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Orsted gets delayed permit for Taiwan offshore wind projects

The permits come on the heel of a compromise on feed-in tariff levels between Taiwan and developers

Taiwan’s bureau of energy has granted Danish utility Orsted the delayed establishment permit for its Changhua 1 and 2A offshore wind projects that have a combined capacity of 900MW.

The utility had originally expected to receive the permits last year, which would have entitled it to still receive the 2018 feed-in tariff (FIT) level for them. In a dramatic announcement in early January, Orsted had announced it would pause all of its offshore wind activities in Taiwan due to the permitting challenges.

After the Taiwanese Ministry of Economic Affairs (MOEA) yesterday in a compromise raised the 2019 FIT level by 8% from an earlier proposal to TWD 5.5160 per kilowatt hour ($0.179/KWh), Orsted has revised its position.

The utility Orsted now says it will work with Taiwanese authorities and local stakeholders to reach other outstanding key project milestones, such as completing the supply chain plan and signing power purchase agreements.

"There is clear expectation from the Taiwanese government that we support the development of a Taiwanese offshore wind supply chain and we stand by that commitment," Orsted chief executive Henrik Poulsen said in a conference call on company results today.

"What we need to do now is find a project that will give the Taiwanese government what they need which is green energy at a good price, us to support an establishment of a supply chain that will build capabilities and drive economic growth."

Still, Poulsen remained somewhat cautious about the Taiwanese developments, adding his company "obviously" needs a risk-return equation that makes sense for it to invest in.

"We’re going to spend some time with our supply base, not least in Taiwan, to make sure we build a business case that makes sense for everyone."

The company’s board of directors will review and decide on the projects’ final investment case once it has clarity on the outcome of supply contract renegotiations and relevant project milestones being achieved in time to keep Changhua 1 and 2a on track for a potential commissioning in 2021, Orsted said.

Orsted's upheavals with Taiwan on permits and FIT levels come as Francesco Starace, the CEO of rival European utility Enel, said his company - a giant in the global renewables sector - would abstain from offshore wind, calling it a 'risky niche.'

Orsted's Poulsen just a day later rebuffed the criticism by Starace, pointing out that his company's strong construction track record and "convincing" O&M operations support that offshore wind as a technology has proven itself.

Blow to investor confidence

The market will undergo careful calculation with the supply chain and financial institutions to see whether projects off Taiwan remain viable, James Knight, a founding partner at the Augusta & Co. renewable energy advisory stressed.

"While investors will welcome a smaller reduction than was proposed in November, the initial changes called into question the government’s promises and have certainly dealt a blow to investor confidence," he said.

Taipei needs to respect that building an offshore industry in Taiwan is not the same as building one in Europe, Knight pointed out.

"Taiwanese offshore is an exciting market but challenging with deeper water, and prone to earthquakes and typhoons. There’s no incumbent offshore industry supply chain. The government’s level of support and commitment needs to reflect this in order to attract international investment."

UPDATES with expert comment

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