Taiwan’s Government is making good on longstanding plans to close nuclear power plants and invest heavily in offshore wind energy
Late April 2018 saw the authorities in Taiwan announce the results of the first large-scale auction for offshore wind in the country, a process that will eventually see around 3.8 GW of capacity being built there. This demonstrates the Taiwanese Government’s determination to follow-through and execute plans announced earlier for the sector.
Taiwanese President Tsai Ing-wen has proposed to end the country’s dependence on nuclear power by 2025 while sourcing 20% of Taiwan’s electricity from renewable sources – that is, five times the level in 2015. That plan depends heavily on offshore wind, for which the Taiwan Strait is seen as particularly well-suited. Data provided by law firm Jones Day showed that in 2016, electricity generated from renewable energy accounted for 4.8% of the aggregate produced electricity and 9.4% of the aggregate installed capacity in Taiwan, so the government’s strategy is certainly an ambitious one. In due course the Taiwanese Government would like to have an energy mix of 50% natural gas, 30% coal and 20% renewable energy.
Companies that were successful in the auction include Ørsted, wpd, Copenhagen Infrastructure Partners, Northland Power, Yushan Energy, and China Steel Corporation and Taipower.
After awarding 3.8 GW of capacity on 30 April 2018, the Taiwanese authorities will award a further 2 GW via a competitive tender later this year.
One of the big winners from the process, Ørsted, secured the right to connect 900 MW offshore wind capacity to Taiwan’s power grid with the Changhua 1 project, which has a capacity of 605 MW, and Changhua 2, with a capacity of 295 MW, and a grid connection in 2021 for both projects. This means Ørsted will be delivering the first large-scale commercial offshore wind projects in the Changhua region and connect 900 MW into Changhua’s available grid capacity of 1 GW in 2021.
Ørsted Wind Power’s executive vice president and chief executive wind power, Martin Neubert described the awards as “a breakthrough moment for offshore wind in the Asia Pacific region.”
wpd was awarded 1 GW of grid connection capacity for the Yunlin and Guanyin offshore wind projects. The Yunlin project, which will be built 8 km off the coast of Yunlin County, will be the first project and will be commissioned in 2020/2021. It will have a capacity of 650-700 MW.
The Guanyin project, which will be built 2 km off the coast of Taoyuan County, will be the second project, will be commissioned in 2021 and provide approximately 350 MW of capacity.
Northland Power confirmed the Taiwanese Bureau of Energy had allocated 300 MW to the Hai Long 2 offshore windfarm. “This is a significant step forward for the project, as it allocates capacity for Hai Long 2 to connect to Taiwan’s grid in 2024 and advances the project’s ability to execute a 20-year power contract under Taiwan’s FIT regime,” said Northland. Northland and its partner Yushan Energy Pte own 60% and 40% of Hai Long 2, respectively. Hai Long 2 received an environmental permit in early 2018 and advanced development work is ongoing. Project economics and financing details will be finalised as development progresses; selection of the turbine supplier and negotiation of construction contracts is underway.
Copenhagen Infrastructure Partners (CIP) has been allocated 600 MW for the Changfang and Xidao projects 13-15 km off the coast of Changhua County, and 300 MW for Site 29 (also Changhua), which it will develop with partners China Steel Corporation and DGA. With a combined volume of 900 MW, CIP will also play a major role in building the offshore wind industry in Taiwan.
Speaking at the time the deals were announced, law firm Hogan Lovells partners Alex Wong and Joseph Kim said the Taiwanese development meant that sponsors can now start developing projects in the country. They noted the Taiwanese deals would also encourage developers considering nearby regional markets, such as Japan and South Korea, and lessons learned to date in the Taiwanese market would be invaluable when going into those markets.
“Some of the developers were granted less capacity than they sought,” said Mr Wong, “and some projects were not awarded any capacity at all. Now that the results have been published, developers will be working hard to get projects commissioned on time. We also expect that some of the applicants for this process will apply for additional capacity during the auction process later this year.”
In May 2017, two turbines (Formosa 1, Phase 1) with an aggregate capacity of 8 MW were commissioned and are currently operational. Three demonstration offshore windfarms are also under development with an aggregate capacity of approximately 360 MW.
In April 2018, Ørsted also confirmed it had taken a final investment decision for the second phase of the Formosa 1 offshore windfarm in Taiwan’s northwestern coast. The second phase will add 20 offshore wind turbines with a total capacity of 120 MW to Formosa 1’s 8 MW capacity. Formosa 1 will be the first commercial-scale offshore windfarm in Taiwan.
Formosa 1 is a joint venture between Ørsted (35%), Taiwanese developer Swancor Renewable (15%), and Macquarie Capital (50%). The joint venture, established in January 2017, is expected to make a final investment decision about Formosa 1 phase 2 in May 2018.
Ørsted general manager for the Asia Pacific region Matthias Bausenwein said he anticipates that the next phase of the project will be installed in 2019.
A contract has been signed with Siemens Gamesa for 20 6 MW turbines and a full-service agreement for 15 years. Formosa 1 has also signed a contract with the Taiwanese company Fortune Electric for an upgrade of the Formosa 1 onshore substation. The contracts are subject to the joint venture’s final investment decision and financial close. The permitting process is on schedule, and Formosa 1 signed a power purchase agreement with Taipower in December 2017.
The project will utilise non-recourse project finance to fund a large proportion of the capital costs. The project financing loans will come from a consortium of international and Taiwanese banks. This hands-on experience enables the financial community to prepare for future investments in large-scale offshore wind projects in Taiwan.
In addition to its engagement in Formosa 1, Ørsted is currently developing four offshore wind sites in the Greater Changhua region. The four Greater Changhua projects, located 35 to 60 km off the coast, have a maximum capacity of 2.4 GW and received environmental impact assessment approval in February 2018.
The projects are due to be built from 2021 to 2025, subject to further permits and final investment decision.
Seajacks has secured a contract from Siemens Gamesa to install the turbines on phase 2 of Formosa 1, this being the first time the Great Yarmouth-based company has won a renewables contract outside Europe. The vessel Seajacks Zaratan will site all 20 SWT-6.0-154 wind turbines in the Taiwan Strait, with the jack-up vessel due to begin work in Q2 2019.
April 2018 also saw Jan De Nul Group and Hitachi Ltd awarded a contract to manufacture and install 21 turbines and customised foundations for the Changhua offshore windfarm on behalf of Taiwan Power Company. Taiwan Power Company plans to construct the windfarm off the coast of Fangyuan in Changhua County in central western Taiwan, in an area sometimes subject to extreme weather conditions.
The contract includes design, manufacturing and installation of the foundations and 5.2 MW turbines for the offshore windfarm and maintenance for five years. The contract has a value of around US$800M.
Jan De Nul will be responsible for foundation design, fabrication and installation, wind turbine installation, supply and installation of cables offshore and onshore as well as for upgrading the electrical substation. Hitachi will oversee manufacturing, assembly, operation and maintenance and other work related to the turbines.
Seabed survey and geotechnical investigations will start in May 2018. Manufacturing of the foundations and wind turbines will take place in 2019 to deliver them in early 2020. Test operation of the equipment is to start mid-2020 and completion is scheduled for December 2020.
The Changhua windfarm will be constructed in a region known to be subject to typhoons. As a result, the consortium submitted a proposal using Hitachi’s proprietary downwind turbine. The downwind configuration will reduce wind loading in adverse conditions.
The foundations for the turbines will be enhanced to enable them to withstand meteorological conditions in the area and the potential effects of earthquakes.