Offshore Wind in Asia - Insurance Considerations in China and Taiwan

Introduction

Asia is the new frontier for offshore wind, and this represents a huge opportunity for local and international insurers. State-led initiatives to move away from coal and nuclear power and an awareness of the need to find more sustainable, longer term power sources has led to a large push to emulate the large-scale offshore wind projects which had previously been limited to Europe.

For international developers the lower labour and land rental costs are attractive compared to the higher start-up costs experienced in Europe. The local government backing for renewables projects provides further incentive, and this should ensure continued growth.

For underwriters, there are risks associated with writing such projects (not least the heightened risk of natural catastrophes) but there are obvious advantages to early entrants if these risks can be managed and priced appropriately.

Strong growth in established and new offshore wind power markets Installed capacity, GW

2005 0.7

+1.1GW 33%

2015 10.9 1.0

+4.3GW 23%

2020

24.3 9.2

+8.8GW 18%

2025

43.5

29.9 3.9

+10.3GW 11%

2030

67.8

54.0

7.1

Americas

Asia Pacific

GW addition/yr

CAGR

Europe

Source: Bloomberg New Energy Finance (BNEF), 1M 2018 offshore and wind market outlook

3

This paper considers the risks associated with the construction and operation of offshore wind farms in Asia, and how insurance policies in Asia might respond to these risks. We focus on two of the fastest-growing jurisdictions for offshore wind, China and Taiwan.

Although geographically close, China and Taiwan are adopting very different approaches to the development of their offshore projects, and the insurance of the same:

China's offshore wind farms are being developed by Chinese-owned utilities principally using local suppliers and contractors. Insurance cover for construction of Chinese wind farms is based on the Munich Re onshore CAR policies with little adaptation for offshore. Our analysis of the current position of offshore wind development in China, its energy policy and future trends is set out at page 10.

Taiwan's offshore wind farms are being developed by a mix of local operators and European operators using mostly European suppliers and contractors. Insurance policies in Taiwan are typically based on more sophisticated London offshore wordings such as WELCAR/ WINDCAR. Our analysis of the current position of offshore wind development in Taiwan, its energy policy and future trends is set out at page 24.

Several large offshore wind projects have now entered into operation in China, underwritten by local and international insurers, and so-far the claims have, thankfully, been very limited. If the experience in Europe is any guide, however, this is likely to change. The big question for insurers, therefore, is how will offshore wind claims in Asia differ from those in Europe in terms of scale, frequency and claims handling? Using our extensive experience of offshore wind claims in Europe we consider these issues at pages 3 to 9 of this paper.

It goes without saying that the legal environment in China and Taiwan is significantly different to that in Europe, and this will have an influence on coverage, claims handling procedure and disputes. We consider these issues at pages 18 to 23 and 30 to 35 of this paper.

Offshore Wind Claims in Europe

The insurance market has faced a steep learning curve in relation to the claims seen on European offshore wind projects. New technologies and new participants have ensured a steady stream of claims, and consequent wording amendments.

The most common types of claims seen in offshore wind in Europe are as follows:

1. Cable damage

Both to export cables and inter-array cables. Losses arise from a multitude of different reasons including: faulty cable design, faulty cable workmanship, mishandling causing overbending and static cables being placed in dynamic situations.

2. Blade delamination

Blades delaminating due to design/ workmanship errors, or due to edge-wise vibration from yaw failure.

3. Termination failure

Poor design or workmanship of cable terminations, leading to overheating.

4. Foundation damage

Damage to wind turbine foundations due to design/ workmanship errors, for example incorrect heat treatment of connecting bolts.

5. Crew negligence

Damage due to failure to follow industry standard practices and/or agreed procedures.

The most common types of coverage issues we have seen in offshore wind claims in Europe are as follows:

1. Defect/ damage

When does property turn from being `merely' defective to damaged, such as to trigger coverage under the policy? This becomes particularly relevant where one component is damaged but the project is obliged to replace all such defective components across the wind farm.

2. Series loss

The interpretation of the series loss clause, in particular how to distinguish between different `loss amounts'.

3. Breach of due diligence/ Marine Warranty Survey Clause

In cases of damage due to negligence, whether the due diligence and/or Marine Warranty Survey Clauses have been breached.

4. Sue and labour

Where there has been no actual damage, whether the sue and labour clause is engaged.

5. Defective part

In cases where the defect cover distinguishes between damage to the part which is defective and consequential loss, where that dividing line should be drawn.

6. Deductibles

Where there are multiple instances of damage, how many occurrences there have been and how many deductibles should apply.

5

Claims handling considerations in Asia

We set out below some of the key risks in relation to offshore wind farms in Asia, and other factors which may influence the scale and frequency of claims:

1. Supply chain

As with claims in all construction lines of business, the physical damage repair cost depends upon several factors, including (i) the extent of damage (ii) the availability and cost of materials required for the repair and (iii) the replacement value of the property where repairs are not possible.

In Europe, project owners are generally able to source repair vessels locally where there is a good supply of wind focused and oil and gas vessels. In Asia, however, there are currently far fewer of the specialist vessels required for repairs for example cable lay vessels and the crews required to operate them. Difficulties may be encountered where support vessels are not abundantly available in proportion to the number of projects. This risk is likely to reduce over time as more wind-specific vessels are developed specifically for Asian markets.

Where vessels are brought over from the North Sea this could in turn cause an undersupply of vessels on North Sea projects in future years. This will necessarily increase vessel costs in both locations.

Where projects are using European turbine and cable suppliers, there will be delay where replacement equipment (for example cable joints, replacement cable and blades) needs to be delivered from Europe. This is likely to be more of a consideration for Taiwanese projects, as Chinese projects have so-far tended to use more local suppliers.

The effect of this is that the costs of repairing physical damage are likely to be higher for claims in Asia, and

business interruption/ delay in start-up outages longer in duration. Focus should be given to the terms of the expediting expense clauses (for example when is it acceptable to use air freight for repairs?).

This will be especially significant where the policy includes cover for Additional Cost of Working. This cover sits within Section 1 of a Construction All Risks policy and provides an indemnity for the costs of making up delay to the project completion date caused by a covered physical loss event. Whilst the cover is subject to a number of pre-conditions, it is not normally subject to a sub-limit and has no `economic test'1 so has the potential to result in significant claims for insurers.

2. Local infrastructure

We are aware of problems whereby an offshore wind project cannot operate because the grid is not yet ready to accept the new supply.

Without a covered physical damage loss such delay would generally not be indemnifiable under a Construction All Risks policy, but such delay will complicate the adjustment of an unrelated delay in start-up or additional cost of working claim. We have seen contingent delay in start-up and contingent business interruption extensions added to Asian offshore wind policies, but these would still only be triggered by physical damage to the third party asset rather than, for example, normal construction delay or delay due to lack of approvals.

1 By contrast, an Increased Cost of Working claim in a Delay in Start-Up cover would be limited to the value of the delay that has been saved by the increased costs. There is no such `economic test' for Additional Cost of Working.

The lack of grid access (or `curtailment') can also lead to high production losses where the energy generated cannot be efficiently transmitted. This should be borne in mind where insureds may not apply appropriate deductions to their calculated profit losses. If some of the generation from the renewables projects is unable to be commercialised due to this curtailment then deductions should be appropriately applied by insurers and loss adjusters. In China, the government has recently offered priority grid access for new capacity to renewable energy developers in an attempt to improve the curtailment problems.

3. Natural catastrophe risk

The risk of natural catastrophes (or `Nat Cat' and specifically typhoon, earthquake and tsunami) significantly impacts upon underwriting considerations and is likely to have a corresponding effect on the type of losses and claims handling.

As there have not yet been any Nat Cat losses on offshore wind farms globally, the significant and ever-present threat of adverse weather must be built in by underwriters to the risk profile of the offshore wind projects through a mixture of quantitative and qualitative measures. In addition, various requirements may be written into the cover and imposed upon the insured which may affect claims handling.

For example, underwriters may require the insured to provide back-up power on the project to counter the risk of the project coming offline (and therefore unable to position each turbine appropriately for mitigation purposes) in the event of a Nat Cat occurrence. This back-up power could be provided by diesel generators installed within the turbine itself or a substation. If a loss occurs then the cost of these generators/ back-up power sources will need to be factored into the claim.

Underwriters may also require `T-class' or `typhoon-class' turbines on Asian projects to reflect the region-specific typhoon risk. These turbines are intended to be more resilient than turbines used on European projects. The T-class turbines are intended to stop turning in high winds and are used in conjunction with wide blades with a removable root, which are able to better withstand typhoons. As it stands, however, these turbines are untested and it remains to be seen whether they will actually withstand the forces of a Nat Cat event. There is also no consistency across the Asian countries as to what constitutes a T-class turbine. Chinese projects adhere to different standards to those in Taiwan and T-class in one jurisdiction is not necessarily T-class in another.

