Offshore wind energy trend ups Taiwan’s FDI

In an era where sustainable energy solutions have taken centre stage, the global march towards offshore wind power development is gaining unprecedented momentum. A particularly striking development is the surging interest and investments in the Asia-Pacific region, with Taiwan emerging as a beacon of growth. Driven by the support of government policies, Taiwan is now seeing an influx of foreign offshore wind developers, including industry giants like Orsted Wind Power TW Holding A/S, NP Hai Long Holdings B.V., and Yunneng Wind Power, who are firmly committing to advancing their projects in Taiwan.

The Global Wind Energy Council (GWEC) recently unveiled its much-anticipated “Global Offshore Wind Report 2023.” According to the report, a staggering 380 gigawatts (GW) of offshore wind power capacity are expected to be added worldwide by 2032, with almost half of this remarkable expansion set to unfold in the Asia-Pacific region. The stellar contributions to this monumental growth are anticipated from China, which is poised to boast an installed capacity of over 180GW, and Australia, which is on track to surpass the 50GW milestone. As of the end of 2022, cumulative global offshore wind power capacity stood at 64.3GW, with China and Europe accounting for a substantial 96% share.

Taiwan, with its strategic location and favourable regulatory environment, has recently witnessed a surge in foreign investments. According to data from Taiwan’s Ministry of Economic Affairs’ Investment Commission, there were 1,534 approved foreign investment cases in the first eight months of 2023, marking a slight 7.92% decrease compared to the same period in 2022. Despite this dip, the approved investment amount reached an impressive US$7.52 billion (approximately NT$225.61 billion), reflecting a 27.58% decline from the previous year, primarily attributed to a higher comparative base period. Nonetheless, renowned global companies continue to signal their unwavering commitment to investing in Taiwan.

The energy sector, in particular, has emerged as a magnet for substantial investments, tallying up to NT$49.3 billion, encompassing three noteworthy cases. Germany’s Yunlin Holding GmbH, in the first case, injected approximately NT$29.2 billion to bolster its stake in Yunneng Wind Power. In the second case, Danish industry heavyweight Orsted Wind Power pledged a total of NT$12 billion across its subsidiaries. Lastly, Dutch firm NP Hai Long Holdings infused approximately NT$8.1 billion into a sizeable investment project.

It is worth noting that the first half of 2023 witnessed reports of financial challenges at the Yunneng and Hai Long wind farms, raising concerns within the industry about the financial stability of these flagship projects and their potential impact on the sector’s development. However, despite the turbulence encountered in the first half of the year, which included financial crises at wind farms and announcements of market exits by some developers, as well as a slowdown in investment plans in Taiwan, the resolute investments made by Yunneng and Hai Long in these flagship wind farms have rejuvenated confidence within the industry.

Insiders within the industry underscore that while certain foreign companies initially contemplated redirecting their focus back to the European and American markets, the outbreak of the Russia-Ukraine conflict triggered significant shifts in energy prices and distribution dynamics in Europe. Therefore, the decision to pull out from Taiwan may not be solely attributed to the growth potential of the Taiwanese market. Rather, it is more likely linked to foreign companies recalibrating their global strategies, favouring the familiar and advantageous terrain of established markets in terms of guarantee mechanisms and interest rates.

Nonetheless, recent developments in the European market have fallen short of expectations. The UK government’s recent launch of a new round of offshore wind power tenders has left some developers dissatisfied with the offered subsidies, which they perceive as insufficient to incentivise development. Escalating costs, including wages and equipment, alongside rising interest rates, have substantially inflated construction expenses, eclipsing the guaranteed purchase prices.

Industry experts emphasise that market development dynamics diverge for foreign and domestic developers and are intricately entwined with local government policies. While Taiwan grapples with the Taiwan Strait crisis, Europe and the United States confront challenges related to the Russia-Ukraine conflict and fluctuating interest rates. Each developer brings its unique advantages to the table, but a common aspiration prevails—to secure government policies that offer greater flexibility, allowing global developers to mitigate risks effectively when assessing markets.