Why local sourcing of solar components is economically inefficient

Should developers of solar power in the Middle East be required to source components locally?

Guests at the Arabian Water & Power Forum in Dubai last week mostly voted “Yes”. But this is a complex question, involving not only the future of renewable energy in the region, but the whole economic development strategy.

Solar power is increasingly popular and economically viable across the Middle East and North Africa.

Even with progress in Abu Dhabi, Dubai, Morocco and Qatar, the region’s largest plans belong to Saudi Arabia, which wants to build 41 gigawatts of solar power by 2032, about a third of its total generation.

And it’s the Saudi plans that highlight the issue of local content. Successive rounds of renewable procurement will feature increasingly stringent requirements for Saudi-produced components, in the hope of creating 137,000 jobs.

Like the Saudis, many countries view local content requirements as a way to generate domestic employment, create high-tech industries and keep some of the value of renewable investment in-country. They also help to attract public and corporate support for renewable energy programmes.

For instance, India’s National Solar Mission, announced in 2009, requires winners of tenders to use solar cells and modules manufactured in the country.

Elsewhere, the Canadian province of Ontario, and some American states, also have in-state sourcing requirements. Some German companies lobbied for social and environmental standards – disguised protectionism – to keep out Chinese competitors.

However, local content requirements may hurt the solar sector – and the wider economy – more than they help.

Read the full article at: www.thenational.ae