Development of Taiwan’s offshore wind market is likely to be strongly underpinned by foreign companies in the short term, but they face a slow erosion of their dominance as authorities enforce local content rules, Fitch Solutions said.
“Taiwan’s Ministry of Economic Affairs has in place policies to mandate the use of the local supply chain, and lately this requirement has been a key factor considered by the Taiwanese government when selecting winning projects,” the analysts said in a research note.
“Copenhagen Infrastructure Partners’ Zhangfang and West Island Offshore Wind Farm projects were reported to have experienced difficulties in obtaining approvals from the government in 2019, highlighting increasing scrutiny from Taiwanese authorities.”
Taiwan’s Ministry of Economic Affairs (MOEA) last year warned foreign investors that they could be “replaced by second-tier candidates” if they failed to fulfil localisation targets set out by the ministry, Recharge reported, in what adds to a growing list of pressures facing international players.
The government has previously come into conflict with players such as offshore wind champion Orsted over a revision to (previously lavish) support levels for wind at sea.
And this week, civil aviation authorities flagged flight safety concerns at German developer Wpd’s 350MW Guanyin project due to its closeness to the island’s Taoyuan International Airport, which eventually could block the wind farm.
Fitch Solutions in its note said the establishment of local supply chains in offshore wind will result in a slow shift in market dominance away from European groups towards local Taiwanese companies.
As well as Wpd and Orsted, European contractors such as Heerema Marine Contractors, DEME or Jan de Nul, are also active in Taiwan, which aims to establish itself as the regional hub for offshore wind in East Asia.
A strong offshore wind pipeline valued at $8.4bn will lead growth in the energy and utilities sector of Taiwan over the next decade, Fitch Solutions estimates.
Despite the issues related to local content, the Fitch Solutions analysts still think the offshore wind sector in Taiwan is driven by supportive government policies, as the governing Democratic Progressive Party (DPP) is determined to phase out nuclear power on the island and is aggressively supporting the development of renewables.
Fitch Solutions forecasts Taiwan’s overall energy and utilities sector to grow at an annual average of 2.0% in the 2021-2019 period.
