Ep 10 Taiwan offshore wind with Maya Malik

Yiou: Hello Maya. Welcome to the show. Could you talk about your experience developing offshore winds and how you came to create kema energy in January of this year? How's your experience?

Maya: Yeah, sure. Well, I spent 20 years now in energy and 11 of those in offshore wind. Initially I worked for Shell on petrochemical projects in Australia, then the Netherlands and Singapore. And then I did my MBA and decided to work for Don Energy, which is now Ed, outta, the uk. So there I had a number of senior commercial, technical and operations management roles. Overseeing offshore wind assets in the UK and Germany and Denmark. And I was also part of the team that started to look at the strategy for entering the first new markets outside of Europe, which would be the US and Taiwan.

 Then in 2017, that was a big year for me. I left Austin and I went to work for Copenhagen Infrastructure Partners and Copenhagen Offshore Partners. I moved to Taiwan. And started working for, very early stage development phase in new markets.

 in Taiwan I was leading. Government bid applications and we were quite successful. We won 900 megawatts together with our partners and led the task force to secure our project rights PPAs, and manage our project financing processes for our first project. Then I went on to work in, other new markets in Asia, and I saw huge potential. So that became my area of love and focus. So I let our market entry established our team and managed the development of our pipeline there. This year, decided to establish my company Chemo Energy. Together with my business partner Kimberly Kram.

At kema we essentially provide development management and strategic advisory services to developers and investors. Our niche is in offshore wind and we focus on the APAC region.

 I also work as an advisor to World Banks Offshore Wind Development Program on the. . So essentially we are there to help developers and investors navigate the markets, pick good sites, design partnership structures, and set up clear plans for market.

in some cases we also help them to support their plans. Like in Taiwan, we've,, advised on bidding of round three projects so we've worked on all markets now in apac, except for China. Really enjoying the independence and diversity of work.

Ben: I would guess it's, nice to have an entrepreneurial, adventure after long years in corporations.

Maya: Yeah. I'm really enjoying it.

Ben: That's really good. Taiwan of wind, which is, besides China in Asia is one of the biggest, wind markets. Could you give us an overview of Taiwan wind resources and the role of O wind in the country?

E.

Maya: Yeah, sure. Taiwan has some high level targets. They want to achieve net zero by 2050, and they're saying they need 60 to 70% renewables by 2050. At the moment they're on about 10 gigawatts of renewables, and most of that is solar. Around 10% on wind, mostly on shore and some hydro as well. They're essentially reaching the point, but because it's quite the dense population with a very mountainous landscape. There's just be some natural limitations on how far they can take on shore, wind and solar. On the flip side, they have lots of Coastline, and access to great wind resources along the Taiwan straits. Where most people live. It has become just for them a really good natural solution. And can be the key thing that helps them to drive the transition and energy independence. 21 gigawatts by 2035 is what they're aiming towards, and six gigawatts of those already award. We giggle what's being tended now, and then the rest sort of planned in future.

Yiou: Sounds like a attractive market. Could you talk more about like, the main actor in this market? For example, why. The main developers, OEMs, off-takers and regulators.

Maya: Sure, I'll start first with the developers. The developers that have been awarded project for a while and already, doing stuff. You have, PI Power, which is the state grid operator. then, international players like Foster. And Copenhagen Infrastructure Partners who partnered with, local state loan company, China Steel, then, Northline Power, w p d, now Sky Born Renewable, in a partnership, withal, then Coio.

, Wanko, which used to be a local developer, but is now owned by Stone Peak, , as well as Jira or one Japanese, , company there. Then you have a number who are developing projects, but haven't yet been awarded a project. So rwe, iro, ll , blue Float and Flotation. Big one floating. Then a number of local players in partnerships with internationals.

So TA with edf. Then you have group with Sky, Asia, just with R. And when it comes to OEMs, you have. Big ones are here. So Siemens investors, and perhaps with Siemens sort of being here a bit longer and having a bigger share of the market. GE are not yet here, so, it's just those two.

