(Bloomberg) -- Some of the biggest players in Taiwan’s nascent offshore wind power sector said they’re confident the government will scale back its latest policy proposal that threatens to slash revenues for their planned projects.
Copenhagen Infrastructure Partners K/S and WPD Offshore GmbH said they expect Taiwan to change the policy it floated late last year, which would call for lower payments for offshore wind power and put a cap on annual electricity sales. Between them, the two companies are involved in projects that account for 1.8 gigawatts of capacity, nearly half of what Taiwan awarded at government-set rates last April.
“We expect the government will improve the conditions because all developers say the changes are unacceptable,” Jesper Krarup Holst, chief executive officer of CIP’s project office in Taiwan, said in an interview Thursday on the sidelines of a conference in Tokyo.
The island is attempting to create the first Asian offshore wind market, while maintaining cheap and reliable electricity to underpin the global competitiveness of its manufacturing industry. But the dispute over the policy changes has tarnished Taiwan’s budding reputation as the darling of the industry. Taiwan wants 6.7 gigawatts of offshore wind electricity, along with massive increases in solar and natural gas, to help it move away from nuclear and coal.
In April, the country agreed to give space in its electrical grid for about 3.8 gigawatts of offshore wind, divided among projects led by seven companies. It offered to pay NT$5.8498 ($0.19) per kilowatt hour. But there was a catch: developers had to sign power purchase agreements with grid operator Taiwan Power Co. by the end of 2018 in order to guarantee those rates.
In November, Taiwan’s Ministry of Economic Affairs surprised the industry when it proposed that purchase agreements signed this year would get NT$5.106 per kilowatt hour, a reduction of 12.7 percent. In addition, Taiwan proposed limiting payments to wind farms for only the first 3,600 hours operations per year, and to end a fee structure that pays higher tariffs early in the project’s life to help service financing debt.
Combined, the proposal would reduce project revenues by 20 percent to 25 percent, CIP’s Holst said. Only WPD, which had signed deals for two of its three projects, and Swancor Holding Co., have power purchase agreements at the 2018 rates.
Boris Balan, vice president of Northland Power Inc., which is also developing a project affected by the tariff proposal, said on the sidelines of the Tokyo conference that the government has been open to discussions with the companies “to arrive at a meaningful, reasonable solution.”
“We have the confidence in the Taiwanese government to take the right decisions and come up with an updated proposal for the tariff,” Eike Schimanski, Taiwan-based project manager for WPD, said at the conference.
A 60-day public comment period for the proposed changes will end Jan. 28, and new tariff will be set on Jan. 30, the Taipei-based United Evening News reported. CIP’s Holst said he expects the decision by Feb. 1, the last working day before the Lunar New Year holiday begins in Taiwan.
“Until then,” he said, “we will all be in suspense.”
To contact the reporters on this story: Chisaki Watanabe in Tokyo at cwatanabe5@bloomberg.net;Jason Clenfield in Tokyo at jclenfield@bloomberg.net;Dan Murtaugh in Singapore at dmurtaugh@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng
©2019 Bloomberg L.P.
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