A Top-level Trade Secret with OWP Developers

Green Mentor's Fireside Chat

  Recently, I have published a series of articles on the offshore wind power (OWP) industry through the platform of the Green Impact Academy.   Oftentimes, I receive numerous phone calls right after the articles get published. Many people thought I enjoy being a naysayer on Taiwan’s future. In recent years, it seems like OWP is all that is left for Taiwan in terms of major investment project, and yet I have nothing but negative comments to make regarding the future of OWP. There are people who compare me to the gloom and doom investment advisor Marc Faber, while others refer to me as the doomsday prophet of OWP development.

  Those who say things like this obviously knows nothing about the judgement of Solomon. The reason why I choose to point out so many pitfalls is not because I wish the worst for Taiwan. In fact, I actually see promises in Taiwan’s future. It just happens that my expertise lies in the field of law, and as a public intellectual figure, I have the responsibility to point out the hidden dangers. This is actually what the country pays me to do.

  Taiwan’s economic develop relies on diversified channel of power sources. Whether coal-generated power or green power (including nuclear power), as long as power can be generated, there is always a place which will need the electricity. But if electricity cannot be generated, that is the end of the story. In support of diversifying the sources of energy, all types of power-generation methods should co-exist with each other. None of them should be forced into extinction, and neither should any one of the methods be big enough to dominate the whole market.

  I understand that all of you are entities that compete in the “world cup” with long track records, and that you pretty much believe in the principle of unalienable rights granted by God. However, “rights are not granted by others, but is something that you have to fight for yourself.” While I am still young, I have to honor to take on the role of observing the entire development of the country’s energy transition during the campaign for a nuclear-free homeland and the development of renewal energy sources after the transition of political power to the opposition party in the year 2000. What did I witness during that period? At that time, everyone in the renewable energy industry had all their cannons in their repertoire aimed at the government. Yes, you did not hear me wrong. The administration of CHEN Shui-bian wanted to realize the vision of a nuclear-free homeland and put its weight behind the development of renewable energies. Why did it become the public enemy No. 1 of renewable energy companies?

  Perhaps all of you find that hard to imagine today. Yet this is what sets Taiwan apart from the rest of the world. For other nations, if the policy is to promote renewable energy and decommission nuclear power plants at an early stage, the government will take on a proactive role; all the renewable energy companies have to do is to work with the government and things will sort themselves out. But in Taiwan, you probably have notice bizarre things happening. When the president or senior government official say the issue is on top of the priority list, how come they become all excited to see promises of substantial developments in the general direction, but when things actually get moving, you see discords between government agencies and either resisting or boycotting the development of OWP? All the sudden and abrupt shift between “for” and “against” only creates more confusion for everybody involved.  

Voila! Welcome to Taiwan!

 It was pretty much like this when Taiwan began its push for the development of renewable energy roughly a decade ago. Your predecessors in the renewable energy industry has to adapt to such hostile environment, lashing out at the government at various occasions and fight it out. Their objective is no other than letting the publicly-elected officials know that their underlings are messing things up and undermining the effort by introducing unrealistic measures. Yet, despite such challenges, the results were brilliant. The rewards from rounds of uphill battle is what we have now – the creation of a golden era in onshore wind power development and the strengthening of export capabilities of the solar power industry.

  You might be unfamiliar with Taiwan’s investment culture. Regarding your understanding of the mystical nation in the Far East, perhaps many of you know this Chinese expression: “You Guan Xi, Mei Guan Xi” (It won’t be a problem for the well-connected). In other words, everything will flow smoothly as long as you pull your strings and pay homage to those in key positions. Truthfully speaking, this is not something unique to the culture of the orient. It is the same thing in western societies. Some of you might recall the famous line from the Broadway musical Chicago: “When you’re good to mama, mama’s good to you.” This explains why many of you are doing meaningless things– many of which you would not normally do when engaged in OWP development back in your home countries: running all over the places to sign stacks and stacks of MOUs which you normally would not do back home; attending frightfully repetitive seminars on issues you probably do not understand; and standing on stage holding ugly plaques to post for photographers in the audience. I will bet that you probably have not taken so many pictures at commercial events since the start of your professional career. What is almost unbelievable is that these photos have a nasty tendency to appear all over the local media. Yes, we have all seen those pictures, and I can recall all those awkward but polite smile on your face.

