The growing impact of non-price criteria, or how to reimagine tender frameworks to stimulate domestic industrialization in offshore wind.

In 2024, at the request of the Ministry of Energy of a floating wind-capable jurisdiction, I undertook a comparative analysis of global procurement strategies. The objective was to craft a set of recommendations that would enable domestic industrial acceleration while preserving the economic viability of large-scale offshore wind projects. The following is a condensed version of the comprehensive report (exceeding 100 pages), which is expected to inform some of the scoring architecture for an upcoming gigawatt-scale floating wind tender many of us are expecting.

 1. The Reasons Behind Local Content Policy

Offshore wind is a capital‑intensive, complex supply‑chain ecosystem encompassing turbines, foundations, electrical infrastructure, vessels, ports and services. National policymakers embed local content requirements (LCRs) into procurement tenders not purely as instruments of protectionism, but as industrial strategy tools designed to:

• Stimulate local manufacturing, thereby multiplying employment and GDP.
• Anchor long-term capital expenditures domestically within ports, shipyards and fabrication yards.
• Leverage technology transfer and skills spill‑over, accelerating domestic capability.

 For nascent offshore markets (e.g. Japan, South Korea, Taiwan, Philippines, Vietnam, Australia, etc.), LCRs are often perceived as market-shaping levers to kickstart a homegrown supply base rather than pure protectionist measures. However, if calibrated improperly, they may generate cost overruns, timeline slippage or simply deter foreign anchorage and investments.

Several jurisdictions (notably Taiwan in its Round 3) instituted hard thresholds (e.g., requiring up to 60 % of components to be locally sourced). These triggered WTO disputes, with the EU citing violations of non‑discrimination obligations. Taiwan ultimately agreed to remove localisation mandates and adopt a more flexible award‑criteria model.

 What we learned here was that LCRs should be implemented within WTO compatibles offtake regimes, typically by embedding score‑based incentives rather than exclusionary eligibility gates. This more dynamic model fosters localisation without erecting trade barriers.

LCRs are politically attractive, but legally fragile under WTO law. Countries seeking to promote local content in offshore wind must shift from protectionist procurement to performance-based incentive frameworks that align with global trade rules. This through embedding localisation in non-discriminatory scoring, ensuring open access to tenders and offering transparent value-based mechanisms.

 2. Tender Design Mechanics and Embedding Local Content Optimally

Adopt a phase‑based tender framework reminiscent of Korea’s 50–50 model:

• Phase 1: Qualitative assessment—evaluates local supply chain contribution, industrial foot-print, community engagement, O&M job localization.
• Phase 2: Price scoring—least‐cost per MWh, with a weighted structure.

This hybrid design internalizes economic externalities while maintaining cost‑competitiveness. Scoring could be calibrated, e.g., 40 % to 60 % weight on localisation; proponents may emphasize port fabrications, steel, hub manufacturing or vessel use.

Shift from binary requirement to tiered localisation:

• Tier 1 (e.g., 30 %): minimum threshold.
• Tier 2 (e.g., 50 %): premium score bracket.
• Tier 3 (e.g., 70 %): elite tier with bonus multipliers.

This encourages developers to exceed low‑hanging targets, while accommodating incremental domestic capability development and learning‑by‑doing benefits.

Eligibility vs. Award Distinction

Avoid hard eligibility cut-offs which lead to legal disputes (e.g., WTO challenge). Instead, allow full market participation and make LCR a bid incentives sub-criterion, consistent with OECD public procurement principles. This reduces risk and widens the competitive envelope.

 3. Supply‑Chain & Infrastructure Enablement

An industrialisation logic requires scale. Isolated projects misalign investor incentives and may push developers to pursue import options or short-term providers. Stable multi‑round pipeline signals (e.g., 5 GW live auctions over 10 years) are essential so local producers can amortize CapEx, acquire debt and above all scale.

Local fabrication depends on suitable port infrastructure: heavy-lift quays, staging yards, SOV berths and O&M staging areas. Many Asian markets currently struggle here. For countries like the Philippines or Vietnam, lack of port depth and modern facilities introduces delays  . Tender criteria should require developers to detail port interface upgrades and vessel usage, backed by performance bonds to ensure delivery.

Rather than imposing national siloes, governments should incentivize regional supply chain clusters (akin to New York/New Jersey or Virginia–Maryland case studies). Governments can create digital supplier directories, co-finance port and shipyard upgrades and coordinate across political boundaries to create economies of scale.

4. Financing Structures & Risk De‑Risking

Local content pipeline is often brittle. To avoid tender defaults, bonds or bank letters of credit conditional on meeting LCR benchmarks could be used. If a bidder underdelivers on localisation, they forfeit part of their bond, offering financiers assurance and ensuring accountability.

As local ecosystems mature, costs (labour, materials) may escalate faster than global benchmarks. To twart project equity stress, tenders should allow indexed price adjustments pegged to local inflation indices or recognized commodity indices. This mirrors existing mechanisms and hence reduces renegotiation risk.

Rigid-offtake constructs (e.g. FIT or CfD) can hamper localisation. Governments should support PPA diversity, including corporate PPAs (e.g. Google in Taiwan) and hybrid models, to enable developers to tap premium buyers, helping absorb higher localisation costs.

