Going Glocal: how to create local content

Wind farm local content

It is not unusual for public tenders in the renewable energy industry to request for a certain percentage on “local content requirements” (LCR).

This  requirements exist (and are usually very demanding) in the majority of countries in South America (Brazil, Uruguay, Argentina) and in several other emerging countries (Morocco, Russia, etc.).

The required percentage can be something reasonable (20%-30%) all the way up to an “almost impossible to reach” 65% set by the Russian government.

Laws and regulations on local content can include a minimum required value, a bid score bonus for offers with an high local content or both.

What are bidders doing to increase local content?

For a wind turbines manufacturer, an easy start could be to source locally as much balance of plant as possible. This strategy make sense if commodities like steel, concrete, earthworks, cabling, etc. are considered in the definition of the local content.

Some more stringent requirements can include in the definition of local content only the wind turbine (in an effort to develop specialized factories in the country) or only “good and services that can be produced locally”, making the life of the procurement guys much more complicated.

After the balance of plant, the next logical step would be to produce steel or concrete towers locally.

Towers and towers manufacturing facilities are usually something with a low technological content, easy and uncomplicated (I hope my colleagues in the Tower Department will not hate me for this).

They do however represent a significant share of the cost of the project.

On top of that, they can usually be manufactured by existing company doing similar products (like steel chimneys).

With both BoP and towers you can easily land somewhere between 30% and 40% of the total cost of the project.

It can be complicate to do more locally.

Another trick I’ve seen is to open a “nacelle assembly plant” in the country. More expensive, but it can give a huge boost if you can declare the full nacelle as “local”.

The following step, much more risky, is to manufacture blades locally.

This strategy usually require a much bigger investment, and it’s justified only in case of VERY big tenders (like the case of Siemens in Morocco). Only large, solid pipelines can absorb the cost.

This entry was posted in Economics and tagged , , by Francesco Miceli. Bookmark the permalink.

About Francesco Miceli

Hello!My name is Francesco and I'm a civil engineer specialized in EPC (that is, "turnkey") wind farms projects.I'm currently based in Hamburg, Germany and I'm developing several interesting project all around the world - southern Europe, LATAM and various other countries.If you want to contact me please don't leave a comment in the blog (I don't check them very often) - you can use the contact form.You can write me in English, Spanish and Italian.To find a (somewhat concise) description of my non-wind business activities you can visit my webpage - www.francescomiceli.comIf you want to know more about my work, here you can download my CV - www.windfarmbop.com/CV_Francesco_Miceli.pdfHope you like the blog!Francesco

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