In contrast to imports, local manufacturing of energy products can constitute a reasonable cost-efficient alternative that supports local value creation.
Successful Local Production / Manufacturing
Key Factors for Successful Local Production / Manufacturing:
- Relevant market: The demand of the relevant market should match the minimum size of one production unit. If a specific niche is big enough, the probability of success is higher. In Indonesia the niche was turbines for mini- and micro-hydro power, which has a high national demand and is not the core business of incumbents like Voith Hydro, Ossberger etc.
- Time factor: Establishing local production of hydro power components takes time (5-10 years). This is the biggest obstacle for projects which are only funded by EnDev and do not have a longer sectoral mandate like a focal area.
- Cluster: The production site / firm should be located within an industrial cluster, where it is easier to get qualified suppliers, employees etc. Multi-product firms are in a better position because they can compensate low demand with other product lines and transfer relevant knowledge to new technologies.
- No grants to the manufacturers. Better use (soft) loans or even better create trust for long-term investments like the German Feed-in Law did.
- ↑ Outcome of a discussion during the GTZ mini-hydro power working group meeting in Nairobi, May 2009.