Political changes in Taiwan promise trouble for offshore investors

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A Word About Wind
December 10, 2018
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Political changes in Taiwan promise trouble for offshore investors

Recent political changes have shaken Taiwan, and could put at risk the development and growth of its nascent offshore wind market.

On 17th November, Taiwan’s ruling Democratic Progressive Party lost significant ground to opposition party Kuomintang in local elections, losing seven of its 13 mayoral and county magistrate seats. For many businesses and onlookers in Taiwan, this was a shock.

It’s a blow for investors in the wind sector too. Since coming to power in 2016, the DPP has pursued a clean energy agenda. It has pledged to phase out nuclear energy by 2025 and has been planning for 20% of Taiwan’s electricity to come from renewable sources by the same year. Government support for a ‘greener’ economy has led to favourable policies for renewables, particularly generous feed-in tariffs for offshore wind.

Taiwan has excellent conditions for offshore wind. Wind speeds of 12m/s in the Taiwan Strait, and guaranteed power prices of TWD5,849/MWh (€168/MWh), have attracted the attention of international wind developers and investors. As a result, in April and June, the government awarded firms the right to connect offshore wind projects totalling 5.5GW to the national grid.

These favourable conditions have made Taiwan a very attractive investment opportunity,despite risks including natural catastrophes and political aggression from China.

But the shift in public opinion from the DPP towards Kuomintang, which has vocally criticised the DPP’s commitment to offshore wind, is an indication that voters are not wholly supportive of the DPP’s clean energy agenda. In a referendum that coincided with the elections, 59.5% of voters chose to ditch the nuclear phase-out deadline of 2025.

This doesn’t mean that the change won’t happen, but it will take longer. This also removes an important driver for replacement energy sources including wind farms.

In addition, the country’s ministry of economic affairs announced in November that offshore wind feed-in-tariff prices would be cut by 12.7% next year, to TWD5,106/MWh (€147/MWh). This affects companies who have won the right to build projects this year but which will only be able to sign their power purchase agreement in 2019. Yes, it is far more attractive that the squeezed margins that investors can access in Europe, but it is still a concern for investors.

This has prompted Danish giant Ørsted to warn that offshore wind projects in Taiwan could face delays following the referendum decision to slow the nuclear phase-out. And if Ørsted is worried, you can bet that other companies are too. Firms in the supply chain need certainty.

The Taiwanese offshore wind market lacks infrastructure. It will take big money to build a supply chain up to the task of supporting major offshore projects. The unique geographical and weather conditions in Taiwan require bespoke technology: MHI Vestas announced that it was ‘typhoon-proofing’ its V164 turbines in preparation for the Taiwanese market this year. These are major investments and so certainty for investors is a must.

But the results of the recent local elections, and their immediate consequences, have cast doubt on what is one of the world’s most attractive emerging offshore wind markets. The next Taiwanese presidential election is not until 2020 but, if Kuomintang wins power, the future for offshore wind will be even murkier. Investors have to take note.

The balance of risk and reward is always crucial for attracting and retaining investor interest. The Taiwanese government may get away with these changes this time – but it doesn’t take much to hurt investor confidence. And when it’s gone, it can take a long time to win back.

Recent political changes have shaken Taiwan, and could put at risk the development and growth of its nascent offshore wind market.

On 17th November, Taiwan’s ruling Democratic Progressive Party lost significant ground to opposition party Kuomintang in local elections, losing seven of its 13 mayoral and county magistrate seats. For many businesses and onlookers in Taiwan, this was a shock.

It’s a blow for investors in the wind sector too. Since coming to power in 2016, the DPP has pursued a clean energy agenda. It has pledged to phase out nuclear energy by 2025 and has been planning for 20% of Taiwan’s electricity to come from renewable sources by the same year. Government support for a ‘greener’ economy has led to favourable policies for renewables, particularly generous feed-in tariffs for offshore wind.

Taiwan has excellent conditions for offshore wind. Wind speeds of 12m/s in the Taiwan Strait, and guaranteed power prices of TWD5,849/MWh (€168/MWh), have attracted the attention of international wind developers and investors. As a result, in April and June, the government awarded firms the right to connect offshore wind projects totalling 5.5GW to the national grid.

These favourable conditions have made Taiwan a very attractive investment opportunity,despite risks including natural catastrophes and political aggression from China.

But the shift in public opinion from the DPP towards Kuomintang, which has vocally criticised the DPP’s commitment to offshore wind, is an indication that voters are not wholly supportive of the DPP’s clean energy agenda. In a referendum that coincided with the elections, 59.5% of voters chose to ditch the nuclear phase-out deadline of 2025.

This doesn’t mean that the change won’t happen, but it will take longer. This also removes an important driver for replacement energy sources including wind farms.

In addition, the country’s ministry of economic affairs announced in November that offshore wind feed-in-tariff prices would be cut by 12.7% next year, to TWD5,106/MWh (€147/MWh). This affects companies who have won the right to build projects this year but which will only be able to sign their power purchase agreement in 2019. Yes, it is far more attractive that the squeezed margins that investors can access in Europe, but it is still a concern for investors.

