Taiwanese offshore policy criticised

Contracts were not awarded properly in Taiwan's offshore wind auctions earlier this year, according to a government watchdog.

Ørsted, Macquarie and Swancor's two-turbine Formosa 1 pilot phase project
Ørsted, Macquarie and Swancor's two-turbine Formosa 1 pilot phase project

The feed-in tariff was also set too high by Taiwan's ministry of economic affairs (MOEA) because it did not take into account technological improvements and reductions in the levelised cost of energy (LCOE) of offshore wind, monitoring agency Control Yuan found.

Local companies in the supply chain are also not sufficiently experienced to carry out contracts, and the financial risk and electricity costs have increased as a result, Control Yuan added.

The watchdog reported that projects were not chosen in proper accordance with the selection criteria, which is meant to be based on a 60% technical capability and 40% financial capability weighting.

"This adds uncertainty to offshore wind developers and the many specialist service providers and manufacturers that were making earnest plans to bring their technologies, knowledge and investment into developing a key renewable sector within Taiwan," said John Eastwood, a partner at Eiger Law.

Eiger helped set up the wind power committee of commercial lobbying group, the European Chamber of Commerce Taiwan (ECCT).

"Companies in any industry prefer stability instead of chaos, and the institutions considering whether to finance projects especially like to see the government have a firm hand at the tiller," Eastwood added. 

Taiwan awarded contracts for 16 offshore wind farms with a combined capacity of about 5.5GW earlier this year.

The MOEA allocated just over 3.8GW to ten projects in April — for which developers are now negotiating power purchase agreements (PPAs).

It then awarded a further 1.6GW across four projects in June, for which Ørsted and Northland Power bid an average price of TWD 2,456/MWh ($79.51/MWh) — about half the current feed-in tariff (FIT) of TWD 5,849.8/MWh.

But the Taiwanese economics minister has defended the country’s feed-in tariff at a press conference.

Shen Jong-chin argued that although the current rate is slightly higher than tariffs paid to operational projects in the UK this year (TWD 5,724.6/MWh equivalent), it is still comfortably below those paid in Japan (TWD 9,831.6/MWh equivalent).

Feed-in tariff changes

The MOEA has, however, proposed cutting the tariff by 12.7% to TWD 5,106/MWh for 2019.

This proposal, along with plans to only pay the tariff for the first 3,600 hours of power sold before the rate is reduced to TWD 1,940/MWh, has attracted criticism from the Global Wind Energy Council (GWEC).

It urged the Taiwanese government to reconsider these proposals.

GWEC argued the changes would reduce project revenues by approximately 20% and deter developers from using the most efficient turbines — making it harder to attract investment.

Ben Backwell, GWEC’s CEO, warned that the changes might prevent the local supply chain from gaining experience, the development of necessary infrastructure and therefore, the reduction of LCOE in Taiwan.

He added that this would threaten the viability of future projects and thwart Taiwanese companies’ potential to help develop other offshore wind sectors in south-east Asia.  

Backwell added: "Taiwan has been widely recognised for quickly establishing its offshore industry and attracting promises of investment from a number of world-class companies in the sector.

"The government must now avoid introducing damaging and unhelpful changes to contracts to ensure that these promises materialise into long-term investments that will create tens of thousands of skilled jobs and provide clean, competitive power for Taiwan’s economy."

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