 When it comes to the off takers, because the grid here is not liberalized, you have mainly one grid offtaker type power with, latest regulations allowing for corporate PPAs. there's been a lot of interest to look for corporate off-takers. but so far just sort of one company sign signing PPAs or commitments to end PPAs with developers and that's tsn.

Ben: That's interesting on the corporate ppa and we'll come back to that. Before we jump in the third round Of type offshore, win tender. could you Give us an overview of the previous two rounds, in Taiwan and tell us a bit more about, specific projects that have already achieved COD and about to achieve cod.

Maya: Yeah, sure, sure. I'll start the beginning. So the round one, which is demo and small scale projects. Less than 300 megawatts and was mainly awarded to local developers via, a selection process. And that, got some projects off the ground and they were good.

but They then find a lot of holes in the framework. They were all delayed and some didn't happen at all. And this, LA government, designing the next process, which was very much focused on attracting more, international experience developers to Taiwan. So, that's around two where they awarded about five and a half gigawatts.

In this round there were two competitions. So first, a selection competition followed by an auction. So the selection process awarded a feed in tariff and was held in two stages. The first stage, which is about one gigawatt, prioritized the maturity of the projects.

So you wouldn't have to implement any local content, but you were only eligible to enter if you could meet a very tight deadline. And that's just, to get the industry going. Then you had a second stage, which would be about the next three gigawatts, prioritize local content.

 Those are staged implementation across the number of years with more and more local content added. The later you, connected to grid, that was followed by a price option very fast for, another one and a half gigawatts where there was no longer content requirements and you just had to bid on price.

So prioritizing cost. To pre-qualify, you had to get an approved EIA and good connection, and the first person to get their EIA would get exclusivity to bid for that site. On top of that, there was a cap, for developers to make sure that there was a spread of winners. If you got capped out of the first competition, the selection competition, you could still enter the auction competition.

And actually everyone. Who entered the auction competition came, out of the part of people who were either capped out or didn't win in the selection process. And if you won, you signed an admin contract and that awarded you your grid connection and a guaranteed, tariff, in a 20 year ppa. That agreement involves some other conditions, like to meet certain delivery milestones and some penalties if didn't meet local content requirements

And I should mention, this process, Was quite, complex, yet ran in quite a smooth way. but At the price auction point, feed tariff was set high and attractive to draw everyone in. But then when developers put in their own prices, it dropped by more than, of the feeding tariff.

The government had that, and there were a lot of good reasons for this. In the price competition there was no content requirement. And also, the winners had already won something in the selection process, so they could kind of use the margins from getting the higher feeding tariff to compensate for the lower price, bigger than the options, but it just didn't look.

For government and then it made, tariffs for offshore wind projects, a political issue as well. There's that backdrop, when you start looking at the round three, dynamics,

Ben: That's interesting. We received in episodes five of the epi from the Global Wind Energy Console. And I actually explain how to start with Theif to track and, do the pro discovery and then switch to a tender. I think all in all, her conclusion on Taiwan was, even though as you said there might be some political sensitivities, but, overall it was quite successful.

 this five gigawatt awarded in round two is quite impressive. And hopefully for run three you would be successful as well. Now let's just focus on run three. So run three will be rule out by phases and with first phase. I think the tender has been already submitted, some of the feature.

However of the current standard is a bit challenging. So there is this local content requirement, which you mentioned already. The price cars the project can now limited to only, 500 megawatts. and overall the entire inflationary pressure puts lot of constraint on developers.

 I've just, looked through LinkedIn and I think the CEO of Ted just announced they wouldn't participate to run three because of those reason. It would be interesting for you to, provide some detail of, what, these challenges are and what type of strategy, developers are implementing to overcome.

