Doubts remain

Taiwan is well known as one of the leading manufacturers of solar PV products, mostly cells and wafers, with globe-spanning giants Gintech, Motech and NSP supporting an entire ecosystem of solar related suppliers. The island’s nearly 10 GW of solar manufacturing capacity—second only to China— gives it the scale to compete with larger Chinese rivals, while Taiwanese firms’ reputation for manufacturing high quality, high performance products allows them to command premiums over cheaper Chinese-made goods. Amidst global trade disputes over China’s alleged dumping, Taiwan is now the go-to source for non-Chinese solar PV products. However, while Taiwan leads in solar PV manufacturing, it lags in solar power installations. The island has only 222 MW of installed solar PV power capacity, and 99% of Taiwanese-made solar PV products are exported. To rectify this situation, Taiwan’s Bureau of Energy (BOE) under the Ministry of Economic Affairs announced plans to ramp up local solar installations to 175 MW for 2013, up from only 135 MW and 100 MW in earlier plans. This follows 2012’s 104.5 MW of solar installations, and is part of broader BOE plans for renewable energy to comprise 18% of Taiwan’s installed power capacity by 2025. The BOE announced further targets of 420 MW of PV installations by 2015, increasing to 1.02 GW by 2020, 2.5 GW by 2025 and finally 3.1 GW by 2030.
A statement released by the BOE in June this year stated that, “Considering the solar energy cost [is] still not a match to [the cost of] conventional fossil fuel [energy] and the [lack of] availability of land, the best strategic implementation for solar is to expand at a moderate rate, [and] prioritize…solar rooftops for residential and industrial applications in the near term.” The government has formed an organization dubbed “One Million Rooftops” with lofty goals of placing solar panels on as many as one million rooftops in Taiwan’s densely populated society and is working towards implementation.
At this point, solar PV in Taiwan is comprised mostly of mid-sized utility-scale installations, such as industrial rooftops and smaller scale solar farms.
Industry insiders and social activists are divided on the government’s go-slow approach to solar installation. Some praise the government for taking a sensible approach to sustainable solar development, while others criticize both the rate and scale of Taiwan’s solar installations, particularly in light of the size of the solar manufacturing industry on the island.
“Compared with the capacity we have, especially in solar cells and wafers,… there’s a huge gap,” notes James CP Chen, head of AU Optronics BenQ’s solar division.
Yet Chen supports the government’s plan to develop the market slowly, citing Spain and Italy as examples of how not to develop a domestic solar power industry. He says that many countries developed their local markets too quickly, offering substantial support for the industry, “but after two or three years, [support] disappears. Investors maybe earned a lot of money, but the government simply cannot offer such huge support.” Instead he favors the more incremental approach adopted by Taiwan’s government, saying slower, steady growth will “keep the whole solar ecosystem sustainable.” Others are less sanguine. Lee Wen-bin, Chief of Planning for state-run power utility Taipower’s Renewable Energy division, speaking on his own behalf and not representative of his company, says in an e-mail that Taiwan’s domestic installations market is “far from enough” but also admits that determining what is “enough” in Taiwan’s unique context is difficult to determine.
Vincent Lin, head of Taiwanese solar module maker Winaico’s engineering and manufacturing division, says that Taiwan’s domestic installations market is too small for his firm to pay much attention to, saying less than 1% of their business goes to the local market. “We do not pay attention to R&D and business in the Taiwanese market,” he notes.
Taiwan’s President Ma Ying Jeou has made development of renewable energy a key plank in the overall platform of upgrading industry and reducing carbon emissions. Despite being an island with few natural resources and one that imports 98% of its energy needs, Taiwan is an industrial giant in such energy-hungry industries as steel, petrochemicals and semiconductors. The island is one of Asia’s top per capita energy consumers and polluters, and the government has ambitious plans to slash CO2 emissions to year 2000 levels by 2025. Central to achieving this is the development of renewable energy. Since the passage of the Renewable Energy Development Act in 2009, solar installations have surged from less than 10 MW to the current 200-plus MW, and are continuing to rise.
Taiwan currently offers an attractive feed-in tariff of between NT$6.33 (US$0.21) and NT$8.44 (US$0.28) per kWh for rooftop installations, and NT$5.98 (US$0.20) per kWh for ground-mounted installations. This has generated a lot of attention from developers, but hurdles remain and critics accuse the government of dragging its feet when it comes to approving solar installations. As of May, Taiwan has actually only installed 10 MW of its intended 175 MW for 2013, and some worry that the goals might not be met by year’s end.
Bureaucratic obstacles remain for solar installers. For example, any project over 500 kW requires that the developer is registered as an Independent Power Producer (IPP). This lengthy process slows down development, but, as BenQ’s Chen notes, also means that only serious developers with long-term goals in the market will be able to compete. Chen says that once an IPP status is granted, this can be a platform for development and attract outside investment into the market. BenQ has been granted IPP status by Taiwan’s government and Chen says they have already garnered investment interest from global green funds.
But industry insiders are divided as to whether Taiwan is moving fast enough, or intends to go far enough, in developing renewable energy, especially solar PV.
Taiwan’s experience in domestic solar installations stands in marked contrast to its cousin and sometime rival across the Taiwan Straits—mainland China. Taiwan developed its solar industry well before China, with Motech starting out as early as 2002 and Gintech in 2006, compared to 2009-10 for many of China’s solar manufacturers. But China’s size and economic heft allowed it to catch up and then vastly exceed Taiwan, with over 30 GW of installed manufacturing capacity, compared to Taiwan’s 10 GW. China’s massive, state-funded buildup of manufacturing capacity between 2009 to 2011 is blamed for subsequent price crashes that rocked the industry and led to multiple consecutive quarterly losses. Accusations of dumping led to steep tariffs on Chinese-made solar cells in the U.S., and an agreement to set a minimum price for Chinese-made solar products. These measures have had their intended effect; Chinese-made solar products are now more expensive in many markets and Chinese firms are finding it harder to succeed in these markets.
With mounting losses, idled capacity and several famous company collapses, China’s solar industry needs more than just funding lifelines provided through state banks. Along with generating clean energy and contributing to energy security, China’s domestic installations market offers a substantial ready-made market for the manufacturing industry.
China installed 7 GW of solar power capacity in 2012, with plans for another 10 GW in 2013, accumulating to 35 GW by 2015 – ten times Taiwan’s 2030 goals and 15 years earlier. While helping local manufacturers, China’s push into solar installations has also generated a powerful new solar installations industry that has since taken solar EPC and systems integration to overseas markets. With profits generally migrating downstream, this presents Chinese firms with substantial opportunities to expand their business and improve profits.
Taiwan has so far not been the target for any punitive trade actions, although India has made some noise in that direction, and Taiwan has generally benefitted from trade actions against China with orders being redirected away from China to the island. But even as sales and revenues have grown, profits remain small on the continuing glut of global manufacturing capacity and subsequent downward pressure on prices. Prices have rebounded somewhat, but remain low, with PV Insight recording global averages at US$0.39 per watt for cells, US$0.839 per piece for wafers and polysilicon at US$16.63 per kg as of July 31. Taiwanese manufacturers can charge a small premium on their products based on brand and location, but are nevertheless challenged to turn a profit, even if they have seen an uptick in orders as a result of antidumping measures against China.
Could following China’s example of ramping up the domestic market play a similar role for Taiwan’s solar manufacturers? Gintech calls China’s expanded domestic market “an effective strategy” for the industry and says, “We think that may work well for Taiwan, too.”

