Northland director chides Taiwan government over 'floundering' offshore wind push

Canadian energy firm Northland’s outgoing Taiwan managing director Sean McDermott took to social media to chide the government for its floundering 15GW Round 3 offshore wind procurement drive.

Taiwan has the world’s highest local content requirements for offshore wind, which have raised costs to unsustainable heights, stalling development.

“Round 3 is struggling to gain momentum, and the government seems either unable or unwilling to change direction on some of the most problematic elements of the regime,” said McDermott in a recent post on Linkedin.

“The Round 3 dilemma is simple: risk is high and reward is low. As a consequence, many of the world’s largest suppliers and developers are leaving Taiwan. Most won’t come back,” he added.

Early lead

Taiwan took an early lead in sector development in its first two procurement rounds, with 2.35GW already in operation and another 3GW in late-stage development.

The island’s 5.5GW by 2025 capacity goal is “mostly on schedule, and that is a tremendous success”, said McDermott.

Northland’s 1GW Hai Long project with partner Malaysia’s Gentari awarded in round 2 “is proceeding apace and shows how hard work, talented people, and flexible policy can lead to extraordinary outcomes,” he added.

McDermott has managed Northland's Taiwan operations for nearly three years, shepherding Hai Long to installation, and will now return to Canada to spearhead development in the Maritime Provinces.

These early projects benefitted from generous government offtake contracts and more lenient local content requirements that contained costs.

Subsidy-free struggles

Government feed in tariffs (FiTs) have since declined to below costs as local content requirements have ramped, a one-two punch that has left the industry staggering.

Developers now say they need offtake prices as high as TWD6,000/MWh ($190/MWh), exceeding even pricy US projects, and are not finding customers.

“Industry has been proclaiming the Round 3 challenges for years, and there are multiple examples of prominent suppliers, developers and investors exiting Taiwan offshore wind. The consequences of these policies are obvious,” said McDermott.

“Still, nothing fundamental is changing,” he said.

“It’s not clear if the government doesn’t believe industry, or does believe industry but is too restricted by politics / regulations / bureaucracy to make big changes, or simply has different measures for success,” McDermott mused.

“Regardless, Round 3 is floundering, people and companies are leaving, and material policy changes are needed to shift that direction,” he said.

Cause for hope

Despite the sector’s struggles, McDermott maintains hope that the sector will overcome and flourish, driven in no small part by the need for energy.

In contrast to much of the world where offshore wind plays a prominent role in reducing emissions, in Taiwan it forms a fundamental component of primary energy supply.

The island imports nearly 99% of its primary energy, mostly as crude oil and liquefied natural gas (LNG), while coal supplies over 30% of power generation. It has shuttered two out of three operating nuclear power plants in recent years, with the goal of a ‘Nuclear Free Taiwan’ by 2025, leading the power sector to precipice of general shortfalls.

“Stable energy supply is a political, security and industrial necessity for Taiwan,” said McDermott.

The island has some of the best offshore wind resources in the world in the Taiwan Straits, where wind speeds over shallow waters average 10-11 metres per second (m/s) close to massive urban and industrial centres where most of its 23 million residents live and work.

“My optimism effectively springs from the banal observation that Taiwan really needs energy, wind is abundant to the point of obnoxious, and Taiwan is generally good at making hard things work,” he said.

“Offshore wind is an obvious solution,” he said. “Obvious does not mean inevitable, unfortunately, but offshore wind is a clear place to build.”

“At some point, I hope, a new renewable energy consensus will emerge, and offshore wind will regain its stride,” he said, adding: “At the moment, it’s not clear to me what that consensus will be, or when it will unfold.”