The Taiwanese Ministry of Economic Affairs (MOEA) finally released the long-awaited administrative contract for Round 3 of offshore development. The first phase of Round 3 auctions already took place last year with six developers winning projects totaling 3GW for construction in 2026 and 2027. Their administrative contracts need to be signed in May, said the government. Despite intense lobbying, developers say there were not substantial changes from the draft administrative contracts they went into the auctions with.
"We tried our best," said one of the developers with a Round "3.1" contract for construction 2026/2027, "the window for substantially influencing the administrative contracts have closed."
Their efforts have now turned to getting as much clarity from the government so that they can calculate the costs of their projects and proceed with crucial consenting steps such as obtaining their EIA.
Open-ended liabilities locked in
The most objectionable feature of the adminstrative contract for the developers are the recurring fines for failing to meet localization goals. Developer say whether or not Taiwanese partners deliver components on time is often beyond their control and the open-ended nature of the fines introduce a huge element of uncertainty into their projects.
"There still seems to be quite a lot of tough time-based penalties in the final contract," said consultant Raoul Kubitschek of NIRAS, "this contract holds the developers in a storng vice."
If the fines end up exceeding the performance bond of the project, the developers are expected to refresh the performance bond or lose their rights to continue development. The one-year grace period developers had for late completion of project has been taken away. In general, there will be much more scrutiny on the developers for project milestones by the Bureau of Energy.
Prior to the announcement of the final administrative contract, developers question whether they could sign such a contract. With so much uncertainty, they pointed out, the banks are bound to balk and they would not be able to achieve financial close. Now that there is no more possibility of influencing the contents of the contract, however, the same developers are still keen to sign.
"We do want to sign the administrative contract," said the developers, "but it just means the Corporate Power Purchase Agreement (CPPA) price has to be higher. We have no choice but to pass on the costs."
How high? Without giving exact figures, developers have indicated that the CPPA price will be substantially higher than generally supposed.
"We cannot do it for less than Round 2's Feed-in-Tariff price," said one developer. The Round 2 Feed-in-Tariff price varied year-by-year, but was in general above NTD$5 per kWh. In contrast, the CPPA signed between TSMC and Orsted for the 920MW Greater Changhua 2b and 4 project is said to be just NT$3.2/kWh.
"That's because that project is not subject to the localization requirements," said the developer, "if you exempt our project from having to include local content, we too can deliver a CPPA price that is three-point-something NTD/kWh. "
In order to secure a project, all the winning developers in Taiwan's Round 3.1 bid zero. This means they are completely dependant on the CPPA offtaker such as TSMC, AUO and Delta Electronics to buy all of their output. Those big tech firms have an urgent need to purchase renewable energy in bulk as they face pressures to green their supply chains. Many have taken the RE 100 pledge, which puts their companies on a roadmap to decarbonize completely by a certain date.
The government's localization efforts, which mandates made-in-Taiwan components such as foundations and turbine tower pieces and blades, will result in a sharply larger power bill for Taiwan's strategically-important electronics makers. That is, if they will pay it. Kubitschek said there is no indication that the tech giants would be willing to stomach sharply higher offshore wind power prices.
There are two additional hurdles to overcome, says developers, if they are to be well-positioned to sign their administrative contracts in May. The first issue is that the Environmental Impact Assessment panels have been on pause pending Taipower and the Bureau of Energy resolving where to route the offshore transition cables. This has the developers nervous as a host of post-EIA assessments are now pushed back pending the EIA approvals.
The other issue is the matter of Reserve Capacity. According to the Electricity Act, "To ensure the stability and safety of the power supply, the Electricity Generating and Retailing Enterprises in selling the electric energy to users shall prepare the appropriate level of electricity reserve capacity based on its electricity sales."
"We got our lawyers to calculate it and our engineers to calculate it and got different numbers," said one developer.
THE UNREDACTED TAKE
With this new administrative contract, the Taiwanese government has doubled down on the "sticks and carrots" approach to getting developers to do what they want. Tighter scrutiny of project milestones, taking away the grace period and reserving the ability to hand down recurring fines indefinitely. Obviously this is partly in response to huge project delays in Round 2 projects, but it's questionable whether more bureaucratic hovering will actually help projects get built any faster, especially as developers are already highly financially-incentivized to stick to their critical paths.
They will certainly not make Taiwanese projects, already "the most expensive in the world" due to the heavy and inflexible local content policy, any cheaper. Unfortunately it is Taiwan's best, most competitive and most strategically important companies who will now have to bear the cost.
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