There is significant design risk associated with such `T-class' turbines. For example, if the design was not effective then in the face of a serious typhoon a large number of turbines could be damaged. As well as the normal questions regarding the application of the design exclusion (WELCAR defective part, LEG 2 or 3 etc) there would also be a question about whether the series loss clause was intended to be engaged in such a situation, given that the damage will have occurred almost instantaneously at all locations rather than occurring over an extended period of time as is normally the case with serial defects.

Installation vessels may also be at risk from Nat Cat events such that insurers may require the insureds to use semisubmersible jack-up vessels as the jacked-down legs provide additional stability.

A typhoon, or series of typhoons in one season, could cause damage to multiple wind farms. As well as being an accumulation concern for insurers, it would likely lead to a scarcity of repair vessels and either increased day-rates or longer outage periods.

7

4. Marine Warranty Surveyor

The role of the Marine Warranty Surveyor ("MWS") has expanded greatly over the last 20 years, expanding from the original scope of vessel approval to now include every aspect of the offshore construction process. The MWS is the insurer's "eyes and ears" on the project, and when utilised properly they can greatly minimise the risk involved in construction. This is especially important in jurisdictions which are starting out in offshore wind, especially if the early mistakes experienced in Europe are to be avoided.

The role of the MWS is less well-understood in Asia compared to Europe and the US, particularly in relation to the `expanded' scope noted above, with some suggesting that certain developers see the role of the MWS as simply superfluous.

There is a marked difference between the approach in China and Taiwan. In response to previously poor performance on hydropower projects, it is now a Chinese government requirement that there be state supervision on all windfarm projects. These `supervisors' may be seen by the insured in China as adequately covering the role of an MWS such that they see no further value in agreeing to an MWS in addition.

Occasionally the role of the supervisor in China will be more expansive than that of an MWS but crucially, there are unlikely to be any adverse consequences under the policy of not following the supervisor's recommendations. Insurers may therefore find themselves without protection where a breach of the MWS's recommendations results in a physical damage event.

Policies for Chinese offshore wind projects sometimes include a clause limiting cover where an insured departs from the pre-agreed installation and this results in a claim. Whilst such provisions are useful, they are no substitute for a MWS clause as they rely on insurers being able to evidence that there has been such a change, which relies on the insured making the necessary documentation available. In any event, prevention is always better than cure.

Where an MWS is used, there are questions regarding the current expertise of those individuals who may not have worked on many (or any) offshore wind construction projects in the past.

Current market experience in Asia shows that the MWS's involvement will be better received where insurers can demonstrate value to developers by actively defining the roles of the MWS. Insurers should set out the distinct roles of the MWS and the state supervisor where one is required. Insurers can then demonstrate where the MWS can add value and oversee elements of the project which fall outside of the supervisor's remit. For example, an MWS in China will supervise installation methodology where this would not traditionally fall within the scope of the supervisor's role. More generally, insurers can advise the Project of `common issues arising' on European wind farms, and explain by reference to previous examples where the MWS has assisted in mitigating risk.

As above, many claims in the European offshore wind industry are borne out of disputes surrounding the MWS's scope of work. There is also often uncertainty as to what will happen if the contractor fails to follow the recommendations of the MWS, or indeed fails to consult the MWS in the first place. It is important that the MWS understands its powers so that they can warn the assured if their actions could jeopardise their insurance cover.

5. The Project

Insurers should consider the increased potential for claims to be made by principal insureds on behalf of their contractors or sub-contractors. Contractors in China for example are subject to an official ranking system which allows them to be ranked by government authorities according to performance. Where claims are made against the policy, they must be declared as part of this ranking system. Insurance claims may therefore adversely affect a contractor's ranking and as such render them less attractive to a prospective project developer during tender.

For this reason, contractors may be averse to presenting claims and insurers may see the claims profile on the project affected accordingly, with the principal insured making a claim on its contractor's behalf. While the ranking system is unusual and specific to the Chinese market, the ability (and indeed often the requirement) for the principal insured to make the insurance claim is not uncommon in European wordings. Insurers must however be satisfied that the claiming party has title to make that claim in order for it to be properly indemnified for the loss.

Given the importance placed on reputation within the Chinese and Taiwanese markets, the manufacturer may be incentivised to ensure close co-operation with the developer and to remedy any issues arising with their products before these worsen and/or are made public. The manufacturer therefore represents an alternative source of recovery for the principal insured and may further explain the relative absence of claims to date against insurers.

Standard European market insurance wordings refer to manufacturer's warranties and may place an obligation on the insured to seek recourse from the manufacturer first before looking to the policy. Insurers ensure that attempts have been made to claim under those warranties, in line with the general principle that insurers are not guarantors or warrantors of defective products. Such warranty clauses are common in Taiwanese policies, but far less frequent in Chinese policies. This is a missed opportunity.

Where recourse is not sought or obtained from the manufacturer by the insured, insurers may have no recourse; the manufacturer will often be named as an insured and consequently protected from subrogation actions by the insurer.

6. General claims management and communications

Any information that is received from the project will necessarily be in the local language such that international insurers would be well advised to have claims handlers with the corresponding language capabilities on the ground.

Licensing requirements will often mean that insurers are only permitted to use local loss adjusters, who are likely to have less experience of offshore wind claims compared to specialist wind adjusters in Europe. This will add to the time and complexity of settling claims. Reinsurers often choose to appoint a second loss adjuster, typically from one of the well-known international loss adjusting companies in Hong Kong or Singapore to supervise the work product of the local adjuster.

9

Unless they are locally admitted in China/ Taiwan, most insurers who wish to write offshore wind business will only have access at the reinsurance level, and the cedent insurers will often retain little if any risk. Claims control clauses are recognised in both China and Taiwan, but in any event reinsurers would be well-advised to keep in regular contact with the cedant insurers and inform them of all developments on claims and exchanges with the broker/ insured. It is not unheard of for a cedant insurer to settle a claim without reinsurer approval, either because they are unaware of the coverage discussions or have come under commercial pressure to settle the claim regardless of the strict policy wording.

Claims management requirements across the region are likely to be considerably different to those in Europe and should be borne in mind at the outset of any claim notification. For example, in Taiwan the insured must notify the insurer within five days of becoming aware of the occurrence of loss and if, for reasons attributable to itself, an insurer fails to make payment within the time period of 15 days after receipt of the insured's notice, a default interest at the rate of 10% per annum will apply.

In China, there is a mandatory 2 year limitation period for an insured to commence court proceedings following the occurrence of a loss. If the insured does not commence court proceedings before this date then their right of action is lost. Significantly, this deadline cannot be extended by agreement between the parties. This is much shorter than in most European jurisdictions for example in England and Wales the limitation period is 6 years. Whilst most insurance claims reach a resolution well before 2 years, it is not uncommon for complex claims to take longer than this, particularly if a lengthy repair campaign is required or there are complicated engineering issues involved. The effect is that either the insured is forced to commence proceedings to protect their position, which would result in unnecessary legal expense for all concerned, or the parties try and resolve the claim without all the necessary information.

7. Policy wordings

As noted above, offshore wind construction policies in China are typically based on the onshore Munich Re Construction All Risks wording, whereas equivalent policies in Taiwan use the London market WINDCAR/ WELCAR wordings. Both approaches come with their own set of challenges.

(a) China

As noted above, the Munich Re Construction All Risks policy is an onshore wording. In order to make it fit for the purpose of insuring offshore construction projects, the standard Munich Re wording is generally supplemented by an additional set of clauses which relate to the particular risk and challenges experienced on offshore projects.

Whilst these additional clauses go some way to filling in the gaps, many of the provisions that you would normally expect to find on a European wind policy are often absent, including (i) the cable cutting clause, and (ii) the Marine Warranty Survey clause. There is also uncertainty about how common expenses should be allocated for example mobilisation and demobilisation costs where the campaign is performing some work which is covered under the policy and some work which is not.

There are also covers provided which are not common in Europe for example cover for vessel cancellation costs caused by bad weather or other insured perils. In the policies we have seen, the series loss clause is notably shorter and less sophisticated than that seen on European policies.

Having two sets of terms also increases the chances of there being inconsistency and uncertainty. For example, in some policies we have seen the sue and labour clauses are different, with the Munich Re policy requiring "imminence" of damage whilst the additional clauses use a different, potentially broader, test. We note that although wordings are often provided in both English and Mandarin, it is important not to rely purely on the English text as the Mandarin version tends to take precedence.

Further information on Chinese insurance law, claims procedure and disputes is set out at pages 18 to 23.

(b) Taiwan

The WELCAR/ WINDCAR policies will be well known to those insurers who have written offshore wind covers in Europe. They have been developed over a number of years, and whilst there are known uncertainties and pitfalls with the wordings, a market practice has developed in Europe as to the extent and limitations of the cover provided.

