The Big Question
investors and manufacturers. In the past decade, we have seen a number
of countries use policy mechanisms that include LCR provisions to promote
Current over-capacity in wind turbine manufacturing means that ful-
fllment of LCRs merely exacerbates an already severe problem. Ideally, we
would like unfettered trade in renewable technologies, but we’re a long way
from that. But perhaps a middle ground could be found.
The LCR approach for promoting domestic production and employment opportunities can be brought about by a positive incentive scheme,
perhaps incentivizing manufacturing tax credits, or an adder on top of
the FIT for locally sourced components. But in the interim, the top-down
enforcement of LCR is likely to do more harm than good for both the local
and the international wind industry and our outlook for a sustainable
clean energy future.
ARE DOMESTIC CONTENT REQUIREMENTS (DCRs) good or
bad for the renewable energy industry? That depends, of
course, on who you ask. Either way, DCR is here to stay. A
protracted dispute over DCR with no clear resolution, however, will be bad for the industry in the long-term.
Whether we like it or not, DCR will be a defning fea-
1. Cheaper/more reliable electricity during peak loads.
ture of renewable energy procurement for the foresee-
able future. Countries will always intervene to protect
their own energy interests, and DCRs provide a per-
ceived beneft to the politicians and bureaucrats that
introduce them. Those benefts usually consist of some
combination of the following:
2. Increase domestically produced electricity for energy security.
3. Increase employment, innovation, and industry capabilities domestically.
4. Reduce greenhouse gas emissions.
DCRs generally increase costs (hurting #1 above) but help create employ-
ment and domestic energy capability (contributing to #2 and 3 above). As such,
in many jurisdictions, DCRs provide the necessary political impetus to pro-
mote local solar development, which, proponents argue, also helps #4 above.
Disputes over DCR may be necessary to protect interests and a natural element in energy trade. But disputes must be resolved in a reasonable
amount of time. If disputes over how countries can best protect their interests in renewable energy development and procurement are allowed to drag
on indefnitely, the resulting uncertainty will hurt the industry more than the
additional costs of DCRs ever could on its own.