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The short-term costs of local content requirements in the Indian solar auctions

Author

Listed:
  • Benedict Probst

    (University of Cambridge)

  • Vasilios Anatolitis

    (Fraunhofer Institute for Systems and Innovation Research ISI)

  • Andreas Kontoleon

    (University of Cambridge)

  • Laura Díaz Anadón

    (University of Cambridge)

Abstract

Developing and emerging economies are implementing local content requirements to spur domestic manufacturing, though their costs and benefits are not well understood and difficult to quantify. Here, we provide an empirical assessment of the short-term costs of local content requirements using a credible counterfactual. We analyse data on government-run solar photovoltaic auctions held in India between 2014 and 2017 and exploit the fact that not all of the auctioned contracts entailed local content requirements. We find that local content requirement policies resulted in a ~6% per kWh increase in the cost of solar photovoltaic power generated from those projects when compared to similar projects not subject to the same local content requirement policy. During this three-year time period, Indian solar panels remained around 14% more expensive than international panels. We found some evidence of short-term increases in domestic manufacturing capacity, yet during this short period Indian firms did not increase market share or break into export markets.

Suggested Citation

  • Benedict Probst & Vasilios Anatolitis & Andreas Kontoleon & Laura Díaz Anadón, 2020. "The short-term costs of local content requirements in the Indian solar auctions," Nature Energy, Nature, vol. 5(11), pages 842-850, November.
    • Handle: RePEc:nat:natene:v:5:y:2020:i:11:d:10.1038_s41560-020-0677-7
    DOI: 10.1038/s41560-020-0677-7
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    Cited by:

    1. Diniz, Bruno Andrade & Szklo, Alexandre & Tolmasquim, Maurício T. & Schaeffer, Roberto, 2023. "Delays in the construction of power plants from electricity auctions in Brazil," Energy Policy, Elsevier, vol. 175(C).
    2. Harilal Krishna & Yash Kashyap & Dwarkeshwar Dutt & Ambuj D. Sagar & Abhishek Malhotra, 2023. "Understanding India’s low-carbon energy technology startup landscape," Nature Energy, Nature, vol. 8(1), pages 94-105, January.
    3. Scheifele, F. & Bräuning, M. & Probst, B., 2022. "The impact of local content requirements on the development of export competitiveness in solar and wind technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    4. Fleck, Ann-Katrin & Anatolitis, Vasilios, 2023. "Achieving the objectives of renewable energy policy – Insights from renewable energy auction design in Europe," Energy Policy, Elsevier, vol. 173(C).
    5. Hastings-Simon, Sara & Leach, Andrew & Shaffer, Blake & Weis, Tim, 2022. "Alberta's Renewable Electricity Program: Design, results, and lessons learned," Energy Policy, Elsevier, vol. 171(C).
    6. Benedict Probst & Simon Touboul & Matthieu Glachant & Antoine Dechezleprêtre, 2021. "Global trends in the invention and diffusion of climate change mitigation technologies," Nature Energy, Nature, vol. 6(11), pages 1077-1086, November.
    7. del Río, Pablo & Kiefer, Christoph P., 2023. "Academic research on renewable electricity auctions: Taking stock and looking forward," Energy Policy, Elsevier, vol. 173(C).
    8. Malhotra, Abhishek, 2022. "Trade-offs and synergies in power sector policy mixes: The case of Uttar Pradesh, India," Energy Policy, Elsevier, vol. 164(C).
    9. Münch, Florian Anselm & Marian, Adela, 2022. "The design of technical requirements in public solar auctions: Evidence from India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    10. Anatolitis, Vasilios & Azanbayev, Alina & Fleck, Ann-Katrin, 2022. "How to design efficient renewable energy auctions? Empirical insights from Europe," Energy Policy, Elsevier, vol. 166(C).
    11. Münch, Florian Anselm & Scheifele, Fabian, 2023. "Nurturing national champions? Local content in solar auctions and firm innovation," Energy Policy, Elsevier, vol. 179(C).
    12. Sharma, A. & Surana, K. & George, M., 2022. "Do clean energy trade duties generate employment benefits?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 159(C).
    13. Rislima Febriani Sitompul & Mesnan Silalahi & Ophirtus Sumule & Friga Siera Ragina, 2022. "Local Content Requirements Policy in Indonesia s Power Plant Development," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 66-76, May.
    14. Andreas Baur & Clemens Fuest & David Gstrein & Philipp Heil & Niklas Potrafke & Aurel Rochell, 2023. "The Impact of the U.S. Inflation Reduction Act (IRA) on the German Economy," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 137.

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