When it comes to a major investment from a foreign investor, even if Taiwan does not have the relevant technology, a certain proportion of local procurement is still required. Copenhagen Infrastructure Partners (CIP), a development fund that values local participation, has announced today (Aug 5) that it has signed an onshore substation E.P.C. contract with Teco Electric & Machinery Co., which fulfilled the requirement of 100% local production. CIP has already sourced locally for their previous steel structure and marine engineering projects. However, CIP and Teco have appealed to the government for a more practical goal for local procurement due to the time pressure. Local acquisition of resources should not be forced, when it is difficult to achieve in the current commercial environment.
Initially the Chang Fang and Xidao Wind Farm was required of only 25% of local participation, in which switchboards, switches and transformers were to be purchased. However, now CIP ends up involving Teco in engineering, procurement, construction, which is 100% local procurement. The onshore substation is part of a wind power system. The offshore wind turbines, which are off the coast of Changhua County, generate and transfer electricity to Taiwan's main island. The electricity is in turn delivered to the power grid and distributed to the end users.
George Lien, the general manager of Teco, asserted that the government's goal of local procurement still needs to be practical. The exclusive and patented technology of foreign manufacturers, such as power converters, will not be licensed to Taiwanese manufacturers for nothing. As for the Taiwanese manufacturers, even when they are willing to negotiate for a technology transfer, they still need time to discuss with the foreign manufacturers about licensing fees and licensing terms. Before the production can commence, the production lines need to be built and certified. Only when the quality is up to par, the shipments are qualified to leave the factory. While some wind power components are relatively low tech, which is within the capability of Taiwanese manufacturers, it still offers little incentive for them to commission factories. The offshore wind power market is, after all, a niche market, whose demand is too little.
The CEO of CIP Taiwan, Jesper Holst, believes that it would better fit the schedule demanded by the government and be more feasible for this industry to have a combination of Asian-Pacific and local manufacturers. CIP has been actively communicating with the government, emphasizing a pragmatic approach in terms of local participation.
The onshore substation project developed by Chang Fang and Xidao Wind Farm is 100% executed by Teco, which has exceeded the 25% of local participation required by the government. The contract is worth nearly NT$2 billion. The construction is expected to commence early next year and be completed by mid-2021.
Holst was inquired about the possibility of the CIP wind farm construction being affected by the election in 2020. The CEO explained that the Taiwanese government, despite the change of administration, has been consistently promoting the renewable energy policy since 2010, from the demonstrative wind farm, potential wind farm, to the area development, which are signs of continuous promotion. It is not a political consideration to have the construction to begin in 2020. Rather, it is a continuation of the previous plan of renewable energy development.
