Agreement details
The corporate power purchase agreement (CPPA) is for a 20-year period at a fixed-price and covers 100% of the power and associated Tawain Renewable Energy Certificates (T-RECs) from the Hai Long 2B and 3 wind farms, which have a combined capacity of 744MW. The agreement was signed with an investment grade counterparty (S&P: AA-). The supply will commence once the Hai Long project, which also includes the 300MW Hai Long 2A wind farm, reaches full commercial operations in late-2026.
Rationale for CPPA
Northland Power and its partners secured a feed-in-tariff (FiT) and grid connection for the 300 MW Hai Long 2A project in Apr’18. Under the 20-year PPA, Hai Long 2A will receive a tariff of $212/MWh for the first 10 years of supply, with $140/MW for the remaining 10 years. Meanwhile, the Hai Long 2B and Hai Long 3 projects went on to secure tariffs of $75/MWh and $85/MWh for a period of 20 years, marking the lowest tariffs awarded under the round.
The partners opted to replace the utility PPA with a CPPA, which offered better prices compared to the agreement with Taipower. Northland Power states that the improved rate enhances the economics of the project and will be a key enabler for securing non-recourse project level debt financing and financial close later this year. Meanwhile, the Taipower PPAs are not affected by the CPPA and provide a backstop to the latter.
Enerdatics’ analysis
CPPAs have been on the rise in Taiwan since 2017, following an amendment in Taiwan’s Electricity Act that permitted the sale of renewable power directly to end-users. Further, the option to fall-back on the utility PPA with Taipower enhances the attractiveness of the CPPA landscape in the country.
While the low tariff awarded in the competitive bidding process implies lower break-evens, Northland Power sought to increase the attractiveness of the Hai Long project, through the signing of a CPPA - a move that was earlier pursued by Ørsted for its 920MW Greater Changua 2b & 4 offshore wind farms. This agreement marks the largest offshore wind CPPA signed to date.
Also, Northland Power has elected to use Siemens Gamesa’s new 14MW SG 14-222 DD turbine for the Hai Long project, for which the company secured environmental approval in 2021. The turbine's production is planned for 2024. The move increases the capacity factor of the installation significantly.
The improved tariffs under the CPPA and the enhanced technical specs due to the 14MW turbine will help the partners meet their target of reaching financial close on the project in 2022.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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