However, insurers must be aware that the cover provided by a WELCAR policy written subject to Taiwanese law and jurisdiction could be very different to a WELCAR policy written subject to English law and jurisdiction. This is because the WELCAR policy was written with English law in mind, building on the marine insurance heritage in London. An example is the sue and labour clause. The concept of sue and labour comes from English marine insurance law, and is designed to provide cover where the insured incurs cost in the face of an imminent insured peril in order to prevent or minimise loss. The contentious question is generally over whether a particular peril is "imminent". In England there are centuries of case law on this issue, and it is clear that the peril must be very close indeed in order to trigger cover. In Taiwan, however, there is no such case law or experience, and so the scope of the sue and labour clause is much less certain.

Further information on Taiwanese insurance law, claims procedure and disputes is set out at pages 30 to 35.

8. Risk Mitigation

Bearing in mind the challenges discussed above, what can insurers do to mitigate their risk in relation to offshore wind policies in Taiwan and China? There is no magic bullet, and both markets are likely to go through a period of high uncertainty as they "find their feet", but we suggest that insurers would be well-advised to keep the following in mind:

1.Learn from the lessons in Europe involve colleagues who have experience of the claims record in Europe when writing new projects. There is no need to repeat the early mistakes seen in Europe.

2.Press for the project to employ an experienced MWS, and ensure that the policy includes a robust MWS clause and broad scope of work.

3.If you want a clause to have a particular effect, set that out in the policy. For example, if you wish the insured to lose cover if they breach a MWS's recommendations then this should be set out clearly. This will limit the scope for Chinese and/or Taiwanese insurance law to overrule the underwriter's intention.

4.Ensure that the intended effect of the clause is properly communicated in the translated version of the policy, as the translation will take precedence.

China

China is heavily dependent on fossil fuels, as evidenced by its position as the world's biggest consumer of coal and the second largest of oil.12 Non-fossil fuel energy accounts for only 14.7 per cent of China's energy mix, the majority of which derives from hydro and nuclear power.13

Key facts

Crude Oil Proved Reserves (billions of barrels) Natural Gas Proved Reserves (Tcm) Installed capacity 2018 (wind) New onshore capacity installed in 2018 New offshore capacity installed in 2018 GDP 2018 (US$) GDP Growth 2018 Population Signatory to the Paris Climate Agreement Subsidy regime Top 3 offshore wind farms (operational) SPIC Binhai North H2 SPIC Jiangsu Dafeng H3 Huaneng Rudong Source: 4COffshore, TheWindPower.net

25.93 1

6.02 2 206 GW 3 21.2 GW 4 1.8 GW 5 13,608.15 billion 6 6.6% 7 1.393 billion 8 Yes Yes

400 MW 9 302.4 MW 10 300 MW 11

Total Primary Energy Supply (TPES) by source China 1990

Coal Biofuels and waste Primary and secondary oil Nuclear Hydro Geothermal, solar, wind etc. Natural Gas

Source: IEA World Energy Balances 2018

Total Primary Energy Supply (TPES) by source China 2016

Coal Primary and secondary oil Biofuels and waste Nuclear Hydro Geothermal, solar, wind etc. Natural Gas

Source: IEA World Energy Balances 2018

11

Despite this, China is also a global leader in renewable energy generation, which has become a major focus of government policy14 since the Renewable Energy Law (REL) was passed in 2005 and amended in 2009.15 In 2017 alone, it spent over US$130 billion on reducing its reliance on fossil-fuel based energy and cleaning up and reforming its energy mix 16; according to the International Renewable Energy Agency (IRENA) the country now has over one-third of the world's wind power and solar capacity.17 The results of this reorientation can also be seen in the manufacturing industry, with a number of Chinese wind turbine manufacturers now ranked amongst the top ten in the world. Goldwind Science & Technology Co. Ltd, for example, was one of the world's leading manufacturers of installed capacity in 2016 (6.6 GW).18

This has led to the percentage of renewable energy generation, including wind power, increasing at a faster rate than coal generation over the last few years.19 Notably, wind power in 2017 accounted for 2.7 per cent of the total energy generation but this is set to increase substantially.20 The International Energy Agency (IEA) predicts that wind power capacity in China will reach 1000 GW by 2050. 21

The majority of existing wind installations are onshore, in the North, North-west and North-east of China, and are far from large-load centres22. While China has for a number of years been developing its onshore wind capacity, government policy is now more focused on wind power development in the middle and east of the country, with a particular focus on offshore projects.23 Part of the attraction of offshore wind development is the proximity of the coast to main cities. With its long coastline, China has exceptional resources for developing offshore wind projects.24 The country's first such commercial project, and the first outside Europe, was connected to the grid in 2010.25 The Donghai Bridge Wind Farm located off the coast of Shanghai 26 has a generation capacity of 102MW.27

To begin with, most offshore wind projects in China were intertidal; however in 2011 the National Energy Administration (NEA) and the State Oceanic Administration (SOA) introduced new regulation prohibiting construction within 10 kilometres from shore and at water depths of less than 10 metres in locations where the width of the tidal flat is more than 10 kilometres .28 Offshore wind installation accelerated in 2018 (1.8 GW) bringing the total to approximately 4.58 GW and placing China in third place globally, behind the UK and Germany.29 The new installations were spread across 18 offshore wind farms with half of these in Jiangsu Province, which is the main focus of offshore development in China.30 On 20 December 2018, the 302.4MW Dafeng H3 offshore wind farm was connected to the Chinese electricity grid. It is located approximately 43 kilometres off the coast of the Jiangsu Province which currently makes it the country's farthest offshore wind farm. 31

Power generation

The rate of GDP growth in China is slowing and the country is shifting away from manufacturing towards a more service-based economy.32 This is partly behind the rise in government support for a cleaner energy mix.33 Other contributing factors for this shift are that the Chinese population has become increasingly concerned about air quality in the cities,34 and a recognition that electricity generated from renewables provides greater energy security than finite fossil fuels.35 The country's current trajectory is towards increased renewable energy generation and steady coal generation.36 Following this, the share of coal generation is likely to fall from two-thirds of the current total, to below 40 per cent in 2040.37

The State Grid and China Southern Grid control the transmission, distribution and sale of power in China. Under the current power regime, grid companies purchase power from power generation companies at regulated feed-in tariffs (FIT) and sell power at regulated power sales prices.38

Beijing

Shandong 1

Xi'an

Jia2ng3su 4

Chengdu Chongqing

Shanghai Zhejiang

5

Guilin

Hong Kong

Macau

Top 5 offshore wind farms

(Operational) 1. SPIC Binhai North H2 2. SPIC Jiangsu Dafeng H3 3. Huaneng Rudong North & South 4. Jiangsu Longuan Chiang Sand H1 5. Guodian Zhoushan Putuo District 6 Zone 2 Source: 4COffshore, TheWindPower.net

(400 MW) (302.4 MW) (300 MW) (300 MW) (252 MW)

13

Energy policy

The NEA was established in 2008 with responsibility for regulating the renewable energy industry,39 whilst the REL set general principles on renewable energy. As aforementioned, the latter was subsequently amended in 2009.40 In 2010, the first national offshore wind power project was connected to the grid41 and the first round of concession projects were made, marking strong support from central government.

More recently, the government has pushed specifically for offshore wind development, which has grown more attractive as space for onshore and nearshore wind turbines becomes scarce.42 The government launched its 13th Five Year Plan (FYP13) for National Economic and Social Development (2016 to 2020) in 2016 which proposed an `energy revolution'.43 The FYP13 sets out China's offshore wind policy and includes a policy to accelerate the research and development of offshore wind power along with the aim of achieving on-grid capacity of 5GW by the end of 2020.44 The authorities had also been lowering the feed-intariff (FIT) for onshore wind projects in an effort to make offshore wind development more appealing.45

As a broader governance objective, the FYP13 affirms that the national policy structure ought to be improved so as to simplify the approval of wind power projects' supporting documents and improve the efficiency of wind power development and utilisation.

