Taiwan's offshore wind power industry, once heralded as a cornerstone of the country's green energy transition, is now grappling with significant challenges. Policy shifts and supply chain disruptions have caused delays in several wind farm projects, prompting a strategic pivot towards overseas markets in Japan and South Korea to mitigate reliance on the domestic market.
Recently, the Energy Administration under the Ministry of Economic Affairs announced the selection and pricing of developers for Round 3.2, with six wind farms qualifying for development. However, overlapping project areas have necessitated ongoing map comparisons, with final results expected by the end of July.
Industry stakeholders highlight the interconnected nature of Taiwan's offshore wind power development. The government's late-April decision to extend the completion and grid connection deadline for Round 3.1 by a year, alongside continuous uncertainties in the Round 3.2 developer selection process, underscores market progress falling short of expectations. Calls are growing for the government to recalibrate completion timelines for each phase.
Supply chain challenges and market shifts
The government has been pushing hard to localize the offshore wind power industry and enhance domestic maritime engineering capabilities. In response, international supply chain companies have established facilities in Taiwan to meet localization requirements.
The extension of Round 3.1 poses significant challenges for the supply chain. Factories must maintain certain utilization rates, which are now under threat. Taiwanese companies are integral in upstream sectors such as cables, towers, blades, and subsystem monitoring and power systems.
Key players include China Steel Corporation (CSC) supplying steel and towers, Swancor providing resin materials, and Tien Li supplying blades. Electrical and mechanical systems are supported by companies like TECO, Fortune Electric, Chem, and Shihlin Electric.
Following the withdrawal of Vestas from Round 3.2, Taiwan's wind turbine market is now dominated by Siemens Gamesa. Industry insiders report that Siemens Gamesa is effectively monopolizing the Round 3.2 wind farm capacity. Tien Li, initially partnered with Vestas, has shifted focus to collaborate with Siemens Gamesa in the blade maintenance market, pausing blade production.
Despite Siemens Gamesa's orders for Round 3.2 wind farms, the extension of Round 3.1 to 2027-2028 means that the supply chain will struggle to maintain existing factory utilization rates for nearly two years between 2025 and 2027, relying solely on Taiwan's wind farms.
Siemens Gamesa is now eyeing opportunities in Japan and South Korea, where localization requirements for offshore wind are less stringent than in Taiwan. The Taichung plant's annual capacity of 2 GW can support regional wind farm demand, making it an opportune moment to enter these markets.
Bidding for wind farms in Japan and South Korea is expected by the end of 2024, with hopes for positive outcomes by year-end.
Venturing into overseas markets presents the significant challenge of competing against China's low-cost manufacturing. Global wind turbine prices have risen due to raw material and shipping issues, posing cost challenges across the supply chain.
Diverse governmental bidding regulations add another layer of complexity. South Korea's offshore wind farm bidding is primarily price-driven, though other factors like technological innovation and project scale are also considered. However, Chinese manufacturers, with their aggressive pricing, remain formidable competitors.
Despite Taiwan's proactive efforts to promote localization and international cooperation, the delays in Round 3.1 and the developer selection for Round 3.2 highlight the complexities of market adjustment. Analysts argue that while international firms can readily expand beyond Taiwan, the domestic supply chain remains heavily dependent on local wind farms, with the Round 3.1 delay posing the most significant challenge to Taiwanese manufacturers.
