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Obscured policies in Taiwan’s FIT scheme to impact on sustainable development of local solar supply chain

published: 2018-12-17 10:22

The Taiwanese Ministry of Economic Affairs (MOEA) has announced a 10.17% decrease to next year’s feed-in tariff (FIT) rates for solar PV installations, which is much higher than the average decrease of 4.25% in the global PV industry. This will make 2019 a tough year for Taiwan’s PV industry, with wider-than-expected impacts on the whole market.

The feed-in tariff is a policy designed to accelerate the development of renewable energy. It offers favorable, fixed rates for renewable energy producers, with subsidies to encourage new installations.

Taiwan’s FIT scheme was introduced in 2010. Since then, the rates have decreased each year. In 2016, to cope with the unbalanced growth and regional development of solar PV systems in the country, the government introduced a 15% FIT markup on PV installations in Northern Taiwan, and a 6% markup for projects using high efficiency modules recognized by the Voluntary Product Certification (VPC). FITs for floating solar PV systems, meanwhile, were introduced in 2017.

Since the second half of 2018, local PV companies have successively planned the construction of large-scale ground-mounted PV systems for 2019. Overall, the capacity is close to 1 GW. However, developers in this sector face myriad construction challenges.

These include equipment that is resistant to salt corrosion for at least 20 years; and the costs of building substations. Indeed, contrary to the rules for rooftop PV, most ground-mounted PV systems require developers to build a booster substation by themselves, meaning the costs for grid connection account for around 25% of the total installation costs.

Damage limitation

In an environment where grid connection costs cannot be reduced and the FIT is greatly cut, EPC companies need to limit equipment costs by using cheaper modules and inverters, for instance, in order to maintain a high internal rate of return (IRR).

EnergyTrend analyst Sharon Chen points out that current module prices are US$0.37/W on the spot market. In this situation, the IRR will be just 2.60% after the FIT cuts, while it will take 15 years for companies to achieve a break-even point.

To combat this, modules prices need to be lowered to $0.30/W or less to make IRR rebound to 5%. However, we believe that even the most competitive module manufacturers in Taiwan may not be able to offer a price as low as this, let alone the prices needed for inverters, which will need to drop by more than 60% to achieve an IRR of around 5%.

Overall, Taiwanese manufacturers will find it difficult to follow the global price decline trends, due to high production costs, meaning modules and inverters made by Chinese manufacturers will continue to be more cost competitive.

Meanwhile, in 2019, PV projects will only receive a 6% markup on FITs when they are fitted with VPC-recognized modules and inverters. As such, companies may increase quotes to cover the associated costs of certification.

However, we predict that this mechanism will actually accelerate the demise of Taiwan's manufacturers, rather than provide them with access to market, because of the cuts.


Taiwan’s government has announced a goal to achieve a cumulative installed solar PV capacity of 20 GW by 2025, aiding foreign investments to the country and driving development of the local PV industry.

It is clear, however, that it lacks the policies and measures needed to support renewable energy. Indeed, the sudden cut in FIT rates, for example, may cause development to stagnate, so that the 20 GW target becomes pointless.

According to statistics from the China Economic Research Institute (CIER), Taiwan's EPC companies have considered political risks, which are the most unpredictable, more severe than the risk of natural disasters, since they cannot pass on the political risks to insurance companies.

It has been a global trend to phase out FITs for solar PV projects. EnergyTrend believes that the best way is to make clear the annual decline in rates to 2025, and to use the subsidy to assist in the development of energy storage, which can supplement intermittent energy sources like solar energy.

In this way, companies will also have a chance to assess the risks themselves, so that those which cannot fit in will be naturally eliminated from the industry. In the long term, the solar energy industry needs healthy and stable development.

This article originally appeared on pv magazine on December 12, 2018. Please visit:


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