Danish firm suspends Taiwan offshore wind projects

Danish firm suspends Taiwan offshore wind projects

The company has yet to decide whether it will proceed with its projects in Taiwan, as it is concerned about the government’s FIT reduction plan

Denmark’s Orsted A/S has suspended its offshore wind development projects in Taiwan after it earlier this month failed to receive an establishment permit for its projects off the coast of Changhua County and was unable to secure a power purchase agreement at last year’s feed-in tariff (FIT) rate, the Chinese-language Liberty Times (sister newspaper of the Taipei Times) reported yesterday.

The wind energy giant has formally informed its local supply chain to halt execution of contracts, despite work being well under way, the Liberty Times said.

The company is also considering renegotiating terms of other contracts that are not yet in the works, the newspaper said.

Orsted’s Taiwan office confirmed the move, adding that it would affect local companies such as China Steel Corp, Century Iron & Steel Industrial Co and Star Energy Corp.

The decision followed a statement Orsted issued on Jan. 2 that it would “pause and revisit” its investment projects and its “supply chain commitments and contracts” in Taiwan, as it had been unable to obtain a key permit for the 900 megawatt (MW) offshore wind projects in time to secure last year’s FIT rate.

It also came a day after the Fredericia, Denmark-based company signed a memorandum of understanding with Tokyo Electric Power Co, the largest power company in Japan, to work jointly on the Choshi offshore wind project near Tokyo.

The Ministry of Economic Affairs in April last year awarded Orsted contracts for two wind projects that were to generate 900MW of electricity in 2021, with total investment of up to NT$165 billion (US$5.35 billion).

The company in June last year won the right to build additional capacity of 920MW on another two projects with a bid of NT$2,548 per kilowatt-hour (kWh) along the coast of Changhua, which might come online in 2025.

In late November last year, the ministry proposed cutting the FIT rate to NT$5,106 per kWh for this year, from last year’s NT$5.8498, and suggested a production cap of 3,600 annual full-load hours.

The proposed 12.7 percent reduction in the tariff has met resistance from developers including Orsted and Copenhagen Infrastructure Partners (CIP).

The ministry on Saturday said on its Web site that it regarded Orsted’s announcement as “normal commercial activity” ahead of the final decision on this year’s FIT rate, which is expected before the Lunar New Year holiday starting on Feb. 4.

Orsted has yet to decide when and whether it will proceed with its wind projects in Taiwan, as it is still concerned about the government’s proposed FIT reduction and the absence of an establishment permit for its Changhua 1 and 2a projects, the company’s Taiwan office said.

A pledge to maintain investment in Taiwan would also take into account the nation’s political risk, the office said, referring to the Changhua County Government and Bureau of Energy’s continued bickering over the procedure through which electricity companies apply for establishment permits.

The impasse between the central and local governments also prevented CIP, Hai Long Offshore Wind and China Steel from securing power purchase agreements at last year’s rate.

Century Iron on Saturday said in a regulatory filing that Orsted’s announcement would have a limited effect on its operations, as its subsidiary Century Wind Power Co (CWP), has yet to sign the transition piece mock-up contracts with Orsted.

CWP has signed transition piece mock-up contracts with CIP and Germany-based Wpd Group, the filing said.

Star Energy, a wholly owned electricity generation subsidiary of Taiwan Cogeneration Corp, said that Orsted’s decision would affect its more than NT$7billion engineering-procurementand-construction contract, as well as 800 to 1,000 jobs.

Star Energy is responsible for all onshore deliverables regarding the design, procurement, construction and commissioning of the onshore substation, on which work is expected to proceed in April.

China Steel said that Orsted’s announcement could affect its wholly owned unit Sing Da Marine Structure Corp, which has signed NT$90 million in contracts to supply 56 jacket foundations for the 900MW projects from next year to 2021.

Orsted has said that it was the largest-ever jacket foundation contract for the Danish company and the largest of its kind in the global offshore wind industry. Changhua Department of Economic Affairs Director Liu Yu-ping on Saturday said that the county government could not comment on Orsted’s announcement before receiving formal notices or responses from the wind developer and its local supply chain, the Liberty Times reported.

Former Changhua county commissioner Wei Ming-ku, a green energy advocate, was quoted by the newspaper as saying that the county would suffer great losses in terms of industrial development, talent cultivation, job opportunities and tax revenue if foreign wind developers were to withdraw their development projects.

Wei, of the Democratic Progressive Party, lost to Wang Hui-mei, of the Chinese Nationalist Party (KMT), in the local elections on Nov. 24 last year

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