What Feed-in Tariff Controversy? Why Taiwan's Wind Power Future Looks Bright

What Feed-in Tariff Controversy? Why Taiwan's Wind Power Future Looks Bright
Why you need to know

At a recent conference in Taipei, January's controversy over feed-in tariffs did not dampen a sense of optimism over Taiwan's wind energy future.

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Did you know that, by 2025, Taiwan will be the 4th largest user of offshore wind power in the world? Few seem to realize the solid fundamentals that are driving Taiwan towards a wind energy future. Before last week’s Global Wind Energy Council (GWEC) conference hosted by the European Chamber of Commerce Taiwan’s Low Carbon Initiative (ECCT-LCI), I, too, did not appreciate the energy revolution taking place in this island.

Onshore benefits from offshore power

The day began with Lee Chun-li (李君禮), the acting head of Taiwan’s Bureau of Energy (BOE), announcing that Taiwan would increase its wind capacity by 5GW after 2026 on top of its initial plan. According to the BOE, they expect offshore wind to be a significant job generator with output value reaching NT$77.3 billion (US$2.5 billion) and total investment exceeding NT$1 trillion (around US$32 billion) by 2025. This benefit can be very real for local communities.

The mayor of Taoyuan, Cheng Wen-tsan (鄭文燦), had equally positive data to share: Wind power in Taoyuan has reduced CO2 emissions by 760,000 tons, generated US$2 billion in investment and created 400 direct jobs with many other indirect ones supporting the industry.

'Taiwan is almost a no-brainier [for offshore wind development] based on the fundamentals,' said Matthias Bausenwein, President for Asia-Pacific for Orsted.

Fundamentally strong

Ben Backwell, the CEO of GWEC, noted Taiwan’s strong potential to become a wind leader, saying: “Seeing the ongoing foreign investment in Taiwan confirms its potential to become the second largest offshore market in Asia, as forecasters have rightly predicted, and Taiwan’s economy will benefit massively from these investments. The local leaders’ willingness to meet and discuss the opportunities for job creation and the development of local supply chains shows that Taiwan is setting the example as a region that’s ready for business and promoting offshore wind development.”

Despite what you may have read regarding negotiations over feed-in tariffs (FITs), progress continues to be made on wind. At the two-day event, international wind power companies, government departments, and research institutions shared their insights and their fears about the future of wind.

“Taiwan is almost a no-brainier [for offshore wind development] based on the fundamentals,” said Matthias Bausenwein, President for Asia-Pacific for Orsted.

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Credit: GWEC / Twitter
Panelists speak during last week's Global Wind Energy Power conference in Taipei.

All the major wind developers attended such as Orsted, Northland Power, and CIP. Financiers like Maquarie Capital and BNP Paribas also spoke on panels. Turbine manufactures such as Siemens Gamesa and MHI Vestas also came to share insights along with Bloomberg New Energy Finance. Essentially, everyone working on offshore wind was there.

And they had generally positive things to say. One major theme running through the first day across a diverse array of speakers was that Taiwan has incredibly strong fundamentals for offshore wind development. Low land area, strong stable winds, a relatively shallow coastline, and high energy demand mean that, regardless of the size of the FIT, there will be a financial case for offshore wind. Combine Taiwan’s carbon reduction goals with the fact that a fourth nuclear power plant will likely never be commercially viable and you have a strong case for wind.

During a panel, when asked about the stability of the government going forward, Mark Dooley, Global Head of Green Investment Group at Macquarie Capital, said “You can rely on the government, you can do business here. Clear policy signals from the government were very persuasive for us.”

Localization as a real challenge

Yet not everything was praise for Taiwan’s policies.

Despite the FIT controversy being relatively fresh, the main challenges facing the wind industry related to local content requirements. These are development stipulations that require a percentage of components to be made in Taiwan. This is to stimulate local economic development and help Taiwan become a regional wind power. However, they may not always be a good idea.

Obviously, wind companies want to keep costs down. But something to remember is that these are larger international players, they have experience with localized content, and they don’t think it always makes sense.

Despite the FIT controversy being relatively fresh, the main challenges facing the wind industry related to local content requirements – development stipulations that require a percentage of components to be made in Taiwan.

One example brought up by the CEO of Northland Power, Mike Crawley, was: “The turbine you want to deploy in 2023 may not be the one you want to start developing today. However, in 2023, 2024, you may be deploying a turbine technology that is no longer current.” Essentially, you freeze the industry in place and prevent it from being competitive as it ends up using older technology.

In other cases, research pointed out that Taiwan will likely never have a significant market share for certain components, such as ball bearings, while other markets have already figured out how to produce them cheaply and effectively at scale.

There is a lot for Taiwan to gain from local development, but not if it is just building components for the sake of it. A better compromise would be to find out where Taiwan can add value in manufacturing and focus there. Taiwan can avoid adding in extra stipulations that end up just increasing the total cost of the project and ultimately the electricity price. This has big implications for companies committing to renewables and mandatory air pollution laws.

Winding up

The GWEC event hosted by ECCT-LCI brought together all the offshore wind industry stakeholders together to publicly speak about what has at times been a controversial yet exciting process. Taiwan is changing its entire energy makeup – a revolution without precedent. It was only a few years ago that private developers could even setup energy projects.

The most crucial theme that ran through all this discussion was the importance of public awareness. Does the average Taiwanese citizen realize that their humble island is about to become a major player in offshore wind?

Probably not. According to recent surveys, most people do not know where their energy comes from. It does not have to be this way. Taiwan does not need to wait to push more aggressive policies on renewable energy. That will require dialogue and discussion. While this event helped bring the industry together, the next step is to bring the public together.

Many still doubt whether Taiwan can achieve its 2025 goal for renewables. Yet, perhaps as an outsider, I am more optimistic. Taiwan revolutionized its waste disposal in less than a generation, created universal healthcare, and survived as a democracy in an increasingly despotic region. Putting up turbines sounds relatively easy when you take into account all the other challenges Taiwan has already overcome.

Read Next: Taiwanese Companies Commit to 100% Renewables, Despite a Dirty Grid

Editor: Nick Aspinwall@TheNewsLens

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