Despite robust demand, corporate renewable energy sourcing poses challenges in Taiwan

Annie Huang, Taipei; Vyra Wu, DIGITIMES Asia 0


In a bid to conform with global standards and fulfill the green energy requisites of the supply chain, Taiwan's industrial plants are actively sourcing green energy and devising strategies for their energy transition. Concurrently, the Ministry of Economic Affairs is gearing up to unveil a green energy assurance mechanism in September, designed to cater to the needs of businesses.

As the worldwide trend towards achieving net-zero emissions gains traction, the quantiy of green energy that enterprises utilize will significantly influence their competitive edge. Nevertheless, due to initial policy considerations, green energy in Taiwan was primarily channeled to the Taiwan Power Company (referred to as Taipower) via a feed-in tariff (referred to as FIT) system, resulting in a scarcity of supply in the green energy market.

With regard to the net-zero emissions objective, three prominent players in the petrochemical sector – Chang Chun Petrochemical, USI Corporation, and Chimei Corporation – collaboratively invested in establishing the "Chem Union Renewable Energy Corporation" (referred to as CURE). Each of these companies holds a one-third stake in CURE.

The central aim of this initiative is to create a platform for the procurement and sale of renewable energy, with the goal of surmounting the challenges faced by enterprises when entering into Corporate Power Purchase Agreements (CPPA). In its preliminary phase, CURE will primarily focus on acquiring offshore wind power, with an initial target of procuring 200MW. Furthermore, it will engage in dialogues with both local and international renewable energy providers for potential collaborative ventures.

In tandem with industry partnerships for the procurement of green energy, Mei-Hua Wang, the Minister of Economic Affairs, has previously affirmed that her ministry is actively formulating a mechanism for assuring green energy availability. This mechanism is poised to facilitate the acquisition of green energy by large industrial consumers while concurrently broadening the array of options for offshore wind energy developers to identify potential buyers of green energy. The pertinent particulars are anticipated to be disclosed during the third quarter of 2023.

Historically, offshore wind power primarily flowed through the channels of Taipower. Nevertheless, with offshore wind energy progressing into its third-phase, a paradigm shift has emerged. Enterprises now engage in direct electricity procurement from power generators through extended commitments, termed Corporate Power Purchase Agreements (CPPA). For developers approach bank for funding, the acquisition of CPPAs becomes a prerequisite. Presently, international banks only extend recognition to TSMC's corporate credit rating, instigating concerns within the banking sector about other firms' capacities to meet the costs of green energy. This dilemma has resulted in other major industrial consumers encountering impediments in securing green energy supplies.

The transition from FIT to CPPA for offshore wind power acquisition has kindled deliberations encompassing not only corporate electricity procurement but also inquiries into whether Taipower's green energy sourcing has incurred financial losses. Taipower has disclosed that its expenses for green energy procurement constitute a mere 6% of its overall outlay. Recent financial deficits were primarily attributed to the substantial surge in international fuel costs due to the Russia-Ukraine war, precipitating an expenditure increase exceeding twofold.

In 2022, Taipower's aggregate expenses stood at NT$955.7 billion, with expenditure on fuel procurement alone soaring to NT$616.3 billion. This accounted for over 60% of the total expenses and represented an increase of more than double compared to previous periods. Conversely, expenditure on procuring renewable energy amounted to NT$58.9 billion, contributing to only 6.17% of the total.

Taipower underscored the critical importance of green energy development for Taiwan's industrial export competitiveness. Industries engaged in the RE100 initiative have collectively attained an annual production value of NT$5 trillion. This enduring impact on the nation should be duly acknowledged when delving into discussions concerning energy-related matters.