OffshoreEnergy:TaiwanRecognizesOpportunitiesand

ChallengesBarbaraKates-Garnick,Ph.D.

TheFletcherSchool,TuftsUniversityConferenceonMaritimeChallengesandMarketOpportunities:Facilitating

CooperationintheAsia-PacificAugust30,2017

Today’sPresentation

• Framingoffshoreenergyissuesforwind,waveandtidalenergy• USmodelandexperienceasacomparisonpoint• OffshoreWindinTaiwan• OtherOffshoreEnergy• IntotheFuture

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FramingtheIssues

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ContextofOffshoreEnergy

• Althoughlocatedoffshore,strongtiestoonshoreissues,environment(oceanandgreenhousegasreduction),connectiontothegrid,costs,stakeholders,policyandpolitics• Developmentofenergytechnology- bothrenewableandconventionalrequireencouragementofinvestment;jobdevelopment(offshorewindcouldsupportUS600Knewjobsby2050)• Impactofongoingderegulationofthepowersector- competitioninpowergenerationandmovementtowardsSmartGridandnewtechnologies• Markettransparencyanddatakeycomponentsofchangeaswellasmultiplestakeholdersupportforchangingenergydynamics

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RevisinganEnergyFrameworkforOffshoreDevelopment• Combiningprocessandfinancialincentives• Offshoreenergyrequiresclear,simplifiedandimprovedpermittingandfinancialincentivesfordevelopment

• Sitingoftenacontroversialportionofanyenergypermittingprocess,particularlyforoffshorefacilities• Offshoredevelopmentfacesgreaterchallenges• Offshorewind- cranesinhundredsoffeetofwateronenormousstilts;toweronsteelfoundationanchoredtoseafloor;bladesneedtowithstandgutsof200mph• Offshorewindoperatesat45%ofcapacityfactorsoissuesofreliabilityandcapacity

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USLegalEnergyFramework

• Clearandseparaterolesforstatesandfederalgovernmentraisesissuesofjurisdictionandregulation• Regulationoflanduseandnaturalresourcesprimarilywiththestateswhichthendelegatestolocalgovernments• Resultsinapatchworkoflocalordinances,stateandfederallaws• Startingin1970sstatesadopted“siting”lawstocoordinate,expediteandstreamlineregulatoryandlicensingprocessforlargescalepowerplants– thresholdbasedongenerationsize

• Difficulttoapplytraditionalsitingtorenewablessincenotlargeenoughtoqualifyforexpeditedprocess;renewabledevelopmentthusfaceslocalapprovalwhichcanbelengthy,costlyandunpredictable;movementunderwayinmanystatestoexpeditepermittingandsitingforrenewables(importantforTaiwantoconsider)

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OverArchingLegalandRegulatoryFramework

• UNConventionontheLawoftheSeagovernsuseofoceans:territorialwaterupto12nauticalmiles/territorialwatersaresovereignterritoryofstateandgivefullrightsoverwater,seabedandsubsoil/thenexclusiveeconomiczoneextendingupto200nauticalmilesfromterritorialseabaselinewhereacountrypossessrightstoexplore,exploit,conserveandmanagethenaturalresourcesofthewatercolumnandseabed.

• Mostoceanenergydevisesinstalledinterritorialwaters• Legalandregulatoryuncertaintyaremajorissuestooceanenergydeployment

• inUSmorethan23federalandstateregulatoryagenciesinvolvedinoceanenergyprojects• Asthistalkwillshow,multiplejurisdictionsengagedandinvolvedinoffshoreenergydevelopment

• ImplicationsforNationalSecurity

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USFrameworkandExperience

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USFederalLegalFrameworkforOffshoreResources• Over60yearsoflegalframework

• SubmergedLandsAct(1953)givesstatesrightstonaturalresourcesnomorethan3nautical(5.6kilometers)milesoffcoast

• OuterContinentalShelfLandsAct(OCSLA)authorizedDOItoleasesubmergedlandsforeconomicdevelopment

• OilPollutionActof1990givesauthorityforoilandgaspipelines• EPACT(2005)– forissueofleasesoncompetitivebasis

