Mon, Oct 12, 2020 page15

• FEATURE: Green power deals to keep booming

  SUPPLY BOTTLENECK: It continues to be challenging for companies in Taiwan to find enough green power to buy, TCI Co chief sustainability officer Remy Lee said

  • By Angelica Oung / Staff reporter
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  With enormous corporate demand for renewable energy and regulation changes under President Tsai Ing-wen’s (蔡英文) administration, industry insiders say the market for corporate power purchase agreements (CPPAs) in Taiwan is primed for growth.

  Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in August announced it would buy all the electricity generated by Orsted Taiwan Ltd’s (沃旭能源) 920 megawatt (MW) wind farm off the coast of Changhua County for 20 years.

  That would be the largest CPPA in the world.

  

  Wind turbines along a beach near Taiwan Power Co’s Linkou Power Plant, a coal-fired power station in New Taipei City, are pictured on Sept. 24.

  Photo: Bloomberg

  “There is a growing appetite for renewable CPPAs in Taiwan, driven by the liberalization of Taiwan’s renewable market and the government’s ambitious renewable energy agenda,” said Tiffany Huang (黃台芬), a partner with the international law firm Baker & McKenzie and head of its construction and power project practice groups in Taiwan.

  Huang has advised on many major offshore wind projects, including the US$3 billion Changfang (彰芳) and Xidao (西島) offshore wind farm projects by Copenhagen Infrastructure Partners.

  “We [Taiwan] have the largest offshore wind market outside of Europe, and this is because of government policy,” Huang said.

  After Tsai took power in 2016, she made the development of renewable energy a key policy initiative, and her administration aims to make Taiwan a nuclear-free country by 2025, with 20 percent of its power supply derived from renewable sources, mainly solar and offshore wind.

  “In the beginning, things did not look so promising. People were very cynical about renewable energy, especially offshore wind,” Huang said. “But now we have successfully attracted all these foreign investors and RE [renewable energy] looks to be a success for the government.”

  Taiwan initially kick-started the building of solar and offshore wind projects by offering feed-in-tariffs (FITs) that are “deemed high or very high” compared with non-renewable rates, she said.

  Independent power providers (IPPs) would sell their renewable energy output directly to state-owned Taiwan Power Co (Taipower, 台電) at the FIT price, guaranteed for 20 years.

  However, corporate demand for renewable energy went unmet, as IPPs preferred the guaranteed safety of selling to Taipower.

  A series of regulatory changes have made the TSMC deal as well as other CPPAs possible, Huang said.

  “In theory, the amended Electricity Act (電業法) in 2017 liberalized the renewable energy market and allowed renewable energy producers to sell energy to end users, but it was not until 2019 that the Renewable Energy Development Act (REDA, 再生能源發展條例) was amended, establishing the regulatory framework that made corporate sourcing of renewable energy workable,” she said.

  Green energy deals are now administered through the Taiwan Renewable Energy Certificate System (T-REC), which monitors and certifies the “wheeling” or transfer of green energy through the Taipower grid as the deals are executed.

  The program, which announced its first batch of issued certificates only in May, could see more than 500 million kilowatt-hours (kWh) of certified renewable energy sales by the end of this year, the Bureau of Standards, Metrology and Inspections (BSMI) said.

  “A lot of deals were in the works before the T-REC platform was even up,” BSMI division director Huang Chih-wen (黃志文) said. “As soon as the first batch of deals went through smoothly, everybody jumped in.”

  Under the amended REDA, Taipower purchases excess renewable energy when supply outstrips the demands of corporate customers.

  The IPPs can even return to sell their renewable energy to Taipower at any time at the original FIT rate.

  With Taipower standing by as a backstop, IPPs are keen to participate in CPPAs whenever the price is right.

  “They went from ‘why take the risk?’ to ‘why leave the money on the table?’” Huang said.

  Since the FIT is calculated at a rate that would allow the IPPs to recoup their investments within 10 years, it falls over time as renewable energy development matures in Taiwan.

