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Exploring the effectiveness of local content requirements in promoting solar PV manufacturing in India

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  • Johnson, Oliver

Abstract

In a bid to make renewable energy technology deployment strategies politically acceptable, many countries are linking them to socio-economic goals, such as job creation, economic development and building competitiveness. A controversial industrial policy tool that is becoming increasingly popular is the use of local content requirements (LCRs). These regulate the extent to which certain projects must use local products and are often justified on the basis of supporting local employment and private sector development. The debate has centred around the rights and wrongs of protecting infant industry, with little progress being made to find a common ground. This paper seeks to move beyond this stalemate to understand under which conditions LCRs might be a legitimate and effective tool for promoting local manufacturing. To do so, it applies an effectiveness framework to LCRs for solar photovoltaics in India’s National Solar Mission. The paper finds that for LCRs to be effective, they must be (a) limited in duration and incorporate planned evaluation phases, (b) focused on technologies and components for which technical expertise is available and global market entry barriers are manageable, (c) linked to additional mechanisms, such as training and promotion of business linkages and measures to support other stages of the value chain and wider services that are integral to success of renewable energy industries.

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  • Johnson, Oliver, 2013. "Exploring the effectiveness of local content requirements in promoting solar PV manufacturing in India," IDOS Discussion Papers 11/2013, German Institute of Development and Sustainability (IDOS).
    • Handle: RePEc:zbw:diedps:112013
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    Cited by:

    1. Maria Carvalho & Antoine Dechezlepretre & Matthieu Glachant, 2017. "Understanding the dynamics of global value chains for solar photovoltaic technologies," WIPO Economic Research Working Papers 40, World Intellectual Property Organization - Economics and Statistics Division.
    2. 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).
    3. Hansen, U.E. & Nygaard, I. & Morris, M. & Robbins, G., 2020. "The effects of local content requirements in auction schemes for renewable energy in developing countries: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 127(C).
    4. Quitzow, Rainer, 2015. "Assessing policy strategies for the promotion of environmental technologies: A review of India's National Solar Mission," Research Policy, Elsevier, vol. 44(1), pages 233-243.
    5. Sooriyaarachchi, Thilanka M. & Tsai, I-Tsung & El Khatib, Sameh & Farid, Amro M. & Mezher, Toufic, 2015. "Job creation potentials and skill requirements in, PV, CSP, wind, water-to-energy and energy efficiency value chains," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 653-668.
    6. Rasmus Lema & Björn Johnson & Allan Dahl Andersen & Bengt-Åke Lundvall & Ankur Chaudhary (ed.), 2014. "Low-Carbon Innovation and Development," Globelics Thematic Reviews, Globelics - Global Network for Economics of Learning, Innovation, and Competence Building Systems, Aalborg University, Department of Business and Management, number low-carbon, September.
    7. Shrimali, Gireesh & Sahoo, Anshuman, 2014. "Has India׳s Solar Mission increased the deployment of domestically produced solar modules?," Energy Policy, Elsevier, vol. 69(C), pages 501-509.
    8. Bhupesh Verma & Ganeshprasad Pavaskar & Tobi Oluwatola & Aimee Curtright, 2017. "State-level Policy Analysis for PV Module Manufacturing in India," Working Papers id:12193, eSocialSciences.
    9. Kalyuzhnova, Yelena & Azhgaliyeva, Dina & Belitski, Maksim, 2022. "Public Policy Instruments for Procurement: An Empirical Analysis," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    10. Boute, Anatole & Zhikharev, Alexey, 2019. "Vested interests as driver of the clean energy transition: Evidence from Russia's solar energy policy," Energy Policy, Elsevier, vol. 133(C).

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