BureauofOceanEnergyManagement(BOEM)tomanageOCSenergyandresourcesinenvironmentallyandeconomicallyresponsiblewayComplex,multistageprocesstoacquire25yearrenewableenergyleasetoconstructandgenerateelectricity- BOEMultimatelydecideswhetherornottoproceedcompetitivelyornot- offshorewind,oceanwaveandoceancurrentExampleofMABOEMwindlease-12nauticalmilesoffshore;awardscompetitivebidsof700,000acresfor$14.5million- companieshave5yearstosubmitbidsforapproval

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USFederal TaxCreditsKeytoRenewables

• Concept:Taxcreditsreducethepriceatwhichenergysold- forwindimpactbetween22- 50%• ProductionTaxCreditappliestowindprojectsandoriginatedunderEnergyPolicyActof1992andthenlapsedin1999;2016OmnibusAppropriationsBilldeterminedplannedphaseout• Cycleofexpirationandreinstatementcausedinstabilityanduncertaintyforinvestment

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FederalTaxIncentives(2)

• PTCcurrentlyunderplannedphaseoutbasedonprojectsinconstruction:• 2015/16- fullPTCof2.3cents/kwh• 2017at80%offullvalue• 2018at60%offullvalue• 2019at40%offullvalue

• Investmenttaxcredit(ITC):orderlyphasedown(mainlyforsmallwind)• 2015/16- full30%ITC• 2017- 24%ITC• 2018-18%ITC• 2019- 12%ITC

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LegalFrameworkforRenewables:MassachusettsasExample• Requirementsthatloadservingentitiesenterlongtermrenewablecontractsthroughcompetitivebiddingprocessestoensurecompetitionandgetthe“bestprice”• Establishmentof“GreenCommunities”toreduceenergyconsumptionandcosts,reducepollution,facilitaterenewablesandcreatejobs• Netmeteringforsolarwhichenablesunusedpowertobesentbacktogridat“fair”marketpriceasopposedtofeedintariffswhichareinplaceinTaiwan• Whenenergygoalsset,thenneedprocessesinplacefordevelopment-projectsrequirecertaintyaboutprocessbutnotoutcome• CreationofEnergySitingBoard• Guidelinesforpermitting,coordinationamongregulatoryagencies,hearings,needtimelimitsfordecisionmakingandregulatoryprocesses(delayisenemyofdevelopment)

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EnergyDevelopment:RenewableEnergyCertificates• RenewablePortfolioStandards(RPS)- stateestablishesrequirementthatretailelectricitysupplierspurchasecertainamountofpowerfromrenewables• TradableRECertificatespresentproofthat1MWofelectricityhasbeengeneratedfromeligiblerenewableenergysuppliers;pricesdependuponyearRECsgenerated,supplyanddemandsysteminstate,typeofpower• RPSsystemin29stateshascreatedRECMarket;MassearlyRECstate• DeterminewhatgeneratingentitiestheRPSapplies• Determinerateofincreaseofrenewablegenerationovertime• Bothcomplianceandvoluntarymarkets

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OffshoreWindinMass/NE:CaseStudy

• UStechnicaloffshorewindpotentialhuge- 2000GW;EUhas41terawatt-hoursofwind,accountingforonly1.5%ofEUelectricityproduction• FirstUSoffshorewindfarmoperationalinRhodeIslandinMay2017-- 30MWBlockIsland,DeepwaterWindwith5GEturbines(589feettall);costof$300million;price24cents/kwhcontrastedto14cents/kwhforRIaverage;• MA“ActtoPromoteEnergyDiversity”-2016- section6ofchapter25AMGL15-20yearcontractforoffshorewindprojectbeyond10mileslocatedinOCS• By2017distributionutilitiesrequiredtosolicit1600MWofoffshorewindtobeoperativeby2027;staggeredprocurementsofnolessthan400MW;procurementsregulatedbypublicutilitycommission;• transmissioncostsaspartofbidbutrecoveredthroughfederaltariffs• Rulesaboutlongtermcontractsandthecosts;rulesaboutRECsandtrackingofcertificates

