Taiwan's offshore projects will move into deeper waters and require more state support
Industry officials and analysts say that Taiwan's attempt to boost its offshore wind market will require a huge amount of government support to help prospective suppliers achieve their capacity goals, as projects are moved to deeper, more technically challenging waters.
The island's densely-populated population, which was long dependent on coal power, has quadrupled the wind power capacity from 1 gigawatt to 4 GW, up from less than 1 before the COVID-19 epidemic. It aims to have 60% of its power derived from renewable sources by 2050.
Energy administration has said that it is still collecting feedback about the bidding process. The government had been widely expected to announce details of an auction in June for contracts up to 3GW of offshore power. It stuck to its target of installing 10.9 GW by 2030.
The industry participants say that the low-cost projects located in shallow water, which incentivised aggressive bids in previous auctions, will soon be exhausted, bringing an end to a period rapid growth. This is despite Taiwan's growing semiconductor sector, which demands more energy, including wind power.
The major IT companies are most of the suppliers. For example, TSMC, they need to fulfil all these Apple (environment-friendly) requirements. This is basically a must," said Scott Hsu of consultancy and engineering firm Ramboll.
Hsu, who was referring to floating offshore wind turbines versus those fixed to the seabed, said that "everyone is now thinking about how to push fixed-bottom technology from 60 metres up to 90 meters before we find a solution to allow floating offshore winds to take over."
In the auctions held last year, most developers signed direct supply agreements with corporate customers and bid at so-called strike price of T$0 per Kilowatt Hour.
Strike prices are the target earnings rates. If the market price lowers, then the project gets a subsidy. If higher, it pays the difference.
Aegir Insights, a Danish company, expects to see strike prices of T$5/kWh - $6/kWh at the auction. This is about twice the T$3/kWh price for coal power, and reflects the greater uncertainty surrounding the economics behind offshore wind projects.
The Taiwanese market for offshore wind will require subsidies in the near future. Simon Engfred, an Aegir analyst, said that the struggle of the offshore industry in Europe requires government support.
Aegir estimates that Taiwan's offshore wind power capacity will be less than 10 GW in 2035. This is short of the 18.4 GW target.
Taiwan's Energy Administration in November changed auction rules so that winners no longer had to buy equipment from local manufacturers such as turbine blades. This was done to increase generation capacity and keep costs down.
David Chiang, Energy Collaborative Lead at SEMI (a global semiconductor industry association), said that the rule change had rattled investors and made investment planning more difficult.
He said that the sudden removal of this requirement had contributed to policy turmoil, which made it difficult for local and international stakeholders alike to plan and commit to new investments.
Floating is an alternative to fixed-bottom technologies that has not been tested. This poses a risk to an industry already impacted by setbacks like soaring costs or cancelled projects.
Edgare Kerkwijk is a board member of the Asia Wind Energy Association. She said, "There has been a huge backtracking in the offshore floating energy sector around the world. Existing players are very cautious about spending money on something they might not succeed."
(source: Reuters)
