Taiwan has built some of the largest offshore wind farms in the Asia-Pacific region, the Changhua 1 and 2a. Renewable energy consultants warn however that spiking localization costs could drive international firms out of Taiwan’s market.
On this episode of Zoom In Zoom Out, TaiwanPlus reporter Sally Jensen sits down with Raoul Kubitschek, managing director of renewable energy consultancy firm Niras. We first zoom in on Taiwan’s progress in offshore wind power over the past decade, then zoom out to understand why localization costs have become so expensive.
On this episode of Zoom In Zoom Out, TaiwanPlus reporter Sally Jensen sits down with Raoul Kubitschek, managing director of renewable energy consultancy firm Niras. We first zoom in on Taiwan’s progress in offshore wind power over the past decade, then zoom out to understand why localization costs have become so expensive.
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00:00 (upbeat music)
00:02 Welcome to Zoom In, Zoom Out,
00:15 your global look at news from Taiwan.
00:17 I'm Sally Jensen.
00:19 Like many countries around the world,
00:22 Taiwan is trying to rapidly expand renewable energy
00:25 to reach the climate goal of net zero by 2050.
00:29 And it's pinning a lot of these hopes
00:31 on offshore wind power,
00:33 created by wind farms placed out at sea.
00:36 To discuss the outlook for offshore wind,
00:39 we're joined today by Raul Kubitschek.
00:42 He's the managing director
00:43 of a renewable energy consultancy firm called NIRAS.
00:48 Raul, welcome to the show.
00:49 It's a pleasure to be here, Sally.
00:51 Firstly, can you tell us your connection
00:53 to the offshore wind power sector in Taiwan?
00:56 So that goes back a little while.
00:58 So I'm in Taiwan since 2008,
01:01 and I used to work in bilateral trade
01:02 and then for a developer,
01:04 and then for a couple of consultancy companies.
01:06 So I had the pleasure to see it grow actually since 2009,
01:10 and then really the breakthrough in 2017, '18.
01:14 And for our company,
01:16 we are very involved in the environment
01:17 and engineering parts of these projects,
01:19 working with the project developers.
01:21 Our company has been working
01:22 on onthology bird topics for round two,
01:25 but then we've been also involved, for example,
01:27 in Tai Power Phase One.
01:29 That was one of the first wind farms
01:31 that was developed and came online in 2021.
01:35 So let's first zoom in on two particular sites,
01:38 the Greater Jianghua 1 and 2A,
01:41 which together have been described
01:43 as Asia Pacific's biggest offshore wind farm,
01:47 just off the Western coastline of Taiwan,
01:49 in the Taiwan Strait.
01:51 Can you tell us how this project came about?
01:54 So it's one of the larger projects,
01:56 and it's true it's one of the largest in APEC,
01:58 with 920 megawatt.
02:00 It's even for a European project, quite sizable,
02:02 and it's quite far offshore,
02:04 and it's developed by a Danish utility called Osset,
02:07 who has been very successful in Taiwan,
02:09 developing this wind farm,
02:10 particularly in probably since 2016,
02:14 and then they have been awarded in 2018.
02:16 And then they finally managed to turn it all online
02:19 against all odds, including COVID, this year.
02:23 And there will be actually followed by other projects
02:25 from other developers this year as well.
02:28 And why is Taiwan wanting to push forward
02:31 these kinds of projects?
02:32 Taiwan Strait is very windy,
02:33 so it's one of the best places in the world
02:36 to put offshore wind.
02:37 Taiwan is also, when you look at other renewables,
02:39 like onshore wind,
02:40 it's very difficult to develop projects nowadays.
02:43 Taiwan has seen some pretty good growth in onshore wind,
02:46 actually beginning of the 2000s up to 2010s.
02:51 But then Taiwan is, when it comes to wind,
02:53 actually the best onshore wind sites
02:54 are all along the West Coast,
02:56 mainly actually Taichung, Tsanghua,
02:58 and then in Tainan, the wind already gets worse.
03:01 But you can also see how Taiwan grew out
03:03 towards these areas.
03:04 So in the past, there was no highway,
03:05 now there is a highway.
03:07 There's a lot of buildings now,
03:09 there's a lot of infrastructure,
03:10 so it's very hard to develop a larger onshore wind site.
03:13 So onshore wind would not be sufficient.
