Taiwan and Turkey provide a warning for emerging offshore wind investors

Short-lived political guarantees show that stable regulatory backing is essential to sustain investment and supply chain growth in new offshore wind markets, a report from wind industry intelligence service, A Word About Wind says.
Taiwan and Turkey provide a warning for emerging offshore wind investors
Courtesy of NREL

According to the special report on Emerging Offshore Markets launched by A Word About Wind on Monday 7th February, revisions to offshore wind support in Taiwan and Turkey are likely to have a lasting impact on international investor confidence. Governments in markets such as the US and Japan must be careful to maintain confidence in new offshore wind growth as the industry works to establish a supply chain from scratch. The report details 18 key emerging markets for offshore wind, alongside insights and analysis from the Chief Executives of MHI Vestas and LM Wind Power.

As these significant offshore wind stakeholders attest, businesses throughout the supply chain rely on a long-term pipeline of projects with guaranteed returns. Where these guarantees are not met, this can have a significant impact on the appetite of international investors.

In Taiwan, political changes last November led to proposed cuts of 12.7 percent to offshore wind feed-in tariffs. Though a compromise was reached last week of a 5.7 percent cut, the change will nonetheless have significant impacts upon project feasibility. In Turkey, meanwhile, low levels of support have led to an indefinitely-postponed offshore wind tender.

“Offshore wind farms are long-term projects that don’t always coincide with short-term political cycles” said Richard Heap, editor-in-chief of A Word About Wind. “If companies in the offshore wind industry are going to build up a foundation from almost nothing, they need the confidence that investment decisions will pay off long-term.”

Other markets can learn lessons from Taiwan and Turkey. In the US, there has been fierce competition on prices for both leasing sites and PPA deals, with the latter going as low as $65/MWh in Massachusetts. This is a demonstration of investor confidence in the rapidly-developing market, but also means that some developers are working with narrow profit margins on projects - and these can be harmed if regulations change suddenly.

Richard Heap added that in emerging markets, margins can be tight, even with higher feed-in tariffs. A lack of local expertise and infrastructure raises capital expenditure significantly, especially when combined with local content requirements, such as the Jones Act in the US.

A Word About Wind will explore opportunities and challenges in the emerging US offshore market at its Financing Wind North America conference in April.

Nonetheless, the global appetite for offshore wind development remains strong. Philippe Kavafyan, CEO, MHI Vestas notes that everywhere the business has gone, it has seen “faster and bigger interest for offshore wind.”

“To convert this impetus into long-term growth, investors need guarantees of political support that can sustain supply chain development over project lifetimes” said Adam Barber, Managing Director of the Tamarindo Group, publisher of A Word About Wind, said. “As Taiwan has taught us, that will take more than short-lived promises.”

At Financing Wind North America, prominent offshore wind speakers will include Beth Waters, Managing Director, MUFG; João Metelo, CEO, Principle Power; Mike Crawley, CEO, Northland Power, and Tom Amis, Founder, APB.

For additional information:

A Word About Wind

Emerging Offshore Markets (report)

Financing Wind North America

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