The 900MW Changhua 1 and 2a offshore wind projects will move forward, Ørsted said in response to the announced 6% Feed-in-Tariff reduction, but the final investment decision depends on the outcome of supply contract renegotiations and relevant project milestones being achieved in time to keep the projects on track for commissioning in 2021.
Developers who sign their Power Purchase Agreements (PPAs) with Taipower in 2019 have the option to choose between a 20-year flat tariff of TWD 5,516 (approx. EUR 157) per MWh, or a tiered tariff of TWD 6,279.5 (approx. EUR178) per MWh for the first 10 years and TWD 4,142.2 (approx. EUR 118) per MWh for the subsequent 10 years. The FiT for projects which signed their PPAs in 2018 is TWD 5,849.8/MWh.
There will also be a tiered production cap:
“We take note of the 6% tariff reduction compared to the 2018 tariff as well as the introduction of a cap on annual full-load hours. The production cap has material adverse impact by preventing an optimal and efficient use of the wind farm. In addition, it puts far-shore projects at a disadvantage versus the near-shore projects which remain unaffected by the cap,” Martin Neubert , Executive Vice President and CEO, Ørsted Offshore, said.
Greater Changhua 1 and 2a are facing extraordinarily high costs related to creating a local supply chain at scale, reinforcing the onshore grid infrastructure and building, operating and maintaining offshore wind farms in challenging site and weather conditions, the developer said.
In the coming weeks, Ørsted will work with the Taiwanese authorities and local stakeholders to reach key outstanding project milestones, such as obtaining the establishment permit, completing the supply chain plan, and signing the PPA.
“We will now collaborate closely with the supply chain to mitigate the adverse impacts from the production cap and the reduced feed-in-tariff with the objective of making the projects investable,” Neubert said.
Ørsted’s Greater Changhua projects comprise a total potential offshore wind capacity of 2.4GW. Approx 1.8GW have now been earmarked for buildout in 2021 and 2025, and the remaining approx 0.6GW can participate in future auction rounds.
Ørsted is also the co-owner of Taiwan’s first commercial-scale offshore wind project, Formosa 1, which will be extended from its current 8MW capacity to 128MW in 2019.