03:16 Onshore wind has a lot of issues,
03:17 let's say around environment,
03:19 environmental groups, and other stakeholders.
03:21 So offshore wind has become a very good choice
03:24 because you can build these multi-gigawatt projects
03:26 off the shore and a little bit away
03:28 from your onshore stakeholders.
03:30 And you mentioned Ørsted as one of the companies
03:33 that is operating in Taiwan.
03:35 Are there any other international companies
03:37 that have been working with Taiwan
03:38 and where are they from?
03:40 Actually, quite a wide range of companies.
03:43 So we have Danish companies like Ørsted or CIP,
03:47 who are very active in Taiwan.
03:49 We had German participation with EMBW and RWE,
03:51 who sadly have left the market.
03:53 We have Japanese companies like Jera, very active.
03:57 We have interest from Singapore like Wiener Energy,
04:00 for example, we had participation of Iberdrola from Spain.
04:04 So it basically attracted for a long time
04:07 some of the best players in the market.
04:10 So for example, Denmark became the largest
04:12 foreign investor two years ago
04:14 because there's also outside of the developers,
04:16 there's what we call tier one suppliers to wind turbines,
04:19 like Siemens, Gamesa, and Vestas, who set up shop.
04:22 And Taiwan has made the point for the,
04:24 what we call round two projects,
04:25 which are currently under construction,
04:27 they demand localization.
04:29 So there has been a movement
04:30 that some of the underwater foundations
04:32 are manufactured in Taiwan,
04:34 that part of the wind turbines are manufactured in Taiwan,
04:36 the towers, some of the cables in the future.
04:39 So it also brought manufacturing activity,
04:42 especially into Taipei ports and Taichung port,
04:44 but also other suppliers.
04:46 It has brought quite some employment.
04:48 So when they start building these projects,
04:50 we're looking now over 10,000 people in the sector,
04:53 and it's the energy sector,
04:54 so it's usually quite well paid.
04:56 And also it attracted,
04:58 as I've also just been back from Japan,
04:59 I think a couple of companies actually use Taiwan as a base
05:02 to fly out to Japan, Korea, Philippines,
05:05 to also see and explore these markets.
05:07 So it has, as a first mover in the region outside of China,
05:11 attracted quite some APEC vision on that.
05:15 - How have these projects,
05:17 or for example, the Greater Zhanghua 1 and 2A,
05:19 been received by the local communities?
05:22 - I think first with skepticism,
05:24 especially from the fisheries,
05:26 but they also bring certainly environmental protection
05:29 and recovery of these fishing areas.
05:32 There might have been some concerns
05:34 also around the lending points
05:35 and the impact on the communities.
05:37 And I think for Zhanghua,
05:39 it was also how do they capture value of that?
05:41 Because a lot of this manufacturing
05:43 is happening in Taichung or in Taipei,
05:45 but how do they get more value out of these wind farms,
05:47 which are actually,
05:48 most of them are actually off the coast of Zhanghua.
05:51 - Is there enough public buy-in
05:53 to support the ongoing expansion of offshore wind
05:57 or any other renewables?
05:59 - I think Taiwan is still struggling
06:01 with a full buy-in on any energy form.
06:04 So we're not really,
06:05 there are sometimes surveys,
06:07 and then you come to 50% for this or 60% for this,
06:10 but you're lacking kind of a full public buy-in on this,
06:14 like you see in Europe,
06:16 where they say renewable energy is super important.
06:18 And we, let's say we sacrifice some goals for it
06:20 because we need to go onto that track.
06:22 I think Taiwan's still,
06:23 you see that even in the discussions now
06:25 about nuclear free homelands.
06:26 So that was the old policy to phase out nuclear by 25,
06:30 which the older government was pretty keen on doing,
06:33 and they have shut down already two nuclear power plants.
06:35 And the last one, the first reactor,
06:37 will go down this summer,
06:38 but you have seen even the president to be kind of open
06:42 to keep it going.
06:43 But even there, you don't have a full buy-in.
06:45 So I think Taiwan needs to discuss a little bit more
06:48 how 2050 should look like,
06:50 and how is the long-term vision,
06:51 because all these infrastructure projects take a long time.
06:55 So they're not done tomorrow.
06:56 So you need actually a lot of public support for this.
06:58 (electronic music)
07:02 - So you've touched on
07:03 some of these localisation requirements.
