Viewpoint: Removing blockers and creating enablers

WORLDWIDE: "I have never known much good done by those who affected to trade for the public good." Many academics agree that this statement, made in 1775 by Adam Smith in The Wealth of Nations, is the underlying reason why free trade is more effective than protectionist measures in delivering prosperity to society.

Indeed, the ability to trade freely has delivered immeasurable benefits, not only to those that participate in industries but to societies more widely.

Renewable-energy supply chains are becoming increasingly global, but protectionism would stifle the rapid progress in the deployment of green-energy technologies in a growing number of countries.

Protectionist measures within the green-energy supply chain can take many forms, but are mostly linked to access to funding or subsidy mechanisms.

These range from local-content requirements at the most draconian end of the spectrum, to much less controversial research-and-development support and tax-incentive schemes. Put simply, some are blockers, others are enablers.

Even those countries that have traditionally used blockers to develop indigenous renewable industries are now seeing that their interests are better served by free trade supported by effective, targeted, enabling schemes.

Jurisdictions that maintain arrangements blocking free trade between renewable industries and suppliers are increasingly subject to successful challenges, both at national and World Trade Organisation levels.

But what is driving the emergence of the global supply chain?

Lower levels of financial support in the more mature markets are forcing developers, financiers and operators to drive down the cost of building and operating renewable generation. This is creating opportunities

for the newly industrialised nations to innovate and export increasingly cost-effective (cheaper) generation assets to the more developed markets of Europe and North America.

This, in turn, drives the established (mostly European) manufacturers to react and develop cheaper, more efficient machines. This would not happen without the effects of competition supported by free trade.

Watershed global agreements on the limitation of climate change, coupled with the quest to reduce CO2 emissions at the lowest cost, are driving nations to embrace green-energy sources as the most sustainable, cost-effective answer to decarbonise their economies and deliver more secure energy supplies.

This is most stark in many developing economies, which are using the skills established in serving more mature renewables markets to now drive the green-energy revolution happening in all corners of the world.

However, in most instances, this rate of change cannot be delivered by indigenous supply chains alone. As such, opportunity is driving opportunity as the virtuous circle is established.

Skill shortages

There are some who argue that the globalisation of the supply chain is creating a skills and money drain from the mature markets, as they struggle to compete with cheaper imports from abroad.

While the manufacture of large-scale components may be moving to developing markets, local renewable markets still rely on local supply chains for most of their requirements.

In the global market, lower-skilled production moves to where it is most economic, with the highly skilled workers required to install, maintain and operate renewable assets remaining "at home".

As renewable markets continue to develop on the back of innovation and cost reduction, those local supply chains are, themselves, growing to take advantage of the new opportunities.

Indeed, many of these highly skilled local support companies are now exporting their goods and services to global markets.

Supply chains are no longer country- or region-based. The increasingly free access to markets is helping deliver a paradigm shift in how green energy is delivered in the global context.

This is helping to ensure CO2 reduction and climate change mitigation is achieved at the lowest cost and as quickly as possible, to the ultimate benefit of society as a whole.

"When goods are not allowed to cross borders, soldiers will." This quote by liberal French economist Frédéric Bastiat perhaps takes the free trade versus protectionism discussion a little far in the context of the global renewables supply chain. But it does provide food for thought of what could happen if too many blockers are put in place by misguided policy makers.

Michael Dodd is business development manager, NEMEA, at DNV GL — Energy