Newsletter
Introduction of Industry Association Implementation Program for Offshore Windfarms at Zonal Development Phase
The Ministry of Economic Affairs (MOEA) announced the Guidelines Governing Allocation of Grid Capacity for Offshore Windfarms at Zonal Development Phase (離岸風力發電區塊開發容量分配作業要點; "3rd GA Rules") on August 19, 2021 (Ref. No.: Gin-Neng-Zi No. 11004604420), under which an applicant should pass the MOEA's review on its technical and financial capacity and also submit its localization proposal. In this connection, the MOEA announced the Industry Association Implementation Program for Offshore Windfarms at Zonal Development Phase (離岸風力發電區塊開發產業關聯政策) on December 6, 2021 (amended on August 26, 2022; "Localization Rules") pursuant to Paragraph 2, Article 8 of the 3rd GA Rules. The Localization Rules set forth 25 mandatory items and 56 bonus items and include the Drafting Guidelines for the Localization Proposal of the Localization Program (離岸風力發電區塊開發容量分配計畫書（產業關聯執行方案）撰寫說明; "Draft Guidelines") which serve as the guidelines for applicants' preparation of their localization proposals (each "Localization Proposal").
With respect to the mandatory localization items, the Localization Proposal of each applicant should contain two main chapters in accordance with the Localization Rules and the Draft Guidelines, i.e., (1) the localization items related to manufacturing activities concerning the electricity facilities, foundations and turbines' components ("Manufacture Mandatory Items"), and (2) the localization items related to maritime services and engineering design services ("Service Mandatory Items").
Under the 3rd GA Rules and the Localization Rules, each applicant should ensure that each of its Manufacture Mandatory Items reaches 60% or more of the grid capacity applied by the applicant. The Industrial Development Bureau (IDB) has identified the "core technology" for each Manufacture Mandatory Item and each applicant should ensure that the relevant "core technology" is performed by the local supplier(s). In this connection, for the localization of foundation(s), the MOEA further announced the 3 key standards for determining the fulfillment of "60%" for this item on August 26, 2022, i.e., (1) the final assembly of the foundations performed by local supplier(s) ("Local Foundation") should reach 60% or more of the grid capacity applied by an applicant, (2) at least 60% of the welding works of the Local Foundations should be performed in Taiwan, and (3) the weight of the local manufactured and welded components of the Local Foundations should reach at least 60% of the total weight of the Local Foundations.
With respect to those items with technical barriers to be localized at the moment (e.g., generators, submarine cables, and gearboxes), the IDB announced the bonus items for the electricity facilities, foundations and turbines' components ("Manufacture Bonus Items"). Each applicant may evaluate proper plan for its own project in terms of the Manufacture Bonus Items and propose in the Localization Proposal. The IDB did not clarify the core technology for each Manufacture Bonus Item and each applicant may thus propose in the Localization Proposal on the basis of its own assessment, which will be reviewed and scored by the review members during the review meeting.
With respect to the Manufacture Mandatory Items and the Manufacture Bonus Items, applicants may proceed with the manner of "industrial procurement", "industrial cooperation (such as technology transfer, technology licensing or entrusted manufacturing"), or "industrial investment (sole proprietorship or joint venture)" and, at a minimum, provide conditional contract(s) as evidence.
With respect to the Service Mandatory Items, applicants should prioritize the use of local vessels and cooperate with local engineering consultant(s) to ensure the graduate accumulation of experience in Taiwan. With respect to mandatory items on maritime services (including the following types of vessels: vessels engaged in environmental survey services, vessels engaged in geotechnical drilling services, vessels engaged in underwater foundation installation, vessels engaged in turbines installation services, vessels engaged in export cable laying services, and vessels engaged in operation and maintenance services), as there are rules on prioritizing local vessels under the "Rules to Apply for Non-Taiwan Working Vessels' Berthing at Harbors or Ports Other Than International Commercial Ports" (非本國籍工作船申請停泊國際商港以外之其他港灣口岸作業要點), the MOEA relaxed the Localization Rules on August 26, 2022 under which the applicants are exempted from providing the preferred supplier agreement or conditional contracts for local vessel(s). As for engineering design services, applicants should cooperate with local engineering consultant(s) in terms of the design of bottom structure of turbines, offshore substations, and submarine cables laying and ensure that the local consultant's or consultants' involvement will reach 50% or above.
Except for the 60% requirement on the Manufacture Mandatory Items, each applicant should meet the core service requirements for each Service Mandatory Item and the bonus items committed by the applicant should reach 10 points. Under the Draft Guidelines, the MOEA will form the review committee in accordance with the 3rd GA Rules to review the Localization Proposal submitted by each applicant. In the event that a Localization Proposal fails to meet the Localization Rules as found by the review committee, the relevant applicant will be deemed to be lack of performance capability.
After an applicant is awarded grid capacity, the MOEA will exanimate the applicant's localization commitments on the basis of its approved Localization Proposal. If there is any inconsistence, the applicant may be exposed to significant punitive damages under the draft grid allocation administrative contract announced by the MOEA (the September 26, 2022 version, subject to the final version to be announced by the MOEA). As the localization items set forth under the Localization Rules are fairly complicated, the market standards remain to be established.