.jpg)
17 April, 2018
According to the global survey done by 4C Offshore Company, a marine consultancy, 16 out of the 20 world’s best wind farm sites are located in Taiwan Strait.
To utilize this valuable green energy, Taiwan government has established a goal that 20% of the electricity consumption will be generated by renewable energy by 2025, which includes 5.5GW that is expected to be generated from offshore wind farms to be installed by 2025. Encouraged by the wind resourses and the Taiwan government policy, many developers have been planning to invest in offsore wind farm projects in Taiwan.
According to local news, there are 23 projects, in an aggregate capacity of 10.68GW, have passd the preliminary Environmental Impact Assessment (EIA) as of November 2017. Said potential capacity has far exceeded Taiwan government’s target. As a result, how the competent authority in Taiwan, i.e., Ministry of Economic Affairs (“MOEA”), will determine the grid allocation for the 5.5GW to be generated by 2025 (“Grid Allocation”) has become the the focus of the future development of the offshore wind farm projects.
For managing the grid allocation for the offshore wind farm, MOEA’s Bureau of Energy (“BOE”) promulgated the “Guidelines for Allocating Installed Capacity of Offshore Wind Potential Zones” (“Allocation Guidelines”) on January 18, 2018. In the explainray notes, BOE indicated that the main subjects of the Allocation Guidelines include, among other things, corresponding the schedule of construction of domestic infrastructure (e.g., grid), orderly achieving the goal and target time table of offshore wind power generation, and promoting the establishment of domestic supply chain.
Under BOE’s plan, the targeted 5.5GW installed capacity will be allocated through two different procedure, namely, 3.5GW thereof will be allocated in accordance with the “Selection Procedure”, and the remaining 2GW will be allocated in accordance with the “Competitive Auction Procedure”. The Allocation Guidelines requires the qualified developers to apply for capacity allocation with BOE no later than March 30, 2018. The Offshore Wind Development Site Approval issued by BOE under the “Guidelines of Application for Offshore Wind Site Selection” would become invalid if the a qualified developler should fail to timely apply for grid allocation.
The Selection Procedure provides for different standards of selection for grid connection to be completed by 2020 (Stage 1) and for grid connection to be completed between 2021 and 2025 (Stage 2). The first selection criteria is technical capabilities (60%), and the second criteria is financial capabilities (40%). The Stage 1 applicants are further required to provide the plans and demonstrate that the grid connection will be complete by 2020. As to the highly debated issue of localization of the supplying chain, BOE now requires all Stage 2 applicants to submit an undertaking on provding the substantial supply chain plan (to be reviewed by Industrial Development Bereau), and make such undertaking a binding obligation by administrative contract after the applicants are successfully selected.
The applicants who scored 60 points or above but is not allocated the entire capacity of the project in the Selection Procedure are qualified to participate in the the Competitive Auction Procedure. The qualified applicants who submits the lower bids will compete for the remaining capacity from the 5.5GW that has not been allocated in the Selection Procedure. The idea is that the cost of electricity may be lower through the Competitive Auction Procedure due to advancement of related technology.
To ensure the their performance of the plans and promises submitted in the application process, the selected applicants are required to provide performance bonds before signing an administrative contract with the MOEA. The State 1 performance bond of is NT$ 4 million per MW, and the Stage 2 performance bond is NT$ 2 million per MW. After signing the administrative contract, the MOEA will issue Offshore Wind Power System Installation Approval. As part of the requirement to maintain such status, each of the selected applicatns through the above-mentioned procedures is required to obtain the electricity establishment permit before the end of 2019, and the construction permit in the year committed by such applicant.
The BOE currently estimates that the Selection Procedure will be completed by the end of April 2018, and that the Competitive Auction Procedure will be completed by the end of June 2018. All offshore wind farm developers shall apply for grid allocation no later than March 30, 2018. Those developers not awarded with any of the grid allocation would have to wait for the next allocation project announced by the government.
We have to wait and see who would pass the tests of this grid allocation contest.
For further information, please contact:
Alex Cheng, Tsar & Tsai Law Firm
law@tsartsai.com.tw