07:05 Let's zoom out to some of these wider challenges.
07:09 Because a lot of the manufacturing occurs in Taiwan,
07:12 there have been reports saying that international developers
07:15 have been spooked by the strict localisation requirements.
07:19 Can you tell us a bit more specifically,
07:21 what does localisation mean?
07:23 - So in the Taiwanese context, it's a little bit different.
07:25 So if you look at the UK,
07:27 localisation meant the value of a wind farm.
07:29 So back then, the UK wanted to achieve 40%
07:31 of the value of the wind farm created in the UK.
07:34 And it could be investment, employment, manufacturing.
07:38 So the developer were free to choose
07:39 what they want to localise.
07:41 Taiwan has taken a very traditional approach,
07:44 and they do it itemised, so they're very, very strict on it.
07:47 So they want to have, as mentioned,
07:49 the underwater foundations and parts of it,
07:52 nacelles and parts of it, cables, vessels.
07:56 And they have not been very flexible in moving this around,
07:59 because what we have seen is the challenge
08:01 that the supply chain is still learning.
08:03 It's a new industry for them.
08:04 And they need to ramp up fast, actually,
08:06 and that has been quite an issue.
08:08 And also what we've seen, because it's such a small market,
08:11 is that for some of these items,
08:12 we do not have enough competition in the market,
08:14 so the prices have gone up.
08:16 So now we are facing especially a challenge
08:18 for the next round, which we call round three,
08:20 is that the government is no further using feed-in tariffs.
08:23 They're basically not taking any subsidies,
08:25 but they're going directly to market.
08:26 So they're selling their energy to the likes of,
08:28 let's say, they hope to sell TSMC or AUO or Delta
08:32 or whoever needs now RE100 fulfillments.
08:35 But this has now come at a price,
08:37 because on the one hand side,
08:38 we have seen financing going up globally
08:40 because of inflation and all these issues.
08:42 So it's become more difficult to lend money
08:44 at, let's say, more competitive rates.
08:46 And also localization is still a demand.
08:48 So the government has said,
08:49 "We are not subsidizing it anymore,
08:50 but we still want you to do localization."
08:52 So now the developers in the next round
08:54 are faced with the challenge
08:55 that they have to sell their energy at quite a high price,
08:58 which then Taiwanese companies obviously say,
09:00 "That's not competitive if we only pay 2.5 or 3 Taiwan dollar
09:04 for thermal energy and all these other items."
09:06 So we've kind of a little bit stuck now
09:09 between do we want more and affordable green energy
09:12 or do we want to have industrial policy?
09:14 And that's for the new government to figure out quite fast.
09:17 So it seems that Taiwan is kind of hitting a fork in the road
09:20 in terms of this offshore wind development here.
09:24 What path forward do you see Taiwan going?
09:28 I think Taiwan needs to be now very careful.
09:29 You said achieving Taiwan net zero 2050 goals,
09:32 and we already see a gap in '26 and '27 for offshore wind.
09:36 So it will be very hard to obtain these goals in 2050
09:39 or even in 2030.
09:41 So the incoming government needs to think
09:44 how do they bring it back on the road
09:45 so it's beneficial still for the local economy,
09:48 but also providing cheap energy
09:50 and keeping investor confidence into the market.
09:53 And they need to see how they adjust their market mechanisms
09:55 for the auctions and the energy market design for this.
09:58 So usually governments would have an idea
10:01 within the exclusive economic zone
10:03 which sea user would use it,
10:05 like fisheries, marine transportation, military or defense,
10:10 and then offshore wind or any other ocean energy.
10:14 And in Taiwan, it's hitting a bit of a slack
10:16 because Taiwan has no holistic marine spatial planning.
10:19 So it's often given to, it's among different ministries
10:23 and it's among different stakeholders.
10:25 So aligning this is difficult
10:27 and we have seen actually in the past,
10:29 especially in the north of Taiwan,
10:31 a lot of agitation because there was one very large project
10:33 that in the fisheries that we are fishing here.
10:35 This is our fishing grounds.
10:37 So that has been not done very well
10:39 also from the perspective of the proposed project
10:41 because you need to have really the deep discussion
10:43 as which areas can you really use
10:45 without taking away the livelihood of the fisheries.
10:48 Or if you do it, how do you mitigate
10:49 and how do you compensate them for that?
