Episode 2 – Asian Market Moves & Danish Auction Ahead – WindLogix Offshore Wind Podcast

Bahzad Ayoub   0:014
Welcome to the second episode of Westwood Global Energy Group’s WindLogix Offshore Wind Podcast. I’m your host, Bahzad Ayoub, Offshore Wind Manager at Westwood. And once again, I’m joined by two offshore wind senior analysts.
Peter Lloyd Williams and Hui Min Foong. Hello to you both.

Peter Lloyd-Williams   0:32
Hi all.

Hui Min Foong   0:34
Hi, Baz. Hi, Peter.

Bahzad Ayoub   0:37
Now, as always, we’ll be discussing some of the big news that’s come from the sector and giving our views on these. The topics that I’ll be covering in this episode include developments in the Philippines, Taiwan’s round 3.3 auction, as well as the state of the floating wind market in South Korea. We’ll be also analysing the upcoming Danish auction. So quite a few topics to cover today. Um, let’s begin.

Now, Hui Min, why don’t you give us an overview of some of the developments that have occurred in the Philippines since our last episode?

Hui Min Foong   1:07
Yes, of course. So the major update in the Philippines is the launch of its first offshore wind auction under the Green Energy Auction 5 or GEA5. To give some background around this, this is a part of the series of large-scale renewable energy auctions that Philippines has been holding for various different renewable energy technologies since 2022. But this is the first time that offshore wind has been included.
The auction capacity was targeted at up to 3.3GW, which is a sizable amount. And because of these ambitions, the Philippines has positioned itself as a closely watched potential new market, which has attracted significant curiosity from the industry in general.

Over the past few weeks, Philippines has achieved several milestones in the auction process. So, the auction ceiling price was finalised at 11 Philippine pesos per kilowatt hours, which is about 19 US cents, and 6% higher than the initial preliminary price that was proposed last year.

Following this, registration was opened early this month and runs for about two weeks to the middle of March. Final awards are then scheduled to be announced in September later this year.

 

An important point to note here is that GEA5 also currently targets for projects to be delivered between 2028 to 2030, which is admittedly an extremely tight timeline for offshore wind projects, even in mature offshore wind markets, let alone a new market like the Philippines.

The current ceiling price appears to be reasonable and is comparable or even higher than the feed-in tariff rates that were offered initially in offshore wind markets such as Taiwan or Germany. However, ceiling price is only one factor when it comes to the success of an auction. Other factors like a longer delivery time frame is also needed to support project viability. And other project implementation risks remain in the Philippines, including supply chain and port limitations, grid access challenges, and regulatory hurdles.

Now, overall, this auction appears to be a test of offshore wind viability in the Philippines, and it has been met with several delays in the past. However, given that this is Philippines’ first attempt at an offshore wind auction, the slower approach could have its merits in terms of allowing for more deliberate auction design.

Having said this, it’s also worth noting that the Philippines has laid out a plan for the next few Green Argyri auctions, GEA 6 to GEA 9, which is the next four auctions. However, none of these include offshore wind as a target technology at the moment. The outcome of this GEA5 auction will therefore set the tone in terms of any future offshore wind development in the country.

Bahzad Ayoub   4:15
Thank you for that great overview of the auction, the process, the prices, and yeah, looking forward to seeing what happens with this auction. Sticking with the Philippines, we’ve also seen grid agreements have been signed for three wind farms. Can you give us a bit of insight on the projects and developers that have received these connexion agreements? And also, you know, how significant is this for these projects, and we look at overall within the scope of the auction happening as well.

Hui Min Foong   4:44
Yeah Baz, that’s right. The Philippines has issued its first grid connexion agreements for three offshore wind sites, totalling 1.65GW. And these were for the Frontera Bay, Guimaras Strait 1 and Guimaras Strait 2 projects. Having this checks a box in terms of fulfilling the prerequisites for the projects to participate in the Green Energy Auction and it is a somewhat promising signal in a market where grid connexion can pose a challenge, given the limitations in grid capacity availability, and it’s especially important for large capacity projects like offshore wind.

