Feito no Brasil? Made in South Africa? Boosting Technological Development through Local Content Requirements in the Wind Energy Industry

"How can local content requirements (LCR) boost technological capability for renewable energy? This question calls increasing attention among researchers, firms and decision-makers. This paper investigates the implementation of LCR in the wind energy in Brazil and South Africa. Brazil tried to grow a local wind industry requiring 60% in each installation since 2004. South Africa demands up to 45% in its recent procurement program. These requirements are heavily debated. Many governments in developing countries intervene in new markets with the intention of creating jobs in new industries and accelerating technological development. An academic debate about localization questions whether these requirements are a form of protectionism or an effective development policy. Our paper presents evidence from Brazil and South Africa. We find that LCR fall short as a single technology policy instrument and requires additional innovation policy support in order to advance technological capability. The Brazilian case shows that LCR incentivized the domestic production of low and medium technology content."