Maya: Yeah, sure. In context of previous competitions, I feel like some quite high bars were put around this auction, They basically took all the local content that was, included, in the maximum requirements of the previous selection process and increased those and made that a kind of requirement.

So you had to meet them there was some flexibility around it, but essentially you would have to deliver at least what was set,, from the previous auction and more as a minimum. That's a starting point. Then you had the. Price, submitted from the previous, auction.

 Also being implemented as the cap for this next round three competition. On top of that, know, although, It was, couple years after the previous competition, there's been no real time for the supply chain to mature, gain efficiencies and, really be confident enough in lowering their cost to pass those on. You'll still paying the price for forced early local content. So essentially, the price cap that was set is not deliverable. You cannot build it with those other requirements for that price. Bearing in mind also because there is a limit on capacity.

You are limited in what you could do in terms of scale as well, which is another thing developers normally can play with to, reduce their price per megawatt hour. It then becomes more about, okay, if I can't deliver at the bid price, even if I bid at the cap, my only option becomes to get a corporate ppa.

 So this competition weirdly turns into a competition about how much risk you're willing to take on your corporate ppa. You'll bid if you are very confident or willing to take that risk. Or maybe make some assumptions, like a wholesale market might be implemented by a certain time that's how you basically deal with the rules of this bid. The other thing you can do is, also put in a bed and say, I know it's not deliverable, and I know it's not just me that can't deliver it. Everyone's in the same boat. If everyone can't deliver it, then there will be a point where someone has to make a U-turn and at least I'm. At the table when that 10 happens. But , that's pretty risky move to make, for, especially a big international company

Ben: It's interesting. Last week we received, Chris, starting from Lento group to talk about, the recent tenders around the Philippine, on, mainly solar, but they are located to gigawatt. And, what he was saying is, a bit like what happened in one three

the cost, increased pressure was really high. The price sets, for the limit cap for the bid was really low, which mean that in the end there were really few competitions, because only a few local developer were really able to submit beads so they could, actually have a profitable project, after that.

 I guess. Many tenders, that are round in this contest might be the same cause No, we are not in the, trend of, decreasing levelized cost of energy anymore. It seems that, over the past years, renewables might become a bit more expensive due to supply chain issues.

It's really on this issue that I want further discuss with you. So, cost has been arising, with Covid, disrupting supply chain with, the price of commodities increasing. , how has this, impacted the supply chain and, how developer adapting, to this price increase.

Maya: I guess it adds definitely another dimension into this. One is rising commodity prices and another is inflation. The thing about the Taiwanese PPAs, they're not indexed either. You are taking. This risk. And it's also the case with some contracts.

As you see these trends the first thing is a big dive into your contracts. Which hopefully you have signed. But then to see how much are you protected against commodity prices? Is that fixed or are you exposed to it and so on.

As a developer, you'll be looking at that. And the first thing you'll wanting to get to the bottom too, is, is it your problem or the supplier's problem. the fact that commodity prices are going up. You can only do that to a certain point because if your supplier's not around , then that also doesn't help you.

 On top of that, you maybe, have hedged. Some elements, or maybe your supplier has in their own supply chain, protected themselves. So you could have some products there. But essentially it becomes, you can only take so much, you start drawing on your contingencies.

Which will be, for new markets tend to be higher than more mature, established markets. So you should have a bit more room. Then, once you've done that to a certain point, you basically start taking a hit on your return rates. And you can only do that for so long.

Then you can be in the unfortunate position where you're basically going back to your off taker, right? To say, I can't do this anymore under the terms of the existing ppa. That's how it plays out. The best protection, I guess if you are a developer is basically to.

Contracts and products that protect you.

Ben: Understood. And you mentioned, about. Ppa. I think it's a good transition just to speak about the offtake. I think on the offtake side, there are a couple of, interesting, questions regarding Taiwan of, the first being On, , as you mentioned, previously , the only option available was a type power of take.

