I OMNI Trending on Energy I Observation of Taiwan's offshore wind market (March)

Recently, Taiwan's offshore wind power market has just completed the announcement of the administrative contract for the selection of developers in Phase 3 zonal development, allowing various developers to prepare for related procedures and hoping to complete the administrative process as soon as possible to accelerate wind farm construction. However, there are many uncertain factors in the future offshore wind power market, especially affecting the selection of developers in the second phase of block development and the floating demonstration wind farm. Therefore, it is necessary to pay more attention to market changes in the future.

Highlights of this issue

．Phase 3 (3.2) of offshore wind zonal development will be postponed until the end of the year, and the results will not be announced until after the 2024 election.

．The floating demonstration wind farm briefing is held in March, but the developer selection process by the Bureau of Energy will only proceed after the feed-in tariff (FIT) is determined, estimating the process is to be held in the second quarter of next year.

．Six developers selected for zonal development 3.1 have not all signed administrative contracts, while some developers are still hesitating.

Offshore wind power market update

　　In November and December 2023, the Ministry of Economic Affairs (MOEA) in Taiwan will announce the selected developers and wind farm rankings. It is expected that the offshore wind power market will continue to grow. In the past, developers have complained about the harsh penalties in the administrative contract, but after several adjustments, the final version of the administrative contract was officially released in late February. The Bureau of Energy (BoE) also announced that developers must complete the administrative contract signing process within three months and submit a performance bond before the end of May. At that time, including the remaining wind farm capacity and wind farm boundary location, everything will be clear.

　　It is worth noting that CIP's Taichung Fengmiao Project has been the most anticipated project. Although the project plans to have a capacity of 1.8 GW, only 500 MW will be allocated, leaving nearly 1.3 GW of development capacity for the next round of selection in 3.2. Therefore, other developers are asking the BoE to announce the results as soon as possible. However, the official response is to wait until after the administrative contract is signed before making any announcements.

　　While there has been significant progress in 3.1, the 3.2 selection rules and localization content have become stuck. The media previously reported that the 3.2 selection draft would be announced in May, with applications being accepted until the end of September. However, due to the delay in the 3.1 selection process and slight adjustments made by MOEA to the current wind farm development policy, the overall selection process is expected to be extended until the end of this year. It is estimated that the selection process will continue until after the 2024 Taiwan presidential election, and major decisions may be postponed until the new president takes office in May 2024.

　　In addition, the limited capacity issue of wind farms in 3.1 has been criticized by various sectors. The European Chamber of Commerce Taiwan (ECCT) has advocated increasing the overall capacity to 4 GW and distributing it over two years, which is equivalent to increasing the yearly capacity from 1.5 GW to 2 GW. However, according to the current attitude of the Energy Bureau and the issue of insufficient capacity, it is likely that the overall capacity will be maintained at 3 GW.

Nevertheless, the number of developers will be reduced from the current six to four, and the maximum allocation limit for developers will be adjusted according to the wind farm selection ranking, but the maximum capacity limit for a single wind farm will remain at 500 MW. For example, in the first round of selection, developer A will be awarded 500 MW for wind farm A, and the second-ranked wind farm B will be awarded to developer B. The third-ranked wind farm C will be awarded to developer A, which means that developer A will win the development rights for wind farms A and C, and the development capacity quota will be filled.

However, the proposal to increase the developer's allocation capacity has caused dissatisfaction among some developers, who believe it will result in a situation where the winner takes all. They also believe that it will affect the financing of future wind farm projects and bank loans and upset the market balance. They hope that the competent authority will not agree to this proposal. Relevant opinions are currently being presented, and the MOEA has expressed that it is collecting opinions from all parties and has not yet made an official decision. It is necessary to communicate with the industry to find a consensus before continuing.

Current status of floating wind in Taiwan

　　As for the current status of floating wind in Taiwan, the MOEA just held an explanatory meeting in late January, canceled the capacity cap, and changed the number of allocated developers from "2" to "2 and increased 1 additionally accordingly", so that the development of floating wind farms is more feasible. But given the capacity cap is increased, some developers express that they must participate no matter how small the number of wind turbines are, and question that the planning and design of the current floating wind farms which may not be suitable for Taiwan's waters, and the policy should support testing gradually and move towards in a steady development mode.

　　Regarding the floating wind construction, RWE suggested that there will be sufficient test data for the large-scale floating wind farm installation, and it is hoped that the number of wind turbines must be at least 6 or even 12 to form an array floating wind farm, and the data related to the wind farm installation will be thorough to facilitate future floating wind construction.

　　There is another voice arises, which believes that the test data of a single wind farm is limited to the local area. The sea conditions differ in Taiwan area, and the difference in seabed conditions is even greater, and small wind farms should be widely installed to conduct multiple tests in order to obtain sufficient data that meet the local circumstances so that it will help to build up the local supply chain and allowing the floating offshore wind industry go further.

　　MOEA responded that due to the current divergence of opinions in the industry regarding the size of the wind farm, installed capacity, the number of wind turbines, and the grid connection plan, it is necessary to gather consensus before pushing down. In addition, because floating wind farms involve FIT, clear and accurate data is needed to support development costs and related risks management, and it is still pending information from developers for trial calculation, so there is no exact schedule for the floating bidding plan.

It is worth noticing that given the "hobbit" of the Bureau of Energy (BoE) in the past, they intend to conduct the next year's renewable energy FIT review at the end of the year, and announce the FIT draft and hold a public hearing in December. It is noted that BoE intends that the industry will provide the FIT by themselves as soon as possible, and save enough time for the FIT review members of BoE to discuss with various parties before the draft has been announced. It will not be ruled out that there will be a relevant demonstration project plan to assist developers in the floating demonstration project installation.

However, since the presidential election will be held in early 2024, the determination of the FIT rate for the floating wind is bound to attract attention from the industry, so the FIT of floating wind has a great chance to be affected by the election, and even delay(perhaps intentionally) the discussion of the floating FIT for another year due to insufficient information. It is possible to move forward when the floating wind demo project is postponed until the end of 2024 at the latest.

Current Status of Offshore Wind in Phase II

Reviewing the construction status of various wind farms.

．The first phase of Ørsted's Greater Changhua Offshore Wind Farm has completed installation, and there are still more than 30 wind turbines to be completed in the Greater Changhua Offshore Wind Farm by the end of this year.

．For CIP Changfang Xidao Wind Farm the target for completing 10 wind turbines and all underwater foundations installations was set last year. Due to the impact of the pandemic, shipping schedules, and crew availability, only five wind turbines underwater foundations were installed last year, with only one wind turbine finally connected to the grid. CIP is striving to complete all installations this year and has coordinated with Boskalis to increase two transportation ships to accelerate piling and underwater foundation installation. However, the delivery of underwater machine foundations by Century Wind Power Co., Ltd. is a critical factor in the wind farm's construction.

．OWF Yunlin's construction has been significantly delayed due to successive pile sliding accidents during piling operations. At the same time, it triggered a debt reduction storm among banks. Recently, the wind farm completed a capital increase, but the wind farm's installation may still be delayed until 2025.

．The final wind turbine cabin of the Formosa Wind Farm (F2) was installed in January, and efforts are being made to complete all turbine adjustments and grid connection by Mar.21, completing the final mile of the wind farm.