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Business trends

Wind power companies flock to Taiwan's breezy shores

Taipei set to choose winners of $60bn worth of contracts for offshore turbines

Only Taiwan is currently offering offshore wind power projects of this scale. (Courtesy of Taiwan Power)

TAIPEI/TOKYO -- Taiwan is preparing to choose the winners in a crowded global contest to develop offshore wind power for the island, as companies around the world shift their focus toward Asia in search of more profitable projects. The decision is expected to be announced on April 30.

Anticipation was intense Friday afternoon as executives from companies including Australian financier Macquarie Group and German wind farm developer WPD gathered at the headquarters of Taiwan's Ministry of Economic Affairs. Taipei is entering its final phase of talks before awarding contracts for 3.5 million kilowatts of offshore wind facilities expected to begin operations in 2025. This portion of the project is worth around 630 billion New Taiwan dollars ($21 billion).

Taiwan granted environmental permits at the end of last year to wind power developers to build a total of 10.6 million kilowatts in offshore capacity. Those companies are competing for 5.5 million kilowatts of contracts, with 3.5 million kilowatts guaranteed at a fixed rate through a feed-in tariff system, and the rest up for auction. Investment applications, including costs after 2026, total some NT$1.8 trillion.

Only Taiwan offers offshore wind power projects of this scale right now, noted an official from one of the bidders. Danish power producer Orsted, formerly Dong Energy, and fund manager Copenhagen Infrastructure Partners as well as Canada's Northland Power were also among the companies present.

The world's offshore wind power capacity worldwide is to grow by around 3 million kilowatts a year.

Taiwan's capacity in 2017 was 8,000kW, which would grow to more than 5.5 million kW in 2025 if the plan materializes.

President Tsai Ing-wen has pledged to end the island's dependence on nuclear power by 2025 while sourcing 20% of Taiwan's electricity from renewable energy, five times the share in 2015. Her plan depends on offshore wind, for which the Taiwan Strait is particularly suitable. Wind speeds in the strait average over 25km per hour year-round, making it the best place in Asia to generate wind power, one participating company noted.

Europe leads in wind power, with 90% of global capacity. But power companies there are suffering from deteriorating profitability as countries shift toward competitive auction systems that award contracts starting with the lowest prices.

Though Asia has emerged as a promising area for wind power, foreign companies face difficulty landing orders in mainland China, and some are eager to participate in Taiwan's feed-in tariff system.

Asian nations aim to increase their use of renewable energy. Some, like South Korea, have pledged to reduce their dependence on nuclear power. Taiwan also plans to make wind power a major export along with its information technology sector. Shen Jong-chin, minister of economic affairs, said he wants bidders for the current projects to bring funds and technology.

Copenhagen Infrastructure Partners said March 27 that it will order turbines from MHI Vestas, an equal joint venture between Japan's Mitsubishi Heavy Industries and Danish energy company Vestas Wind Systems. The next day, MHI Vestas said it agreed to procure components from four Taiwanese companies including Formosa Plastics.

Germany's Siemens Gamesa Renewable Energy made perhaps the biggest impression on Tsai's administration. The company moved its Asian headquarters for wind power from Shanghai to Taipei in December, a move that likely earned praise from Tsai as she works to reduce the island's economic dependence on China. Siemens is expected to have a large presence, with few power companies having settled on turbine suppliers.

In contrast, the wind power industry remains stagnant in Japan, which has only 29 turbines -- far short of Europe's tally of over 4,000. The failure to develop wind power keeps Japan trailing in terms of renewable energy use against European countries such as Germany and the U.K., which continue to bring large-scale projects online.

Japan's offshore wind power generation seems unlikely to catch on soon. The country is surrounded by breezy open ocean but its shores are not long and shallow, making it difficult to install turbines. Power companies must negotiate with fishing cooperatives that own the rights to certain areas as well. Japan's northern regions of Tohoku and Hokkaido, which are gusty areas suitable for generating electricity, also carry restrictions on power cable usage.

Japanese turbine makers hope to raise their competitiveness through experience in foreign markets. Hitachi won a bid from Taiwan with a Belgian company for turbines capable of withstanding rough winds as it boosts sales on the island. It is the company's first overseas order for wind power generation. Mitsubishi Heavy also is increasing orders, mainly from Europe, through MHI Vestas.

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