants and flowers, which seems to be more production rate of more than 7,000€/Ha for the total group.
It can also be noticed that not all the products are subsidised, like the fruit, which, even not having any economic aid, seems to be quite profitable.
Paying attention exclusively to those crops that received some kind of economic aid, it can be observed that the olive trees cover almost a quarter of the vegetable production land. However, its productivity is not so high in quantity terms, in spite of everything it generates more than 5% of the total vegetable production income before subsidies (figures 5.1 to 5.3).
On the contrary, the tomato seems to be very productive generating more than 35% of the vegetable production in terms of quantity and almost 10% of the total income before any economic aid when it covers only 2.35% of the land (figures 5.1 to 5.3).
In terms of economic productivity, the rice seems to be quite profitable and paid at high prices, because covering just 3.2% of the fields and producing 5.2% of the total tonnes, it generates 7.57% of the total income before grants (figures 5.1 to 5.3).
According to the subsidies received in the country, as it is shown in table 5.1 about 14% of the total vegetable production income is earned thanks to different subsidies. It is ascertained that the tobacco got the main part of the subsidies in Extremadura with almost 40% of them. The next two products that got more subsidies were the apparently most productive ones, the rice and the tomato obtaining 14.6% and 11.6% respectively (figure 5.4).
Paying attention to the income that the farmers get thanks to the subsidies according to the crop they cultivated, figure 5.6 presents how the farmers that cultivated tobacco would earn almost 75% less without any economic aid, being the most supported. Other products such as durum wheat, rice, pulses and the olive (only for olive oil production) seem to be also quite dependent on the grants being more than 20% of the farmer income subsidised
Using these regional data, the subsidies received by the farmers per hectare can be estimated. However, it is needed to take into account that the concessions of these subsidies follow different criteria being part of it the extension of the land cultivated per crop, but not exclusively (table 5.2)
4.3. Solar Data.
The Photovoltaic Geographical Information System (PVGIS) is a program available on the internet (http://re.jrc.ec.europa.eu/pvgis/apps3/pvest.php#) which has an historical data base with the irradiation of Europe and Africa. Using this maps of solar resources and PV electricity potential the Renewable energy unit of the Institute for energy (European Commission. Joint Research Centre) has created a program that can estimate the solar radiation per month for any location. At the same time, introducing just some details about the system under study, it calculates and estimation of the energy generated by that system in the location selected with the possibility of adding single or double axis tracker.
The program is really easy to use and with just some knowledge about pv systems is possible to generate a slightly idea about the resources and potential of a selected place. The program can be quite useful to have a first impression before deciding to invest in any project, or to do the first calculation at the first stages.
However, the information generated by PVGIS needs to be read carefully paying attention to the kind of panels the program can use and which one are being used in the real project; the shading issues that PVGIS is considering, because is impossible to have a very local an accurate sun path of any location; and the special local weather conditions that can affect particularly in some locations, because the program has not irradiation data as such detail.
PVGIS generates its own solar radiation maps for the entire Europe and Africa (see figure 5.7 for Extremadura PVGIS solar radiation map). Nevertheless, using this software the solar irradiation on an horizontal surface has been collected for different locations in the region. Beginning at the North-Westernmost of the region (coordinate 40º12' North, 6º12' West) and moving South-East collecting the data every 15º in both directions, so its possible to have an approximated irradiation map of Extremadura.
Figure 5.8. shows the average daily sum of global irradiation per square meter on an horizontal plane for different latitudes and longitudes, taking 0 in the X axis as the westernmost point of Extremadura and 8 the easternmost, while 40º12' and 38º12' are the northernmost and southernmost latitudes respectively. It is presented the differences between the southern and northern part of Extremadura, with a deviation between the maximum and minimum irradiation of almost 9%.
However, to build a PV system in the northern part does not involve to have a very low radiation, because the orography needs to be taken into account and as it can be seen in figure 5.8. some areas in the north east have a higher value than others locations in the centre of the region.
With the data obtained from PVGIS it is observed the high potential for photovoltaic installations. Even so, it is not the same for the entire region, therefore all the analysis will be made working with the maximum and minimum radiation (4.81kWh/m2 and 4.38kWh/m2), so everything will be expressed according to that interval, and it will allow to have an easier estimation according to the location of the PV installation.
Once the solar radiation has been found, it can be calculated the expected energy per year. For that it is needed to be taken into consideration the performance of photovoltaic technology; the temperature at which the panels are working; how the efficiency of the panels is affected by the magnitude of the light; the angle at which the panels have been set up; and how the panels perform depending on the spectrum of solar radiation.
The difficulty for developing a model able to bear in mind all these variables is significantly high. Hence that, to calculate the energy yield per year in this study, it has been used an estimation
Figure 5.8. Average daily sum of global irradiation per square meter on an horizontal surface in Extremadura according to the latitude and longitude (Own source using data from PVGIS, 2009) made by the “Colegio oficial de peritos e ingenieros técnicos industriales de Badajoz” (Oficial School of Industrial Engineers of Badajoz) for Extremadura, that expressed a relation between the expected energy generated in kWh per year and the daily average solar radiation on an horizontal plane and the peak power of the photovoltaic system as:
Where Hh is the average daily sum of global irradiation per square meter on an horizontal plane; Pp is the peak power of the photovoltaic installation; and E is the expected energy yield per year (COPITIBA, 2007).
However, the energy yield can be also expressed depending on area of the PV farm. The previous formula could be expressed as:
where A is the area cover by 1kWp in m2/kWp.
Nevertheless, with the aim of comparing the economic income that could be obtained per area, and knowing the price of the kWh generated by a PV farm:
where I is the income generated by the PV installation in €/m2·year; PkWh is the regulated tariff of the kWh generated by a PV installation, but in terms of including the cost of setting up the installation PkWh should be expressed as:
where the Tariff will be the regulated tariff; Cost the setting up cost in €/m2; and System lifetime the number of years that the system is working.
For this study, different estimations have been made:
- The average daily sum of global irradiation per square meter on an horizontal plane will be those obtained from PVGIS. And it will be calculated for the maximum and minimum, creating an interval of maximum and minimum profit.
- The area necessary for 1kWp used will be estimated as 9m2 (COPITIBA, 2007).
- The PV farms will be estimated as built on the ground, so the regulated tariff that they would get would be like those considered by the Royal Decree 1578/2008 as type II (table 3.3.)
- The installation will be considered without any tracking system.
- It will be estimated that the PV farm will be working and selling energy for a period of 25 years.
- The costs of a installing a PV farm will be estimated as 5.85€/Wp, as the “Colegio oficial de peritos e ingenieros técnicos industriales de Badajoz” does (COPITIBA, 2007). (Details of the costs in table 5.3)
- The installation costs should be paid at once when the PV farm is built, however, in terms of including it in the possible income per year generated, it has been estimated as if it would be paid a proportional amount every year during the system lifetime.
Bearing in mind all the estimations
Appendix A. Importance of rural areas in EU. Graphs and tables.
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