Part IV: Interim Conclusions
4. Part I: Background & Policy Frameworks
4.2. Energy Policy and Projects
4.2.2. The Act Governing Development of Renewable Energy (2009)
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domestic solar PV market) is the Act Governing Development of Renewable Energy (再 生能源發展條例) signed into law on 8 July2009.
4.2.2. The Act Governing Development of Renewable Energy (2009)
This landmark piece of legislation finally establishes and formalizes the role of
generators of renewable energy as (at least notionally) equal participants (and potential competitors) in Taiwan‟s electricity supply network. In addition to setting specific targets with regard to total renewable energy capacity to be installed and over what time
period,21 the Act and its supporting legislation provide specific guidelines, procedures, and incentives (like the FIT and capital subsidies) to allow producers of renewable energy (wind, solar, hydro, biomass etc.) to enter the market and supply and sell energy to Taiwan‟s grid.
Just as the importance of the Act for the development and growth of a renewable energy sector can‟t be overstated, however, neither can the consequences of getting it wrong. We now turn our attention to understanding the development, current health, and functioning of the Act, as it applies to the growth of a domestic solar PV market. As has already been mentioned, since the passage of the Act only 4MW22 of solar PV capacity has been successfully installed.23 What might explain this slow roll-out of solar PV? In the first instance, and somewhat benignly, is the slow formulation and release of key details which would actually allow the legislation to function; around six months elapsed between the passage of the Act in July 2009 and the publication of the FIT Formula and
21 Article Six of the Act (第六條) sets a target of between 6,500MW-10,000MW of renewable energy capacity to be installed within 20 years of it first taking affect (8/7/09). The MOEA, in its Renewable Energy Policy Directions, Decision Making and Implementation (再生能源之政策方向,決策流程及執行 情形) report (unpublished), sets a specific target of 2,500MW of solar PV capacity to be available by 2030 with total renewable energy capacity expected to reach 10,858MW (slightly higher than the figure that appears in the Act).
22 By the end of 2010 total cumulative installed solar PV capacity was supposed to have reached 75MW (64MW was anticipated to have been added in 2010).
23 In order to reach full compliance, and begin selling electricity under the FIT scheme, a completed solar PV installation must first be tested, certified, and then registered by the BOE.
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applicable rates on January 25, 2010; it took over nine months to complete and publish relevant sub-rules (再生能源發展條例子法) in support of the legislation on April 30.
And while it‟s difficult to criticize the MOEA for exercising due diligence in this matter, these processes should (and probably could) have been expedited to capitalize on
momentum generated by passage of the Act, and subsequent demand for renewable energy as evidenced by the number of new applications the BOE received24.
Recent Developments: Negotiating the (New) Applications Process
An additional, and largely avoidable, reason for the slow progress is the complicated and time-inefficient nature of the administrative and applications process, a process that has been further complicated by the major changes proposed to key parts of relevant
legislation (e.g., the Draft Amendments to the Renewable Energy Installations Approval Process - 再生能源發電設備認定辦法修正草案總說明) – MOEA, 2011a). Figure 2 (over page) attempts to illustrate the various steps involved with securing approval for a new solar PV project.
Prior to the proposed amendments, initial approval was to be sought from the BOE, with Taipower subsequently needing to verify the project before work could begin: should the changes become law, however, the responsibility for vetting new projects will reside with Taipower, with applicants first needing to satisfactorily meet the requirements set forth in the Application for Connection Check (申請併聯審查) process.25 Applicants who under the old system had had their new projects approved by the BOE, or approved but not
24 Between 8 July 2009 and 23 December 2010, the BOE had received applications for 1,565 solar PV projects (216MW) and approved 1,029 (151MW) of them. Of those 1,029 cases, however, only 406 (74MW) passed inspection by Taiwan Power.
25 According to Article Six (第六條) of the Draft Amendments for Renewable Energy Installations Approval Process (再生能源發電設備認定辦法修正草案總說明), applicants must first obtain the Connection Check Recommendations (併聯審查意見書) from Taipower before being eligible to apply for similar approval from the BOE – Application to Approve Installation (申請同意備案).