  Perhaps among you guys, there are people who does not want to “lose face.” So… you have one MOU, then I will have to get two of them. What? You have two?! Then I want 3!!! MOU might not be enough, let me see what other extra things I can secure. How about a memorandum on intention of financing? Construction contract? So what happens when everyone else got their own copy of these agreements? I supposed the next thing is to strengthen your ties with important government officials, or you state your intention to help schools, or help boost local employment, providing internship opportunities, and on and on. Everyone attempts to do their best to boost government relations, to showcase their sincere love for Taiwan, hoping to win some kind of promise from the government!

  But do you know that? There is a Chinese saying that goes like this: “Ironclad bureaucracy with one-shot officials.” Consider it the Chinese lesson for the day because you will not find similar expression in English. Basically, consider yourself lucky if you run into an official that does his or her job. But you are in trouble when you have to deal with officials who want benefits but refuses to do their job. Notice, what we are talking about here is “benefits” – which is not necessarily money. It could be public image or other things. What they see is short term benefit for themselves. They will not consider the bigger picture or long-term stuff. They know they will not be in the political scene forever, so they take what they can while they can. What originally was intended to benefit both parties end up with one side reaping the reward – such as support of local residents or voters. However, when things reach a critical moment, they can just act like there has never been deal at all. For example, a written IPP electricity purchase agreement written down, signed, and finalized on paper can all of a sudden reappear on the table with the government demanding you to accept NT$5.8 feed in tariff, citing “political pressure” which believes that the original rate is “unreasonable.” So much for honoring the contract, right?

Three Steps to Protect Yourself from Gentlemen and Lying Scoundrels

  But I think there is no need to worry too much. After all, we are not exactly novices in the wild jungle of the business world. As long as you have a healthy arsenal of firearms ready beforehand, you can choose and pick your weapon depending on the challenge rating of the monster you encounter.

  Here, I will provide you 3 moves based on the legal perspective:

Move 1: The Way of WTO and Trade Sanctions 

  One thing the Taiwanese government is fearful of is being isolated on the international stage. This is one of the reasons why Taiwan has been cooperative on a wide range of issues over the years. Even ruffians like the current US president Donald Trump who has been plotting to impose tax on solar power modules will falter in their steps when facing possible actions across various channels under the WTO. So perhaps the same approach can be applied as a response to the Taiwanese government’s attempts to promote the localization and nationalization of the industry – file a complaint with the WTO. Such action will no doubt generate political pressure, making the government think twice about its action. Either way, you will end up paying the lawyer in this area whether you like it or not, so might as well escalate the controversy to a higher level through diplomatic and government channels.

Move 2: Devise Strategy for Future Risk Management

  In Taiwan, investing in OWP has become high risk investment. However, there are approaches one can adopt to keep the risk factors somewhat contained, such as whether to include clauses on strengthening investment stability into the amendment of “Renewable Energy Development Act”, which is a priority for the current session of the Legislative Yuan. Perhaps there are channels of promotion which has to face a complete overhaul. Think of the good part: at least the rights obtained will be more well-founded with firm backing by the law.

Move 3: Prepare Strategy on Possible Legal Responses

  In the future, there are still many hidden mines ready to blow up in the field of legal risks. It will be wise to take preventative measures and plan possible responses. To reduce the likeliness of general upheaval, the principle of selection process will like be based “there is something for everyone.” As for whether the entire scheme is viable, well, that is a problem to be answered somewhere in the distant future.

  So the most likely scenario in the future is that you eventually end up suing other people. Local parts suppliers and contractors which the government guarantees to be so capable and amazing will end up to be disappointments for sure. You guys will have to take the necessary precautions and have backup plans in place in the case where Taiwanese suppliers fail to deliver. Furthermore, you will have to decide early on regarding whether to handle the issue with Taipower through the time-consuming court system or through other speedy channels to resolve disputes (such as the arbitration method used to resolve the dispute between Taipower and independent power producers).

  Despite the fact that the situation today looks so chaotic and so disheartening, deep down within the soul of “the doomsday prophet” is the anticipation to see wind turbines standing proudly in the Taiwan Straits – hopefully within my lifetime. I am sure it is a moment which everyone will be proud of.

Offshore Wind Power

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