David Foxwell reflects on proposals being considered in Taiwan that would make using Taiwanese vessels mandatory for certain types of offshore wind construction
As I reported here, the authorities in Taiwan are convening a meeting of contractors and vessel operators later this month to solicit information on the vessels required for offshore wind construction and the availability of Republic of China (ROC)-flagged vessels. They are also considering restricting the use of non-ROC flag vessels and liberalising the requirements for a vessel to fly the ROC flag. Currently, Taiwanese law does not require offshore construction activity to be conducted by ROC-flag vessels, although restrictions exist on using People’s Republic of China (PRC)-built and PRC-flag vessels.
Owners and operators of ROC-flag vessels have complained that developers and contractors have contracted foreign-flag vessels when qualified ROC-flag vessels are available. The developers and contractors said ROC-flag vessels do not meet necessary specifications, are not available, or are more expensive than foreign-flag vessels. Right now, Taiwan doesn’t seem to have the required installation vessel capacity; it has some cable-lay vessels and could quite quickly add to crew transfer vessel capacity.
For the time being, the type of vessel and type of activity to which restrictions might apply aren’t clear, nor is the timeframe for the changes, but it seems possible Taiwan could adopt a kind of cabotage regime of the type that often applies to vessels in the offshore oil and gas sector.
The most obvious example of this is the Jones Act in the US; other countries have their own regimes that differ somewhat in detail if not in purpose: the aim is to boost local content. One way of addressing the issue is for international companies to establish companies in Taiwan, but their willingness to do so will depend on the nature of the requirements imposed.
The debate in Taiwan reminds me of one in the offshore oil and gas industry I wrote about extensively when US-based owners of Jones Act ships argued for a ban on international construction vessels in the Gulf of Mexico. The owners in question sought an interpretation of the Jones Act that would exclude from the region the heavy construction ships, mostly owned by large international companies, that install much offshore infrastructure. The International Marine Contractors Association and American Petroleum Institute argued that there would be unintended consequences of banning international ships that were detrimental to the US economy.
Everyone can understand countries’ desire for local content but banning foreign-flag vessels could be potentially problematic for the offshore wind industry in Taiwan. US owners clearly didn’t really have the vessels required to take over from foreign-flag heavy construction vessels and Taiwan doesn’t seem to have enough foundation and turbine installation vessels of the right type.
If Taiwan presses ahead with the plans it could slow down projects, drive up costs and raise health and safety issues. Some vessel owners might set up shop in Taiwan, others might not. It might, like the recent brouhaha about tariffs in Taiwan, make developers and investors think twice about margins for new projects. Whatever happens, using foreign-flag vessels is likely to continue to be an issue for the offshore wind industry as it goes global and new markets emerge in which the authorities understandably want to maximise local content and developers wrestle with declining tariffs and increasingly onerous local content requirements.
Local content or ‘localisation’ is very important to Taiwan. Sources I’ve spoken to suggest that for first-round projects, if developers can clearly demonstrate there aren’t enough ROC-flagged vessels, it ought not be a big issue. But for later projects, those being built in the 2022-2025 timeframe, the pressure to use Taiwanese vessels will be greater.