Identifier
Created
Classification
Origin
10TAIPEI147
2010-02-05 09:35:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

GREENING TAIWAN, PART III: OFFICIALS PREDICT SUNNY

Tags:  SENV ECON ENRG EINV TRGY TSPL TW XE 
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C O N F I D E N T I A L SECTION 01 OF 05 TAIPEI 000147 

SIPDIS

STATE FOR EAP/TC, OES/EGC, OES/ENV, OES/PCI, OES/STC, EPA
FOR KASMAN, TROCHE AND HARRIS, DOE FOR INTERNATIONAL,
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 02/04/2020
TAGS: SENV ECON ENRG EINV TRGY TSPL TW XE
SUBJECT: GREENING TAIWAN, PART III: OFFICIALS PREDICT SUNNY
SKIES FOR SOLAR INDUSTRY

REF: A. TAIPEI 1383

B. TAIPEI 1243

C. TAIPEI 1207

Classified By: AIT Deputy Director Eric Madison for reasons 1.4 (b) and
(d).

C O N F I D E N T I A L SECTION 01 OF 05 TAIPEI 000147

SIPDIS

STATE FOR EAP/TC, OES/EGC, OES/ENV, OES/PCI, OES/STC, EPA
FOR KASMAN, TROCHE AND HARRIS, DOE FOR INTERNATIONAL,
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 02/04/2020
TAGS: SENV ECON ENRG EINV TRGY TSPL TW XE
SUBJECT: GREENING TAIWAN, PART III: OFFICIALS PREDICT SUNNY
SKIES FOR SOLAR INDUSTRY

REF: A. TAIPEI 1383

B. TAIPEI 1243

C. TAIPEI 1207

Classified By: AIT Deputy Director Eric Madison for reasons 1.4 (b) and
(d).


1. (U) Taiwan plans to develop a "green technologies"
industrial base through a USD 1.5 billion public investment
plan, which the authorities hope will attract a further USD
6.25 billion in domestic and foreign investment over the next
five years, create 110,000 new jobs, and drive Taiwan's
economy in the coming decades. The authorities also claim
this new, "green" industrial base will play an important role
in meeting greenhouse gas (GHG) reduction goals by
transforming Taiwan into a "low-carbon society."
Policymakers have identified photovoltaics (PV) and
light-emitting diodes (LED) as the most advanced and
promising green technology industries in Taiwan. This
message focuses on the role PVs are likely to play in
"greening Taiwan."

--------------
SUMMARY
--------------


2. (SBU) Taiwan authorities predict that the island's
photovoltaic (PV) industry is prime for "leaping growth," and
by 2015 will generate USD 13.6 billion in output and create
45,000 jobs. A group of official, semi-official, and
non-governmental entities have been created to advocate for
the expansion of Taiwan's PV industry, and data from the past
4 years show impressive triple-digit growth rates, output
value, and production capacity for Taiwan's PV industry.
There are still bottlenecks holding the industry back from
reaching its full potential, however, and experts have
suggested that technological breakthroughs and increased
cooperation with the PRC are key to the future success of
Taiwan's PV industry. Cross-Strait cooperation, however, is
not without challenges, mostly related to intellectual
property concerns, trade in raw materials, and harmonization

of production standards. Domestically, important advances in
promoting the use of solar energy have been made since
mid-2009, including the passage of a Renewable Energy
Development Act and the promulgation of wholesale prices
("feed-in tariffs") for the purchase of renewable energy.
Nonetheless, geographic, climatic, policy, and other limiting
factors are likely to consign solar power to just a few
percent of Taiwan's installed energy capacity over the next
20 years.


--------------
AIMING FOR THE SUN
--------------


3. (SBU) Taiwan's economic planners have identified PVs and
LEDs as the "Twin-pillar Industries" in Taiwan's plan to
develop a green technologies industrial base. Officials from
the Ministry of Economic Affairs (MOEA) have said the
domestic PV industry already has "sufficient capacity for
leaping growth," noting that Taiwan's existing industrial
base and human resources pool in the semiconductor and
TFT-LCD sectors are easily transferable to PV production.
Taiwan is, in fact, already home to the world's
fourth-largest PV cell and module manufacturing industries,
with over 150 cell, module, and PV systems suppliers
operating on the island. In 2008, Taiwan's Motech Industries
was the world's eighth-largest PV manufacturer, with
production capacity of over 450 megawatts (MW),and plans to

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increase that capacity to up to 600 MW in the near term.


4. (SBU) In 2008, Taiwan's PV industry output was valued at
USD 3.1 billion, up from roughly USD 200 million just three
years earlier, with PV products exported mainly to the EU.
MOEA has estimated that Taiwan's USD 1.5 billion green
technology investment plan will boost PV industry output to
USD 13.6 billion by 2015, will create 45,000 jobs in PV and
PV-related industries, and will make Taiwan one of the top
three PV manufacturers in the world.