10:52 - So would you be able to tell us
10:53 if there are any ways Taiwan could learn
10:55 from its neighbours in the region
10:57 about offshore wind development?
10:59 - I think actually Taiwan can teach other countries
11:01 a lot about offshore wind.
11:03 We've seen that actually we've been involved
11:05 in a project in the Philippines
11:06 where we actually use Taiwan as an example.
11:08 While we are hitting some of roadblocks and forks
11:13 and so on, it's still Taiwan has done a really good job
11:15 in doing it until now we're faced with some of these issues.
11:19 So there's actually a lot,
11:20 and also Japan looked at Taiwan for some issues,
11:23 but then also decided some of, let's say localisation
11:25 or the way that auctions are done
11:26 are probably a little bit too aggressive.
11:29 So if they'd done it a little bit different.
11:31 I think Taiwan can build more bridges
11:33 and it should also have the self-confidence
11:37 to go out and engage.
11:38 And I think the government has been very involved
11:41 in a lot of issues, but perhaps they should think
11:43 to send out some more people to Japan and the Philippines
11:45 and even Korea to have more interaction on that level.
11:48 But there will be also interest
11:49 and you can already see this from Japan towards Taiwan,
11:51 how did you do it?
11:52 So you have talents because now Japan will have more projects
11:56 in 2029, but they will need a lot of talents
11:59 to really build it.
11:59 And you have the experience since 2018 in Taiwan.
12:02 So there's something there for Taiwan to teach,
12:06 but perhaps there's also something for Taiwan to learn,
12:08 for example, from the experience just now
12:10 in the United Kingdom or in the United States.
12:13 When they had their auction over the last years,
12:16 actually nobody bid and the government adjusted the way
12:19 that they compensate for these wind farms.
12:21 And Taiwan sometimes need to learn
12:23 to be a little bit more flexible
12:24 and not to play too hard ball,
12:26 because they need to answer to all these challenges
12:28 that we see with inflation.
12:29 And in the end, we want to build these projects.
12:32 I think that should be the common goal
12:33 between the industry and the government.
12:35 So you cannot play it like nice to have.
12:38 And just if you fulfill this for me, I let you build it.
12:40 No, it should be, how do we build it?
12:42 So that needs to be the outlook.
12:44 - And of course, we have inaugurated
12:46 a new president of Taiwan.
12:49 What is his plan to deal with this situation?
12:52 - So currently we have not yet seen
12:55 a very specific plan for offshore wind.
12:58 He has still reiterated the pathway to net zero
13:01 and how important energy is,
13:02 but in spite of the former governments
13:05 or one president more or less,
13:07 who has actually made a point also
13:08 of pointing out offshore wind, we don't see that yet.
13:11 And I feel that the new government wants to come in
13:13 and assess the situation a little bit more.
13:16 And also the new government is now faced with a parliament,
13:18 which is not, you know,
13:20 we're currently having again demonstrations
13:22 and the brawl in the parliament.
13:24 So I think it's a very difficult for the government now
13:26 how to fix it because it will not be only
13:30 in the purview of the government agency,
13:31 but actually the parliament will play a role
13:33 because you will need to change laws
13:34 and you need to make budgets available.
13:36 So it's actually a very difficult time.
13:39 But renewable energy also in,
13:41 when it comes to national security,
13:43 actually play a very big role.
13:44 So Taiwan is importing 98% of its energy and that's a lot.
13:47 So if you would increase more renewables,
13:50 you would not rely so much on liquefied natural gas
13:53 or oil imports.
13:54 You could cover 20, 30, perhaps 50% just using wind,
13:59 solar, geothermal and other forms of energy.
14:02 And we have seen this over the last two years,
14:03 actually Taiwan's biggest pain point comes
14:06 from high LNG or liquefied natural gas costs.
14:09 So the moment I have renewable energy,
14:10 I do not need to import anymore.
14:11 I do not need to have capital outflow to other countries
14:14 to import oil or gas.
14:16 So that's how offshore wind, but also solar and others
14:18 will play an important role for Taiwan.
14:21 Thank you so much for joining us today, Raoul.
14:23 It's been a pleasure.
14:25 This has been Zoom In, Zoom Out.
14:27 You can find more stories from Taiwan Plus News
14:29 by following us on social media.
14:32 Thank you for watching.
14:33 We'll see you next time.
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