Taiwan awards Ørsted 900MW grid capacity for offshore wind energy

Taiwan is becoming the next battleground for the world’s top offshore wind developers as they seek a foothold in Asia for a technology that has been expanding fast in Europe.

Taiwan announced results on Monday of its first major offshore wind farm auction that aims to add 3.8 gigawatts (GW) of capacity to its existing network of just 8 megawatts (MW).

The island’s offshore wind market is expected to expand to 5.5 GW by 2025, and the government aims to invest $23 billion on onshore and offshore wind projects by 2025, law firm Jones Day says.

Taiwan is making a big push to attract investments in renewable technology as it phases out nuclear power by 2025, after the 2011 Fukushima disaster in Japan highlighted the risks of using nuclear energy in a region prone to earthquakes.

For developers in Europe, where expanding offshore wind projects particularly in the North Sea has driven down costs, Taiwan is seen as a route into Asian markets, such as Japan and South Korea, where the technology is still barely used.

Denmark’s Orsted <ORSTED.CO> and Germany’s wpd were Monday’s biggest winners, securing contracts to install 900 MW and 1 GW of capacity, respectively.

“We see Taiwan as a stepping stone into Asia-Pacific,” said Matthias Bausenwein, the regional general manager for Orsted, the world’s largest owner of offshore wind power sites that was previously known as DONG Energy.

Taiwan’s auction drew bids from the world’s biggest international players, attracted by the island’s strong winds, a stable regulatory framework and the offer of 20-year power purchase agreements with a feed-in-tariff above European benchmarks.

“We have aggressive targets in Taiwan and, with things going on in China, South Korea and other markets, that amounts to it becoming the fastest-growing region globally,” said Bausenwein.


Offshore wind power is costlier than onshore projects or solar power, and still only accounts for about 3.5 percent of global wind energy capacity.

But Europe has been leading the way in using the technology, adding 3 GW last year and taking total offshore capacity to 19 GW, according to the Global Wind Energy Council.

Costs have plunged as a result. In last week’s auction in Germany, the world’s second biggest offshore wind power market, some bids offered capacity with no subsidies. In Britain, the world’s biggest market, the cost of wind power fell below new nuclear generation for the first time last year.

This has been encouraged by an expanding regional grid, greater ability to manage variable wind power supplies and the growing scale of turbines, expected to have capacity of 10 to 15 MW each in two or three years, roughly twice as powerful as today.

Taiwan is not considering firms from China, the world’s third biggest offshore market and which claims Taiwan as Chinese territory. Chung-Hsien Chen, director of the energy technology division at Taiwan’s Bureau of Energy, said Chinese bids were excluded “due to concerns of national security”.

Alongside Orsted and wpd, other bidders included Copenhagen Infrastructure Partners, Canada’s Northland Power <NPI.TO>, Yushan Energy, a subsidiary of Singapore based Enterprize Energy and Taiwanese firms China Steel Cooperation <2002.TW> and Taipower.

After awarding 3.8 GW capacity on Monday, a further 2 GW will be allocated through a competitive price tender this summer. Monday’s auction had included an assessment of factors such as the amount of local content included.

European firms want local suppliers to avoid the cost of shipping bulky equipment used in the turbines from Europe.

“The requirements for local content are increasing step by step,” said Andreas Nauen, offshore chief executive for Siemens Gamesa, adding some European equipment would initially be used.

Siemens Gamesa is working to develop the Port of Taichung as a regional hub and has signed non-binding agreements with some local partners that could provide gear locally.

MHI Vestas, a venture between Japan’s Mitsubishi Heavy Industries <7011.T> and Danish turbine maker Vestas <VWS.CO>, is also considering developing local manufacturing.

This means that Ørsted will be delivering the first large-scale commercial offshore wind projects in the Changhua region and connect 900MW into Changhua’s total available grid capacity of 1,000MW in 2021.
Next step for Ørsted’s projects, which are located in the Taiwan Strait off Changhua County, is to obtain the establishment permit and to secure the feed-in-tariff by signing a power purchase agreement with Taipower. The projects are expected to be built in 2021, subject to Ørsted’s final investment decision.

Martin Neubert, Executive Vice President and CEO of Ørsted Wind Power, says: “This is a breakthrough moment for offshore wind in the Asia-Pacific region. We’re proud to be trusted with this important and large assignment, which will be a landmark in Taiwan’s ambitious transition to renewable energy.”

Matthias Bausenwein, General Manager for Ørsted in Asia-Pacific, says: “We’re honored by the grid allocation results announced today. Ørsted is fully committed to deliver world class wind power plants for Taiwan on time to accompany the ambitious green energy targets in Taiwan. We’ll collaborate closely with central and local governments, and, as outlined in our grid application, we’re determined to build up the local supply chain, engage in local communities and transfer knowledge to Taiwan while developing local talent.”

Ørsted has obtained site exclusivity on four offshore wind sites located between 35 and 60km from the shore of Changhua County. The four sites, which have a total potential capacity of 2.4GW, received environmental impact assessment approvals in February 2018. The remaining 1.5GW allocated across three projects can participate in future auction rounds. Taiwan’s government has announced that it expects to auction up to 2GW of offshore wind capacity in June 2018.

Ørsted’s four Greater Changhua offshore wind farms could in total power approx 2.8 million Taiwanese households and create thousands of jobs over their lifetime.

Ørsted is also the co-owner of Taiwan’s first commercial-scale offshore wind project, Formosa 1. Subject to the owners’ final investment decision, Formosa 1 will be extended from its current 8MW capacity to 128MW in 2019.

As the world leader in offshore wind, Ørsted has installed more than 1,000 offshore wind turbines with a total capacity of approx 4.4GW and has a further 4.5GW under construction. It is Ørsted’s ambition to have installed a total offshore wind capacity of 11-12GW worldwide by 2025.

The information provided in this announcement does not change Ørsted’s previous financial guidance for the financial year of 2018 or the announced expected investment level for 2018.