98 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 offered a fixed rate for the electricity they supply to the grid. Initially, the government focused on growing the sector by offering one of the world’s highest FiT rates to drive investment to pilot projects. Now that these projects have demonstrated feasibility and attracted international developers, the rates have been gradually decreasing. For example, the rate fell ~10% from NT$5.0946/kWh in 2020 to NT$4.5085/ kWh in 2023. Now, the focus is on creating a market-driven model through the adoption of CPPAs, as seen in the Hai Long Project, the first to include CPPAs (Norton Rose Fulbright, 2024). Fifth, there is a wave of international interest in Taiwan’s offshore wind sector. While European players like Copenhagen Infrastructure Partners have always been principal participants, emerging players like Canadian power producer Northland Power and Japanese investor Mitsui & Co. as cosponsors have led to a more competitive bidding process for future projects, even resulting in zero-bidding processes, where developers forego government support to win auctions (Norton Rose Fulbright, 2024). Sixth, financing deals are being structured with longer maturities to match the long-term nature of offshore wind projects, with some arrangements extending up to 30 years to align PPAs. An example is the CPPA financing structure of the Hai Long 2B and 3 projects, spanning 30 years (Northland Power, n.d.). These deals reflect a growing confidence among investors in offshore wind’s long-term viability, helping reduce annual debt service costs for projects due to principal being spread over longer time horizons. Cost of capital The cost of capital, representing the weighted average required return from debt and equity investors, is crucial for offshore wind project financing due to their large upfront investments. A lower cost of capital enables cheaper funding, hence more competitive electricity pricing. Although there is a lack of abundant data on the exact cost of capital range for historical projects, the number can be estimated. A reasonable approach is using Formosa 1’s 75:25 debt-to-equity ratio as a benchmark and adjusting it (Asia Wind Energy Association, 2019). Starting from the Formosa 1 ratio and including the reduction of government subsidies in the more market-based approach, it is fair to assume that lenders will demand a higher equity cushion for future project financing; a 70:30 debt-to-equity mix is assumed for the calculation. Based on the 10-year government bond yield as of June 10, 2025, of 1.565% (risk-free rate), plus a 0.5%–1.5% project finance spread, the cost of debt is 2.07%–3.07%. With a 20% corporate tax rate and an assumed 12% cost of equity (reflecting local risk factors), the weighted average cost of capital is ~4.76%–5.32%. Considering high construction costs, political, equity, and credit risk premiums, it is reasonable to add a 3%–6% spread, bringing the adjusted weighted average cost of capital to between 7.76% and 11.32%. The premium accounts for Taiwan-specific risks. This range positions Taiwan’s offshore wind financing costs above those in more mature European markets but in line with other emerging offshore wind Asian markets. Although the cost of capital is high, there is a global movement of infrastructure investors seeking higher yielding opportunities. The fact that developers are still willing to proceed in Taiwan highlights the strategic value of Taiwan’s offshore wind sector. Revenue streams Revenue streams represent the central feature of any investment, cash flows. The most common forms of revenue streams are PPAs, CPPAs, competitive auctions, and renewable energy certificates. PPAs are long-term contracts between offshore wind generation companies and buyers, in Taiwan’s case primarily Taipower. Historically, customers were limited to contracting their entire electricity demand from a single generating facility under one PPA. However, in late 2024, the Taiwanese government revised PPA rules to allow large consumers to purchase portions of their electricity from multiple facilities (Bellini, 2024). This flexibility enables corporations to better match their energy demand with available renewable supply, improving the competitiveness of developers. Competitive auctions, which Taiwan began adopting in its Round 3 offshore wind tenders, determine which developers are awarded the right to build projects and connect to the grid. Developers compete by bidding the lowest price at which they are willing to sell electricity, aligning with the stronger market-driven energy market as the government reduces dependance on FITs and incentivizes developers to offer lower prices to secure capacity. Renewable energy certificates allow developers to sell carbon offsets or renewable credits to third parties, serving as an additional source of revenue. The certificates are increasingly used by corporations, particularly in the semiconductor and electronics industries, to demonstrate compliance with international supply chain decarbonization requirements.
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