Measuring local content in manufacturing case
The higher cost of renewable energy production from wind turbines will in all likelihood be passed on to consumers through higher electricity prices. Critics hold that LCRs lead to an inefficient allocation of resources by distorting the operation of comparative advantage. The LCR might boomerang India's solar manufacturing and electricity goals. The net effect for job creation of higher input prices and hence less renewable energy production combined with greater demand for component manufacturing is difficult to pinpoint. The LCR is likely to discourage innovation in the solar energy industry and impede manufacturing competitiveness. As such, less renewable energy is produced, resulting in zero job creation and possibly job losses in the green industrial sector. This limit might be best negotiated in the context of a SETA, against other trade- offs in the environmental area. LCR proponents contend that in the medium and long-term, greater competition and innovation will eventually lower manufacturing costs, and hence consumer power prices, but this seems far from certain. Whether you are developing your policy now or want to scale up you local content models, you will get practical insight into what works best for your region. To address this constraint, government-sponsored financing should be promoted, such as loan guarantees for developers of alternative, green energy. Arguments against LCRs Opponents to local content requirements in renewable energy policies point to the economic costs - inefficient allocation of resources, higher retail power prices, negligible employment gains and a negative impact on trade - and question the environmental gains in the medium-term. Cooperation between governments and businesses increases information on both sides. LCRs increase the cost of renewable energy production through higher input prices. To achieve economies of scale, governments should prioritise infrastructure investment.
Countering the output effect is the substitution effect, which assumes that labour can serve as a substitute for the local material. Critics hold that LCRs lead to an inefficient allocation of resources by distorting the operation of comparative advantage.
In this case LCRs have increased the cost of producing renewable energy in Ontario. As part of the Indian government's policy in the area of solar energy, an LCR was introduced in On this first point, renewable energy generally costs more than coal-fired power.
Although global prices for crystalline silicon modules and cells continue to fall, owing to improved technology, Indian manufacturing competitiveness for crystalline silicon technology has not kept pace.
Targeting all portions of the energy value chain rather than imposing an LCR aimed at domestic manufacturers should prove to be a better and less distorting way of expanding output in the green energy sector and would have the added benefit of creating associated green jobs.
Whether you are developing your policy now or want to scale up you local content models, you will get practical insight into what works best for your region.
based on 36 review