On 25 April 2017, the National Development and Reform Commission (NDRC) and the NEA released a further paper titled "Energy Supply and Consumption Revolution Strategy (2016-2030)".46 This document provides an overview of the country's energy sector targets for 2030 and builds on the aforementioned FYP13. The existing targets are broadly recast. By 2050, more than half of primary energy consumption is intended to come from non-fossil energy.47

China has various offshore wind development investment strategies. The government encourages foreign companies to visit and invest in Chinese wind power generation.48 Offshore wind asset financing reached US$10.8 billion in 2017 (up 180 per cent).49 Although China is advanced in terms of onshore wind power, there is a lack of experience and expertise for offshore turbine construction, which is cited as a barrier to sector growth.50 Government-owned power producers have recently begun making significant investments in large wind projects in Europe, which may help them to accumulate wind power knowledge and overcome this obstacle.51

The government's push for more offshore wind generation has resulted in an increase in projects being constructed and connected to the grid. In 2016, Phase 1 of the Binhai North Offshore Wind Farm was completed, with a capacity of 100 MW.52 Phase 2 was connected to the grid in 2018 with capacity of 400 MW. The Huaneng Rudong project located roughly 14 kilometres off the city of Nantong in the Jiangsu Province was put into operation in 2017 and has an installed capacity of 300 MW.53 Construction is currently underway on what will be the country's largest wind farm. Located 20 kilometres offshore of Yangdong District, Guangdong, the Yangjiang Nanpeng Island wind farm is expected to be connected fully to the grid by the summer of 2020.54

Subsidy regime

The development of China's wind industry has partly been made possible because of the government's FIT scheme. A range of FITs for wind development has been available, depending on the location of the project, with offshore wind generating a higher tariff than onshore and nearshore wind power generation. However, on 1 January 2019, FITs were replaced by an auction mechanism55, with power price commanding at least a 40 per cent weighting in a developer's competitiveness assessment.56

Any offshore projects with assigned developers will still be able to access them but any new projects approved from 2019 will be subject to auction.57 This change of policy is part of the government's bid to reach grid parity - the point when renewable energy costs the same or less as a conventional energy form58 - by 2020. 59

In addition, the renewable energy industry is supported by the government through a variety of tax and fiscal incentives, including possible exemptions from corporate income tax.60 For renewable energy projects listed in the "Guidance Catalogue for Renewable Energy Industry Development", which includes offshoreconnected wind power generation in the early stage of commercialisation,61 favourable loans are available. 62 It may also be possible to obtain a subsidy for the construction of wind turbines.63

In 2016, the NRDC and NEA began a push to promote the consumption of renewable energy power and reduce curtailment rates. Management rules were issued in March 2016 to guarantee the purchase of renewable energy generated power (excepting hydropower).64 China has since published a draft renewable energy obligation policy which imposes mandatory quotas for hydro and non-hydro renewable electricity consumption on each province.65 Regulators in China are keen to reduce the renewable energy sector's reliance on state subsidies by making it easier for renewable power providers to increase profits. In August 2019, China's parliament approved the dispatch of inspection teams to ensure that renewable energy resources are being prioritised by regional governments.66

Geographical considerations

China has relatively abundant wind energy resources, primarily due to its positioning in the monsoon zone and because of its lengthy coastal line along its south and east. This is opportunistically where most of the demand for electricity lies.67 Annual wind power density reaches above 200 W/m2 within the areas 10 kilometres from the coast.68

Water depth for China's offshore wind development is unlikely to be more than 20 metres. 69 An assessment carried out by the China Meteorological Administration indicates that offshore wind power at water depths less than 20 metres has 750 GW potential capacity.70

The turbines of the Donghai offshore wind farm on the east coast stand at 8-13 kilometres from the shoreline at an average water depth of 10 metres.71 The seabed on which the wind farm is built is soft and made up of thick sediment like much of China's coastline which presents a challenge for turbine construction, and means the monopile foundations that are traditionally used for offshore projects are largely unsuitable.72 The Donghai wind farm uses highrise pile cap foundations to support turbines instead.73 Of the offshore wind farms with top capacity, foundations vary between monopile74 or a mixture of monopile and highrise pile cap. 75

China has a weak and unconsolidated upper layer of muddy and silty clay for the first 25 metres of seabed with fine and silty sand underneath that. Accordingly, high-rise pile caps are the most commonly used foundation type as monopiles are unsuitable for that type of terrain. High-rise pile caps provide the lateral stiffness required to provide the necessary strength to the structure. They are a derivative of an onshore foundation type and suitable for soft soils and shallow waters. They commonly use eight piles as the basic pile, each 80 metres long, and a concrete platform to support the structure. They are more expensive than other foundations and have a large impact on the capital investment required. The Shanghai Donghai Bridge Offshore Wind Farm was the first to use these foundations (and indeed China's first large-scale offshore wind project).

In 2016, Ramboll were awarded a EUR 4 million contract to design a 400MW offshore wind project in China (SPIC Binhai North Phase 2 offshore project). The project site is in an earthquake-prone zone with soft soil. The seabed consists of deposits washed out by the large rivers, which poses a high risk of soil liquefaction.

This led to the design and construction of the foundations that will be placed 60 metres below the seabed in order to support turbines in depths of 14 to 18 metres.76

As well as providing challenges in relation to foundations, the geology of China's seabed presents issues in relation to installation. The soft seabed conditions are not well-suited to jack-up vessels which dominate the European market. There is therefore a need for more challenging floating installation vessels. China's soft and silty seabed is different to the soil conditions of Europe making it difficult to leverage EU experience.

While Jiangsu Province has the most offshore wind installations, the industry is also focussed on Fujian Province.77 Under the 13th FYP for wind, Fujian is targeting 900 MW grid connection by 2020, and for a further 2GW to be under construction.78 This area is subject to regular seismic activity so developers are considering floating installations.79

Licensing of offshore wind farms

Power companies are required to obtain electric power business permits issued by the NEA, which regulates the energy industry.80 A company applying for an electric power business licence must demonstrate that it has the financial capability and personnel, along with the required experience.

There are various stages wind farm project investors must go through to obtain approval for development. At the planning stage they must sign a development agreement with the local government, and make a subsequent filing to the state for approval. Investors must also conduct a feasibility study.81

In 2017, 13 offshore wind projects valued between US$600 million and US$1.2 billion were given the go-ahead, including the 400MW CGNWP Yangjiang Nanpengdao array.82

15

17

Infrastructure

Although China has the most wind installations globally, it lags behind the US in wind power consumption because of high curtailment levels. These are due to most installations being in the sparsely populated north which is far from large-load centres and which has inflexible grid capacity.83 The focus has now shifted to offshore wind development, which is touted as a possible solution to the regional energy imbalance.84 Because offshore farms on the east coast are near to populous areas, grid infrastructure is already developed. The main infrastructure issue lies with getting the energy from the installation to the shore.85

Chinese offshore wind developers are now aiming to construct turbines at large distances from land as nearshore space becomes increasingly unavailable due to existing projects. Huadong Engineering Corporation is planning a 1.1 GW offshore windfarm 90 kilometres off the coast of Jiangsu Province in eastern China,86 but offshore projects this far from shore create difficulties in how to transport electricity over such large distances. To deal with this, China is to install its first high-voltage direct current offshore wind substation to export offshore power from the windfarm to the mainland,87 avoiding the need for traditional submarine high-voltage alternating current cables. The latter become inefficient when transporting large amounts of electricity over large distances.88

Reactive Converter Stations (RCS)

RCS are specialised types of substations that form the terminal equipment for a high-voltage direct current transmission line. They convert direct current ("DC") to alternating current ("AC") or vice versa. When using AC transmission, losses of power rise as voltage, capacitance and cable length increase. Beyond 100 to 150 kilometres (known as the critical length) there will be no capacity left for active power transmission. Traditionally, transmission capacity is increased by increasing the voltage level.

However, reactive power increases with the square of the voltage so an increase in voltage reduces the critical length.89 RCS are therefore used to convert the power generated by turbines into DC in order to transport it over long distances.

In China, all prospective offshore sites within 10 kilometres of the shore have now been exploited. As such, to meet its 2020 target, China now has to explore locations that are further offshore. As mentioned above, for example, Huadong is planning to build a 1.1GW offshore about 90 kilometres off the coast of Eastern China. DNV GL who are coordinating with Huadong in building this installation, plan on building China's first high-voltage DC offshore wind substation. As installations move further away from the shore, the requirements for RCSs will increase.90

Floating turbines

As Chinese wind installations move further offshore and into deeper waters, using fixed offshore wind turbine foundations becomes increasingly impractical and contributes a substantial increase to project costs with complex design and construction issues. Floating turbines are seen as the solution to this.

There are several different types of offshore floating turbines including: spar foundation, semi-submersible foundation, TLP foundation and barge foundation. It is generally thought that the TLP foundation and semi-submersible foundations are the most suitable for floating wind turbines in the East China Sea based on their good adaptability to water depth and stability.91

As well as China, South Korea's state-owned National Oil Corporation (KNOC) is collaborating with Equinor to explore floating offshore wind turbine projects. Equinor and KNOC signed a memorandum of understanding earlier this year. This includes the planned development of a 200MW floating offshore wind project 58 kilometres off the coast of Ulsan City. Further, Japan has already implemented some floating offshore turbines, for example the Fukushima and Goto demonstration projects.92

Flying turbines

Airborne wind turbines have been in development for several years. For example, in December 2014, Japanese telecommunications company SoftBank Corporation invested USD 7 million into Altaeros Energies Inc to support the commercial development of the startup's high-flying wind turbine technology.93 Flying turbines do not require huge investment in terms of production or installation and are seen as a possible solution to the inconsistency of wind patterns onshore and offshore. The flying turbines are designed to garner the more consistent and strong winds thousands of feet above the ground.94

Storage

Storage of energy produced by offshore wind installations is still in its infancy. The Batwind, the world's first battery for the offshore wind industry, was installed by Equinor in mid-2018,95 but such technology has yet to be implemented in South East Asia. There have, however, been some developments in this sphere. For example, in December 2017 Tokyo Electric Power Company (Tepco) bought a 50 per cent share in Battery Utility of Ohio, a renewable energy battery system firm.96 Further, earlier this year, it was announced that Saft, a subsidiary of Total, agreed to form a joint venture with Chinese company Tianneng Energy Technology to boost output of lithium-ion batteries used for energy storage.

