Taiwan has set a tentative feed-in tariff (FIT) of NT$5.106 (US$0.166)/kWh for offshore wind farm development projects with PPA (power purchase agreements) to be signed in 2019, decreasing 12.71% from the 2018 rate.
The proposed cut has sent all international firms developing offshore wind farm projects in Taiwan protesting. Orsted said a FIT reduction will affect the contracts it has signed with several local suppliers and its decision to be made in March 2019 on further investment in Taiwan.
Copenhagen Infrastructure Partners, which has signed 60 contracts with local suppliers totaling NT$20 billion, said it will reevaluate its investment projects in Taiwan.
Some other international makers have been looking for local partners for their Taiwan projects: Siemens Gomesa Renewable Energy and MHI Vestas for makers of blades of ofshore wind turbines; SteelComp for constructors of steel towers supporting offshore wind turbines; and GeoSea for partners in undertaking marine engineering projects.
Viewing that the average contract FIT for offshore wind farm development in Europe is about NT$2.15/kWh currently, local academic organizations have urged the government to lower FIT, but the government has argued that in order to attain the goal of accumulating installation capacity of 5.5GW for offshore wind farms by 2025 with electricity of 19.8 billion kWh to be generated a year, equivalent to reduction in carbon dioxide emission by 10.47 million metric tons, it is necessary to offer high FIT.
Compared to FIT of NT$5.1156/kWh for the first 12 years in Germany, an average contract FIT of NT$5.7426/kWh in the UK and NT$9.8316 in Japan, Taiwan’s 2018 FIT of NT$5.8498/kWh is within the international range, the Ministry of Economic Affairs (MOEA) indicated.
Taiwan originally aimed to have renewable energy take up 20% of total power generation in 2025, but a referendum on November 24 resulted in removing the deadline and allowing extended runs for the country’s aging nuclear power plants. As it is now not urgent to attain the target 20% for renewable energy, MOEA has proposed lower FIT for 2019.
Taiwan’s development of offshore wind power generation is at an infant stage with high development cost, MOEA explained, adding the cost will decrease at later stages and so will FIT rates along with progressive development of infrastructure, supply chains and financing schemes.
It remains to be seen whether the propsoed FIT reduction will send offshore wind farm developers abandonign their projects. If they do, Taiwan will be frustrated in its aim to build up a local supply chain consisting of firms in the wind turbine, underwater infrastructure, submarine cable and marine engineering sectors.
As international contract FIT tends to slip due to continual drops in steel pricing and oversupply in Europe and cost for semi-submersible platforms or spar-buoy ones to support floating offshore wind turbines is lower than that for underwater foundation to support fixed offshore wind turbines, a FIT of NT$5.1060/kWh for 2019 is still attractive to international offshore wind farm developers.
The rate is not yet final, but for the developers, less profit should be better than no business at all.