  As the FIT rate drops, newer projects would find CPPAs increasingly attractive, Huang said.

  On the demand side, a key driver for the market for CPPAs is the RE100 initiative, a global proposal bringing together the world’s most influential businesses committed to source 100 percent of their power from renewable sources.

  The RE100 is led by the Climate Group, in partnership with CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.

  More than 240 businesses worldwide have taken the pledge, including tech heavyweights such as Alphabet Inc’s Google and Apple Inc.

  TSMC, shortly after announcing the Orsted deal, said it would join the RE100 initiative, and pledged to be entirely on renewable energy by 2050.

  According to Greenpeace, TSMC accounts for an estimated 4.8 percent of Taiwan’s total electricity consumption.

  As TSMC expects to start commercial production of its smaller and more powerful 3-nanometer chips in 2022, that number is set to grow to 7.2 percent of the nation’s total energy consumption, according to Alynne Tsai (蔡篤慰), a specialist with Greenpeace East Asia’s office energy project.

  In addition to addressing the global concern of climate change and making sure Taiwanese businesses have enough renewable energy to satisfy their international business partners, accelerating the growth of renewable energy is a national security concern, said Chen Chung-hsien (陳崇憲), director of the energy technology division at the Bureau of Energy.

  “About 98 percent of Taiwan’s energy [resources] is imported right now,” Chen said. “It is important for Taiwan to have stable and available renewable energy as a matter of energy security.”

  The government aims to reach 20 gigawatts (GW) of solar energy and 5.7GW of offshore wind energy by 2025. An additional gigawatt of offshore wind power is to be added every year after 2025, for 10 years, as more offshore areas are auctioned off for development.

  “In addition to providing more renewable energy, the continual development of new wind farm projects will stimulate the economy and create green-collar jobs,” Chen said.

  Ultimately the problem with renewable energy in Taiwan could be that demand will exceed supply.

  Remy Lee (李東維), chief sustainability officer at nutraceuticals company TCI Co Ltd (大江生醫), said that it is challenging for companies to find enough green power to buy.

  “TCI is not a small company by any means, but it is still hard to find green energy companies to work with us on reasonable terms,” Lee said during the Global Wind Energy Council’s Web cast series, speaking about corporate sourcing of renewable energy.

  “The amount of readily available green power will definitely affect Taiwan’s competitiveness,” Lee said.

  The demand for green energy is poised to become even more pressing in January next year, when the government is to phase in a 10 percent renewable energy requirement for more than 500 of Taiwan’s largest electricity users.

  “We will give them a choice as to how they choose to fulfill the requirement,” Chen said. “They can buy renewable energy through a CPPA, they can put up their own renewable energy generation facility, such as rooftop solar panels. As a last resort, they can simply pay a RE fee in lieu of participation.”

  Despite the government’s commitment to accelerating the growth of renewable energy and the pressing need for more energy development projects, a number of solar farms and offshore wind farm projects have been stymied by unexpected obstacles.

  A plan by TSMC to clear 230 hectares of reforested land in Pingtung County to build Taiwan’s largest photovoltaic solar farm was shut down by protests by residents and environmentalists.

  That came as the Council of Agriculture in July tightened rules to restrict solar farms on farmland.

  Meanwhile, Wpd Taiwan Energy Co’s (達能能源) 640MW offshore wind farm project in Yunlin County has been delayed by local fishers protesting the loss of their traditional fishing grounds.

  Another of the company’s projects, a 350MW offshore wind farm off the coast of Taoyuan, has been delayed by opposition from the Civil Aeronautics Administration on safety grounds, as the agency said the location is too close to Taiwan Taoyuan International Airport.

  While it is important to support the development of renewable energy, this does not mean green energy projects can steamroll over other considerations, Alynne Tsai said.

  “It is possible for renewable energy to coexist with other environmental concerns, but green energy companies should prioritize best practices that minimize damage,” she said.
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