Taiwan's planned 12.5% increase in industrial power rates has been welcomed by renewable energy firms, who anticipate a narrowing price gap between traditional "gray" and green electricity. This move is expected to potentially spur further growth in the green energy market and could bring clarity to Corporate Power Purchase Agreement (CPPA) negotiations between semiconductor giants and offshore wind developers.
Industry leaders maintain that the imbalance between supply and demand remains the green energy market's key issue. They emphasize that progress in Taiwan's Round 3 offshore wind projects will be critical for future stability. Solar energy providers also stress the need for offshore wind capacity to come online as scheduled, noting that delays create uncertainty for the entire renewable supply chain.
Following the Ministry of Economic Affairs' decision to raise industrial power rates by 12.5%—effective October 16, 2024—the price differential between gray and green electricity is narrowing. While Taiwan's electricity rates remain relatively low compared to regional neighbors like South Korea and Japan, the new hike aligns with the global shift towards costlier energy and could drive more industries toward green power sources.
Solar power providers view the rate increase as a catalyst for growth, as the rising cost of gray power encourages more businesses to adopt green energy. While solar installations have faced delays due to election-related slowdowns, solar remains a relatively quick-to-deploy option compared to offshore wind.
Driven by RE100 commitments, Taiwan's semiconductor giants have moved quickly to secure green power, with leaders like MediaTek, TSMC, and ASE seeking supply-chain stability. For these power-hungry companies, securing offshore wind power remains key, despite price negotiation hurdles with wind developers.
Supply-chain sources report that semiconductor firms aim for rates close to those of gray power, while developers are targeting up to NT$6 per kWh. With the new rate hike narrowing the gap, an agreement may be within reach.
For the semiconductor supply chain, stability in green power supply outweighs price concerns, with overseas plant relocation seen as a costlier and riskier alternative. Consequently, companies prefer securing local green power sources, even at higher prices.
As price talks progress, offshore wind developers face mounting pressures from construction costs, financing hurdles, and localization requirements. Third-phase projects are 40 to 60% costlier than earlier phases, and recent policy shifts to ease localization mandates have elicited mixed responses among developers. While some welcome the flexibility to cut costs, early-phase developers view it as a setback.
According to the Ministry of Economic Affairs, Round 3.1 projects will adhere to original localization contracts, with later phases gradually adopting more flexible policies. While this resolves immediate localization debates, cost pressures remain high across projects due to capital expenditures and interest rate hikes. Domestic banks, especially state-owned institutions, are expected to play a critical role alongside export credit agencies in providing necessary financing.
TSMC's Senior Vice President Lora Ho recently urged government support in securing renewable energy, calling for policy adjustments in offshore wind and localization requirements to help companies manage costs and achieve sustainability goals.