However, these projects are still very much in early pre-development stage at the moment, and this is not a guarantee of future development. Furthermore, these projects are led by domestic developers, and while they may have a stronger understanding of the local business environment, which is quite critical,
They will likely also face additional challenges developing these large-scale projects with little prior development experience in the offshore wind space specifically.

Bahzad Ayoub   5:56
Thank you for that. Now, let’s move on to our next topic, which is the slowdown of floating wind development in South Korea. Now, Peter, what’s been happening there?

Peter Lloyd-Williams   6:07
Thanks, Baz, and thanks for those insights on the Philippines, Hui  Min. So just to remind, South Korea is a relative newcomer in the offshore wind world. The south and west coasts face shallower waters, while the east coast abuts onto much deeper waters facing Japan. South Korea has made moderate progress with offshore wind so far, although it’s still a fairly early stage market, I think it’s fair to say 342MW is operational with a further 755MW under construction. That’s almost exclusively located off the west of the country and Jeju Island in the south. And so, of course, the government’s trying to get a floating wind sector going, and that’s off the east coast, of course. And most proposals are centred around the Ulsan area in the southeast, which is a pre-industrialized part of the country, so a pretty big base of power demand. Progress has been pretty challenging, however, as has been the case in other markets where floating wind is being established. So sort of the recent high point came when the 750MW Firefly project, which is being developed by Equinor, was awarded a 20-year fixed price contract through a government bidding system back in December 2024. And industry chatter at the time sort of suggested that the effective offtake price would work out as something like 500,000 Korean won per MW hour or about 350 US dollars per MW hour. So, a relatively healthy price. Now, I say at the time there, because Equinor has twice missed deadlines to confirm this contract, once in September of last year and again in January of this year. So, for now, it’s kind of unclear what the status of the project is.
Another major project is the 1,500MW Gray Whale floating wind development, which has three phases and was being developed by Bada Energy, which is a consortium of Corio Generation, SK Eco Plant and TotalEnergies. This project had secured grid connexion back in 2024, but didn’t have a fixed price contract in place. Again, I say had because Bada Energy withdrew its proposal earlier this year for the Grey Whale Project. So that paints a pretty difficult picture, but there are things I think to keep an eye on. The Korean Energy Agency indicated in a recent briefing that floating wind contracts would be on offer in the next round of fixed price bidding. Those weren’t available in 2025. And Copenhagen Offshore Partners, which is the developer of the large floating Haewoori project, have indicated that they’re positioned to bid. And it looks like there’s at least one other floating project that might be looking to bid as well. So, bidding should take place in the first half of this year, so we’ll keep our eyes peeled for any updates coming out.

Bahzad Ayoub   9:01
Thank you for that Peter. Great analysis there of what’s been happening and you know looking forward to seeing what happens with their auction as well. And I guess sticking with the APAC market and the theme of auctions, the draft selection mechanism for Taiwan’s round 3.3 auction have also been released. Hui Min what can you tell us about this and what’s included within the drafts?

Hui Min Foong   9:28
Taiwan’s MOEA, that’s the Ministry of Economic Affairs, has held several rounds of public consultations regarding the new draft rules for this round 3.3 auction. And the latest consultation was actually just held on the 26th of February. So in the current edition of the draught rules, are projects are scored on a 100 point matrix with the highest weightage focused on developer track record. This refers to the developers experience in executing offshore wind projects, either domestically or overseas, how much success they’ve had with that. And there are also penalties for developers of domestic projects that have previously experienced delays or terminations for their projects. This is worth noting, of course, because there have been some projects that have been awarded in previous auctions that have later on been cancelled.

 

Now this category of developer track record is weighted 35 points and is expected to give experienced international developers such as CIP or Orsted that have sizable international portfolios a significant advantage in this auction. Regardless, domestic project development track record within Taiwan itself is also rewarded based on the framework with a higher scoring multiplication factor that is applied to domestic projects that are either already grid connected or have obtained construction permits.

