Asia’s investor-friendly hub?

Taiwan may have a small offshore wind market at the moment, but it has certainly attracted a large group of private investors who are actively exploring it.
The momentum began in 2016, when President Tsai Ing-wen’s recently elected administration introduced breakthrough developments in renewables policy. Those reforms have attracted foreign investors like Partners Group and Macquarie, which have invested in solar and wind across the island.

When it comes to offshore wind, Macquarie Capital and DONG Energy’s investment in a demonstration project in north-west Taiwan earlier this year is showcasing the sector’s attractiveness. The Australian investor and the Danish energy group agreed to acquire a 50 and 35 percent stake respectively in the 128MW project from local developer Swancor Renewable. The Formosa I project, which is one of the first offshore wind farms currently under development in Taiwan, installed its first two, 8MW offshore turbines last October.

“The fundamentals for offshore wind development in Taiwan are strong”, says Matthias Bausenwein, general manager for DONG Energy Asia-Pacific. He explains that steady wind and high wind speeds, shallow waters and good seabed conditions surrounding the island allow for large-scale offshore wind development. He also points out that, given limited land resources for onshore wind development, it is “a natural choice” to develop offshore wind as an alternative utility-scale power source, especially since the island is phasing out nuclear generation and seeking to reduce its reliance on fossil fuel imports.

On top of the geographical and economic fundamentals, Taiwan’s transparent framework is helping to convince investors and developers to give the island’s nascent offshore wind market a go. “Offshore wind is a long-term investment. It takes six to eight years to develop, build and commission an offshore wind farm. Taiwan’s framework for this particular sector is transparent [and] clearly states the procedures and responsibilities [for all] parties involved,” explains Bausenwein, stressing that a stable framework for long-term investment is essential to enable market growth and provide certainty for private investors.

It is that kind of visibility that convinced DONG Energy, the world’s largest offshore wind developer, to set up its Taipei outpost last November. The company has since committed to developing four Taiwanese offshore wind farms, representing at least 2GW of capacity, which are now under environmental evaluation.

The four sites are part of a larger portfolio of 36 offshore wind farm sites planned by Taiwan’s Ministry of Economic Affairs. The island aims to install 4GW by 2030, under a broader government-led strategy called ‘Thousand Wind Turbines Projects’, which covers onshore and offshore installations.

DONG Energy and Macquarie are not the only first movers in the market, though. Two other international players – Canada’s Northland Power and Singapore-based Yushan Energy – agreed to select two sites and co-develop an offshore wind portfolio generating 1.2GW. The latter will cost 157 billion Taiwanese dollars ($5.1 billion; €4.8 billion) and will be located in Changhua, a county which sits on the west coast of the island and is endowed with a windy climate.

But there is another favorable wind helping Taiwan’s offshore wind market along: compared to China, Japan and Korea, which are dominated by state-owned enterprises and local utilities, Taiwan is much more open to foreign investment.

In that sense, the island is well positioned to become an industry leader, as it develops a local supply chain for the whole Asia-Pacific region, comments Edgare Kerkwijk, a board member of the Asia Wind Energy Association. If it is successful, Kerkwijk stresses, Taiwan can end up acting as a catalyst for other countries in the region, like India or Thailand.

A promising market indeed.