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Taiwan, China Renewables Key View
- 25 Mar 2022
Key View: Taiwan, China remains as a strong performer in growing non-hydropower renewables. Solar power projects will dominate growth in the sector, followed by offshore wind projects. The authorities have constantly reaffirmed their ambition to grow the sector over the coming decade, with renewable energy plans, policies and investments. We note that though a strengthening of the market’s gas power project pipeline will weigh down on greater growth of non-hydropower renewables, Taiwan, China will still remain a strong renewables performer.
Renewables Headline Forecasts (Taiwan, China 2021-2026)
|Indicator ||2021e ||2022f ||2023f ||2024f ||2025f ||2026f |
|Generation, Non-Hydropower Renewables, TWh ||14.076 ||18.457 ||20.713 ||24.713 ||29.127 ||31.327 |
|Generation, Non-Hydropower Renewables, % y-o-y ||14.6 ||31.1 ||12.2 ||19.3 ||17.9 ||7.6 |
|Capacity, Non-Hydroelectric Renewables, MW ||9,144.3 ||12,016.8 ||13,752.1 ||16,195.7 ||18,536.9 ||20,168.4 |
|Capacity, Non-Hydroelectric Renewables, % y-o-y ||23.8 ||31.4 ||14.4 ||17.8 ||14.5 ||8.8 |
|e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, Local sources, Fitch Solutions |
Key Forecasts And Latest Updates
- Taiwan, China will experience robust growth of the non-hydropower renewables sector in the coming decade. We expect non-hydropower renewables capacity to reach 30.5GW in 2031, up from 9.4GW as of end-2021. This capacity growth will be weighted towards solar power projects, as Taiwan, China has a strong pipeline of such projects, which will take up 75% of the total non-hydropower capacity share in 2031.
- Non-hydropower renewables generation will also increase, in line with capacity growth. We forecast that it will grow on an annual average of 13% from 2022 to 2031. As of end-2021, the total non-hydropower renewables generation totalled 14.1TWh, which will reach 47.7TWh in 2031, contributing to 14% of 2031’s power generation mix.
- In light of developments in Taiwan, China strengthening its pipeline of gas power projects, we have made a downward revision to our generation forecasts for non-hydropower renewables. This was a downside risk which we previously highlighted, which took form with the December 2021’s referendum results rejecting another delay of the Datan liquified natural gas (LNG) terminal following environmental concerns. The Datan LNG terminal will feed into the Datan Combined Cycle Power Plant set to have units come online from 2022 to 2024.
- Regardless, Taiwan, China will still be an outperformer for offshore wind and solar. Taiwan, China has emerged as one of the largest markets for offshore wind power development worldwide in a relatively short time, with nearly 11.2GW of offshore wind capacity in the project pipeline at present, and a goal to reach 7GW of wind generation capacity by 2025. The progress of the Changhua 1 and 2A offshore wind farms will play a key role in helping to establish Taiwan, China as an offshore wind power outperformer over the coming decade. Additionally, Formosa 4 and 5, which are currently pending environmental impact assessments (EIA), will add an additional 4.4GW of generation capacity post-2025.
- Additionally, the December 2021 referendum results showed support for discontinuing the construction of the Lungmen Nuclear Power Plant. This spells opportunities for non-hydropower renewables growth, by shrinking any potential for more nuclear growth in the market.
- In February 2022, Malaysia’s Supara Energy Berhad served a termination notice to Yunneng Wind Power in regard to their contract for supplying and installing wind turbine foundations for the 640MW Yunlin offshore wind farm. Though the wind farm was initially slated for commissioning at the end of 2021, we believe this will delay the project’s commissioning further into the latter half of 2022. This news comes in spite of Total’s announcement of the project’s first turbine installation on November 30 2021.
- In February 2021, President Tsai Ing-wen announced several strategies to develop Taiwan, China into a renewable energy hub in order to become a global player in the renewable space. To achieve this, the authorities will continue its strategy of providing clear policy direction, boosting investments into the sector, developing robust supply chains and establishing a market mechanism for green energy trading. They are also developing stronger legal frameworks and simplifying investment procedures and mechanisms for renewable energy. This is in line with the market’s existing energy policies, to rely on renewable sources as a diversification strategy away from nuclear and coal-fired generation.
- Supporting the announcement in February 2021, President Tsai further announced, in December 2021, that the authorities plan to invest heavily into wind and solar power industries. The authorities expect a total investment of about USD72bn by 2025, advancing renewable energy goals and having Taiwan, China be a hub for green energy development. This is in line with our view that Taiwan, China will be an outperformer in the region for wind and solar power.
- In October 2021, TSEC Corp., a local solar panel and material manufacturer, announced that it is investing NTD1bn (USD36mn) to expand its solar module and logistics plant in Pingtung City. TSEC expects this to increase their annual solar module output by 1.5GW annually. Expansion will be completed in September 2022, catering to Taiwan, China’s growing demand for solar power.
- In September 2021, Keppel Offshore & Marine reported that it has finished building two 600MW offshore substations for Taiwan, China’s Greater Changhua 1 & 2A wind farms. Ørsted is the largest shareholder of the 900MW Greater Changhua 1 and 2A offshore wind farms, and the project marks Taiwan, China's first large-scale offshore wind farm. Following the substation installations, the firm expects to proceed with wind turbine installation in 2022. Greater Changhua 1 and 2A are part of a bigger wind project, with Greater Changhua 2B and 4 to be fully commissioned in 2026, with power purchase agreements (PPAs) already signed with major companies like TSMC, and Greater Changhua 3 having just passed EIA in 2021. Ørsted is also planning for further expansion of wind farms in the Changhua region, with a 2.1GW Xu Feng wind farm approximately 60km from the Greater Changhua wind farms. The Xu Feng project has also passed EIA in 2021.
- In August 2021, Taiwan, China reaffirmed its favourable stance for wind power by announcing that it will boost generation capacity of offshore wind by 15GW from 2026 to 2030. The authorities plan to attain this goal by adding 1.5GW of capacity each year, an upward revision from prior planning of 1GW. As such, there are upside risks to our forecast for wind which will be determined by the results of project bids happening in 2022 and 2023, and corporate’s appetite for green PPAs. As for solar power, Taiwan, China has set in place a target for 20GW in capacity by 2025.
- As of August 2021, SRE New Energy has contracted ZTE Engineering to begin engineering designs for deep-water foundations for Formosa 4’s wind turbines. Successful design and construction will help the development of offshore wind farms for Taiwan, China in the future. SRE New Energy expects Formosa 4 and 5 to add 4.4GW of generation capacity when fully commissioned post-2025.
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