This has prompted Danish giant Ørsted to warn that offshore wind projects in Taiwan could face delays following the referendum decision to slow the nuclear phase-out. And if Ørsted is worried, you can bet that other companies are too. Firms in the supply chain need certainty.

The Taiwanese offshore wind market lacks infrastructure. It will take big money to build a supply chain up to the task of supporting major offshore projects. The unique geographical and weather conditions in Taiwan require bespoke technology: MHI Vestas announced that it was ‘typhoon-proofing’ its V164 turbines in preparation for the Taiwanese market this year. These are major investments and so certainty for investors is a must.

But the results of the recent local elections, and their immediate consequences, have cast doubt on what is one of the world’s most attractive emerging offshore wind markets. The next Taiwanese presidential election is not until 2020 but, if Kuomintang wins power, the future for offshore wind will be even murkier. Investors have to take note.

The balance of risk and reward is always crucial for attracting and retaining investor interest. The Taiwanese government may get away with these changes this time – but it doesn’t take much to hurt investor confidence. And when it’s gone, it can take a long time to win back.

Recent political changes have shaken Taiwan, and could put at risk the development and growth of its nascent offshore wind market.

On 17th November, Taiwan’s ruling Democratic Progressive Party lost significant ground to opposition party Kuomintang in local elections, losing seven of its 13 mayoral and county magistrate seats. For many businesses and onlookers in Taiwan, this was a shock.

It’s a blow for investors in the wind sector too. Since coming to power in 2016, the DPP has pursued a clean energy agenda. It has pledged to phase out nuclear energy by 2025 and has been planning for 20% of Taiwan’s electricity to come from renewable sources by the same year. Government support for a ‘greener’ economy has led to favourable policies for renewables, particularly generous feed-in tariffs for offshore wind.

Taiwan has excellent conditions for offshore wind. Wind speeds of 12m/s in the Taiwan Strait, and guaranteed power prices of TWD5,849/MWh (€168/MWh), have attracted the attention of international wind developers and investors. As a result, in April and June, the government awarded firms the right to connect offshore wind projects totalling 5.5GW to the national grid.

These favourable conditions have made Taiwan a very attractive investment opportunity,despite risks including natural catastrophes and political aggression from China.

But the shift in public opinion from the DPP towards Kuomintang, which has vocally criticised the DPP’s commitment to offshore wind, is an indication that voters are not wholly supportive of the DPP’s clean energy agenda. In a referendum that coincided with the elections, 59.5% of voters chose to ditch the nuclear phase-out deadline of 2025.

This doesn’t mean that the change won’t happen, but it will take longer. This also removes an important driver for replacement energy sources including wind farms.

In addition, the country’s ministry of economic affairs announced in November that offshore wind feed-in-tariff prices would be cut by 12.7% next year, to TWD5,106/MWh (€147/MWh). This affects companies who have won the right to build projects this year but which will only be able to sign their power purchase agreement in 2019. Yes, it is far more attractive that the squeezed margins that investors can access in Europe, but it is still a concern for investors.

This has prompted Danish giant Ørsted to warn that offshore wind projects in Taiwan could face delays following the referendum decision to slow the nuclear phase-out. And if Ørsted is worried, you can bet that other companies are too. Firms in the supply chain need certainty.

The Taiwanese offshore wind market lacks infrastructure. It will take big money to build a supply chain up to the task of supporting major offshore projects. The unique geographical and weather conditions in Taiwan require bespoke technology: MHI Vestas announced that it was ‘typhoon-proofing’ its V164 turbines in preparation for the Taiwanese market this year. These are major investments and so certainty for investors is a must.

But the results of the recent local elections, and their immediate consequences, have cast doubt on what is one of the world’s most attractive emerging offshore wind markets. The next Taiwanese presidential election is not until 2020 but, if Kuomintang wins power, the future for offshore wind will be even murkier. Investors have to take note.

The balance of risk and reward is always crucial for attracting and retaining investor interest. The Taiwanese government may get away with these changes this time – but it doesn’t take much to hurt investor confidence. And when it’s gone, it can take a long time to win back.

Recent political changes have shaken Taiwan, and could put at risk the development and growth of its nascent offshore wind market.

On 17th November, Taiwan’s ruling Democratic Progressive Party lost significant ground to opposition party Kuomintang in local elections, losing seven of its 13 mayoral and county magistrate seats. For many businesses and onlookers in Taiwan, this was a shock.

It’s a blow for investors in the wind sector too. Since coming to power in 2016, the DPP has pursued a clean energy agenda. It has pledged to phase out nuclear energy by 2025 and has been planning for 20% of Taiwan’s electricity to come from renewable sources by the same year. Government support for a ‘greener’ economy has led to favourable policies for renewables, particularly generous feed-in tariffs for offshore wind.

Taiwan has excellent conditions for offshore wind. Wind speeds of 12m/s in the Taiwan Strait, and guaranteed power prices of TWD5,849/MWh (€168/MWh), have attracted the attention of international wind developers and investors. As a result, in April and June, the government awarded firms the right to connect offshore wind projects totalling 5.5GW to the national grid.

