Summary: 

  • Market characteristics of Taiwan power market:

    • Energy policy is formulated at the highest level of government, and the current Taiwanese government has ambitious RE targets and plans to completely phase out nuclear by 2025

    • The power market has been tight since 2015; and phasing out nuclear can potentially lead to resource adequacy issue.

    • Taipower will continue to dominate the electricity market even though market liberalization is being slowly rolled out since 2017

    • Economic dispatch is used in Taiwan; so there is almost no renewable curtailment up to now

    • Renewable energy is subsidized, funded via a surcharge on non-RE power sale.

  • Investment Opportunities are plenty and diverse in Taiwan, as it shifts its fuel mix towards RE and gas

    • To meet growing demand (400-800 MW each year) and replace about 12 GW of old nuclear and thermal capacity in 2018-2025, presenting strong financing needs for new capacity and gas infrastructure

    • To leverage on the relatively favorable RE policies for solar and offshore wind expansion to meet the ambitious RE targets [20 GW for solar and 6.9 GW for wind by 2025]; RE could become even more important if construction of new LNG terminal(s) face delays

    • To capture potential opportunities of new IPP projects if construction of Taipower capacity or new LNG terminal infrastructure is delayed.

  • Investment Risks

    • It is unclear how Cost Competitiveness and Environmental Sustainability will be reconciled in Taiwan. Profitability of Taipower may be further squeezed and there is a risk that it may have to revise its legacy contracts with power developers

      • Taipower re-negotiated the original 25-year PPAs with the IPPs in 2013 to lower the cost of power purchase, partly due to inability to pass-on cost to customers

    • There are several other potential risks, including credit-risk of off-takers after market liberalization, curtailment risk, construction and exchange rate risk.

WaterRock Energy Economics (HK) Limited  /  S-01, 10/F, Wharf T&T Centre, Harbour City, 7 Canton Rd, Tsim Sha Tsui, HK  /  +852 93658216 / Liutong Zhang (Lucas) lzhang@waterrockenergy.com