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RenewablesandOffshoreWindasEconomicDevelopment• Offshorewindasgreatestsourceofinstateenergy- thusatoolofandforeconomicdevelopment• WindTechnologyTestCenter- testswindturbineblades• NewBedfordMarineCommerceCenter– tosupportofshoreindustry

• Keyopportunities:stakeholderengagement,environmentalcharacterization,metaocean data,supplychain, portsandinfrastructureinvestment,workforcedevelopment,transmission,research• Endgame- creationofanoffshorewindindustry

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General ProjectOverview

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ExamplesofProjectIntegrationofEnergyandEnvironmentalInitiatives

DevelopmentoftheNewBedfordMarineCommerceTerminal

BenefitsofthePort•Createsafirst-in-the-nationpurpose-builtfacilitytosupportassemble&constructionofoffshorewindproject.•Providesforconstructionof1,000footlongbulkheadcapableofsustainingloadsof4,000lbs/PSF.•ProvidesNewBedfordwithnewopportunitiesforheavymarinecargo.•SignificantincreaseineconomicactivityforMassachusetts&SouthCoastarea.

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• Removalof244,600cubicyardsofcontaminatedsediments.

• Environmentallyresponsibledisposalofcontaminatedsoils.

• Creationofresourceareasforwinterflounder,shellfish,&wetlandhabitat.

Benefits:Environmental

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Taiwan’sOffshoreOpportunities

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Taiwan’sCurrentGenerationMix

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PotentialRenewableGeography

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Taiwan’sEnergyPicture

• Taiwantotalelectricpowercapacityis40GW(compareUSat1000GWorChinaat1200GW)• GenerationMix:Coalat38.4%;LNGat31.1%;Nukesat13.8%

• Goaltobenuclearfreeby2025whichcompletelyaltersenergydirectiontowardalternativeenergywhichmeanssolarandwind- keyissue• Goaltoreplacenukeswith20GWofsolarand3GWofoffshorewind-

• 2015GHGReductionandManagementActcallsfor50%emissionsreductionby2050,TEPAandEnergyandCarbonReductionOffice(ECRO)• Dependenceonfossilfuelstiedtosecurityconcernsbutnowenergysecuritythroughrenewabletechnology• RenewableEnergyAct(2009)– developersreceivea20yearPPAandFITforoffshorewindof18.5771cents/kWh

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Taiwan’sArticulatedGreenEnergyPolicy:RecognitionofMultipleAspects• StepOne:Integrationoftalent,communication,innovationconnectingcorporateandacademictalent– offshorewindenergyinTaiwanStrait,solarinsouth,geothermalineastandocean/tidalinPacificOcean• Taiwanalreadyworld’slargestproducerofsolarcellsin2015- providingnearly20%andalsooneofleadingsolarwaferandmodulemakersalthoughowninternalmarketisunderdeveloped

• StepTwo:Increasegreenenergygenerationasawaytoattractinvestment• StepThree:Exportgreenproductsandturnkeyrenewablesolutionsintoanincreasinglygreenglobalmarket

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FocusonOffshoreWind:PlanninginPlace

• OffshorewindrecognizedasTaiwan’smostattractiverenewableenergyoption• ThousandWindTurbinesProjectinTaiwanStraits,oneofworld’sbestoffshorewindsites2016-2030• 600offshoreturbines/450onshoreturbines- 4000MWoffshoreby2030• ThreeRounds:One- InitialDemonstration;Two- PotentialShallow;Three-CommercialandZonalDeepwaterDevelopment• Involvesinfrastructureconstruction,environmentalassessments,fisheriescompensation

• RoleforgovernmentsubsidiesbyFITs,loansanddirectgrants;incentivesinclude50%ofinstallationexpenditures

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TaiwanWindPotential(fromNetherlandsTradeandInvestmentOffice)

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CurrentTaiwanWindProjects

• FORMOSAI• Phase1twoturbinesof8MWinstalledin2016/Phase2120MWtobeinstalledin2019offMiaoliCountyinNWTaiwan• DONG(35%)asadvisors,MacquarieCapital(50%)andSwancor (15%)forsitedevelopment