Next, the second major category is weighted 30 points, and this is based on the developers’ financial capabilities. Right, so in this case, developers with higher SS net worths are expected to have an advantage. And again, this puts your large international developers ahead of smaller domestic players.

Interestingly, the round 3.3 draft rules have introduced a new ESG category. This is not entirely new, but more details have been provided in this latest edition of the draught rules. It is now clearly stated that 10 out of the 15 ESG points will be awarded based on local economic benefits. which then tie into local procurement and investment, which is an important consideration that has been at play throughout the history of offshore wind in Taiwan.
Another new addition to the draft rules is a proposed floor price of 2.29 new Taiwan dollars per kilowatt hour for any excess electricity that’s produced that goes beyond the contracted corporate power purchase agreement volumes or CPPA volumes. This translates to about seven US cents per kilowatt hour, which at that level serves its purpose as a price floor, but also confirms that majority of electricity sales will still need to require corporate offtake via CPPAs in order to secure sufficient revenues for those projects.

Overall, with the round 3.3 rules being refined, it appears that the auction is on track to closing within 2026 as planned. Taiwan, it is the largest offshore wind market in Asia outside of mainland China. So this auction is definitely one to continue to look out for and we will be tracking its progress very closely.

Bahzad Ayoub   13:01
Thank you for that great overview, Hui Min. Peter, as our commercial analyst who covers auctions within the WindLogix database, do you have any views on these draught rules?

Peter Lloyd-Williams   13:12
Yeah, thanks, Baz. I think in many ways it sort of brings us back to a topic which we discussed in our last episode, which is sort of what do you want to prioritise with your system? This time it seems like Taiwan is putting emphasis on developer experience and financial muscle, presumably with the aim of increasing the likelihood of successful project delivery and avoiding some of the challenges that have been seen with projects that have been awarded in earlier round three auctions. However, there are sort of some limitations to this approach. Offshore wind projects are almost always financed on a project finance basis with debt and the responsibility to deliver bundled up in a special purpose vehicle. So really the project lives and dies on the ability of that SPV to deliver it. And as we’ve seen elsewhere in quite a few cases, if a project isn’t going to be profitable on its own terms, a developer is not going to progress it regardless of how much financial muscle the wider company has.

Bahzad Ayoub   14:14
Thank you, Peter. Now, we’ll be moving on to our final topic. So moving away from the APAC market over to Europe, but still sticking to the theme of auctions. Peter, you’re currently writing a briefing for our WindLogix clients on Denmark’s upcoming auction. Can you please provide a preview of what this will be covering?

Peter Lloyd-Williams   14:31
Yeah, so Denmark is really one of the heartlands of the wind industry, wind power industry. And you’ve got Orsted and Vestas, and of course, the first ever offshore wind farm, Vindeby, back in the 1990s. So in a way, what you have there is a sort of microcosm of the industry, which has experienced all the twists and turns that the wider sector has gone through. And in this briefing, what we’ll be looking at in particular is the evolution of the subsidy and leasing system in recent years, which again goes back to a little of what we were discussing in the context of Taiwan. How do you run your system and what do you want to prioritise? So in the years running up to sort of 2020, you had declining costs and government that wanted to reduce financial support to developers or moved to a zero subsidy system. And that was sort of also the trend that you had in Denmark. And now you have governments concerned about a stalling capacity build out and offering more support as the cost of building offshore wind projects has increased. So those are the sorts of things that we’ll be looking at in the Danish context. So it should be really interesting.

Bahzad Ayoub   15:37
Thank you, Peter. Looking forward to having a read through once that’s available. Now, that’s all the time we have today. I’m going to be bringing this episode to a close. Thank you both again for joining me. We’d like to encourage our audience to please reach out to us if they’d like to discuss any of these topics with us, or they’d like to learn more about our market intelligence offerings. You can do so via our website, which is westwoodenergy.com. And on that note, we’d like to thank you all for listening and hope you join us for the next episode.

 

 

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