Natural catastrophes

China is vulnerable to various natural catastrophes, including earthquakes, tsunamis, flooding, landslides, and typhoons. The typhoon season in China normally runs from May to November, affecting southern and eastern coastal regions in particular,97 meaning any offshore projects must be built to withstand typhoon damage. Typhoon Saomai devastated the onshore Cangnan wind farm in 2006, destroying 20 out of 28 turbines,98 while in 2013 Typhoon Usagi knocked out 17 wind turbines in south China's Guangdong Province.99

These extreme events pose a severe risk to offshore development, partly because short "weather windows" make projects difficult to complete.100 The global insurance industry has recognised the growth potential for China's offshore wind sector, but also the risk involved with wind farm construction.101 Accordingly, some insurers are now offering risk management guidelines.102

19

General insurance principles

Question

Chinese law position

What is the main legislation/code for insurance and reinsurance contracts in China?

The central piece of legislation is the PRC Insurance Law (last amended in 2015), which is applicable to all non-marine insurance. For marine insurance, the applicable legislation is the PRC Maritime Law (1993).

Where the above two enactments are silent on any specific issue, the operation of Chinese allows the court to apply the more general PRC Contract Law (1999) or the PRC General Part of Civil Code (2017). It is expected that the codification of the Chinese civil law will be completed by early 2020. The forthcoming Civil Code will supersede all previous primary legislation on contract, tort, property, etc and will be applied to decide more general issues where the insurance statutes are silent.

In the context of an "all risks" policy, does the insured have to prove that the loss was accidental?

Who has the burden of proof?

There is no express requirement the loss must be accidental but Article 2 of the PRC Insurance Law states that an insurance incident should be a `potential incident', which implies fortuity or accident. In judicial practice, the courts apply the requirement, may not be applied very strictly.

The insured has the prima facie burden of proof to prove that the loss was accidental. The standard of proof in China's civil litigation is, literally, `high probability', which is in essence the same as balance of probabilities or preponderance of evidence.

How does Chinese law interpret "damage" Damage is understood to be limited to physical damage, i.e. physical harm done

for insurance purposes?

to the subject matter.

It is debatable whether damage can be extended to economic loss, i.e. depreciation of the subject matter in the absence of physical damage.

Is there a concept in China which allows the insured to be reimbursed for costs incurred to avoid or mitigate loss, once a physical damage event has occurred?

Yes, the insured has the obligation to avoid or mitigate loss by taking necessary measures (Article 57 of the PRC Insurance Law).

The insured is entitled to claim reimbursement for the measures it has taken to avoid or mitigate loss, but the reimbursement shall not exceed the insured amount.

Question

Chinese law position

Do the concepts of `gross negligence' and `wilful misconduct' exist in Chinese law?

The concept of `gross negligence' occurs in various Chinese enactments. In tort, the central piece of legislation is the PRC Tort Liability Law (2007), where `gross negligence' occurs twice. These occurrences are both strictly defined circumstances: (1) in case of liability for animals, the victim's gross negligence (e.g. provocation of the animal) may diminish or even negate the animal keeper's liability; and (2) in case of liability for dangerous goods, the victim's gross negligence (e.g. unlawful tampering with the goods) may diminish (not negate) the dangerous goods user's liability. `Negligence' is also a concept in tort law, which is usually used as the antonym of `intention'. There is no statutory definition for either `negligence' or `gross negligence'.

`Gross negligence' or `negligence' also occur in other legislation.

`Wilful misconduct' rarely occurs in Chinese law. As far as we know, it is only used in the context of juvenile delinquency or public order law (e.g. gambling, use of illegal drugs, etc).

Does the English law principle of `betterment' exist under Chinese law?

Under Chinese law, the concept of `depreciation' is usually used to achieve the same effect.

In case of total loss and replacement of an item which is not entirely new (e.g. 40% of its value has been depreciated), the insured can buy a brandnew item (e.g. a tyre) but insurer will only pay for the undepreciated part of the lost item.

In case of repairment, the concept of depreciation is not usually used because it is presumed that repairment, unlike replacement, can be done to the effect that the damaged item is restored to the status immediately prior to the accident.

Is there an automatic right of subrogation Yes.

once the insurer has indemnified the insured?

Once the insurer makes the insurance payment, it is automatically subrogated to the insured's claim against any potentially liable third party for the accident.

There is an important restriction to the insurer's subrogated claim where the insured's claim is `personal', the insurer is barred from a subrogated claim against the liable third party. For instance, if a third party causes personal injury to the insured, the insurer cannot sue the tortfeasor by way of subrogated claim because the insured's claim against the tortfeasor is deemed personal under Chinese law.

The insurer sues in its own name in subrogated claims, not in the name of the insured.

21

Policy wordings

Question

Chinese law position

Are `claims control clauses' and `claims cooperation clauses' recognised under Chinese law?

Yes, the law is silent on it but this is the usual practice.

Do `follow the settlement' clauses have a Yes, the law is silent on it but this is the usual practice, i.e. back-to-back arrangements. recognised meaning under Chinese law?

Are the traditional defects wordings (i.e. LEG/DE) recognised in China?

Yes, it is usually referred to as `inherent defects' in the exclusion clauses.

If so (i) is there any legal guidance in relation to such clauses; and/or (ii) is there a definition of `part'?

No particular legal provision on that, but the PRC Insurance Law provides guidance on all exclusion clauses at Article 17:

`For those clauses exempting the insurer from liability in the insurance contract, the insurer shall sufficiently warn the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain those clauses to the insurance applicant in writing or verbally. If the insurer fails to make a warning or express explanation thereof, those clauses shall not be effective.'

Are `cut through' clauses enforceable? No, `cut through' is expressly prohibited by the PRC Insurance Law (Article 29).

Procedure / Disputes

Question Will arbitration clauses be upheld by Chinese courts?

Under Chinese law, are there any legal and/or regulatory restrictions that require the relevant local insurer/ cedant to handle, or be involved in, claims handling?

Chinese law position

Yes. For purely domestic disputes, an arbitration clause must state the following elements:

1. The intention to arbitrate

2. Subject matter of arbitration

3. Chosen arbitration institution

Chinese courts support arbitration, which have the power to grant interim remedies (e.g. preservation of assets / evidence) upon the parties' application. In addition, Chinese law does not recognise ad hoc arbitration as a means to settle purely domestic disputes.

If the dispute has a foreign element, foreign arbitration is permissible by Chinese law / courts, in which case, the usual international practice (e.g. ad hoc arbitration) should prevail.

No, foreign insurers can handle claims locally so long as they set up a legal entity in China. If this requirement is met, they have the same rights as Chinese insurers (such as PICC).

23

Procedure / Disputes (cont.)

Question What is the `limitation period' within which proceedings must be commenced for contractual disputes under Chinese law?

Does the principle of `without prejudice' exist in your jurisdiction? If not, how are settlement discussions with an insured/insurer kept confidential? What methods of alternative dispute resolution are commonly pursued in China as an alternative to litigation and arbitration?

Chinese law position

Marine insurance 2 years, which starts running from the date of accident.

Non-marine insurance (property) 2 years, which starts running from the date on which the insured knew or ought to have known the occurrence of the accident.

Non-marine insurance (life) 5 years, which starts running from the date on which the insured knew or ought to have known the occurrence of the accident.

Subrogated claims

Marine insurance 1 year, starting from the date on which the insurance payment is made.

Non-marine insurance 3 years, starting from the date on which the insurance payment is made.

Yes, but to a limited extent.

The principle is recognised by the Chinese courts to the extent that a litigant's offer to settle shall not be used to its prejudice in the legal proceedings. This means that settlement offers given in pre-litigation settlement negotiations do not have the same protection.

Traditionally, the only two methods of dispute resolution are litigation and arbitration.

The Supreme People's Court has recently launched a pilot scheme that settlement agreements administered by lawyers are judicially enforceable. But it is still a pilot scheme experimented in some parts of the country, not nationwide, and the practice has not been enshrined in law.

Question

Chinese law position

Is there a specific insurance court or commercial court for insurance-related matters?

No, there is no specific insurance court in China. However, all marine-insurance matters must be heard by Maritime Courts (there are eleven of which in China, situated in all major ports). Appeals to marine insurance courts are to be heard by the provincial level higher people's courts.

What is the court expert procedure in your judicial system i.e. is there a single court-appointed expert or are the parties allowed to engage their own experts?

Parties are allowed to engage their own experts.

Are there any claims management requirements and how strictly are these enforced. Specifically:

i. What are the rules on notification?

ii. Is there a requirement to reserve rights?

iii. Are there any consequences to late payment?

1. The insured has the obligation to notify the insurer of the accident `in a timely manner' (Article 21 of the PRC Insurance Law).

