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 has been slowly rolled out since 2017

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

  • Commercial framework of RE investment is via feed-in-tariff or via auction schemes, funded via a surcharge on non-RE power sale.

  • Green corporate PPA (cPPA) is available, and cPPA prices have been high. 

  • Land-related cost is very high and there are local content requirements in Taiwan, making developing solar PV costly. 

  • Local content requirement along the value chain of building offshore wind capacity is high. 

• Investment Opportunities are plenty and diverse in Taiwan, as it shifts its fuel mix towards RE, BESS 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 is delayed.

  • To build large-scale battery energy storage solution (BESS) for the frequency regulation and energy shift (E-dReg) market. 

• 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 (if happened), curtailment risk in the long term, construction and exchange rate risk.