Key PPA deals in Q4: Taiwanese PPA fight continues

Taiwan is among the most promising emerging markets for offshore wind, if not the most. But political and policy changes since November have shaken this nascent market – and caused shockwaves among developers and investors.

In 2018, the Asian island became a battleground for the world’s top offshore wind players seeking to secure very attractive feed-in-tariff prices. As a result, international key players including Ørsted, Copenhagen Infrastructure Partners, Northland Power and Macquarie Capital secured last year the right to connect projects totalling 5.5GW to the national grid.

In December, two of these projects totalling 736MW secured power purchase agreements at TWD5,849/MWh (€165/MWh). These are two of the stand-out deals on our table of the most significant wind power purchase agreements signed in the last quarter of 2018 (see table), alongside continued activity in the United States, Scandinavia and Australia.

Key Power Purchase Agreements in Wind in Q4 2018‍

Offshore PPAs in Taiwan

Changes in Taiwan following the rise of anti-wind party Kuomintang in local elections two months ago have cast doubt over future offshore PPAs in the country.

Taiwanese utility Taipower signed PPAs last month with the companies behind the 376MW Formosa 2 offshore wind farm, which has been developed by Macquarie Capital (75%) and Swancor (25%); and at Wpd’s 360MW Guanyin scheme. These were the first PPAs signed after the offshore tenders last year, at pre-agreed rates. When bidding, developers thought they would be able to secure those PPA rates in both 2018 and 2019.

However, in November the Taiwanese ministry of economic affairs announced that offshore wind feed-in-tariff prices – i.e. the prices paid in the PPAs – would be cut by 12.7% in 2019, to TWD5,106/MWh (€144/MWh). We analysed the change here. This has cast doubt on the projects where PPAs are not yet signed.

The cut affects companies that have won the right to build projects last year, but which will only be able to sign their PPAs this year. While Macquarie, Swancor and Wpd have signed a PPA with higher 2018 feed-in-tariff prices last month, owners and developers of projects totalling over 4.7GW won’t – unless the government has a change of heart.

Ørsted has been the most vocal. The Danish giant missed a deadline of 2nd January to sign a PPA with Taipower for its 900MW Changhua 1 and 2 projects.  As a result, the company has now paused all of its project activities in the country.  Martin Neubert, CEO of Ørsted's offshore activities, said the utility is "very concerned about the suggested feed-in tariff level for 2019 as well as the newly-proposed cap on annual full-load hours".

We wouldn’t be surprised if some of the other affected developers were to follow Ørsted’s lead, which could pile more pressure on the government.

In total, the offshore wind developments that won support last year are expected to attract investment of up to $22bn, which would benefit both the local industries and economy. But that is now at risk, all because the government thinks it can offer PPAs at lower established market prices for projects with emerging market risks.

The Taiwanese government needs to make a decision soon about whether to honour its previous promises. This is set to prove crucial to the growth of offshore wind in Taiwan.