Ørsted warns Taiwan’s proposed tariff cut could impact ‘final investment decision’

The Taiwanese government has proposed a 12.7% cut in feed-in-tariffs for offshore wind PPAs in 2019.

Danish developer Ørsted Energy, one of the main players in Taiwan’s offshore wind industry, has warned that a proposed feed-in-tariff cut for the sector in 2019, announced yesterday by the government, could have “a negative impact” on their investment plans in the region.

“We are on track when it comes to the milestones we need to enter the PPA in 2018,” Matthias Bausenwein, president for Ørsted Asia-Pacific, said in a statement. “However, if we for any reason slipped into 2019 –  and if the drafted 12.7 percent cut in FiT for offshore wind in 2019 became indeed reality –  then it would have a negative impact on Ørsted’s localisation plans and also its final investment decision for the first Taiwanese offshore projects, planned for March next year,” the statement read.

The company declined to give further details about any possible changes to their involvement in the region. Ørsted is currently developing four sites for offshore wind in Taiwan, with a potential total capacity of 2.4GW.

A joint statement issued by the Danish developer, CIP, wpd, Yushan Energy and Northland Power, criticised the government’s “sharp turn” in policy, and said the decision will “seriously affect” the confidence of international markets in Taiwan.

CIP, wpd, Yushan Energy and Northland Power declined to comment or could not be reached immediately.

The criticism comes after the Taiwanese government announced yesterday a proposed feed-in-tariff for offshore wind of 5,1060 new Taiwan dollars per MWh for 20-year PPAs implemented in 2019. The figure is 12.7 percent lower than 2018’s FiT of 5,850 new Taiwan dollars per MWh.

The deputy director general of the Bureau of Energy of Taiwan, Chun-li Lee, told Infrastructure Investor that the government will be holding a public consultation with the relevant parties, including developers, by the end of December, and that a final price will be announced by February next year.

Asked about Ørsted’s position, Lee said the government is trying to establish “the real cost” of electricity, and pointed to an auction earlier this year, when the cost of MWh was substantially lower than that of feed-in-tariffs.

In an auction in July, Ørsted and Canada’s Northland Power won a combined 1,664MW of capacity for four projects, with bidding prices between 2,224 and 2,548 new Taiwan dollars per MWh, much lower than the feed-in-tariff fees offered by the government.

“Developers will have to prove the costs [of their projects],” Lee said.

At the time, Ørsted argued costs were expected to decline due to the development of the local supply chain and more efficient EPC process being developed and the fact it planned to operate all its projects from the same hub, among others.

“It shouldn’t have influenced [the government], but it put a lot of pressure on the whole topic because the public opinion vision on renewables changed after it,” said Raoul Kubitschek, managing director at Petawatt energy consultancy.

Taiwan is aiming to increase the share of renewable power in its electricity mix to 20 percent by 2025, and it has already allocated 5.5GW of capacity to offshore wind projects. During the past two years, the island has become one of the main hotspots for investment in renewables in Asia-Pacific.

“The government now needs to appease everyone,” Kubitschek said. “But they also know that there hasn’t been such kind of foreign investment in Taiwan in the last decade.”