The feed-In tariff (FIT) system is a crucial policy tool for advancing solar energy development in Taiwan, but recent debates have surfaced over its future. (Photo: Pixabay)
Taiwan’s feed-In tariff (FIT) system, a cornerstone policy for promoting renewable energy development, is facing growing debate. The Ministry of Economic Affairs recently announced its draft FIT rates for 2025, maintaining stable reductions for solar energy except for small rooftop installations. While the FIT system has been instrumental in advancing solar energy since its implementation in 2010, mounting criticism has raised questions about its future.
The role of FIT and emerging concerns
The FIT system guarantees a 20-year purchase agreement for renewable energy, providing developers with stable revenues and enabling financing from banks. However, as solar technology becomes more cost-efficient, the necessity of prolonged government-backed support is being questioned.
Critics argue that the FIT model has become a breeding ground for malpractice, with so-called "green energy profiteers" exploiting subsidies. In addition, Taiwan Power Company’s (Taipower) financial strain from purchasing high-cost green energy has fueled discussions about phasing out the system.
Chen Kun-Hong (陳坤宏) , Chairman of Sino Greenergy, highlighted a key issue: Taipower purchases solar power at NT$4–6 per kWh, creating high costs and fostering public distrust due to frequent controversies.
Chen Chung-shun (陳中舜), a researcher at the Chung-Hua Institution Economic Research (CIER), pointed out that the FIT system’s government-led pricing negotiations exclude Taipower and users, disrupting market dynamics. He criticized the system for guaranteeing returns that undermine competition, leading to inefficiencies and an uncompetitive environment.
Impact on green energy markets
The FIT rates for 2025, ranging from NT$3.5 to NT$5.7 per kWh, are higher than Taiwan’s average green electricity market price of NT$5.4–5.5 per kWh. This disparity influences free-market solar electricity pricing. According to Chen, the FIT system’s pricing benefits developers but inflates green electricity costs for the open market.
Taiwan’s high renewable energy costs are partly due to "soft costs," including limited land availability. Chen suggests addressing land-related barriers and creating renewable energy zones to streamline development.
Taiwan’s high renewable energy costs are attributed to hidden 'soft costs,' highlighting the challenges in scaling up green energy projects. (Photo: Pixabay)
Recommendations for reform
1. Introduce competitive bidding mechanisms
Experts suggest transitioning to a competitive bidding system to reduce costs and prevent inefficiencies. Chen cited the successful 2017 Chiayi Salt Pan Solar Project, where the government managed land consolidation and compensation, allowing developers to bid competitively. Winning bids were as low as NT$2.6 per kWh, close to Taiwan’s average electricity price.
Revisiting such models could help test market mechanisms in a controlled environment, minimizing resistance and addressing concerns about local interference and corruption.
Chen Kun-hong emphasizes the success of competitive bidding under Taipower’s early FIT system, citing the Chiayi Salt Pan Solar Project as a notable example. (Photo: Venaenergy)
2. Implement green tariff and certificate separation systems
Taiwan could introduce "green tariffs," segmenting electricity pricing into green, low-carbon, and standard categories. This would simplify implementation and remove the need for credit ratings in purchase agreements, making renewable energy more accessible for small and medium-sized enterprises (SMEs).
Additionally, separating energy certificates from electricity purchases could enhance flexibility. Chen emphasized that green energy, regardless of its point of use, contributes to Taiwan’s overall carbon footprint. By integrating mechanisms for public pricing, quantity, and timing transparency, the market could become more efficient, ensuring all low-carbon energy is effectively utilized.
Data table provided by Chen Chung-shun, illustrating key insights into Taiwan's renewable energy pricing. (Compiled by RECCESSARY)
Challenges for SMEs in a liberalized market
The solar industry in Taiwan is dominated by SMEs, with over 60,000 solar installations nationwide. A sudden phase-out of FIT without adequate mechanisms could disproportionately impact smaller developers with lower credit ratings.
Chen noted that banks primarily evaluate financial models when approving renewable energy loans. Without the scale of Taipower, SMEs may struggle to secure financing.
Building a flexible energy market
Taiwan must adopt international best practices, including energy attribute certificates (EACs) and time-dependent EACs (T-EACs), to create a more dynamic energy market. By making market information transparent, pricing signals could align supply and demand more effectively, allowing Taiwan to transition smoothly toward a competitive green energy market.
As Taiwan prepares for a greener future, balancing cost efficiency, market competitiveness, and policy transparency will be critical. The FIT system, while pivotal in the past, must evolve alongside the market to sustain renewable energy growth and ensure equitable participation across industries.