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併聯審查意見書
Connection Check Recommendations (Taipower)
signed a contract with Taipower, will be asked to begin the process again according to the new rules.26
Figure 2: New Administrative Procedures Based on the Draft Amendments to the
Renewable Energy Installations Approval Process 再生能源發電設備認定辦法修正草案總說明
Notes: The above figure is a simplified representation of the actual application and approvals process for electricity procurement via the FIT, modified from the original – Taiwan Power Renewable Electricity Procurement Procedures (台電公司再生能源電能收購作業流程) – and available from the Taipower website (Taiwan Power Corporation, 2010).
26 Readers should refer to the newly inserted Article Eighteen (第十八條) of the Draft changes.
申請開始躉售電能
Application to Commence Electricity Procurement (via the FIT) 申請完工證明及發電設備登記證
Application for Proof of Installation (Taipower) & Registration (BOE) 申請同意備案
Application for Installation Approval (BOE)
購售電契約執行
Enforcement of Electricity Procurement Arrangements 申請併聯試運轉及併聯試運轉
Application for Grid-connection & Testing (Taipower) 施工興建
System Installation 申請併聯審查
Application for Connection Check (Taipower)
申請簽訂購售電契約
Application for Electricity Procurement Contract (Taipower)
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Besides the confusion associated with these changes, an enhanced role for Taipower may also impede the approvals process and subsequent growth in the residential solar PV market; Taipower currently generates, supplies, and sells the majority of Taiwan‟s electricity. With the introduction of the Act and these new Draft measures, however, Taipower is now also charged with fostering the growth of a competing (and privately owned) renewable energies sector. It‟s conceivable that Taipower, finding it increasingly difficult to maintain its own bottom line,27 will delay processing a higher proportion of new projects should they impact significantly on business operations.
In the last of the major changes, a newly inserted clause (Article Five – 第五條) in the Draft grants the BOE (and its overseeing body, the MOEA) the right to delay, or halt altogether any new renewable developments – no detail is provided as to what would happen to applications already in process – so that in addition to Taipower functioning as primary gatekeeper for all new applications, the BOE may (at anytime) also decide to apply the brakes.
Additional Obstacles: A Cap on Renewable Energy
A final obstacle embedded in the Act itself, is the cap on renewable developments as described in Article Six (第六條). Article Six caps total renewable developments at between 6,500MW to 10,000MW of capacity within 20 years of operation of the Act,28 with solar PV expected to account for approximately 2,500MW of that capacity. While these figures look impressive (10,000MW is around 20% of Taiwan‟s current total installed electricity generating capacity) on paper, they must be put into perspective.
27 An expansion of solar PV (and other renewable energy applications) entails significantly more resources to be diverted to the processing of applications, carrying-out of inspections, and facilitation of grid-connections. Supposing renewables gain a significant foothold in Taiwan‟s energy market, Taipower‟s sales of electricity (generated from traditional sources) will also likely suffer.
28 The final target is to be reviewed by the MOEA once renewable capacity reaches 5000MW.
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In the last five years, Taiwan has added approximately 4,000MW of generating capacity mostly in the form of LNG-fired power stations (BOE, 2010). Were growth in generating capacity to continue at this rate, and supposing the government could actually reach its target of 10,000MW of renewable capacity, by 2030 Taiwan would see around 15% of its total electricity generating capacity supplied by renewable energy, but also a huge leap in the total amount of energy derived from non-renewable sources (from 42,321MW in 2009 to approximately 53,984MW by the end of the Act‟s operational period).
By enforcing a cap, the government is not only effectively limiting (prematurely and artificially) the extent to which a renewables market can grow in Taiwan, but also
impacting (negatively) on the ability of Taiwan to reach its long-term emissions (a return to 2000 levels by 2025) and renewable energy targets (8% of total electricity output).
This seems especially unfortunate, given that solar PV technology should become increasingly cost competitive after cost buy down and learning effects accumulate over time,29 and the fact that Taiwan is also one of the world‟s largest manufacturers and exporters of solar PV technology.
As touched on in the literature review earlier, another potential consequence of enforcing a cap is the introduction of additional volatility into the local renewable energy market.
