Phase 3-3 Offshore Wind Releases 3.6GW as Local Supply Chain Mandates End

Bidding for Phase 3-3 of Taiwan's offshore wind development will close on the 30th of this month, with a total quota of approximately 3.6GW expected to be released, while previously terminated sites are re-included in the scope for capacity expansion. This round of quotas is larger in scale than the previous two phases, demonstrating that the government's determination to promote offshore wind power remains undiminished. According to the Energy Administration of the Executive Yuan, the Phase 3-3 capacity will be allocated to multiple domestic and foreign developers through a competitive bidding process to determine the final winners. This will result in a batch of new or expanded offshore wind projects scheduled to come online sequentially around 2028, adding tens of millions of kilowatt-hours of green electricity to the island.

Since 2019, in order to cultivate the local wind turbine industry, the Taiwanese government implemented a "mandatory localization" policy, requiring offshore wind projects to use domestically produced wind turbines and related components at a proportion of over 70%. In the initial stage, this policy indeed stimulated the rapid growth of the local supply chain. The production capacity and technical standards of local Taiwanese wind turbine manufacturers improved significantly within just a few years, attracting a large influx of capital. However, as the technological and cost advantages of major international wind turbine manufacturers continued to manifest, mandatory localization was gradually criticized for restricting market competition, driving up project costs, and even impacting the payback periods of offshore wind investments. In mid-2024, the Energy Administration of the Executive Yuan officially announced the cancellation of mandatory localization regulations, replacing them with a "voluntary procurement" approach to encourage developers to choose suppliers freely on the premise of meeting quality and safety standards.

Following this policy shift, the offshore wind market will welcome a more intense competitive landscape. Major international wind turbine manufacturers, such as Denmark's Vestas, Germany's Siemens Gamesa, and Spain's Nordex, are expected to reassess their strategies for entering the Taiwan market and contend for Phase 3-3 bidding opportunities. For local enterprises, although they lose the guarantee of mandatory procurement, they simultaneously face the pressure to upgrade technology, reduce costs, and strengthen international cooperation. If they can compete with foreign brands on quality and price, they still have the opportunity to secure a foothold in this new round of market-driven competition, and even expand production capacity through joint ventures or technology licensing.

From a financial perspective, canceling mandatory localization is expected to reduce the capital expenditures of offshore wind projects. According to industry estimates, the unit cost of high-efficiency foreign wind turbines is about 8% to 12% lower than that of equivalent domestic specifications. Based on this calculation, if all quotas in Phase 3-3 adopt international brands, the overall investment scale could be reduced by more than NT$10 billion. This move will enhance the financial feasibility of projects, attract more foreign investment and financial institutions to participate in financing, and help mitigate the pressure of future electricity price hikes, aligning with the government's long-term goal of achieving a 20% renewable energy share by 2025.

However, marketization also brings uncertainty. Local supply chains that previously relied on localization, if unable to adjust quickly, may face risks of overcapacity or layoffs, causing a short-term impact on employment and revenues in related industries. The government has stated that it will assist local enterprises in upgrading their technical levels through industrial upgrading subsidies and R&D funds, while encouraging them to participate in international cooperation to mitigate the negative effects during the transition process. If a balance can be struck between policy support and market competition in the future, Taiwan's offshore wind power will not only accelerate green electricity supply but is also expected to become an offshore wind manufacturing and service hub in the Asian region.

Overall, the closing of the Phase 3-3 bidding and the rescission of mandatory localization mark a transition for Taiwan's offshore wind sector from a policy-protected "umbrella" stage to a "Warring States period" dominated by market mechanisms. In an environment intertwined with capital, technology, and policy, whoever can stand out in the fierce competition will directly impact Taiwan's future renewable energy supply structure and energy security. (Source of facts: Central News Agency)