2. It appears that, once the insured has duly notified the insurer and provided the required documents, the insurer must make a clear decision as to its liability `within 3 days' (Article 24 of the PRC Insurance Law). This wording appears to eliminate any room of uncertainty associated with reservation of rights. In practice, however, it is not uncommon for an insurer to make a much slower decision, leaving the insured in doubt for a prolonged period.

3. Limitation period for marine or non-marine property insurance is 2 years, as indicated above.

4. The insurer will be punished for late payment by the court. It will be ordered to pay the interest from the date on which it should have made the payment to the date of actual payment.

The information provided in this guide is general and might not apply in a specific situation. Up to date legal advice should always be sought from suitably qualified professionals.

Taiwan

Oil is the dominant fuel in Taiwan's energy mix. In 2018, it accounted for approximately half of total primary energy supply according to the Taiwan Bureau of Energy (BOE). Coal continues to play an important role occupying 29.38 per cent of total primary energy consumption in that same year, followed by natural gas (15.18 per cent) and nuclear power (5.38 per cent).10 Notably, Taiwan relies heavily on imported energy to sustain its power supply, with imported energy occupying approximately 98 per cent of the total supply of primary energy.11

Key facts

Crude Oil Proved Reserves (billions of barrels) Natural Gas Proved Reserves (Tcm) Onshore installed capacity (wind) Offshore installed capacity (wind) GDP 2018 (US$) GDP Growth 2018 Population Signatory to the Paris Climate Agreement Subsidy regime Offshore wind farms (operational) Formosa I Offshore wind owners (of Formosa I) Macquarie Capital (50%) rsted (35%) Swancor Renewable (15%)

0.00238 1 0.006230 2 707 MW 3 8 MW 4 589.39 billion 5 2.6% 6 23.6 million 7 No Yes

8 MW 8

8 MW 9

25

Total Primary Energy Supply (TPES) by source Taiwan 1990

Coal Natural Gas Nuclear Hydro Geothermal, solar, wind etc. Biofuels and waste Primary and secondary oil

Source: IEA World Energy Balances 2018

Total Primary Energy Supply (TPES) by source Taiwan 2016

Coal Natural Gas Nuclear Hydro Geothermal, solar, wind etc. Biofuels and waste Primary and secondary oil

Source: IEA World Energy Balances 2018

Taiwan has been exploring its renewable energy potential for a number of years. The then-government announced in 2009 that it would invest T$45 billion (US$1.4 billion) in the island's domestic renewable energy sector in an attempt to help the sector grow nearly eight-fold by 2015.12 In the same year the government passed the Renewable Energy Development Act (REDA) to, among other things, encourage renewable energy use, increase energy diversification and improve environmental quality.13 In April 2019, the Legislative Yuan passed amendments to REDA in which it increased the renewables target to 27 GW by 2025.14 Additionally, the Taiwan Ministry of Economic Affairs (MOEA) is now to review set renewable energy development goals in 2020 and 2021 and to publish the proportion that each source of renewable energy should contribute to the overall target.15 Of this, a significant portion of this projected renewable energy generation is to come from offshore wind, as developers seeking a foothold in the Asia Pacific target Taiwan.16 Under REDA, offshore wind power systems are those "installed in waters outside the subtidal line".17 The island's offshore wind capacity is targeted to expand to 5.5 GW by 2025;18 beyond this, Taiwan has set an indicative target of 10-17 GW by 2030.19 As part of this expansion, the MOEA is aiming to invest US$23 billion in both offshore and onshore wind projects by 2025.20 It is estimated that by 2030, on the basis of an average turbine of 8MW and half the available wind field being in use, offshore wind energy in the Taiwan Strait could generate a capacity of approximately 24 GW per year.21

It is necessary for Taiwan to develop its offshore wind power rapidly to attain the energy security it needs. The country has an acute energy supply problem, and a power outage in August 2018 impacted millions across the country.22 Critically, there is an energy supply mismatch; demand on the north exceeds local generation, and the reserve margin has been decreasing steadily since 2009.23 In order to address this bottleneck, the government is aiming to increase overall capacity (i.e. both from renewable and non-renewable sources) by 20,089 MW by 2026.24

The first offshore wind farm in Taiwan started commercial operations in April 2017 and achieved financial close in June 2018.25 The Formosa 1 offshore wind farm has an 8 MW capacity and is located between 2 kilometres and 6 kilometres off the Miaoli Coast in the northwest of Taiwan.26 Phase II of the project will consist of 20 turbines with a total capacity of 120 MW. Phase II is currently under construction and is scheduled to be fully commissioned by early 2020. As of September 2019, 10 units had been erected with 6 now producing power. 27

Power generation

In 2018, the gross power generation in Taiwan reached 275,577.9 GWh. Thermal contributed 84.15 per cent (coal-fired, gas-fired and oil-fired power stations) with nuclear providing 10.05 per cent.28

State-owned Taiwan Power Company (Taipower) is the pre-dominant energy producer in the country and is under the control of the MOEA. Taipower previously held a monopoly on electricity supply but the Electricity Act was amended in 2017 to allow for the liberalisation of the renewable energy market.29 Accordingly, private investment in the sector is now possible.

3.8 GW of grid capacity with a fixed feed-in tariff (FIT) has been allocated to eleven offshore wind project developers using the `Guidelines for Grid Allocation' published by the BOE in January 2018.30 Developers made bids to the BOE, which based its selection on a range of criteria such as construction capability and financial capability.31 In June 2018, the remaining 1,664 MW of capacity were awarded in an auction.32

Energy policy

Taiwan is still heavily reliant on oil, coal and nuclear power but the current administration led by President Tsai Ingwen has set itself ambitious targets for renewable energy generation. President Tsai Ing-wen had previously laid out plans for Taiwan to both reduce its reliance on coal, and to completely phase out nuclear power. In respect of the latter, the objective was for all existing nuclear reactors to be retired by 2025.33 However, in November 2018 a referendum was held in which the majority of voters voted to remove this legally binding deadline.34

Notwithstanding the result of the referendum, and subsequent removal of the deadline from the Electricity Act 2017 in May 2019, the Taiwanese government remains steadfast in maintaining the 2025 deadline.35 Renewable energy generation is set to supply 20 per cent of Taiwan's power supply by 2025 under the current energy plan,36 with between 6.5 and 10 GW installed renewable energy capacity by 2030.37

As part of Taiwan's recent efforts to transition towards a more balanced energy mix the government is supporting an increase in wind power generation with a focus primarily on offshore development projects. One of the reasons for targeting offshore development is because of the limited number of onshore locations available for additional wind capacity; this is in part due to the western coast of Taiwan being a densely populated region.38

Geographical considerations

Taiwan's offshore wind power market has substantial growth potential. The country is able to exploit the shallow Taiwan Strait, which sits between the island of Taiwan and mainland China. It averages at 180 kilometres wide and approximately 300 kilometres in length.

This is where the majority of the offshore wind farm projects will be located, an area where the average wind speeds are greater than 10 m/s.39 In terms of existing projects, including those under development, 4C Offshore has rated one Taiwanese project as having the fifth highest wind speeds globally.40

Whilst the Taiwan Strait presents a unique opportunity for commercial wind farm development, the weather is prone to frequent changes including strong tidal currents, typhoons and monsoons.41

Subsidy regimes

The REDA, introduced in 2009, establishes a number of government subsidy schemes to incentivise an increase in installed renewable energy capacity. FIT and a Tariff Setting Method have been set up, which are regulated by REDA, and apply to a variety of renewable technologies including onshore and offshore wind.

The offshore wind developers are required to enter into a 20year Power Purchase Agreement (PPA) with Taipower which provides a FIT which is set on the PPA signing date. The BOE sets the FIT each year. In 2019, the FIT (offshore wind) is an average of TWD 5.5160/kWh (US$ 0.1788/kWh) for 20 years, with the first 10 years being TWD 6.2795/kWh (US$ 0.2036/ kWh) and the remaining 10 years being TWD 4.1422/kWh (US$ 0.1343/kWh). The FIT for 2019 equates to a 5.7 per cent reduction from 2018.42

In order to promote offshore wind power, the Thousand Wind Turbines Project (TWTP) was formed with the primary goal of increasing the number of land and offshore wind turbines. The TWTP was approved by the Executive Yuan in 2012 and is overseen by the BOE, under the MOEA. The TWTP assists with the removal of regulatory obstacles to investment and provides technical assistance to facilitate private sector investment.43 The program has three phases: (i) demonstration round; (ii) Zones of Potential; and (iii) Zonal Development.

Within the Demonstration Stage, the Taiwanese Government contracted to three projects, one of which was the Formosa 1 project. In July 2015, as part of phase two, Zones of Potential, the BOE released 36 sites for the potential development of offshore wind farms, with 21 of these situated in waters off Changhua in the Taiwan Strait. In phase three, Zonal Development, the undeveloped offshore windfarms in Taiwan's territorial waters will be developed into selfsustaining projects on a commercial scale.

