Energy Commission Ministry of Economic Affairs May 2004 Financing Renewable Energy Development in Chinese Taipei

OUTLINE (I) Renewable Energy Promotion Plan for Chinese Taipei (II) Current Incentive Measures (III) Case Study (IV)Conclusion

(I) Renewable Energy Promotion Plan for Chinese Taipei (I) Renewable Energy Promotion Plan for Chinese Taipei (1) Under the “Renewable Energy Development Plan” adopted in January 2002, a higher rank inter-ministerial coordinating mechanism has been created, and the Energy Commission is in charge of the passage of renewable energies related laws. (2) Before the above laws are legislated, current incentive measures for demonstration and promotion will be continued to trigger investments from private sectors, and to sponsor local R&D efforts to accelerate the maturity of technologies and the reduction in costs. Furthermore, thematic demonstrations shall be implemented to enhance the effectiveness of promotion.

Renewable Energy Target for Chinese Taipei

(II) Current Incentives for Renewable Energy Promotion * In November 2003, TaiPower Co. announced interim measure agreeing to a preferential PPA for renewable power at NT$2/kWh ( ～ US$0.06/kWh) up to 300 MW or until the passage of Renewable Energy Development Bill ** This subsidy will be discontinued in 2004

A solar water heating system with m 2 of collectors on a college’s dormitory for 450 students. Promotion of Solar Thermal Systems  At the end of 2003, almost 300,000 households have installed over 1.18 million m 2 of solar collectors.

The Presidential Palace (10.5 kW) PV system installed on House (4.2 kW) PV System in a Technical College in Southern Taiwan (10 kW) PV Systems installed on Peng-Hu Island (3 kW) Promotion of Solar PV Systems  Energy Commission promotes PV system with 50% subsidy for private entities and 100% subsidy for selected public institutions.  Currently, 68 PV applications have been installed under this plan, with a total installed capacity of 460 kW.

Promotion of Wind Energy  Installations to date: a total of 8.54 MW Developer: Formosa Heavy Industry Ltd. Vestas-660 kW  4 Commissioned in December 2000 Developer: Taiwan Power Company Enercon-600 kW  4 Commissioned in October 2001 Developer: Tien-Lung Paper Mills Vestas-1750 kW  2 Under review

 In May 2002, the “Challenging 2008: Key Plan for National Development” was announced  Promotion of renewable energies is included  Three major thematic demonstrations have been adopted: * Solar City * Wind Farm * Geothermal Park  The passage of the “Renewable Energy Development Bill” has been set as top priority for review by Legislative Yuan  In June 2003, the “Nuclear-Free Homeland National Conference” was held  A budget of NT$3 billions (US$90 millions) each year commencing from 2004 for promoting the development of Clean Energy and Energy Saving industries has been committed. Future Directions

(III) Case Study  Methodology  Using Discounted Cash Flow Analysis  Inflation rate (3%) considered in O&M cost  Interest payment not included in cash flow and IRR analysis  Discount rate included while calculating payback period

The Case: Mai-Liao Wind Power Demo. System (Commissioned in Dec 2000)

The Monthly Power Generation and Average Wind Speed at Mai-Liao

 Parameters  Capital Investment: around NT$90 million (installed capacity 2.64 MW)  Subsidy: NT$38 million  O&M Cost: NT$1.35 million for the first year  Annual Power Generation: around 7.05 million kWh (equivalent to 2,670 full load hour)  Tariff for Power: NT$1~2/kWh (US$ /kWh)  Life of Turbines: 20 years  Discount Rate: two cases using 3% and 6%  Tax rate: 25%

Sensitivity Analysis: Levelized Cost and Annual Power Generation per KW

Sensitivity Analysis: Payback Period and Annual Power Generation per KW

(IV) Conclusion (IV) Conclusion  Current subsidizing schemes have made demonstration systems workable.  However, to promote long-term development of renewable energy, the current supporting mechanism is still insufficient.  The Renewable Energy Development Bill, still under legislative review, propose a fix tariff system (NT$2/kWh) for renewable powers.