The ebb and flow of the Taiwan offshore wind market

This week has seen another flurry of activity for offshore wind developers in Taiwan, with the Ministry of Economic Affairs (MOEA) providing an update on the consultation process relating to the proposed drop in the 2019 Feed-in Tariff prices and the Taiwan Bureau of Energy (BOE) outlining the process for a new auction for projects post 2025.

2019 FiT consultation

In accordance with Article 9, paragraph 1 of the Renewable Energy Development Act whereby feed-in tariff  rates are established each year, the MOEA has provided a reminder of the latest situation.

  • The rate calculation formula will be stipulated by the central competent authority through an integrated consideration of the average installation cost, service life, operation and maintenance fees, annual electricity generation capacity and related factors for each type of renewable energy power facility in accordance with each type of renewable energy.
  • Within 60 days of the draft announcement on 30 November 2018, that is, before 29 January 2019, anyone can provide comments and supporting materials regarding the content and parameters of the draft.

The MOEA also held a public hearing on 25 December 2018 to collect a wide range of opinions. The information gathered, so far, will be discussed within the Feed-in Tariff Rates Committee.

Developer concerns, relating to the proposed drop in the 2019 Feed in Tariff (by up to 12% on the 2018 tariff), coupled with a tariff cap of 3,600 hours, both announced in November, are well documented. This led to developers, such as Ørsted, to pause their development progression. Many developers were attempting to secure a power purchase agreement (PPA) with the 2018 Feed-in Tariff.  However, due to a series of compliance requirements post-consent and possible ‘confusion’ between local and central government departments, only companies such as wpd and Swancor were successful. The predicted scramble for a 2018 Feed-in Tariff rate at the end of 2018 favoured those projects that had less localization requirements and tighter deadlines for construction.

Stage 3 Zonal Development

Whilst the early front running developers, above, have been grappling with predicting what the next feed-in tariff price will be, the Bureau of Energy has just given some indication (15 January) as to the process they will be running for projects post-2025 (see our earlier RCG article for details on the previous rounds, Taiwan Offshore Wind – Game on!). They are:

  • Selection process (2018/4/30): 7 developers (10 wind farms) were allocated a total of 3,836 MW.
  • Auction process (2018/6/22): 2 developers (4 wind farms) were allocated a total of 1,664 MW.
  • The official announcement for the schedule and process for the next phase of awards is scheduled to be announced in the first quarter of 2019.
  • Offshore wind farm capacity totaling 4.5 GW that passed the environmental assessment stage, but that has not yet been allocated, will be released preferentially in a third stage – Zonal Development (ZD). Priority will be given to companies that own wind farm projects that have passed an environmental impact assessment.
  • In future, offshore wind farms will also be gradually extended to waters deeper than 50 meters in depth.
  • The feed-in tariff rates in 2019 will be sent out from the Feed-in Tariff Rates Committee on 28 January 2019 and Bureau of Energy is expected to make announcements soon after.
  • There may still be localization requirements in the third stage of Zonal Development (ZD). The Bureau of Energy is still having internal discussions on the matter, but local suppliers are supportive of continued localization requirements in the third stage of the plan, unlike the June 2018 auction process that had no localization requirement.

It is hoped that, following the current consultation process, the government will give some positive movement in relation to localization, feed-in tariff rates, and tariff cap hours to allow developers to get back on track with what is a globally ambitious programme. Whatever the outcome, there will be lessons learned for next year all round, including consideration of what is a fair price for offshore wind in today’s market, compared with the potential in five or six years time following year-on-year supported investment in the local supply chain, technological advances, deeper understanding, an enhanced skills base, and improving infrastructure.

It is hoped that investor confidence in the vital lending community is not dented by this very public negotiation and that Taiwan maintains a long-term and sustainable offshore wind industry.

Gareth Lewis

Partner and Managing Director - Asia Pacific