OECD Consensus: Progress of the local content regime

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Recently, the first important advances have begun to emerge: the regulation for local costs is to become more flexible in the future

OECD Consensus: Progress on the local content regime

The sector agreements for "rail infrastructure" and "renewable energies, climate protection and adaptation to climate change" were also extended. What does this mean for large-scale plant construction? As a result of this agreement, higher local cost shares will be eligible for cover in the future: this is a central topic area for which the large-scale plant construction sector has been campaigning emphatically for years.

On the one hand, the possible co-financing of local construction and assembly shares fulfils the expectation of customer countries that there will be increased recourse to local value creation. On the other hand, the need for local procurement is high from the outset, especially in the infrastructure and energy technology sectors.

The share of local costs that can be covered currently amounts to a maximum of 30% of the export contract value, in Germany it is 23% of the total contract due to a different calculation. The new regulation will now increase the permissible upper limits to 40 or 50 % of the export contract value, depending on the country category. The EU still has to formally approve the new rule before it can take effect in Europe. The large-scale plant construction industry, which has long campaigned for reform of the permissible local costs, welcomes this important step and urges swift implementation in Europe.

Germany: Greater flexibility in financing locals costs

In May 2020, the Special Initiative Renewable Energies was implemented in the field of German export credit guarantees. It covers technologies of the corresponding OECD Renewable Energy Sector Understanding, which allows longer maturities for such projects. This measure in Germany makes it possible for German exports in the field of renewable energies with foreign supplies to be covered up to 70 percent with federal cover. Normally, the share of foreign supplies in Hermes cover is limited to 49 percent. In addition, the Renewable Energy Special Initiative provides for greater flexibility in financing local costs.

This special initiative is an important step from the perspective of large-scale plant construction, as it addresses the requirements in infrastructure projects. The advantages relate in particular to the handling of foreign supplies in the German support system.