Investors wishing to capitalize on government support for solar PV, for example, may rush to install new systems just prior to the cap being reached. As has been seen in other markets, most notably Spain, this disproportionate and rapid uptake may drive up costs for renewable support programs in the short term, and disrupt supply chains and
sustainable growth in the longer term. This may, then, be one reason why the government has added Article Five to the Draft – as an emergency brake should renewable
installations under the FIT scheme become too popular with investors.
29 According to the IEA (2010a), the average price of grid-connected systems (although varying widely between PVPS member nations) was $4.8 USD per Watt, more than 30% lower than the 2008 price.
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Additional Obstacles: the FIT Schedule and Electricity Pricing
Returning now to a key plank of the Act, and the mechanism by which renewable energy is theoretically able to compete with traditional forms of energy generation, the FIT. Part of the reason for delays in formalizing the FIT arrangements (and the slow pace of new installations) has been the difficulty in setting an appropriate (or attractive enough) FIT pricing schedule. This is evidenced by the number of hearings the BOE conducted in the lead up to the policy release - between the formation of the Pricing Committee on 1 September 2009 and the publication of the FIT formula and applicable rates on 25 January 2010, the Committee met five times and conducted two public hearings30. And despite what has seemed like extensive consultation and deliberation from the government, there has been no shortage of confusion and policy on the run.
As reported on earlier, the government on 17 December 2010 suddenly announced that solar PV applicants that had signed a contract with Taipower for electricity procurement, but not able to complete work on projects before 31 December would no longer be
eligible for the (higher) 2010 FIT rate and subsidy program (equivalent to NT$50,000 per KWp of installed capacity). Having signed a contract in good faith with Taipower for 2010 rates, new investors would it seemed be forced to accept 2011 rates.
That was the case until the Pricing Committee (perhaps responding to criticism from solar industry groups and members of the public) on 31 January of this year, released the new FIT guidelines and pricing schedule. As it stands now, applicants who had signed a contract before 17 December 2010 and completing construction before 28 February 2011 are eligible for the 2010 rates. Applicants who had signed a contract last year but
completing construction between 28 February and 31 May of this year will instead receive the reduced 2011 FIT rate. Finally, applicants that had signed a contract last year
30 The debate between government and renewable energy generators remains ongoing, however; the Taipei Times reported in February last year, for example, that German firm Infravest (英華威集團), Taiwan‟s only private wind generator would cease operations citing „a lack of confidence‟ in the government‟s renewable energy strategy and uncompetitive FIT rates for wind energy (Tan, 2010).
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but who complete construction after 31 May will have to „bid‟ (details are unclear) on their respective FIT arrangements.
These problems are relatively superficial, however, compared with the difficulty that the government faces in balancing the interests of industry (and other large consumers of electricity) on the one hand, and the growth of a renewable energy sector (as mandated in the Framework and the Act) on the other. Put quite simply, the cost of electricity in Taiwan is much too low, putting downward pressure on the FIT (the cost of purchasing electricity from solar PV sources is already more than three times the current retail price of electricity and significantly higher again when compared with wholesale energy prices31) and attracting criticism from all sides; Taipower and industry would be
concerned by what they see as changes to the status quo and a potential increase to their operating costs if forced to subsidize the FIT through higher electricity prices; renewable providers and private investors, meanwhile, will find it difficult to compete because the FIT offers only marginal returns whilst also carrying a substantial amount of risk should the government keep changing the goal posts on procurement policy.
And while this problem seems intractable – the result of Taiwan‟s export oriented economy combined with a centralized (state dominated) approach to management of energy grid issues – we don‟t actually know whether the current FIT rates are problematic or not, due to procedural problems associated with the application and approvals process as reported on earlier. That is, too few solar PV applicants have
completed, registered, and finally sold electricity to the grid via the FIT for us to make an informed judgment about this. In the next stage of the analysis, however – The Market Barriers Perspective – we attempt to determine whether the current subsidy and FIT arrangements are sufficiently attractive (at least in theory) to attract new investment in solar PV.
31 For a 1-10kW solar PV installation the government is offering a FIT rate of NT$10.3185 per KWh (MOEA, 2011). The current retail price is approximately NT$2.9 per KWh for residential users, and NT$2.46 per KWh for industrial purposes (IEA, 2010c). Taiwan‟s FIT rate, incidentally, is significantly lower than South Korea‟s (NT$15.7) who also has comparable retail rates for electricity.
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