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| Photograph: Gettys Images |
Taiwan's Feed in Tariff was launched in 2009 to stimulate
domestic demand and create a national PV market. However, major cuts to
Taiwan's FiT announced in early 2011 have presented a whole new set of market
challenges and opportunities.
Taiwan's PV market is dominated by
upstream/midstream players with over 50 manufacturers of Ingots, Wafers, Cells
and Modules exporting 98% of production, making Taiwan the second-largest
global supplier after China (Taiwan Ministry Of Economic Affairs, 2011). The introduction of a generous FiT in 2009 was the
catalyst for creation of a domestic PV market, but major cuts announced in
early 2011 have dramatically altered the PV market landscape.
The
Taiwanese FiT - Important Factors
- Major Cuts in FiT Rates for Solar PV
- Ground-Mounted rates (all sizes) slashed by 34% to US$ 0.252 per kWh
- Roof-Mounted (100-500 kW) rates cut to US$ 0.304 per kWh
- Rates will remain in place till at least December 31st, 2011 BUT FiT rate only applies from date of installation as opposed to date of contract signing
- 2011 Quota for Solar PV is 70MW (10MW reserved for installations <10kW)
- Power Purchase Agreement (PPA) is for 20 years with Taiwan Power (national utility)
(Above FiT Data is Compiled from Bloomberg & SolarServer.org, courtesy of MOEA)
KEY CHALLENGES
Taiwanese Ministry of Economic Affairs (MOEA) has incorporated elements of a Competitive Bidding Process with some interesting provisos. I compiled the following data from a variety of sources including MOEA papers, Bloomberg, SolarServer.org and REcharge news.
Taiwanese Ministry of Economic Affairs (MOEA) has incorporated elements of a Competitive Bidding Process with some interesting provisos. I compiled the following data from a variety of sources including MOEA papers, Bloomberg, SolarServer.org and REcharge news.
A.
Competitive Bidding Process
o For Solar PV Quota
allocation, applicants bid a
discounted rate (r) on prevailing FiT Rate (1)
o
Applications with highest discount win the Quota
allocation
o
Thus, actual FiT Rate received is (1-r)
o
For applications with the same
bid-discount rate (r), precedence is given to Roof-Mounted projects over
Ground-Mounted.
B. ‘Guarantee Deposit’
o
Open-bidders required to provide a
“Guarantee Deposit” (GD) to ensure completion of allocated projects
o
GD equal to Proposed Installation
Capacity (kWp) X NT$ 1000 (US$34.5) OR
o
Minimum of NT$ 1000 and Maximum of
NT$ 1,000,000 (US$ 34,500)
C.
Internal Rates of
Return (IRR’s)
o
The
Taiwanese Ministry of Economic Affairs (MOEA) has reduced FiT rates by about
30%, in line with falling module prices
o
MOEA has
set a benchmark IRR of only 5.25% profit under revised scheme
D. Competitive Landscape
From my extensive research & analysis of the Taiwanese Solar PV industry I found that:
From my extensive research & analysis of the Taiwanese Solar PV industry I found that:
o
Majority of Taiwanese PV Companies
are focused on upstream/midstream manufacturing, but there is an increasing
trend towards vertical integration
o
Trend signals that local
manufacturers are swiftly developing capacity in Planning & Design, EPC, Project Development & Financing and O&M
Based on my significant previous experience in the Taiwanese market, I observed that:
o
Taiwan is a price-sensitive market
where local manufacturers will enjoy competitive cost-advantages over foreign
manufacturers
ARISING OPPORTUNITIES
Having completing an in-depth analysis of the Taiwan Solar PV market I firmly believe there to be interesting opportunities for specific market-segments particularly for downstream players. Tailoring strategy to fit the unique characteristics of the Taiwanese PV market (and arising opportunities) will be essential for successful market-entry, but finding the right local partners will be a key challenge.
1.
Commercial & Industrial Rooftop market segment of 100kW
– 499kW
o
FiT structure encourages Direct
Ownership model- commercial & industrial rooftop customers can turn annual
energy cost into a higher annual income
o
Value-proposition for customers
involves using 5.25 % IRR (profit) on cash flows to offset
current energy spend and develop a long-term revenue center after PV system
costs are recouped within 8 – 10 years.
2.
EPC / Planning & Design Contracts
o
Solar Companies with an EPC /
Project Development Business Model (BM) will be most likely to succeed as the EPC
BM allows for agility in responding to industry price shocks and greater freedom to
source price-competitive modules for price-sensitive project bids.
o
As Taiwanese manufacturers move
towards Vertical Integration, the domestic market is also developing at a good
pace, with several 200- 500 kWp systems currently under construction across the
country
o
For Solar PV EPC Companies there
will be several opportunities to collaborate with local System Integrators,
Project Developers, Investors and Manufacturers within Commercial/Industrial Rooftop
segment
o
Key will be to forge partnerships
with local players to add-value on PV System Planning & Design/ Engineering & Procurement/ Operations & Maintenance, however actual construction should be outsourced to a
local third-party
Based on my knowledge of Taiwan's geography and Industrial landscape, I have outlined several potential clients within the Commercial & Industrial sectors, including location-specific dispersion:
3. Commercial/Industrial Rooftop Segment – Targeted Sectors
3. Commercial/Industrial Rooftop Segment – Targeted Sectors
o
Industrial
-Warehouses (Taipei
County) - Factories
& Manufacturing Facilities (Kaohsiung, Southern Taiwan) -Industrial Parks (Hsinchu) -Storage Facilities (Taipei
City)
o
Logistics
-Distribution Centers (COSCO) -Export
Clearing Centers -Logistics Hubs (Kaohsiung Port) - Transport
Depots (MRT Stations/ Bus Interchanges) -High-Speed Rail Stations (Taipei Main Station, TaoYuan Airport, Taichung,
Tainan, Kaohsiung)
o
Agriculture (Taichung-
Central Taiwan)
-Farms -Grain Silos -Food Processing Centers
o
Universities
-
NTU -Cheng Kung University -Taichung University -University
Car-Parks (Solar Trees)
o
Government
-Military Bases -Army
Barracks -Naval Bases -Government Tenders
