Citing Homogeneous Developmental Conditions, TOWIA Opposes Lowered Rates for Offshore Wind Energy in Light of 7.6% Cut in 2020 Offshore Wind Energy FIT

published: 2019-12-26 0:30 | editor: | category: News

The Bureau of Energy, Ministry of Economic Affairs held a renewable energy feed-in tariff (FIT) hearing on December 12th. Yuni Wang, chairman of wpd Taiwan, pointed out that Taiwan’s current offshore wind energy installation capacity sat at a measly 0.1GW, while construction is still underway for related infrastructures. Since the cost of wind farm development will not be changing in any meaningful way before 2025, Wang hopes that the Ministry will reconsider its decision to lower FITs.

The Ministry unveiled its 2020 proposal for renewable energy FITs on December 6th, with its corresponding hearing scheduled on the 12th. A PV hearing is to take place in Tainan, in consideration of the fact that most PV stations are concentrated in the Southwest. Hearings for other renewable energies, such as wind energy, are to take place in Taipei, as per usual.

With regards to offshore wind energy, the FIT will be lowered from $5.516/kWh in 2019, to $5.0946/kWh in 2020, a decrease of 7.6%. Wang expressed her opinion on the matter on behalf of the Taiwan Offshore Wind Industry Association (TOWIA).

TOWIA was established in 2019 as a provider of policy expertise and as a bridge between the government and the general public. TOWIA members include Swancor, Ørsted, NPI, YECL, CIP, wpd, Macquarie, JERA, SEMI PV Group, etc.

According to Wang, there are three reasons why FITs should not be lowered. First, Taiwan’s current 0.1GW offshore wind energy installation capacity is a far cry from the proposed 5.6GW target, for which basic infrastructures are under construction. Second, most offshore wind farms developed before 2025 require fully fleshed-out power purchase agreements (PPA) before 2019, meaning their developmental costs have already been set. Lastly, municipal governments, local communities, and fishermen expect significantly higher subsidies than expected – up to 10 times higher than official calculations. In light of these three factors, Wang hopes that the Bureau can give more thought to the proposed reduction before committing.

At the same time, according to the Ministry, companies yet to fall under the FIT scheme are to initiate grid connections in 2021; time-wise, this is no later than companies that do fall under the scheme. Therefore, according to TOWIA, there is no reason to change the pricing scheme, since there is no change to the conditions for wind farm development and construction costs pre-2025.

According to Wang, most companies have already signed PPAs with Taipower by this point, making them immune to the possible effects of FIT. However, the 2020 FIT reduction has not priced in the actual costs of wind farm construction within the next three to five years. It is expected that the lower FIT rates will be applied to Taipower’s offshore wind farms in the future and to the Taoyuan-based LiWei wind farm, built by wpd, which has not signed a PPA with Taipower.

TOWIA pointed out that pre-2025 development of offshore wind farms in Taiwan must adhere to a specific schedule, as opposed to being done on an ad-hoc basis. Should pre-2025 rate adjustments take place in accordance with global pricing trends while neglecting Taiwanese market realities, the public would be prone to misconceptions regarding the offshore wind farm market.

When the Bureau significantly lowered FITs in 2018, it suffered heavy blowbacks from the solar PV and offshore wind energy industries. However, the committee responsible for FIT has readjusted the magnitude of FIT reduction thanks to the data from and discussions involving various stakeholders. The committee reached the decision to preserve the tiered structure of FIT rates and relaxed the restriction on maximum acquisitions. This also proved the importance of a stable acquisition control mechanism to the development of the renewable energy market, especially during the pioneering stage.

Aside from offshore wind farm companies, many other companies offered their input during the renewable energy hearing in Taipei; for instance, some companies expressed their hope that a tiered pricing structure can be applied to future small-scale hydroelectric power, in addition to raising FITs in light of the difficulty involved in the installation process. On the other hand, representatives from geothermal energy companies indicated that initial costs of construction need to be priced in when establishing FITs. Finally, certain companies protested the loss of FITs for marine energy and accused the Taiwanese government of neglecting the marine energy industry.

(Image:shutterstock)

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