Earlier this year, Taiwan’s Ministry of Economic Affairs (MOEA) announced a total of 2.25 GW installed offshore wind capacity. That could reach 3 GW by the end of 2024. With the goal to achieve 13 GW before 2030, the island aims to construct 1 GW each year for the next five years.

The first demonstration plant was Formosa 1 (Ørsted, JERA, Seagull; 128 MW), in operation since 2020. Since then, wind farms to begin operation include Taipower 1 (owned by Taiwan Power Company, operated by Hitachi; 110 MW), Formosa 2 (JERA, Corio, Synera Renewable; 372 MW), Changhua 1 (CDPQ & Cathay PE and Ørsted; 605 MW) and Changhua 2a (Ørsted; 295 MW).

Offshore wind is estimated to provide 3–4 % of the daily electricity use of the island of 24 million people; with many new projects and construction ongoing, the ratio will continue to rise. And more projects are on the cards, the MOEA also recently announced the award capacities of Round 3.2 auction participants. Not long before that, the European Union (EU) initiated dispute settlement consultations at the World Trade Organization (WTO) on Taiwan’s local content requirements in offshore wind projects.

Although the Round 2 projects seem to be overcoming the challenges caused by the pandemic and are finally getting back on track – as the Yunlin project finished piling work, and the Hailong and Taipower 2 wind farms both kicked off construction – the prospect of the Round 3 projects remains uncertain, with rumours that many of the Round 3.1 projects might be seeking new buyers as developers withdraw from the market.

So, what’s next for offshore wind development in Taiwan when the future seems dim? A short recap of the Round 3.1 and Round 3.2 auction results could shed some light on this question.

Previous auctions 
The Round 3.1 results and capacity allocation were announced at the end of 2022, with the administrative contracts for the five projects signed about a year ago. The projects are FengMiao (CIP; 500 MW); one of the three Formosa 3 projects, HaiDing 2 (Corio/TotalEnergies; 600 MW); HaiXia (Phase 2, LeaLea; 300 MW), Formosa 4 (Synera Renewable; 495 MW) and HuanYang (EDF-R/Taiya; 400 MW). For all, grid connection was set for 2026/2027.

Other than the HuanYang project, the developers awarded with Round 3.1 all have track records from previous rounds. However, the recently announced Round 3.2 projects welcomed some new players and appears to open opportunities to local developers. The five awarded 3.2 projects, determined by their local content requirements criteria are YouDe (Shinfox Energy; 700 MW), Formosa 6 (Synera Renewable; 800 MW), FengMiao 2 (CIP; 600 MW), Formosa 3 (HaiDing 1, Corio/TotalEnergies; 360 MW), and DeShuai (Enervest; 240 MW), and are expected to complete signing agreements with the government this November (2024). Grid connections for the latter two are expected to be in 2028; the first three in 2029.

Surprisingly, Ørsted pulled out of Round 3.1 bidding. Greater Changhua North-East (Greater Changhua 3) project, which ranked number 3 in the Round 3.2 auction, was not granted capacity due to substantial overlap in the site location with Formosa 6. As a result, Danish associate CIP became the biggest winner in both rounds.

However, before the administrative contracts are signed, it is still difficult to tell how these Round 3.2 projects will turn out, since the grid connection deadline for Round 3.1 will now be extended by one year. This extension is considered to be a relief for Round 3.1 developers, since there has been slow progress with the projects, given the impact of escalating costs, a shortage of big lift vessels worldwide and the stalemate with regard to acquiring corporate power purchase agreements (CPPA), which private enterprises considered to be too expensive to bid for.

Round 3.2 and local content requirements
Looking at the ranking of the Round 3.2 projects, it is clear that the core driver of offshore wind development for the Taiwanese government is ‘localisation’. Indeed, the main reason that Ørsted was defeated by its competitors in this round was lower local content compliance compared to other projects. However, this also accounts for why Shinfox – the parent company of Foxwell Energy, the EPC provider for the Taipower 2 project – triumphed in this round. Although there’s no way to determine details of its ‘grading’ in local content requirements, Shinfox’s strong connection in both business and politics, and its ambition to establish local marine engineering capability via its subsidiary company Shinfox Far East (SFE) and Foxwell Energy certainly reflects the government’s offshore windfarm development strategy.

For the healthy development of the Taiwanese wind farm sector, it makes sense to encourage more local developers. But has the Taiwanese market climbed this learning curve and made sufficient progress in terms of local content? The answer is ‘not necessarily so’.

