Limited Effectiveness For New Solar Regulations
BMI View : The Taiwanese government's decision to raise its solar capacity installation goal reflects the government's ambition to assist its troubled solar equipment manufacturing industry. This move mirrors an earlier move by the Chinese government, though we highlight that the measures proposed by Taiwan are far less binding than that of the Chinese, and could therefore by limited in their effectiveness. The government's decision to lower FiTs is also questionable; we believe that this could threaten the economic feasibility of solar projects in the country.
The Taiwanese Bureau of Energy announced that it would be increasing its solar photovoltaic installation goal from 100 megawatts (MW) to 130MW for 2013. The Bureau also stated that the feed-in tariff (FiT) for solar energy would be reduced by 9.2-11.9% in 2013 depending on the type of PV system.
|Technology||Tariff||Time Frame||Payment Period (Years)||Note|
|Source: Taiwan Bureau Of Energy.|
|PV - Rooftop||7.12 - 9.25||July 2012 - Dec 2012||20 years||Depending On Project Scale|
|PV - Ground Mounted||6.76||July 2012 - Dec 2012||20 years||Depending On Project Scale|
|PV - Rooftop||6.33 - 8.4||Jan 2013 - June 2013||20 years||Depending On Project Scale|
|PV - Ground Mounted||5.98||Jan 2013 - June 2013||20 years||Depending On Project Scale|
|PV - Rooftop||5.98-8.18||July 2013 - Dec 2013||20 years||Depending On Project Scale|
|PV - Ground Mounted||5.62||July 2013 - Dec 2013||20 years||Depending On Project Scale|
We believe that the Taiwanese government is trying to assist its troubled solar equipment manufacturing industry. The country has a number of large solar equipment manufacturers, ranging from global solar cell producers Gintech, Neo Solar Power and Motech, to wafermaker Green Energy Technology. However, a situation of oversupply and declining demand from the global market has led these companies to experience shrinking revenues and margins (see our online service, October 18 2012, 'Changing Dyanmics Of Renewables Manufacturers'), and the Taiwanese government is trying to stimulate growth in local demand to help these manufacturers.
The Taiwanese government appears to be taking a leaf out of the Chinese government's book. Over the course of the year, the Chinese government has provided support for its troubled solar industry by twice increasing its solar installation targets, introducing a FiT, providing free grid connections for distributed PV systems and imposing a renewable portfolio standard (RPS) of 5-15% on its utilities (see 'Government Policies Still Driving Growth', October 22 2012).
In our opinion, these measures by the Taiwanese government would be of limited effectiveness in assisting the local solar industry. We have yet to see conclusive proof that the new regulations introduced in China would lead to a material pickup in sales for Chinese solar equipment manufacturers. This is despite regulations in China being binding, unlike in Taiwan. For instance, Chinese utilities that fail to meet the RPS would be penalised, creating a strong incentive for these companies to meet their requirements. Taiwan, however, does not have such binding regulations, and could find its attempts to develop domestic demand for solar equipment stifled.
Additionally, Taiwan's decision to further reduce the solar FiT could have negative consequences on the industry. Despite being one of the largest manufacturers of solar panels and modules in the world, solar energy accounted for 0.01% of total electricity generation in 2011. The government had introduced a FiT of TWD11-13/kWh (US$0.37-0.44) for solar energy in 2009, but we believe that it was insufficiently attractive to energy producers. The government's decision to further reduce the FiT could threaten the economic feasibility of solar projects.
We believe that domestic demand will continue to play a minor role for Taiwanese solar manufacturers. External demand for these manufacturers could further increase over the coming years should the EU decide to impose tariffs on Chinese solar products. Taiwan has already benefitted from the US tariffs on Chinese solar products, as some Chinese solar manufacturers have resorted to sourcing for cells from Taiwan to avoid tariffs.
|Solar To Play Relatively Small Role|
|Taiwan - Non-Hydropower Renewables Generation, TWh (LHS); Wind Energy Growth, % (RHS)|
From an internal perspective, we also believe that wind and biomass energy are far more accessible and affordable than solar power in Taiwan, and expect these generation sources to play greater roles in Taiwan's non-hydropower renewable mix.