Taiwan: Taiwan Offshore Wind Farm Projects: Guiding Investors Through The Legal And Regulatory Framework

 The Taiwanese Government has set aggressive renewable energy targets, with a particular focus on the development of its offshore wind power capabilities. This exciting new market presents great opportunities for foreign investors. At the same time, it highlights the need for a local legal and regulatory framework that will foster the development of the market in an effective and efficient manner.

This Jones Day White Paper provides an overview of the current legal and regulatory framework for offshore wind farm projects in Taiwan, including the general procurement process, environmental approval process, grid allocation process, approvals/licensing regime, and other key considerations for offshore wind developers (i.e., foreign ownership limits, foreign exchange controls, etc.). The intention is to provide foreign investors with an early "heads up" of what to expect when seeking to undertake offshore wind energy projects in Taiwan.

INTRODUCTION

Taiwan Profile

Taiwan is located in East Asia with Mainland China to the west, Japan to the northeast, and the Philippines to the south. It is referred to as one of the "Four Asian Tigers" 1 and is the seventh-largest economy in Asia. Taiwan is a member of the World Trade Organization ("WTO"), the Asia-Pacific Economic Cooperation ("APEC"), and International Chamber of Commerce ("ICC") and is an observer at the Organisation for Economic Cooperation and Development ("OECD"). Taiwan's primary trade partners include Mainland China, Hong Kong, the United States, Japan, and Singapore. Annex 1 provides an overview of the legal framework in Taiwan.

Diagram 1

Source: U.S Passport Service Guide

Taiwan Offshore Wind Farm Market

Taiwan is surrounded by sea. The geographic environment provides an abundance of wind energy to many areas along the coast of Taiwan and its offshore islands. On the west coast of Taiwan, where the majority of the offshore wind farm projects will be located, the average wind speed reaches up to approximately 11.24 meters per second (measured at 100 meters).2 These wind speeds are far in excess of the neighboring coastal area of Hong Kong, with wind speeds of up to approximately 5.8 meters per second (measured at 105 meters).3 The abundance of offshore wind resources in Taiwan presents a significant opportunity for investors in the offshore wind farm market.

The Taiwanese Government (the "Government") has set aggressive renewable energy targets, with a particular focus on the development of its offshore wind power capabilities. In 2016, electricity generated from renewable energy power plants accounted for 4.8 percent of the aggregate produced electricity and 9.4 percent of the aggregate installed capacity in Taiwan.4 The policy of the Government is to progressively phase out nuclear power plants and have an energy mix containing 50 percent natural gas, 30 percent coal, and 20 percent renewable energy by 2025.5 The achievement of this renewable energy target will focus on the development of solar photovoltaic ("PV") generation and offshore wind power. Refer to Annex 2 for a summary of the Government's renewable energy targets.

To achieve the Government's renewable energy targets, the Government announced on July 3, 2012, the "Thousand Wind Turbines Project" (the "Program"). The Program is divided into the following three phases:

1. Demonstration Round (2016–2020)

Three projects were awarded contracts for the Demonstration Round with an aggregate capacity of approximately 360 MW. These projects include the Formosa Demonstration Project (expected capacity of 120 MW with 32 installed wind turbines), the Fuhai Demonstration Project (expected capacity of approximately 120 MW and 30 installed wind turbines) and the TPC Demonstration Project (expected capacity of approximately 108 MW and 22-36 installed wind turbines). The intention is for each of these projects to be under a 20-year PPA with fixed feed-in tariff pricing. While the Formosa Phase I Project (aggregate capacity of 8 MW) is operational, the other demonstration projects are expected to be operational by 2020 (including the Formosa Phase II Project).

2. Transition Round (2019–2020)

In July 2015, the Bureau of Energy ("BOE") released 36 zones for potential development of future commercial wind farms. Those developers that have received preliminary approval of their environmental impact assessment ("EIA") may apply for developing the relevant zone. As of January 30, 2017, 24 offshore wind farm projects have received the Taiwanese Environmental Protection Administration's ("EPA") preliminary approval (including 11 projects that have obtained final approval). There are three offshore wind farm projects continuing to undergo the preliminary EPA review.

Recently, the BOE increased the offshore wind energy target for the Transition Round from 3 GW to 5.5 GW.6 3.5GW of projects will be guaranteed at a fixed feed-in tariff for 20 years. The remainder of the projects will go through a competitive auction to sell power at a lower price in a tender held by Taiwan Power Company ("Taipower"). Of the 5.5 GW of targeted capacity, the Government plans for 500 MW (with feed-in tariffs) to be operational by 2020, with the remainder to be operational by 2025.