5. (SBU) In order to further stimulate the domestic PV
industry, Taiwan authorities have instructed the Industrial
Technology Research Institute (ITRI),the island's
semi-official technology incubator, to focus R&D efforts on
green energy technologies. Since 2007, ITRI's Photovoltaics
Technology Center has been working closely with Taiwan's
Photovoltaic Industry Association to advance the island's PV
industry through advocacy, training, professional
consultation, and promoting Taiwan-supported international
standards. Meanwhile, SEMI Taiwan, which is under SEMI, the
prominent global industry association for the
microelectronics, display, and photovoltaic industries, has
been a powerful advocate working to both expand PV technology
development in Taiwan and harmonize PV-industry standards.
SEMI has also worked closely with the Taiwan External Trade
Development Council (TAITRA) to organize and host the annual
"PV Taiwan Exhibition," which is Taiwan's most prominent
forum for promoting its domestic PV industry. The 2009
exhibition comprised 500 booths, 236 companies from across
the PV supply chain and from over 50 countries, and over
10,000 visitors. TAITRA and SEMI have already announced that
the 2010 PV Taiwan Exhibition will take place from October
26-28, and organizers tell us they expect the numbers of both
exhibitors and attendees to grow by 50 percent.

--------------
BREAKING THE BOTTLENECKS
--------------


6. (SBU) Taiwan authorities' focus on PV as a target
industry for investment and promotion, timed to coincide with
rising global interest in alternative energy, has yielded
impressive growth. From 2005-2008, the output value of
Taiwan's PV industry grew by a multiple of 14. Over the same
period, production capacity measured in megawatts increased
ten-fold, and despite weak global prices, doubled again from
2008-2009. Despite the skyrocketing growth figures, however,
MOEA officials and industry experts have noted a number areas
where "bottlenecks" are holding back even faster development
of the island's PV industry. These bottlenecks include: a
limited supply of raw materials, a dearth of innovative
manufacturing processes, few autonomous production
facilities, and lack of expertise in testing and
verification. Bureau of Energy Director-General Yeh
Huey-Ching has said that engineering technological
breakthroughs in the PV sector is a priority for Taiwan
researchers, and is key to success in an increasingly crowded
global PV marketplace.


7. (SBU) Contacts in the PV industry have remarked that
beyond technological advances, Taiwan manufacturers must also
focus on increasing vertical integration in the PV industry,
which will likely require closer cooperation with the PRC. A
senior Taiwan PV Industry Association member noted that while
Taiwan's comparative advantage is in management expertise,
quality control, and services, mainland China is home to the
raw materials, in particular polysilicon, that are required
for PV manufacturing.


TAIPEI 00000147 003 OF 005



8. (C) Mainland authorities have recognized the utility of
cross-Strait cooperation, as well, and Jiangsu Province's
Xuzhou city Municipal Party Committee Secretary Cao Xinping
during a November 2009 visit to Taipei, told local officials
that his city would offer tax breaks and attractive land
prices to lure Taiwan PV companies. (Note: Xuzhou has one of
the world's highest production capacities for polysilicon.
End Note.) More recently, in January 2010, Taiwan's Sun Well
Solar company signed a USD 600 million deal to establish a
300 MW thin-film solar production base in Jiangsu Province.
Taiwan PV industry experts have told us that while Taiwan
firms would likely have to work with mainland firms in order
to offer price-competitive products, the long-term success of
Taiwan's cross-Strait cooperation efforts will depend on
whether the island's firms are able to maintain control of
their PV-related intellectual property.


9. (C) According to a senior Taiwan PV Industry Association
member, a cross-Strait Economic Cooperation Framework
Agreement (ECFA) could promote effective Taiwan-PRC
cooperation on PVs by resolving tariff issues related to the
import of raw materials from the PRC and establishing
cross-Strait production standards. During the December 2009
fourth-round of cross-Strait dialogue, participants did sign
an agreement on industrial standards and certification, which
committed both sides to consult on harmonization of standards
and develop mutually acceptable certification procedures.
Although formal PV-related discussions under this agreement
have not yet occurred, local industry contacts generally
expected that discussions on harmonizing PV standards would
take place in the near-term, and cooperative cross-Strait PV
projects would be launched in 2011.

--------------
FUTURE OF DOMESTIC USE STILL HAZY
--------------


10. (SBU) Taiwan's MOEA has described its PV industry
investment and promotion program as part of the island's move
to develop an "energy-efficient society and low-carbon
economy," in line with the Ma Administration's plans to cut
carbon emissions to 2005 levels by 2020 and 2000 levels by

2025. Bureau of Energy (BOE) and Taiwan Environmental
Protection Administration (TEPA) officials have projected
that Taiwan's installed photovoltaic capacity will grow from
4 MW in 2008 to 320 MW in 2015 and 1000 MW in 2025. However,
1000 MW would amount to only an estimated 1.8 percent of all
installed energy capacity in 2025, and only 12 percent of all
installed renewable energy capacity. Local environmental
NGOs have pointed out that solar energy is hardly a panacea
for Taiwan's GHG emissions, which rank among the top 20
globally on a per capita basis.