Limitations

But Gintech also notes, “Given the limited area in Taiwan as a small country [with] high population density, Taiwan has its limitations for solar installation.” Taiwan’s small size, rainy climate and high rate of urbanization count against the development of solar power. Most of Taiwan’s 35,883 km² is comprised of steep mountains that are off limits to development, forcing the island’s 23 million residents onto about a third of the landmass, resulting in most people living in apartment blocks. Added to this, most apartments are owned individually rather than with a single owner for the whole building, resulting in complicated negotiations for installing rooftop solar panels. The BOE’s “One million rooftops” campaign is studying the feasibility of rooftop installations. Taipower’s Li notes that rooftop installations are plagued by dangers from high winds from the island’s frequent typhoons, not to mention leaky roofs and complicated construction.
Other complicating factors include an older power grid that faces difficulties handling the vagaries of solar power input.
More significantly, power prices in Taiwan have become highly politicized. Currently, residents pay about NT$2.7 (US$0.09) per kWh – among the cheapest in the world. Taipower, the state-run power company that generates over 70% of the nation’s power and who is responsible for transmission and infrastructure, has faced years of losses stemming from selling power at near or below cost to consumers. Yet when the government tried to raise power rates to be more in line with global fuel prices, they were met with angry opposition and ultimately backed off a second round of price hikes. With its finances in disarray, the government notes that Taipower simply cannot afford to significantly install costly renewable energy.
The opposition party in government has exploited the issue by claiming that Taipower’s losses are more likely due to corruption and mismanagement and that low power prices and renewable energy development can continue hand in hand. The merits of the claims are debated, but Taipower’s history of opaque deals and poor communication has not helped its case in the court of public opinion. Nevertheless, Taiwanese power prices continue to remain among the lowest in the world, with little public support for raising them to levels that might mean sustainable pricing and allow for more leeway with renewable energy. Unlike many countries in Europe, where the costs for FITs are borne by consumers, Taiwan’s FITs are paid for from the governments already hard-pressed budgets.
Wind and solar farms have also met with angry protests, with area residents citing cancer risks and bad feng shui as reasons for their opposition.
How much a domestic industry would directly benefit from Taiwan’s current solar manufacturers remains open. Most Taiwanese solar manufacturers are concentrated in mid-to-upstream wafers, cells and modules. Very few of the major players are directly involved in the local installations market.
However, Gintech is indirectly involved through a joint venture in an installations firm called GDDC. Gintech notes that “GDDC’s business focus is on solar project development. Therefore, this local installation volume represents a very important opportunity for GDDC.” This joint venture can then serve “as the platform for Gintech to expand downstream system business and capture more profitability.” BenQ’s Chen says that the government’s plan to develop the solar installations side will slowly allow solar companies to plan for regular, sustained growth. Whether it will have an impact on other thornier issues of carbon reduction and energy security remain to be seen.