99 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE The United Kingdom and Germany as benchmarks The UK has implemented two mechanisms, the Renewables Obligation and the Contracts for Difference, to increase the overall supply of renewable energy while cutting costs, both of which are areas of focus for Taiwan. The Renewables Obligation scheme incentivized electricity suppliers to secure a portion of their energy from renewable energy developers to reduce exposure to energy price fluctuations. Taiwan could implement a similar strategy, where suppliers and corporate users are encouraged to purchase target percentages of their energy needs from certain wind projects in Taiwan, such as those with significant job creation potential or favorable localization implications. Such a strategy would avoid direct government subsidies while still maintaining the competitiveness of wind projects in Taiwan. Germany, on the other hand, has the Renewable Energy Sources Act, which has played an instrumental role in that country’s energy transition. Initially, the Act relied on FiTs and fixed government subsidies aimed at project developers to boost the renewable energy industry. However, over time, Germany moved to a more market-driven approach through competitive bidding processes for wind projects. These auctions played an important role in driving down costs and improving efficiency. The country also introduced an innovative sliding feed-in-premium (Hunt, 2024), which has resulted in developers selling electricity directly to the market. Germany’s experience shows that while FiTs can help launch nascent industries, shifting to a more market-driven approach is essential for the long-term financial sustainability of future renewable energy development. In short, Taiwan’s case closely aligns with that of Germany, evident by the heavy government subsidies and FiTs in initial pilot project stages as well as a current push to more market-driven mechanisms. Opportunities, challenges, and outlook Taiwan has a land area of 36,197 square kilometers, with a population density of 674 people per square kilometer (en:former, 2024). This density limits the development of onshore energy sources, competing for land for other critical uses like farming. Offshore wind, in contrast, has significant potential for development. Opportunities Taiwan’s ambitious offshore wind targets (discussed previously) are designed to attract investments in phased development. There is strong support from the port authorities for the offshore sector, with three categories of land zones identified for these projects (Eiger, n.d.): 1. Three original projects approved in the Phase 1 Demonstration Incentive Program 2. Thirty-six zones identified by Taiwan’s Bureau of Energy in the Phase 2 Zone Application for Planning Program 3. Four other zones identified by individual developer applicants Most of the installed capacity has been developed in partnership with European infrastructure funds. Some of the major local firms are Shinfox, Synera Renewable Energy, Taiya Renewable Energy, and Taiwan Generations Corporation. International developers include Copenhagen Infrastructure Partners, Corio Generation, EDF Renewables, Northland Power, Ørsted, and Skyborn Renewable Energy and joint partnerships, for example JERA (partnering with Corio Generation) and LeaLea Group (partnering with Skyborn Renewables). The participation of many of the world’s leading infrastructure investors demonstrates international confidence in Taiwan’s potential. Challenges Despite this recent positive progress, challenges remain. Construction costs in Taiwan are almost 2.5 times those of Europe (Liu, 2024). Other concerns include pricing and profitability, market monopolization by certain developers, and competition from other markets with more favorable localization requirements that allow for a smaller percentage of components and labor from domestic sources. Historically, Taiwan was a strong advocate for such local favoritism; thus, large companies like Ørsted invested heavily in local production facilities for turbines and substructures, helping meet localization requirements. While such investments played a role in strengthening local project manufacturing capabilities, they also drove up the costs of these projects by closing out cheaper international alternatives. Bidders in Taiwan’s 2022 tender for offshore wind projects had to meet a 60% localization for their projects (Taylor, 2024), meaning that at least 60% of the components used in wind projects were to be produced domestically. Although this regulation led to greater energy independence, it also justified the existence of many inexperienced local suppliers that caused inefficiency in project development and operation. According to wind power consultants (Liu, 2024), even after factoring in shipping costs, Eu-
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