Will trimmed subsidy roll back knock the wind out of Taiwan’s offshore turbine sector?
- Taipei forced into climb down from aggressive cuts after industry players voice concerns
- Taiwan still the most attractive market in Asia for western developers, but they will give Japan and China a harder look, says consultant
A retrospective reduction in subsidies for offshore wind power development by Taiwan could take the wind out of international developers’ sails, and erode some of the sector’s attractiveness relative to Japan, mainland China and South Korea as an investment destination.
The Taiwan government had proposed an aggressive cutback in subsidies for offshore wind power projects in November 2018, after the ruling Democratic Progressive Party suffered a major election setback at the hands of the opposition Kuomintang Party, which has criticised offshore wind subsidies previously given as too generous. It initially proposed a 12.7 per cent cut in tariffs and the restriction of subsidies to output within 3,600 hours of operation in a year.
China explores use of foreign expertise to speed up deep-sea wind power development
But it was forced into a climb down after affected industry players voiced their concerns. On January 30, when the reduced subsidies were announced, the cut in tariffs was trimmed to 5.7 per cent and the cap on subsidies was replaced with a less punitive limit of 4,200 hours.
The subsidy cutback, and related tariff mechanism changes also announced last month could increase policy risks attached to infrastructure investment, which will raise financing costs, said industry watchers.
“Everyone expects subsidies to fall over time … but having retrospective changes is a big shock that hits both confidence and the cost of debt, which will be as big a deal as power revenue reduction,” David Sanders, a managing director at FTI Consulting’s global clean energy practice, said in an interview. His team advises European and Asian clients.
And to make the situation worse, international developers that won tendered project development rights in April 2018, were unable to benefit from higher tariffs last year because the government failed to issue their permits by January 2, 2019, a prerequisite for the signing of power sale and project financing agreements.