 A government own utility of take. , but now there is, the C ppa, in this round and you mentioned that, uh, tsmc, was, involved could you talk about, how the developer are looking at the two options and,, how they are strategizing, around, these different type , of take.

Maya: Yeah, so I think Thai Power PPA would always be preferred and it's been proven to be bankable and what's standing behind that is also the government of Taiwan. So, there's kind of comfort. In that revenue stream. There's no So carbon market yet.

Next, option, for corporate PPAs is to go for, someone who is a big power consumer, has steady power consumption and needs renewable energy for another reason. And, that main reason currently is, around suppliers who need to meet their re 100 requirements.

So developer, start looking at, who needs renewable energy and is willing to, pay more than Thai power. Than what can get in bid, ppa. And, start looking for people who use a lot of power and who use it in a very, predictable way. actually most of the time, you can't, find such unicorn companies that can,, support a large offshore wind farm on their.

 But Taiwan has TSMC and it's really unique. It's a huge power consumer. Like I think it consumes the same amount of power as greater type A, and then it, operates twenty four seven, three hundred and sixty five days a year. If they really wanted all renewable energy, they could probably prop up the whole offshore wind industry.

So it's a really unique company and also because of that global position, credit ratings, et cetera, it's like a, a situation., if they were sole offtake. You could, probably confident that it's a bankable arrangement as well. Oh, well that's not.

 That's where, basic things are now. Then I think you can go to outside smc, the next tier of consumers or maybe start pulling together lots of smaller scale consumers and. Haven't seen that implemented yet. I think it gets quite complicated then to do that.

Maybe moving a future, there'll be some kind of platform or product that combines, a number of users that also farms can, enter direct agreements with. I think that would be pretty cool, like that evolution.

Ben: You're right. The CPA is definitely a trend, in renewable of take and, it's going to develop further in the future. So I think there's a, uh, could be a strong. Gross area , for Taiwan offshore wind as well. The other question around offtake, is more, is mostly, uh, you know, like as, as a bank, we don't really look at that, but I think as a developer, uh, it's a really relevant question, which is, uh, about, about exposure.

Uh, you know, like the, essentially the, you know, the life of, uh, of show wind. Um, Toine or projects might be 35 years. You have like 20, 20 years of take. Uh, and then you, so, so then you have like 15 years at the tail end where, uh, you don't have any effects of take and, uh, and a lot of developer are considering, uh, then what to take as a mention exposure.

What is the price, uh, to, to assume, uh, whether there will be a market, uh, could, could you, uh, Uh, talk about, uh, that and how, uh, know developer are approaching this issue and how are assessing the, uh, mention exposure in the, in the bid, um, on the projects.

Maya: Yeah. So, um, yeah, generally you use, you know, your forecasted power prices. I think cuz Taiwan is quite a controlled market. Um, It's more, more predictable. It's more stable than what you see in the, in the wholesale, uh, in the liberalized markets. And, um, yeah, generally, as you say, because the debts are, are, are, you know, paid off before the BPA expires.

It's, um, you sort of. Almost an upside the, the revenue that you can make. But, um, it's, uh, it's quite often it's one of the levers if you start, um, uh, You know, if you think the business case doesn't look very good based on the term of the ppa, it's one of the levers to say, okay, what about an extension of lifetime?

Um, then, um, you can take it to a certain point and then, uh, sometimes you have other issues that come in that make it, um, difficult, like, uh, you know, maybe. Certification of certain, uh, components, et cetera. Um, so, uh, yeah, I, I would say, you know, it would be quite, let's say if that's a paid off by year, you know, 15, like most would assume at least the wind farm, that's still going to year 25.

And, um, just, uh, doing their, their best to forecast what their revenues would be in, in that term. Um, yeah, it's just, that's your typical approach.

