US Assistant Secretary of Commerce Michael Camuñez, who is leading a trade delegation to South Africa that includes 14 American renewable energy firms, voiced some concern on Monday about the local content stipulations contained with the country’s recently released bidding documentation.

The mission follows hot on the heels of the September 14 bidders conference convened to offer potential independent power producers deeper insight into the Department of Energy’s (DoE’s) tender for the procurement of the first 3 725 MW of renewables capacity by 2016.

The first bid window would close on November 4 and the commercial processes should be completed by mid-2012. This could trigger a project development phase that was likely to involve foreign and domestic investment of between $10-billion and $12-billion.

The current version of South Africa’s Integrated Resource Plan for 2010 to 2030, which would be changed periodically, envisaged renewables contributing 42%, or 17 800 MW, of South Africa's new generation capacity by 2030.

Briefing the media at the US Consulate in Johannesburg, Camuñez indicated that some of the companies within the delegation had participated in the DoE conference and were considering bidding for the initial projects. But he also stressed that others were simply hoping to gain insight into the market opportunities and might only participate in future rounds.

The renewables participants included Abound Solar, Amonix, Bright Source Energy, Catalyst, Comverge, ERAS, First Solar, Global Solar Energy, One World Clean Energy, Qteros, Resolute Marine Energy, Suniva and Vector Systems.

Camuñez, who was appointed Assistant Secretary in September last year, indicated that the local-content requirements within the bid documentation were of some concern to the US and to some of the companies considering submissions under the current procurement round.

“The concern is that, while we share the commitment and the desire to create and stimulate local manufacturing, our experience globally is that mandates don’t work.

“The most innovative companies internationally do the R&D [research and development] and they source internationally and mandated local-content requirements can potentially have the effect of requiring innovative companies to use and deploy technology that may not be best in class, that may not be of the highest quality and that may, in the long run, drive up costs and run counter to the overall objectives of the alternative energy initiative,” Camuñez said in response to a question posed by Engineering News Online.

He argued that an incentive-based approach, such as offering tax credits, R&D support and other voluntary initiatives, would be more effective.

Ambassador Donald Gips argued that it was possible to achieve solutions that were supportive of job creation and exports in both countries, pointing to the recent deal struck between General Electric and Transnet for the procurement of 100 locomotives. The first ten locomotives were being fully manufactured and assembled in the US, while the balance would be assembled in South Africa using components sourced from the US.

Camuñez also dismissed any proposition that President Barack Obama’s National Export Initiative (NEI), which aims to double US exports by the end of 2014, might be in direct conflict with South Africa's policies to upscale manufacturing, such as the Industrial Policy Action Plan and the New Growth Path.

Instead, he argued that there was good “policy alignment” between the two countries and that the NEI could even result in economic growth and opportunity for South Africans. “Far from being in conflict, they [our respective policies] are actually quite complementary,” he asserted, noting that through the trade facilitated by the Africa Growth and Opportunity Act some 300 000 jobs had been created in South Africa.

“It is important, as in any relationship, that our trade relationship should be robust in a bilateral way. So we are supportive of South Africa’s trade with the United States and, similarly, we are encouraging US exports to this country.”

He argued, further, that exports and foreign direct investment were typically linked and “often go hand in hand” and that South Africa remained a priority market for the US and for American companies considering new investments.

He said that South Africa – together with Colombia, Indonesia, Vietnam, Turkey and the Arabian Peninsula – had been identified as a “next tier” market and would be given policy priority over the coming five to ten years.