Taiwan back-pedals on proposed FiT cut after developers push back

While the new FiT tariff at NT$5.516 per MW is still 5.7% lower than last year's, it represents a much more modest reduction than the 12.7% cut the government had in mind.

The Taiwanese government backed off from its initial proposal to cut the offshore wind FiT regime by more than 10 percent this year, after several industry players threatened to scrap their projects on the island.

“We believe that, with the new FiT [scheme], all the projects will continue,” Yuming Cheng, senior president of the Energy Technology Division of Taiwan’s Ministry of Economic Affairs, said.

The new tariff for PPAs signed in 2019 is NT$5.516 ($0.18; €0.16) per MW, still a 5.7 percent discount from last year’s scheme, but higher than the original proposed cut of 12.7 percent.

“It is a significant improvement from the original offer,” a developer involved in Taiwan’s offshore wind industry, who asked to remain anonymous, told Infrastructure Investor.

The source believes their firm will proceed with its projects in Taiwan, but stressed that it will have to “renegotiate contracts with local supply chain companies.”

Asked about the government’s change of stance, Cheng, from the Ministry of Economic Affairs, said the new figure has been reached using data that wasn’t considered previously, such as Taiwan’s seabed features, climate and wind power characteristics.

The government decision comes after weeks of intense criticism from developers against the original proposed cut of 12.7 percent, announced in November.

German developer wpd told Infrastructure Investor last week it would have to cancel its 350MW Guanyin project in Taiwan if the tariffs were cut at that level. The firm is aiming to invest around $970 million in their local supply chain to develop the plant.

Similarly, Danish offshore wind developer Ørsted, which is currently developing more than 1GW of offshore wind capacity on the island, said it would  “suspend and re-evaluate all activities” in the region, and asked local partners to halt execution of contracts, local media reported.

Northland Power, wpd, CIP, and Ørsted, which are either developing or investing in Taiwan’s offshore wind sector, declined to comment or were not immediately available for comment.

“They saved the baby from the well,” Raoul Kubitschek, managing director at Petawatt energy consultancy, said but added that the situation might be tough for projects farther offshore, like those being developed by Ørsted and Northland Power.

“They will have to enter very tough negotiations with their suppliers in Europe and Taiwan, to see if they can squeeze more money,” he said.

The government also announced the introduction of a cap on the number of hours of electricity per year that could be acquired under the PPA agreement, and stricter rules for a two-tier 20-year PPA scheme that allows companies to receive higher FiT tariffs during the first half of the contract, and lower ones during the latter half.

Analysts expect negotiations to continue with local governments in order to achieve the necessary permits to build the projects.

“We can sense that the next battlefield will lie between the central and local government. Further negotiation with the local government, and highly likely along with the fishery association, would be needed to obtain the Establishment Permit and signing PPA[s] based on the new 2019 FiT,” said Will Cleverly, managing director of Offshore Wind Consultants Taiwan.

The island has become one of Asia’s main renewable investment hotspots, especially in the past year, as Taiwan allocated 5.5GW of offshore wind capacity, attracting international developers and investors such as Macquarie, wpd, CIP, EnBw and Mitsui.

According to data from the Global Wind Energy Council, Taiwan’s offshore wind industry could bring NT$880 billion ($25.8 billion; €22.7 billion) of investment and create around 20,000 jobs by 2025.