Ben: Interesting. Another issue I want to discuss was on the, on the technology in itself. So, so mostly if we summarize like most of the, um, offshore wind for now has been developed with fixed bottom. So just, you know, like a construction anchor to the, to the, you know, a c bed. But, you know, in run three, we have actually some allocation.

Of, uh, areas, uh, above 60 meter with six, uh, above 60 meter deep. Uh, and, uh, and then it come in the question of floating, uh, floating bottom, uh, solutions and floating bottom. You know, some of the project has been done in the, in Europe, in the uk. Um, but, uh, so basically part of the industry will have like, uh, uh, will require this technology.

So how do you. Playing out in the tender. And, uh, how much do you think the floating bottom technology is?

Maya: Yeah. Okay. Start with the maturity instead of the contact of where floating is. Um, So the technology is definitely proven, although, you know, there's still a lot of designs out there and continuous work on going to refine sort of which, which designs work best in what conditions and can be scaled up. Um, I think I, my gauge is probably there's a lot more talk and nce that, uh, is ahead of the reality.

So there's still a journey to go there for sure to commercialize, floating. If you look at, uh, where we are now, so, um, the amount of floating that's been installed, and then the current sizes. So you have, uh, Uh, tampon, which is, you know, just under 90 megawatt in Europe, and that is about the same size as Barrow wind Farm, which is fixed bottom, which is the first wind farm I worked on, um, in the uk, which was built in 2006.

So kind, the safe floating is at now is basically barrow in 2006. And so, yeah, I, I would say, There's reasons to say, well, we kind of know what we're doing and we can commercialize this a lot faster. But I would say it's still kind of a, a 10 year journey to commercialize. It's my, my, my opinion. I have a, I have a bit of a worry because I think there is, like I say, a lot of confident talk, a lot of competitive bidding and pipeline grabbing.

And somehow I feel developers can send a signal, um, uh, to governments that it's more mature than it actually is, and then that will cause government to a bit skip this fostering stage. And goes straight to these uber competitive bits. Cause they get the signal that industry is ready. And then of course, you know, whenever you have a bid, you always get someone bidding.

Um, you know, they're never kinda short of that. Uh, but then they, they won't be able to deliver and then you can waste years in this cycle of feel like, uh, failed good deliveries. So, That's my own personal worry about kind of floating and, and where we are Then, um, looking specifically at Taiwan, so yeah, in the last, uh, wave of projects that were awarded in that initial six gigawatt, we were kind of up to 50 meters water depth.

Um, and then, um, now you have us kind of going to, you know, what we call deep fixed bottom, which is to 60, maybe 70 meters water depth. Um, which, um, you could figure could probably, which. Yeah, we'll get Taiwan through this auction round of three gigawatts and maybe even through the 2023 auction round of up to six gigawatts, but it might be as early as 2023 or 2024 for sure.

Where then, you know, the anything left will be floating. The exception is there's still, you know, there's still fixed bottom areas out there. It's just a lot of them have been carved out as no-go areas by go. So the exception is if, if they revisit that and somehow actually say, uh, you know, we will now kind of reclassify these zones and, and make them develop over for aware, then, then that could change things.

But yeah, let's say now we're kind of needing to build commercial scale in 2324, um, in Taiwan to, to meet their targets and auction timelines. Um, then you have also a demo. process for, for floating. Uh, that's been announced by government, so they're now trying to fit this in, um, before the 2023 auction.

Um, uh, but of course it will not be delivered before they need to auction commercial scale. So, um, We are watching with great interests, uh, to see, you know, how, how this, uh, this rolls out. There's a few ways it could turn the, the ways I mentioned before.

Ben: That's interesting what you say cuz um, I, I mean, if, if, uh, the government is too, uh, as you said is too aggressive on putting a com, you know, competitive, uh, Process into that and uh, to confidence for sure. The reason that we will lost, lost a couple of years if, you know, the leaders cannot really deliver.

