It seems like the topic of offshore wind power (OWP) has attracted immense public interest since the news of OWP permits being secured by lower-than-expectation bids hit the papers. On top of numerous press conference held by government agencies, officials from the Ministry of Economic Affairs and Executive Yuan appeared on TV talk shows in an attempt to downplay the hype. Even both MOEA and DPP disseminated their respective “dummies’ guide” to explain why there has been a huge gap (from NT$5.8 to NT$2.5-2.2 range in the final outcome) within a 2-month period. On the other hand, the anti-OWP camp definitely did not miss this opportunity to stir things up: in addition to citing the situation being a proof to a series of claims set forth between March and April of 2018, they even went as far as proposing tender cancellation and contract termination to avoid the loss of NT$900 million accumulated through the price gap multiplied by 20 years.
NT$900 billion? Are you serious?
The Root of the Price Drop: The Success of Developers Shrugging-off the Burden of Localization
The most often-cited government explanation regarding the significant price difference is that the local supply chain has already been formed during the first phase of the selection process, thereby helping developers to reduce their development cost significantly. However, this explanation fails to convince the public, and here are the reasons: First, it is quite impossible for Taiwan’s local supply chain to emerge out of thin air in such a short time. What we are talking about is establishing the local supply chain before 2025, but the government seems to ignore that even Taiwan’s local industries do not believe that the government can establish a comprehensive supply chain. More importantly, the main reason behind the drastic drop in the bidding price probably has more to do with the clause in the bidding documents stating that “localization is not necessary” which explains the significant reduction in costs.
Of course, aside from the topic of supply chain, there are also “explanations” which verge on the level of blatant lies, promising that the government will not be dishing out NT$900 billion. Political figures such as Chao Tien-lin, Huang Wei-cher, and Chung Chia-pin appear on political talk shows to swear that even if the final contract is NT$5.8, it will not be flat rates and will drop gradually over the years; or that with the completion of facilities, the rates for the year the PPA is signed will be applicable for 20 years. Well, both of these explanations do not work given the current subsidy scheme which has been implemented for many years in Taiwan. Either the legislators did not do their homework – indicating their lack of understanding regarding Taiwan’s existing subsidy mechanism that has been running for years, or that they are speaking blatant lies, trying to fool the public who have no ideas about how subsidies work.
An even more lowly deceit is the claim that the NT$900 million will not be coming out of the public’s pocket, since the cost of developing OWP will be covered by companies who have deep pockets! Let us face the uncomfortable fact – the ever-lasting truth of the electricity market is that there’s no such thing as a free meal. The profits which developers have factored into their equation based on the purchasing price comes from the electricity bill everyone pays at the end of the day. Even if the subsidies are not taken out from the pool off tax money which no one is exempt from, they are still hidden within the electricity bills which everyone has to pay. So where is the free meal? In the event that Taipower goes bankrupt because they cannot handle the arrangement, guess who are the lucky ones to pick up the tab?
By Not Signing the Contract with Developers is Exempt from Legal Repercussion
The focus of controversies is that everyone wants to stop the government or Taipower from signing the contract with developers to avoid the NT$5.8 rate of this year (2018) from becoming applicable. But what can you do at this point, when the developer has already won the bid/selection process and acquired the right to signing the contract? This inevitably leads to the question of the government being sued for the act of profiteering and referral to the Control Yuan for further follow-up actions.
Finding solutions to these problems is actually pretty easy. Due to the flaws within the legal arrangement designed by the Ministry of Economic Affairs (MOEA), the legal documents entitling rights to the bid winners are administrative acts implemented in the form of “executive orders without authorization by law.” In fact, these are not administrative acts that falls within the jurisdictional scope or authorities of MOEA. As for the legal implications, there is a high possibility that such orders qualify as “authority orders” which are prohibited under the Administrative Procedure Act – even regarded as invalid administrative acts due to the order acting beyond the agency’s jurisdiction.
Therefore, there will not be a question of profiteering, because the whole act is invalid since the very beginning. Based on this reasoning, the government and Taipower will naturally have the right of not signing the contract, so why should we bother discussing the legal basis for abandoning the tender? At the end, what are the casualties of the entire farce? The answer: the government’s reputation and its vision of promoting the transition and development of renewable energy.