Further details regarding the process for developers to apply for an allocation of the 5.5 GW of capacity is set out in "Grid Allocation Process" below.

3. Zonal Development Round (2021–2025)

As part of this phase, the offshore wind farm projects with an aggregate capacity of 5 GW, as selected pursuant to the Transition Round, will be developed as self-sustaining projects and on a commercial scale.

It is anticipated that the projects will be developed according the following indicative timeline:

In the period to 2025, the Taiwan Ministry of Economic Affairs ("MOEA") intends to invest NT$684 billion (US$22.74 billion) in order to achieve its onshore/offshore wind power targets. The MOEA hopes that this initial investment will stimulate the private sector to contribute NT$478 billion (US$15.92 billion) in the same period.

Lessons Learned from the Taiwan Onshore Wind Farm Market

While the offshore wind farm market in Taiwan is in its infancy, the onshore wind farm market is relatively mature. As of July 2017, there were a total of 348 onshore turbines in Taiwan situated mainly along the western coastline and in outlying Penghu County with a total capacity of 686.7 MW, accounting for 15.3 percent of installed capacity of renewable energy.7 By 2025, the Government aims to have a total of 450 turbines, with an installed capacity of 1.2 GW.8

Since 2000, the Government, including the BOE and the MOEA, has actively promoted the development and application of onshore wind power development through resource exploration, technical guidance, research survey, and, particularly, by providing subsidies for the purchase of equipment.

While the Taiwan onshore wind farm market is reasonably developed, it is not without its challenges, including:

  • projects located on government-owned land are given a nine-year lease, which may be renewed provided certain requirements are satisfied. This raises a bankability issue for any proposed limited or non-recourse financing for a period longer than the lease term;
  • limited appetite of local banks for non-recourse project financing, impacting on costs;
  • stringent environmental requirements making for a complicated and prolonged application and approval process; and
  • onshore wind farms are saturated due to limited land space. Most onshore wind energy resources have been constructed or planned.

Some of the same issues will also be challenges for the development of the offshore wind farm sector in Taiwan. For instance:

  • developers are already experiencing challenges with regard to the environmental application process; and
  • as the revenues will be denominated in NT$, it will be important for developers to obtain financing from local financial institutions. The need to obtain domestic financing is also included as a key consideration in the selection criteria for grid allocation (see "Grid Allocation Process" below).

With regard to the necessary site leases for offshore wind energy projects, the National Property Administration has released a regulatory letter, specifically permitting the lease for an offshore wind farm project to extend beyond the nine-year limit placed on onshore wind farm projects on government-owned land and to instead remain effective for the period of the electricity license. Upon the expiry of the electricity license, the lease will remain effective with the consent of the Government.9

OVERVIEW OF THE LEGAL AND REGULATORY FRAMEWORK

From a foreign investor's perspective, an informed understanding of the legal and regulatory framework (including the general procurement process, environmental approval process, approvals/licensing regime, foreign ownership restrictions, environmental requirements, and foreign exchange controls) will be critical before making any investment decision regarding the Taiwan offshore wind farm sector.

The primary legislative instruments for the renewable energy sector in Taiwan include:

The Electricity Act ("EA"): The EA covers the establishment of power plants and the transmission and distribution of electricity. The EA was amended on January 26, 2017, with the aim of liberalizing the power market by:

  • allowing the renewable energy generation industries to sell electricity through wholesale, wheeling, or direct sales;
  • allowing renewable energy companies to be operated by corporate forms other than limited companies (e.g., cooperatives);
  • fully releasing the users' power purchasing choices and allowing all users to choose either the electricity generated from renewable energy or from traditional energy sources; and
  • clearly stating the target of being nuclear-free by 2025.

The Renewable Energy Development Act ("REDA"): The REDA was introduced in July 2009 as part of the Government's aim to increase the installed renewable energy capacity in Taiwan.

The REDA covers a mixture of obligations and incentives, including:

  • Fund Establishment: Financed by the Renewable Energy Fund with revenues collected from power generators using fossil fuels and nuclear energy.
  • Feed-In Tariff Rates and Tariff Setting Method: The feed-in tariffs regulated by REDA apply to solar, onshore/offshore wind, biomass, and hydro energy and are subject to annual review by a dedicated committee. When conducting its annual review, the dedicated committee will take into account any technology development, changes in costs, target accomplishment, and other relevant factors to determine the applicable feed-in tariffs.
  • Other: Land-use requirements, demonstration/capital grants, mandatory grid connection, and power purchasing obligations (i.e., power purchase agreement).