Um, I think now

Maya: and I think it's partially kind of government, but I also think they also get signals. They also

Ben: yeah, yeah, yeah. yeah. So everyone

Maya: we're to blame as well.

Ben: Yeah.

Maya: yeah.

Ben: it's, yeah, it's, uh, . That's, that's quite interesting. Um, you know, if you were to, uh, you know, like, uh, Advise a developer. Uh, what, what do you think are, you know, the top three issues and we cover a lot of issues, uh, just during our conversation.

What do you think are the top three issues when looking at developing, uh, offshore wind in Taiwan?

Maya: Yeah, well, the first thing I would say is, It's, um, it's a, a high entry like, uh, cost. Um, you know, the price for your ticket. To, to get to a bid is high compared to other markets. So, uh, you know, in Taiwan you have to spend a couple years development. You're not getting any exclusive rights while you develop, so you're really spending sort of 10 million plus range just for a.

Just for one ticket to bid. So, um, you've got to stomach that, uh, and be okay with that before you even start. Um, then I think, um, the next thing yeah, is to understand this current gap, right in the to market because of these, uh, conditions and, and the low, the low price. Uh, you know, you are basically, um, relying on corporate ppa, which is, you know, still there are things to solve around that and you kinda, um, yeah, have to be okay with that.

That's the situation. Or, or maybe you are hanging out and waiting for government to u-turn, but you just have to be okay that that's a condition that the market is at Before, before you. Um, I would still, um, say, you know, in Taiwan, the pros of it is that, uh, I feel development here moves very fast, um, especially, uh, when government, you know, supports or like concludes on decisions and I do.

The big decisions needed quite fast, I think, compared to other markets. Um, and, uh, compared to other markets in apac, I still think it's a good place to be. It's just also proven and demonstrated and established. Um, I think, uh, yeah. I guess the other, uh, issue I would flag as the third one would be the, the local content trend.

I, I feel it's one of those, um, pendulums that has to swing a few times before it finally lands somewhere that works and is sustainable. Um, so, uh, um, yeah, you also have to, you know, the be okay with with that, uh, if you're doing off projects.

Yiou: Great. So Maya, um, actually the final question here, um, it is, you've been in the industry for, uh, such a long time and we're just very curious. Like if you had to pick one, what would be like the most impressive, uh, experience or what kind of, do you have a best memory that you could share?

Maya: Yeah, it's quite tough. Um, I, I guess, and it's always the thing I say when I, when I hire people, um, because you know, we often hire a lot of people like, uh, from other industries cuz that's just the nature of working in, in a kind of frontier industry. And, um, I had this, uh, I had this experience or this feeling when I was working on the, in, you know, the first market I worked in, in the uk, especially after so many years in oil and gas, was that it was just so incredibly cool to be part of, you know, A huge industry at that very early stage that would, you know, just be really defining the energy scene of that country for many, many years.

And I thought in the UK I was a bit like this is a once in a career opportunity basically, you know? And, and I was so glad to have that and, um, Yeah, and then I was lucky enough to be able to do it in a few other countries as well. Um, and so have the, the chance to make that impact, um, a few times in my career.

But I feel that, that, you know, is. Big motivator for me, and it's something when I hire people, I, I always sort of say, say it to them. Um, just, you know, this, this chance you have to be part of something so big and, you know, make a difference to your country. Is, is really cool.

Yiou: Definitely. Okay. Uh, so Benjamin, I think, uh, would this be the end of the interview?

Ben: Yeah. Yeah. So, so you, you, you can, you can say, uh, thank you for being on the show and Well, I, ill cut it out and, uh, and I'll, I'll let, and you'll let my, uh, ref and, uh, , you

Yiou: Yeah. Sorry. Yeah, I just wanted, uh, maybe, uh, the final sentence. Thank you so much for being on the show. May.

Maya: Thank you. I've really enjoyed it.

Yiou: Yeah.

Ben: a lot, Maya. I'll stop the recording now. Uh,