5. Regulatory Framework

Investors are deterred by opaque localisation metrics. Tender documents must unambiguously specify:

• Definition of local content (e.g., value‑added, origin, processing).
• Verification mechanisms: documentation, audit, site visits.
• Scoring rubrics: transparent weights and price‑localisation trade‑off curves.

Europe’s “one‑stop‑shop” permitting and simplified guidelines are often referenced as best‑practice.

Volatile frameworks scare off lenders. Taiwan’s prior tightening then rollback recall example: November 2024 saw Taiwan remove LCR mandates after WTO settlement. Markets need regulatory predictability (e.g. multi‑year confirmation of incentive mechanisms, grid connection windows) and tariff clarity.

Governments should fund local supplier training, workforce development, benchmark visits to global fabrication yards, etc. Hybrid public‑private ventures (e.g., Danish CIPs and China Steel in Taiwan) demonstrate synergy between capital infusion and technical acumen.

Locally‑focused financial arms (e.g., DFI initiatives) can provide concessional finance or credit enhancement to local suppliers, bridging cost premiums until economies of scale kick in. Asian DFIs could emulate UK Export Finance or EIB offshore wind programmes.

 6. Some Case Studies

Taiwan

• Round 3 tender condensed with 60 % localization mandate triggered WTO consultation by EU.
• Resolution involved flexibility instead of hard LCR gates and removal of LCR in future rounds.
• Result: continued EU investment (~€2.9 bn 2023), collaboration with Vestas/Ørsted, and industrial partnerships like CIP + China Steel.

 South Korea

• Applies qualitative scoring (50 % non-price, incl. local supply effects) in two‑stage process  .
• Offers deadline flexibility on COD tied to local constraints and grid delays, reducing project risk.

 Japan

• Early-stage identification via Marine Renewable Energy Act ensures project zones meet port, grid, and stakeholder criteria  —a template for integrated local cluster planning.

Denmark

·      Denmark’s failed subsidy‑free auction (no price stabilization, state took 20 % stake) highlights how undisciplined tenders yield zero uptake

 7. Techno‑Economic Modelling

Levelized Cost of Energy (LCOE) vs. Macro‑Economic Gain:

Introducing localisation increases capital costs but if channelled into domestic installation the multiplier effect can boost local ROI. Developers can quantify this via Techno‑Economic Assessments (TEAs).

 Learning Curve Dynamics:

Empirical reality shows that each doubling of factory output yields ~10 to 15 % cost reduction (experience curve effect). Stable pipelines supported by LCRs trigger this dynamic; port fabrication yards approach economies of scale, making localisation less expensive over time.

 Supply Chain Resilience & Contingency Modelling:

Local capacity gaps can cause schedule slippage, triggering Liquidated Damages. Thus, tender frameworks should model the probability of underperformance.

 Grid‑Integration & Vessel‑Availability:

Offshore demands deep technical integration: specialized installation vessels (WTIV, CLV, SOV) and EPC logistics must be modelled in tender criteria. To reduce bottlenecks, tenders can include vessel allocation plans and onshore fabrication commitments.

 Risk‑Return Matching:

Tenders must balance IRR expectations of commercial investors (~8–12 %) against sovereign development goals. Mechanisms such as indexed price collars, contractual CPI linkage or grid‑delay extensions (as in Korea) smooth returns and preserve bankability.

In a nutshell:

• Stage-gate/tiered scoring aligns price vs localisation goals.
• Clarity & bonds ensure compliance and reduce downstream disputes.
• Pipeline consistency is the bedrock for industrial investment and LCOE reduction.
• Regional collaboration and cluster-building amplifies scale and lowers delivery risk.
• Adaptive contract features (inflation, delays) preserve commercial IRR.

Fostering local content in offshore wind is not a binary trade-off or ideological contest, it is a systemic techno-economic challenge requiring procurement architecture, financial scaffolding and governance coherence. By combining flexible scoring systems, long-term demand signalling, infrastructure readiness, risk-sharing mechanisms and regulatory stability, jurisdictions can home‑grow domestic offshore wind ecosystems without deterring global partners or violating trade norms.

 LATEST UPDATE (June 24th 2025): It seems that at least one very promising jurisdiction for floating wind is clearly veering towards local and regional content acceleration and intends to make it particularly hard for developers to rely on Far Eastern steel substructures and the likes given what the regional (continental) market is already able to deliver in terms of both steel and particularly concrete substructures. OEMs should however (and very likely) benefit from an exemption given the very limited regional (continental) offering and the need for more competition in that field.

WindEurope WORLD FORUM OFFSHORE WIND (WFO) Global Wind Energy Council (GWEC) Oceantic Network France renouvelables Syndicat des énergies renouvelables (SER) FOWT Conference Floating Wind Solutions Norwegian Energy Partners (NORWEP) RenewableUK Scottish Renewables APREN - Associação Portuguesa de Energias Renováveis AEE Asociación Empresarial Eólica Darius SnieckusGreenUnivers reNEWS - Renewable Energy News Windpower Monthly offshoreWIND.biz A Word About Wind ANEV, Associazione Nazionale Energia del Vento Belgian Offshore Platform Belgian Offshore Cluster vzw Hellenic Wind Energy Association Wind Energy Ireland The Swedish Wind Energy Association (SWEA)The Economist Le Monde The Times International Renewable Energy Agency (IRENA) International Energy Agency (IEA) #offshorewind #floatingoffshorewind #floatingwind "FLOWRA" / Floating Offshore Wind Technology Research Association