In order to achieve the Government's aggressive renewable energy targets, the MOEA has proposed amendments to the REDA, which would require that large consumers of electricity are required to pay a fee or purchase renewable energy vouchers for their consumption of nonrenewable energy. Alternatively, those large consumers of electricity may install renewable energy generators to generate power proportional to their consumption of nonrenewable energy. This amendment was approved by the Taiwan Cabinet on January 11, 2018, and will now be reviewed by the Legislative Yuan.

In addition to the EA and the REDA, there are various other legislative instruments that govern the development and implementation of offshore wind farm projects. These are set out in Annex 1.

PROCUREMENT PROCESS FOR THE OFFSHORE WIND ENERGY PROJECTS

Overview

The process for implementing offshore wind energy projects in Taiwan is currently in its infancy. Diagram 3 below provides a high-level overview of the procurement process. At present, the market is developed only as far as the EIA approval, with the grid allocation the next hurdle to overcome.

The procurement process is considered in more detail in the following paragraphs of this section, with a particular focus on the processes currently being encountered by offshore wind power developers—the environmental approval process and the grid allocation process.

Approval / Licensing Process

To operate an offshore wind farm project, the project developer must obtain an electricity license. There are six phases to be satisfied in order to obtain the electricity license:

1. EIA Process: The project developer is required to obtain the EPA's final approval of the EIA in order to obtain the Establishment Permit. Refer to "Environmental Framework" below for a detailed analysis of the process for obtaining the approval of the EIA.

2. Obtain the Establishment Permit ("EP"): The EP is issued by the BOE. It is a precondition to the EP that the final EIA approval has already been obtained. To obtain the EP, the applicant is required to obtain consent letters from various authorities, including the local government, the National Property Administration, and the Ministry of Transportation and Communications. Based on the practice in other sectors in Taiwan, the processing time for these consent letters varies and may be unpredictable.

It is also necessary for the project developer to: (i) satisfy a capitalization requirement of at least 5 percent of anticipated capex; (ii) enter into a connection agreement with Taipower; and (iii) obtain letters of intent from financial institutions for the financing of the project.

The EP is valid for a period of three years (and may be extended for a further two years).

Annex 4 provides a detailed flowchart of the process for obtaining the EP.

3. Recognition by the BOE: After the project developer has obtained the EP, it is required to apply to the BOE for recognition that the project developer's energy facilities are renewable energy power facilities.

4. Power Purchase Agreement ("PPA"): Within six months of obtaining its EP and the required recognition from the BOE, the project developer is required to enter into a PPA with Taipower. Taipower is a 96.92 percent government-owned power entity providing electricity to Taiwan.

The standard form PPA for the offshore wind energy sector was recently published by Taipower. Refer to "Power Purchase Agreement" below for Jones Day's preliminary comments on the PPA.

5. Obtain the Construction Permit ("CP"): The CP must be obtained from the BOE prior to the commencement of construction. An applicant may submit an application for an EP and CP in parallel; however, the CP may be granted only after the applicant has obtained the EP. The CP is valid for five years and is renewable.

6. Obtain the Electricity License ("EL"): The EL must be obtained prior to the commencement of operations. Annex 4 provides a detailed flowchart of the process for obtaining the EL.

While it may vary, the time period for the BOE to issue the EP, the CP and the EL usually takes a period of two to three months for each license / permit from the time of application.

Environmental Framework

Regime. The EPA is the agency responsible for the development of the environmental standards and coordinating action among the various other Governmental agencies. It has also been proactive in developing a legislative basis for environmental management in Taiwan.10

The Environmental Impact Assessment Act governs the EIA process. The EIA process is intended to prevent and mitigate adverse impacts of development activities (including pre-implementation planning, project implementation, and post-project facility use) to attain the goal of environmental protection.

EIA Process. A project developer for an offshore wind farm development is required to obtain the EPA's approval of the EIA in order to progress with the development of the project.

To date, the EIA process has proven to be a difficult barrier for offshore wind power developers. The Taiwan Strait is a heavily trafficked waterway, and the EPA is closely scrutinizing how offshore wind development will affect the ecology.

The process for obtaining the requisite EPA approval is summarized below (and illustrated in Diagram 4). The process may vary (depending on whether the project developer is required to conduct a Phase II EIA) and may take an extended period of time to complete.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions