Reduced Taiwanese tariff ‘out of line’ with actual rate of cost reduction

Asia Wind Energy Association board member Edgare Kerkwijk told OWJ the decision to reduce the FiT so much compared to the 2020 FiT “was no great surprise,” but disappointed developers working in the country.

“The strategy of the Taiwanese Government is to reduce the tariff for offshore wind gradually and bring it in line with tariffs in other markets, such as Europe,” he said.

“This strategy is based on the assumption that the installation and operating costs of offshore wind in Taiwan will gradually decline as a result of economies of scale, the development of a local supply chain, greater experience and the sector’s growing track record.

“In ideal circumstances, it would have been sound policy to reduce tariffs, but unfortunately targeted cost reductions have fallen short of the government’s expectations.

“Projects under construction are exceeding budgets for a number of reasons, including bad weather, Covid-19 quarantine issues, and the delayed arrival of installation vessels.”

Mr Kerkwijk said the local supply chain and the process of localisation “has not taken off” in the way that the authorities in Taiwan hoped, despite the best efforts of developers.

“Developers would have liked to have more time to get costs down and for tariff reduction to have taken place at a slower rate,” he said.

He warned that reducing tariffs too quickly could have an adverse effect on the market in Taiwan. “If developers try to reduce EPC costs even further, this could have an impact on the quality of the construction and installation process,” he suggested.

“We have seen the appointment of EPC contractors with no track record in offshore wind because developers want to drive down costs in their EPC tenders. This has had an adverse impact, as can be seen in the Yunlin project.”

However, NIRAS Taiwan managing director Raoul Kubitschek told OWJ the reduced tariff would have a limited effect, at least in the short-term, because only one project is likely to sign a PPA in 2021. “It will only affect wpd’s stalled Guanyin project, or whichever project replaces it,” he said.

“Guanyin, or whichever project replaces it, will get the reduced FIT and need to comply with strict localisation requirements.”

Mr Kubitschek said, “The industry issued a protest about the reduction in the FiT, but the Taiwanese Government stuck with the reduction it first proposed in December 2020. Doing so indicates the direction of travel toward the next bidding round in Taiwan and demonstrates that the government thinks that localisation has already started to become less expensive.”

As reported by OWJ in August 2020, wpd’s establishment permit for the Guanyin project was revoked by the Bureau of Energy, which cited flight safety concerns brought forward by the civil aviation authority in Taiwan. Mr Kubitschek said there has been “no final word” on the outcome of the project.