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Renewable Energy and Related Services: Recent Developments

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Renewable Energy and Related Services: Recent Developments ( renewable-energy-and-related-services-recent-developments )

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U.S. foreign direct investment in wind energy services has risen. U.S. firms are increasingly looking abroad to expand their presence in European and Asian markets, citing weakness in the U.S. market as motivation for their outward focus.154 For example, in 2008, wind developer AES acquired a minority stake in a Chinese wind farm; in 2010, it acquired UK developer Your Energy and signed a deal for a majority stake in Polish wind developer 3E. Trade Barriers Restrictions on or barriers to trade in goods have frequently created challenges for wind energy service providers in the global market. Reportedly, among the most prominent of these challenges are local-content requirements, which mandate that a certain percentage of the wind turbines or labor required for a wind project must be sourced locally.155 Since many OEMs are also leading service suppliers, even where the local-content requirements are focused specifically on equipment, these policies appear to be impeding trade in services.156 A number of localities and countries have local-content requirements in place. Reportedly, among the most problematic for U.S. wind service providers have been those in Ontario, Canada. Ontario’s market provides significant export opportunities for U.S. service providers, but wind service firms must meet local-content requirements to qualify for the FIT.157 Industry representatives indicate that while they try to meet these specifications, the requirements become particularly challenging and make the market unattractive when there are too few local suppliers to meet demand. This can result in less competition in the market.158 Additionally, these requirements have reportedly influenced decisions on commercial presence, leading companies who would otherwise establish a presence in the United States to establish a presence in Ontario instead in order to provide goods and services in both places.159 In May 2013, the WTO Dispute Settlement Body adopted a WTO Appelate Body report and panel report (as modified by the Appelate Body) finding that the Canadian measures were inconsistent with the TRIMs Agreement and the GATT 1994.160 Subsequently, Ontario’s Minister of Energy directed the Ontario Power Authority not to procure any additional large projects. The Minister indicated that the government intends to replace the FIT program for large projects with a competitive procurement process, and that the Ministry intends to pursue legislation to bring the FIT program into compliance with the WTO ruling.161 154 Goosens, “AES Says U.S. Wind Market Is Weak,” November 4, 2010. 155 Industry representative, email to USITC staff, March 8, 2013. 156 Industry representative, telephone interview by USITC staff, January 25, 2013. 157 Countries with local-content requirements include Turkey, Ukraine, Croatia, and South Africa. EWEA, “WTO Rules Against Ontario,” December 20, 2012; Tardieu, “EWEA Trade Policy Views,” March 29, 2012; Creed and Kordvani, “The WTO Report on Local Content Requirements,” February 13, 2013; industry representative, telephone interview by USITC staff, March 8, 2013; industry representative, telephone interview by USITC staff, January 18, 2013; industry representative, telephone interview by USITC staff, February 8, 2013. 158 Industry representative, telephone interview by USITC staff, January 30, 2013. 159 Industry representative, telephone interview by USITC staff, January 18, 2013. 160 The complaint in this matter was filed by Japan in September 2010. WTO Dispute DS 412: Canada, (accessed July 2, 2013). 161 There are separate FIT programs for large and small projects. Ontario Ministry of Energy, FIT Program Directive, June 12, 2013, 3. 4-25

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