• DONG’sotherinvestments– 4offshorewindsitesinChanghuafortotalcapacityof4MWforconstruction2012-2024• EarlystagecollaborationwiththeNetherlands- proofofexperienceandrecognitionofopportunity

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RecognitionofOpportunitiesandChallengesofCollaborationwithForeignCompanies• OpportunitiesofDutchandDanish• Beyonddemonstrationprojects• Recognitionofenvironmentalissues- navigation,fisheries• Experiencewithengineering,projectspecificrisk,marineconstruction

• Challenges• Typhoonsandearthquakes• Specificenvironmentalissues• Technologygaps• Financingissues• Locationofwindfarms

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OpportunitiesforMarineEnergy:TaiwanasPotentialTestbed

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OffshoreEnergyOpportunities

• Taiwanasislandnationtolookforotherformsofoffshoreenergy-tidal,wave,andcurrentallofwhichinR&Dorearlyprototypestage• Allrenewableenergycontributestosustainableenergysupplybutarenotenvironmentallyfriendlyperse:Impactonthebenthiccommunity(oceanfloor)duetoalternationsinflowpatterns,wavestructures,sedimentdynamics;species-specificresponses- willbeaffectedbysubseacables,flowalteration.Sedimentandhabitatchangeneardevices• Challengesincludetechnologydevelopmenttoproverobustnessandreliability,toreducecosts,todeployandtoreducerisks

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FairlyRecentOffshoreEfforts

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OtherIssuesrelatedtoOceanEnergy,DevelopmentandManagement• Gridintegration

• Canbeexpensiveduesubsystemandsubmarinecables;gridproximitytoremoveareas,griddevelopmentperseandvariabilityofoceanenergy- eg tidesvariableonanhourlybasis,canbehighwhilewavecanbelowandthengreatonaseasonalorannualbasis;highcoststointegratewithgrid

• Alsoissuesofpowerqualitylikevoltagecontrol;thusconvertersandarrayswillbeimportant

• Installation,operationandmaintenance• Willbeexpensive– upto3.4-5.8%ofcapitalexpenditurescomparedto2;3-3.7%foroffshorewind

• Arrayconfigurationisimportant- hydrodynamicsandlocationwillaffectpoweroutputandcosts

• Operatinginharshenvironments

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SocioEconomicImpactofEarlyStageOffshoreEnergyProjects• Howdevelopmentrightsaffectsocietyasawholeandlocalpopulations:• Employment,incomeandeconomicpower• Visualimpacts;impactonusersoftheoceanenvironment- measurementtoolsincludebudget,householdincome

• Socialimpactonnewjobcreationv.negativeimpactonexistingindustries,bothOPEXandCAPEX• Operationalcostsneedtobeestimated– gridconnection,AVvDCtransmission,offshoresubstationcosts,cablecosts,maintenancecosts,energylosses

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MovingintotheFuture

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OffshoreMarineTechnology:SpecificTechnicalRequirementsforTaiwan• AdvancedModelingshouldincludecompetingusesofmarineenvironmentasfishing,shipping,offshorewind,habitatprotectionandgridconnection• ComprehensiveLifeCycleAssessmentsofoceanarraysshouldincludefluctuationofpoweroutput,storage,gridintegration• Gridintegrationstudiesneedforpowerquality,areaofcontrolforpotentialcostreduction,spatialarrays• Reformedlegalandregulatoryaffairstomeetenergysectorrequirementsandshoulddefineoptimumstakeholderprocess

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OffshoreEnergy:KeytoFuture

• BottomLine:OffshoreEnergyshouldreceivegreaterfocus• Clearimplicationsforenergy,environment,economicdevelopment,socialcontext,gridintegration• Broadperspective:technologydevelopmentandenergysecurity• KeyimplicationsforTaiwanintheglobalcontext

• Offshoreenergyasconflictpointorcooperation?• Broadersecurityinreducingfossilfuelimports- coal,LNG,oil• Waytoattractforeigninvestment,foreignpartnerships

• PositiveoutcomeintermsofbringingTaiwanoutofisolationandacleaner,technologydrivenenergyfuture

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