These favourable conditions have made Taiwan a very attractive investment opportunity,despite risks including natural catastrophes and political aggression from China.

But the shift in public opinion from the DPP towards Kuomintang, which has vocally criticised the DPP’s commitment to offshore wind, is an indication that voters are not wholly supportive of the DPP’s clean energy agenda. In a referendum that coincided with the elections, 59.5% of voters chose to ditch the nuclear phase-out deadline of 2025.

This doesn’t mean that the change won’t happen, but it will take longer. This also removes an important driver for replacement energy sources including wind farms.

In addition, the country’s ministry of economic affairs announced in November that offshore wind feed-in-tariff prices would be cut by 12.7% next year, to TWD5,106/MWh (€147/MWh). This affects companies who have won the right to build projects this year but which will only be able to sign their power purchase agreement in 2019. Yes, it is far more attractive that the squeezed margins that investors can access in Europe, but it is still a concern for investors.

This has prompted Danish giant Ørsted to warn that offshore wind projects in Taiwan could face delays following the referendum decision to slow the nuclear phase-out. And if Ørsted is worried, you can bet that other companies are too. Firms in the supply chain need certainty.

The Taiwanese offshore wind market lacks infrastructure. It will take big money to build a supply chain up to the task of supporting major offshore projects. The unique geographical and weather conditions in Taiwan require bespoke technology: MHI Vestas announced that it was ‘typhoon-proofing’ its V164 turbines in preparation for the Taiwanese market this year. These are major investments and so certainty for investors is a must.

But the results of the recent local elections, and their immediate consequences, have cast doubt on what is one of the world’s most attractive emerging offshore wind markets. The next Taiwanese presidential election is not until 2020 but, if Kuomintang wins power, the future for offshore wind will be even murkier. Investors have to take note.

The balance of risk and reward is always crucial for attracting and retaining investor interest. The Taiwanese government may get away with these changes this time – but it doesn’t take much to hurt investor confidence. And when it’s gone, it can take a long time to win back.

Recent political changes have shaken Taiwan, and could put at risk the development and growth of its nascent offshore wind market.

On 17th November, Taiwan’s ruling Democratic Progressive Party lost significant ground to opposition party Kuomintang in local elections, losing seven of its 13 mayoral and county magistrate seats. For many businesses and onlookers in Taiwan, this was a shock.

It’s a blow for investors in the wind sector too. Since coming to power in 2016, the DPP has pursued a clean energy agenda. It has pledged to phase out nuclear energy by 2025 and has been planning for 20% of Taiwan’s electricity to come from renewable sources by the same year. Government support for a ‘greener’ economy has led to favourable policies for renewables, particularly generous feed-in tariffs for offshore wind.

Taiwan has excellent conditions for offshore wind. Wind speeds of 12m/s in the Taiwan Strait, and guaranteed power prices of TWD5,849/MWh (€168/MWh), have attracted the attention of international wind developers and investors. As a result, in April and June, the government awarded firms the right to connect offshore wind projects totalling 5.5GW to the national grid.

These favourable conditions have made Taiwan a very attractive investment opportunity,despite risks including natural catastrophes and political aggression from China.

But the shift in public opinion from the DPP towards Kuomintang, which has vocally criticised the DPP’s commitment to offshore wind, is an indication that voters are not wholly supportive of the DPP’s clean energy agenda. In a referendum that coincided with the elections, 59.5% of voters chose to ditch the nuclear phase-out deadline of 2025.

This doesn’t mean that the change won’t happen, but it will take longer. This also removes an important driver for replacement energy sources including wind farms.

In addition, the country’s ministry of economic affairs announced in November that offshore wind feed-in-tariff prices would be cut by 12.7% next year, to TWD5,106/MWh (€147/MWh). This affects companies who have won the right to build projects this year but which will only be able to sign their power purchase agreement in 2019. Yes, it is far more attractive that the squeezed margins that investors can access in Europe, but it is still a concern for investors.

This has prompted Danish giant Ørsted to warn that offshore wind projects in Taiwan could face delays following the referendum decision to slow the nuclear phase-out. And if Ørsted is worried, you can bet that other companies are too. Firms in the supply chain need certainty.

The Taiwanese offshore wind market lacks infrastructure. It will take big money to build a supply chain up to the task of supporting major offshore projects. The unique geographical and weather conditions in Taiwan require bespoke technology: MHI Vestas announced that it was ‘typhoon-proofing’ its V164 turbines in preparation for the Taiwanese market this year. These are major investments and so certainty for investors is a must.

But the results of the recent local elections, and their immediate consequences, have cast doubt on what is one of the world’s most attractive emerging offshore wind markets. The next Taiwanese presidential election is not until 2020 but, if Kuomintang wins power, the future for offshore wind will be even murkier. Investors have to take note.

The balance of risk and reward is always crucial for attracting and retaining investor interest. The Taiwanese government may get away with these changes this time – but it doesn’t take much to hurt investor confidence. And when it’s gone, it can take a long time to win back.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.