27

Licensing of offshore wind farms

Project developers must obtain an electricity license to operate an offshore wind farm project and there are various stages developers must go through. This includes approval by the Environmental Protection Administration (EPA) and attainment of an Establishment Permit from the BOE. Additionally, offshore wind developers must enter into a PPA with Taipower.

This licensing process presents a difficult barrier to entry, and it appears that a number of projects have been caught up in the administrative requirements. After Formosa 1 received its operating license in 2017, it appeared that additional projects would soon follow suit.44 However, after rsted received EIA approval in late-2017 for its Changhua projects it subsequently faced extensive delays in receiving its Establishment Permit the next step before a PPA can be signed with Taipower.45 That permit was only obtained in January 2019, with the PPA signed soon after. The timeline for other projects, including Yunlin and Formosa itself, has shown that developers can expect to wait at least 36 months between the approval of the EIA and commencement of construction.46

It is also noteworthy that the entire licensing process is handled by the MOEA. Although it was intended that the MOEA would designate an appropriate administrative agency to manage licensing of renewables projects, it has not yet done so.47 The result is that developers only have recourse to one, central body regarding the timing and approval of their applications.

In terms of the risk to GDP posed by natural disasters and climate, Taiwan ranks no.1 in the world according to the Lloyd's of London City Risk Index 2018.48 The Taiwanese capital's top two natural catastrophe risks are tropical windstorm and earthquake and it is estimated that Taipei could lose US$ 8 billion annually to the former.49 The region is considered to be incredibly vulnerable to natural catastrophes, including typhoons, earthquakes, landslides, floods, and debris flow.50 According to the National Science and Technology Program for Hazard Mitigation, on average the island is hit by three to four typhoons a year. Typhoon and flood events have resulted in significant economic losses to the region over the past two decades.51 Accordingly, offshore wind power installations must be suitably designed and maintained to withstand these conditions during the operational lifespan of the project.52

Taipei Hsinchu City

1 Taichung City

Hualien County

Chiayi City

Tainin City

Kaohsiung City

Offshore wind farms

(Operational) 1. Formosa 1 Source: 4COffshore, TheWindPower.net

(8 MW)

29

31

General insurance principles

Question

What is the main legislation/ code for insurance and reinsurance contracts in Taiwan?

In the context of an "all risks" policy, does the insured have to prove that the loss was accidental?

Who has the burden of proof?

Taiwan law position

The Insurance Act. In addition, for consumer protection purposes, the Insurance Regulator has promulgated a set of model contracts for various types of insurances stipulating the terms & conditions which in principle shall be adopted by the insurance contracts.

In principle, the insured has to prove that the occurrence of loss is to be covered by the insurance policy.

However, where the insured has proven the occurrence of a fortuitous loss, the burden of proof moves to the insurer to prove any exclusion in the policy on which it may wish to rely.

How does Taiwan law interpret "damage" for insurance purposes?

Is there a concept in Taiwan which allows the insured to be reimbursed for costs incurred to avoid or mitigate loss, once a physical damage event has occurred?

The definition of "damage" for insurance purposes will be determined by reference to the definition of damage under the Civil Code. This includes both actual damage and lost profits (Article 216 of the Civil Code).

The Supreme Court in Taiwan has ruled that, in a property loss, the definition of actual damage refers to the loss/decrease of the fair market value.

We note however that the concept of "physical damage" in the context of material damage cover is not codified as a matter of law in Taiwan.

Yes. Article 33(1) of the Insurance Act states that the insurer is liable to reimburse the insured for expenses resulting from any necessary action taken to avoid or mitigate damage. Even if the combined total of reimbursement and indemnification exceeds the total insured amount, the insurer shall pay the full combined amount.

Question

Taiwan law position

Do the concepts of `gross negligence' and `wilful misconduct' exist in Taiwan law?

Yes. As mentioned, concepts under Civil Law are widely adopted in insurance matters in Taiwan. Pursuant to Article 64 of the Insurance Act and Article 222 of the Civil Code, the concepts of gross negligence and wilful misconduct are recognised.

As to the specific definition of gross negligence and wilful misconduct, we will normally refer to the case law, according to which:

1. in general, wilful misconduct refers to a circumstance in which "a party foresees the result of loss and causes it to occur". According to Article 29(2) of the Insurance Act, damage due to misconduct by the insured shall not be indemnified under Taiwan law;

2. "gross negligence" is defined as lack of care of an ordinary person. According to Article 29(2) of the Insurance Act, damage as a result of gross negligence shall be indemnified.

Does the English law principle of `betterment' exist under Taiwan law?

Despite not being explicitly stipulated, under Taiwan law this principle is recognised as long as it is explicitly specified in the insurance contract. Normally in the insurance contract, the insurer will reserve the right to choose the means of indemnification.

Is there an automatic right of subrogation The insurer has an automatic right of subrogation upon payment of an indemnity

once the insurer has indemnified the

by the insurer. Article 53 of the Insurance Act provides that if an insured has a

insured?

right to claim indemnification from a third party due to an occurrence of loss

for which the insurer bears insurance liability, the insurer may, after paying

indemnification, be subrogated to the insured's right of claim against the third

party. However, the amount of the subrogated claim which the insurer may

claim shall not exceed the amount of the indemnification paid to the insured.

In addition, it is also ruled that in the case that the aforementioned third party causing the loss or damage suffered by the insured is a family member or employee of such insured, the insurer does not have the right of subrogation upon payment.

However, in the case that such loss or damage resulted from the wilful misconduct of such family member or employee, the aforementioned rule does not apply and thus the insured has the right of claim by subrogation.

33

Policy wordings

Question

Taiwan law position

Are `claims control clauses' and `claims cooperation clauses' recognised under Taiwanese law?

Yes, both "claims control clauses" and "claims cooperation clauses" are recognised under Taiwan law.

Pursuant to Article 93 of the Insurance Act, a settlement between the insured and insurer is not binding on the reinsurer who was not afforded an opportunity to participate in the settlement if the reinsurance contract clearly stipulated that the reinsurer's involvement is required.

Do `follow the settlement' clauses have a "Follow the settlement" clause does not have a recognised meaning under Taiwan recognised meaning under Taiwanese law? law. However, this concept has been widely adopted in the insurance sector in

Taiwan, in particular given the fact that most reinsurance policies are governed by foreign laws. This has become part of the good faith principle under Article 148 of the Civil Law of Taiwan.

Do you have any specific defect wordings (for example the `LEG' or `Defective Part' clauses) which are typically incorporated into insurance policy wordings?

There are no specific defect wordings in Taiwan.

Offshore wind policies in Taiwan tend to use London defects provisions, for example LEG clauses and WELCAR defective part.

If so (i) is there any legal guidance in relation to such clauses; and/or (ii) is there a definition of `part'?

There is no definition of the term `part' under Taiwan law for the purposes of interpreting defective part wordings.

Are `cut through' clauses enforceable?

"Cut through" clauses are recognised and enforceable as long as it is agreed upon both in the original insurance policy and the reinsurance policy, pursuant to Article 40 of the Insurance Act.

Procedure / Disputes

Question

Taiwan law position

Will arbitration clauses be upheld by Taiwan courts?

Yes. They are enforceable as long as they meet the requirements of the Arbitration Act. According to Article 4 of the Arbitration Act if one party refuses to follow the arbitration agreement and thus files a lawsuit, the court shall, under the request of the adverse party, give an order to suspend the lawsuit and order the plaintiff to apply for arbitration within a specific period of time. However, if the wording of the arbitration clause is considered as "optional" the majority opinion of the court is that it depends on who exercises the option (arbitration or lawsuit) first, and the other party must then follow.

Notwithstanding the above, please note that, with reference to the US model, Taiwan has promulgated the Financial Consumer Protection Act under which the financial ombudsman service scheme, as a statutory ADR, will apply to individual consumers. Thus, the dispute with individual consumers is required to be reviewed by the ombudsman body before being arbitrated.

Under Taiwan law, are there any legal and/or regulatory restrictions that require the relevant local insurer/ cedant to handle, or be involved in, claims handling?

The Insurance Act does not stipulate to what extent a reinsurance company can or must monitor the claims, settlements and underwriting of the cedant company.

Pursuant to Article 93 of the Insurance Act, the insurer and reinsurer may agree in the reinsurance policy that the reinsurer should be involved in the claims handling process.

What is the `limitation period' within

The limitation period for an insurance claim is two years (Article 65 of the

which proceedings must be commenced Insurance Act).

for contractual disputes under Taiwan law?

35

Procedure / Disputes (cont.)

Question

Taiwan law position

Does the principle of `without prejudice' There is no clear definition of "without prejudice" under Taiwan law; however,

exist in your jurisdiction?

the principle is in general recognised by the Taiwanese court.

If not, how are settlement discussions with an insured/insurer kept confidential?

Pursuant to Article 422 of Civil Procedure Act, the court shall not take into account any offer, proposed settlement plan, or compromise made by a party in the course of an in-court mediation (i.e. mediation by a judge or a courtappointed mediator).