Since Round 3.1, many in the industry have been pushing the government to consider losing its tie to local content requirements. Although the local content requirements are intended to reflect the capabilities of local supply chains, it has long been criticised that they only benefit a particular few. Given a rather small selection of suppliers and the ‘tricky’ question with respect to whether they have sufficient production capacity and can deliver on time to meet project timelines.

Also, the lack of infrastructure is a big issue. Changhua Port, in Taiwan’s western Changhua County, offshore of which most of the wind farms are located, won't open after their completion. A plan to expand Taichung Harbour in neighbouring Taichung County to the north involves the Maritime Port Bureau, local government and Taiwan Port Company, but progress remains slow.

Industry analysts point to ‘red flags’ from previous delays in signing administrative contracts for Round 3.1, and the challenges from global supply chain disruptions – such as the vessel shortages mentioned. These challenges seem likely to continue in Round 3.2 and will impact whether the projects can be delivered on time.

Winds of change
The rise of local developers and the exclusion of a major player like Ørsted signal a competitive and increasingly complex environment in Taiwan’s offshore wind market.

While international developers and investors continue to play a crucial role, it is clear that these international players’ strategies need some adaptation to meet Taiwan’s policy demands and remain competitive in future licensing rounds. Even so, an unexpected event has opened the way for the government to reassess the situation.

In July 2024, the EU requested dispute settlement consultations at the WTO, arguing that Taiwan’s local content requirements discriminate against imported goods and services. This dispute settlement consultation is the first step in the WTO’s proceedings.

A WTO ruling on this issue looks to be fairly imminent, with the MOEA currently reviewing the policy and believed to be gradually loosening the localisation requirements in the future. Indeed, there might be a silver lining to the awarded projects, with some relaxation of the local content requirements. Maybe no (or lower) fines will be issued for a breach of commitment. However, developers will still need to establish alternatives to local content criteria missed in order to maintain their ranking in the auction.

 

Considering that Taiwan has little land available to develop onshore wind and giant solar farms, offshore wind is likely to be a key player in the country’s energy transition.
 

Looking ahead
It is apparent that the Taiwanese government faces a turning point in offshore wind development – not only whether it loosens the localisation policy but also in the rush to build capacity and nurture a long-lasting, resilient industry.

The current approach, with a focus on rapid construction of pipelines and enforcement of stringent localisation requirements, may expedite the development of a domestic industry.

However, this strategy risks being short-sighted and could undermine the organic growth needed for a sustainable and competitive industry. While current government policy direction may boost rapid growth in local supply chain companies by ensuring the domestic market, it may also increase risk as they are tempted to enter international wind project markets.

Taiwan is not alone in promoting the need for local content, and countries like Japan and Korea have both imposed rigid local content policy requirements for offshore wind farm projects.

A robust offshore wind sector requires the development of a strong, flexible supply chain, a skilled workforce, and a supportive regulatory environment. These elements take time to cultivate and are essential for long-term success. Without allowing the industry to grow organically and build up its adaptation capability, there is a danger that Taiwan may build an industry that struggles to thrive in the face of challenges, ultimately compromising its potential to become a leader in the global offshore wind market.

The government’s aggressive push for offshore wind development is rooted in its broader commitment to achieving net zero emissions and renewable energy targets as a pillar of the Democratic Progressive Party (DPP) – the ruling party for the past eight years. This focus on the net zero transition and sustainability is commendable, while also maintaining Taiwan’s strength in the global supply chain, including the IC (integrated circuit) industry.

Considering that Taiwan has little land available to develop onshore wind and giant solar farms, offshore wind is likely to be a key player in this transition. However, in its eagerness to make offshore wind a success, the government has possibly overlooked critical infrastructure gaps in Taiwan. The local supply chain, port facilities and availability of specialised vessels all remain under-developed, posing significant challenges to the rapid and efficient scaling of the offshore wind industry.

In conclusion, while the future of Taiwan’s offshore wind sector remains uncertain, it is clear that both the government and industry stakeholders will need flexibility and patience to adapt to evolving conditions. The outcome of the WTO dispute and the subsequent policy decisions will probably define Taiwan’s offshore wind industry trajectory for Round 3.3 onwards.

Taiwan’s ability to navigate these challenges will determine whether it can achieve its ambitious renewable energy goals while not compromising the building of a healthy and sustainable industry in the long run.

• Further reading: ‘Taiwan’s first floating offshore wind site announced’. BlueFloat Energy has revealed the location for the 180 MW Winds of September Phase 1 project, part of Taiwan’s Floating Demonstration Programme, due to be launched later this year by the Taiwanese government.
• Find out how digital solutions can help offshore wind farms ramp up capacity to meet demand for clean electricity, while optimising costs and efficiency.