A new round of offshore wind development could be launched by the authorities in Taiwan in October 2019
A new round of offshore wind development could be launched by the authorities in Taiwan in October 2019, but risks abound that could affect the success or otherwise of the plan.
Parameters and requirements that are being defined for what is being described as ‘Round 3’ development in Taiwan are expected to include localisation requirements, price and conditions such as the status of environmental impact assessments (EIAs) for projects.
The Taiwanese Government is expected to prioritise EIA-approved projects, including some that have an EIA but failed to be selected in Round 2. Prices bid by developers will be expected to be lower than those achieved in previous auctions (NT$2.2245~2.5481/kWh (US$0.07-0.08) in Round 2).
Offshore Wind Consultant’s project manager in Taiwan, Howard Hu, told OWJ that, based on the experience of Round 2 projects, developers have appealed to the Taiwanese Government for what would be – as they see it – a realistic appraisal of localisation requirements, which takes into account the capability of the nascent local supply chain.
Mr Hu said demand for greater localisation is one of a number of potentials risks for a successful outcome in Round 3. If developers believe that localisation requirements are excessive, it could have an adverse effect on their appetite to participate in Round 3.
The level of localisation required by the Taiwanese Government could also affect financing, he suggested. “Local finance can be difficult to come by because domestic banks are not familiar with the offshore wind industry,” he told OWJ.
“They tend to be conservative if a project doesn’t have sufficient export credit agency (ECA) guarantees,” he explained. “This is particularly the case at the moment because of the fallout from a recent scandal involving state banks and syndicated loans.”
Mr Hu highlighted the fact that only four local banks participated in the deal to finance wpd’s Yunlin offshore windfarm in Taiwan. The rest of the banks involved were all international financial institutions.
Greater localisation pressure in Round 3 projects could make it more difficult for developers to secure ECA support. Greater localisation would mean less foreign content in future projects, which would drive down the level of ECAs. “Some Taiwanese banks have concerns of their own about the capability of the local supply chain,” Mr Hu said.
Mr Hu said the government plans to hold further discussions with developers on the rules for Round 3 and is seeking feedback from them.
Another risk that could affect Round 3 in Taiwan includes uncertainty surrounding the result of the Taiwanese presidential election, due to take place in 2020, which could make decision-making more politically-driven than it already is.
As also highlighted by OWJ, the government in Taiwan is also looking at making Taiwanese-owned vessels mandatory for future offshore wind projects, despite concerns that there are not sufficient Taiwanese vessels.
Some owners and operators of Republic of China (ROC)-flag vessels have complained that developers and contractors have contracted for foreign-flag vessels when qualified ROC-flag vessels are available. Developers and contractors have responded that ROC-flag vessels do not meet necessary specifications, are not available, or are more expensive than foreign-flag vessels.
Developers and the Taiwanese Government will be keen to avoid potential pitfalls of the type that plagued the latest round of offshore wind developments in the country when the feed-in tariff was significantly reduced, causing some developers to put projects on hold and reassess their involvement in them.
The government relented and eventually agreed a tariff that developers considered sufficiently high to press ahead, but there are undoubtedly numerous challenges ahead for the next round of projects.
Mr Hu said the government in Taiwan remains committed to developing a further 5 GW of offshore wind capacity, to be released between 2026 to 2030 at a rate of 1 GW per year, or in the form of a one-time release, but the final strategy for this has yet to be decided.