11. (SBU) Despite solar energy's relatively small projected
contributions to Taiwan's energy mix and greenhouse gas
reduction efforts, Taiwan EPA and influential advisors to
President Ma Ying-jeou have been strong proponents of
increasing the island's use of solar power. In July 2009,
the Legislative Yuan (LY) passed the landmark Renewable
Energy Development Act (REDA),which aims to promote
increased use of renewable energy through incentives for
equipment purchases and the creation of a wholesale pricing
structure ("feed-in tariff") for alternative energy. Feed-in
tariffs were finally announced at the end of December 2009,
following months of public hearings, with wholesale prices
for solar power set at a minimum of NTD 11.12 (USD 0.35) per
kilowatt-hour, well above the NTD 8 per kw/h price sought by
the SEMI PV group back when REDA passed the LY. Although BOE
is still finalizing regulations for the feed-in tariff, the
SEMI PV group has estimated a lower-limit price of NTD 11.2

TAIPEI 00000147 004 OF 005


could stimulate installation of 200-300 MW of PV capacity in
2010 alone, which would put the island on track to easily
exceed the authorities' 2015 goal of 320 MW of installed PV
capacity.


12. (SBU) We have, however, heard concerns expressed by PV
manufacturers and distributors that because BOE has reserved
the right to reassess the tariff rate on a yearly basis, and
also to cap the amount of projects that could be approved
annually for subsidies, PV use in Taiwan may not expand as
quickly as initial estimates based on the current feed-in
tariff rate have shown. Energy experts, meanwhile, have
pointed out that although Taiwan has a sub-tropical climate,
weather conditions, including insufficient sunshine and
frequent typhoons, as well as air pollution, all limit the
widespread use of solar energy in Taiwan. Other issues, such
as the relatively high cost of PV cells relative to
purchasing power, insufficient subsidies for PV equipment for
private, residential use, and a lack of privately-owned
roofs, have also hampered the spread of solar power as a
domestic energy source. Experts in the field of "green"
buildings have commented that while some PV limiting factors,
like geography and weather, are beyond the authorities'
control, policies encouraging new construction using building
integrated photovoltaics (BIPV),and increased subsidies for
private PV installation, could significantly raise the amount
of installed PV capacity in Taiwan.


13. (C) Environmental NGOs and TEPA officials have told us
that Taipower, the island's state-owned energy supplier, has
been overly sluggish in embracing and promoting greater use
of renewable energy, including solar power. Although REDA
and feed-in tariffs offering reasonable rates of return for
renewable energy suppliers will increase Taipower's purchase
and distribution of solar energy, the company's revenues rely
largely on the generation and distribution of energy from
fossil and nuclear fuels. Critics have said Taipower has few
financial incentives to ramp up its own production of solar
energy, and little desire to purchase energy from others,
which would affect the company's bottom line. Taipower
representatives have responded that Taipower operates a
number of solar power pilot projects around the island
already, and is on track to install and operate 10 MW of PV
capacity by 2011. Meanwhile, Taiwan's Institute of Nuclear
Energy Research (INER) has been touting its own contributions
to increasing the domestic supply of solar energy, noting
that in December 2009, INER inaugurated Taiwan's largest
solar power facility, with 141 panels capable of generating 1
MW of energy.

--------------
COMMENT
--------------


14. (C) Much like Taiwan's domestic electric vehicle industry
(ref A),Taiwan's push to become a global PV manufacturing
powerhouse is much more likely to benefit Taiwan's economy,
rather than its environment. Despite initial positive signs
from the recently announced feed-in tariff price for solar
power, truly stimulating the domestic market for solar energy
will require an integrated, island-wide push to educate and
subsidize the public and private sectors, including
industrial, commercial, and residential users of energy.
Even with a successful promotion policy, however, barring
major technological breakthroughs in the price and efficiency
of solar cells, a small domestic market is likely to cap the
spread of solar energy in Taiwan to just a few percent of
installed energy capacity over the next 20 years. On the
other hand, closer industrial ties with China, and a
continued global focus on renewable energy, appear likely to

TAIPEI 00000147 005 OF 005


benefit Taiwan PV producers, provided they can maintain a
comparative advantage in mid- and down-stream PV production
and secure their R&D advances against intellectual piracy.
U.S. PV firms will continue to compete with Taiwan firms, but
cooperation could offer American companies the opportunity to
advance their own commercial interests by leveraging Taiwan's
PV research activities, IC and TFT-LCD manufacturing
expertise, and a growing body of knowledge related to PV
manufacturing and marketing in the PRC.
STANTON