APAC: Low offshore wind auction bids catch industry by surprise 

25 June 2018 - 12:00 am UTC

The result of Taiwan’s 1.66GW offshore wind auction has caught developers by surprise with winning bids between NTD 2.2245 (USD 7.3 cents) and NTD 2.5481 per kWh.

This is below state utility Taipower’s benchmark electricity tariff of NTD 2.6253/kWh, and well below market expectations of NTD 4-5/kWh.

“It first came as a shocking result for us but ended up making sense,” an offshore wind developer source told Inframation.

The source explained the wind farms could sell electricity to end-users, such as factories, at a higher electricity price than Taipower does.

Further, the projects awarded at auction were not subject to localisation requirements, unlike those selected by the government in April. This will lower project costs explained Taiwan’s Minister of Economic Affairs, Shen Jong-chin, at a press briefing.

Developers will also benefit from a more established supply chain the construction of projects awarded in the April selection, according to developers.

Seven developers with 12 projects participated in the 1.66GW auction, for projects to be connected to the grid between 2024-2025.

Northland Power Inc (NPI) secured a combined 744MW, with a bid of NTD 2.2245 (USD 7.3 cents) per kWh for its Hailong II (232MW) project and NTD 2.5025 per kWh for its Hailong III (512MW) project.

That is in addition to 300MW capacity it secured for its 532MW Hailong II project in April, to be connected to the grid by 2024.

It aims to sign a 20-year fixed-rate PPA with Taipower for 300MW of Hailong II’s capacity “as soon as possible,” said NPI Taiwan’s general manager Sean McDermott in an email. The FiT for PPA’s signed in 2018 is NTD 5.8 per kWh.

“The high FiT and the low auction [bids] are both good for Taiwan,” added McDermott.

The projects are owned by NPI (60%), Mitsui (20%) and Yushan Energy (20%).

In addition, Ørsted secured 920GW capacity for its Greater Changhua (Southwest) (337MW) and Greater Changhua (Northwest) (583MW) projects in the auction, with bids of NTD 2.5480/kWh and NTD 2.5481/kWh respectively.

“We set the bid price based on our projections on the market situation in seven years,” an Ørsted spokesperson said.

The Danish developer is not in a rush to raise financing for the auction projects which expect to reach financial close between 2022 and 2023.

Like its peers such as WPD and Swancor, the Danish developer is working to sign PPAs for the 900MW of capacity secured in the April selection by the end of 2018, for grid connection in 2021.

That includes 605MW for the Greater Changhua (Southeast) project and 295MW for the Greater Changhua (Southwest).

Ørsted anticipates the FiT set by the government’s review committee for 2019 to be “roughly stable” despite the surprising low bids submitted in the auction, which will be used as a reference by the committee.  

“Apart from the bid tariffs, there are a variety of parameters influencing next year’s FiT,” the spokesperson said. “For instance, they will consider the newly added capacity this year, which is actually very little with only one operating wind farm in Taiwan so far.”