Following the "without prejudice" principle, in the course of settlement, if an offer is proposed by a party, it will not be binding on the proposing party if eventually said offer is not accepted by the other party.

In addition, as part of the arbitration/mediation rule, the doctrine of "without prejudice" is also recognised for an arbitration or out of court mediation.

However, for other settlement discussions, unless agreement is reached between the parties on the confidentiality of those discussions, or stated explicitly by a party, such settlement negotiations may be used as evidence in a civil lawsuit.

Accordingly, it is a common practice in Taiwan that, before the negotiation for settlement, both parties will enter into a pre-settlement agreement to keep the settlement discussions confidential.

What methods of alternative dispute resolution are commonly pursued in Taiwan as an alternative to litigation and arbitration?

Mediation and arbitration are commonly used forms of alternative dispute resolution in Taiwan.

According to Article 403 of the Code of Civil Procedure, except otherwise ruled in the same Code, if the dispute concerned is a proprietary rights dispute and the price/value thereof is less than NT$500,000, the parties are obliged to mediate the dispute before proceeding to lawsuit. If the parties filed the lawsuit directly, the filing thereof will be deemed as the application for mediation according to Article 424 of the Code of Civil Procedure. Under such circumstances, the court will not start the lawsuit procedure unless and until the mediation has failed.

Please also refer to Question 13. In addition to arbitration/mediation, the most commonly used ADR for financial disputes will be the ombudsman scheme (i.e., Financial Ombudsman Service Scheme) under the Financial Consumer Protection Act. According to the Financial Supervisory Commission (the regulator of the insurance sector), an insurance dispute, subject to certain exceptions, can be resolved through the ombudsman scheme.

Question

Taiwan law position

Is there a specific insurance court or commercial court for insurance-related matters?

Yes. In Taiwan, the District Court and Court of Appeal have specialist tribunals specialising in insurance and other complex commercial issues.

In principle, parties to (re)insurance contracts can agree on dispute resolution procedures (such as a submission to court or arbitration), unless this is obviously unfair under Article 247-1 of the Civil Code.

Taiwan is planning to establish a commercial court system for complex commercial disputes. The draft bill is currently under the Legislature's review.

What is the court expert procedure in your judicial system i.e. is there a single court-appointed expert or are the parties allowed to engage their own experts?

It is quite common in Taiwan for a court to appoint an expert where specialist knowledge or experience is required. Calling the party-appointed experts is part of the investigation, and thus the relevant party needs to make an application to the court first. However, since the party-appointed experts will usually receive remuneration from the parties and will not be trusted by the adverse party, the court prefers to have the court-appointed expert selected from independent institutes.

Are there any claims management requirements and how strictly are these enforced. Specifically:

i. What are the rules on notification?

ii. Is there a requirement to reserve rights?

iii. What limitation periods are there?

iv. A re there any consequences to late payment?

i) Pursuant to Article 58 of Insurance Act, the insured must notify the insurer within 5 days of becoming aware of the occurrence of loss.

ii) N/A

iii) T wo years to bring a claim, otherwise this will be extinguished pursuant to Article 65 of the Insurance Act.

iv) P ursuant to Article 34(2) of the Insurance Act, If, for reasons attributable to itself, the insurer fails to make payment within the time period of 15 days after receipt of insured's notice, it shall pay default interest at the rate of 10% per annum.

Our thanks to Lin & Partners Attorneys-at-Law (David Lee, Partner and Amy Wu, Attorney) for the above contributions on the law of Taiwan. http://www.linandpartners.com.tw/

The information provided in this guide is general and might not apply in a specific situation. Up to date legal advice should always be sought from suitably qualified professionals.

37

Clyde & Co Our experience with offshore wind insurance

We are a leading, sectorfocused global law firm with 440 partners, 1,800 legal professionals and 4,000 staff in over 50 offices and associated offices on six continents.

The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance.

Clyde & Co's global renewables insurance team has advised renewable energy insurers on some of the largest and most complex claims in the market. As renewable energy grows in scale and geographic spread, we are there to assist insurers with unprecedented experience of the renewable energy insurance market.

Our global renewable energy group advises insurers in relation to all forms of renewable energy projects, including onshore and offshore wind, PV and concentrated solar. We have seen the industry grow from a niche concern, to a core area of any insurer's power and energy book. Throughout this time we have used our experience handling onshore and offshore renewable energy claims to assist with and develop new and existing wordings in order to reduce uncertainty and match the product to the risk appetite of insurers.

We have been trusted by the market to advise on some of the largest and most complex onshore and offshore losses, often involving new and innovative technologies. Looking at offshore wind, in the UK we have advised insurers right through from foundation defects on Round 1 projects to Round 2 and Round 3 claims. As other European markets have come to prominence, for example Germany in recent years, we have built on the experience in the UK to anticipate the issues which may arise and provide a consistent service to our insurer clients. As new offshore wind markets come on-line outside of Europe, for example in the US and Asia, we have again augmented our European experience of wordings and claims to offer insurers advice which builds on this accumulated knowledge.

With over 50 offices worldwide, including key markets for renewables such as China, Germany, the US, South Africa, Australia and Brazil, Clyde & Co is well-placed to assist insurers in relation to renewables losses wherever they arise.

We are able to assist on insurance claims issues in relation to all aspects including:

Construction and erection

Property damage

Business Interruption

Delay in start-up

Construction site access

Cable laying

Wind force disruption

Lightning damage

Natural catastrophe

Liability claims

Our team members' experience includes:

Construction

Advising construction insurers on appropriate policy response during a maintenance period with respect to PD and DSU losses resulting from the failure of a switchboard cable on a Scottish wind farm

Advising construction insurers in relation to a sue and labour claim, following cutting of export cable to a wind farm, offshore North West England

Advising construction insurers in relation to multiple claims at an offshore wind farm, offshore South East England, including advice on application of Marine Warranty Surveyor and due diligence clauses

Advising insurers in relation to coverage following damage to an export cable during installation work, and potential issues of wilful misconduct

Advising reinsurers in relation to DSU claim at offshore wind farm in Asia

Advising construction insurers in relation to multiple instances of damage to the export cable at a wind farm in southern England

Operational

Advising operational reinsurers on coverage and defending proceedings following the failure of a high voltage subsea power interconnector between Trinidad and Tobago

Advising operational insurers on removal of debris coverage for a blade failure loss on a wind farm in the German sector of the North Sea

Providing coverage advice to Operational All Risk insurers following a number of claims presented by the Insured at German offshore wind farm

Advising insurers on coverage in relation to cable terminations at an offshore wind farm

Advising on coverage in relation to a claim relating to loss of fibres on an export cable at an offshore wind farm

Key contacts

Ik Wei Chong

Partner / Managing Director, Asia +86 21 6035 6100 [email protected]

Paul Lowrie

Partner, London +44 (0)20 7876 4435 [email protected]

Nicholas Sykes

Partner, Singapore +65 6544 6533 [email protected]

Sophie Shiffman

Senior Associate, Sydney +61 2 9210 4537 [email protected]

Samuel Yang

Senior Associate, Shanghai +86 21 6035 6112 [email protected]

Elliot Boler

Associate, London +44 (0)20 7876 6710 [email protected]

Our global reach

Key Clyde & Co offices Associate offices

39

41

Bibliography

China

1 https://www.eia.gov/beta/international/data/browser/#/?pa=0000000000000000000008&c=00000002&ct=0&tl_id=5-A&vs=INTL.57-6-CHN-BB.A& cy=2016&vo = 0&v= C&start=1980&showdm =y

2 https://www.eia.gov/beta/international/data/browser/#/?pa=000000000000000000004&c=00000002&ct=0&tl_id=3002-A&vs=INTL.3-6-CHN-TCF. A&cy=2016&vo = 0&v= C&start=1980&showdm =y

3 https://gwec.net/wp-content/uploads/2019/04/GWEC-Global-Wind-Report-2018.pdf 4 https://gwec.net/wp-content/uploads/2019/04/GWEC-Global-Wind-Report-2018.pdf 5 https://databank.worldbank.org/views/reports/reportwidget.aspx?Report Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm

= n&countr y= CHN 6 https://databank.worldbank.org/views/reports/reportwidget.aspx?Report_Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm

= n&countr y= CHN 7 https://data.worldbank.org/indicator/SP.POP.TOTL?end=2018&locations=CN&start=2014 8 https://unfccc.int/sites/default/files/list-of-representatives-to-high-level-signature-ceremony.pdf 9 https://www.4coffshore.com/windfarms/huaneng-rudong-300mw---north-china-cn82.html 10 https://www.iea.org/statistics/?country=CHINA&year=2016&category=Energy%20supply&indicator=TPESbySource&mode

= char t&dataTable = BA L A NCES 11 https://www.iea.org/statistics/?country=CHINA&year=2016&category=Energy%20supply&indicator=TPESbySource&mode

= char t&dataTable = BA L A NCES 12 https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-

2019-full-report.pdf 13 https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-

china-insights.pdf; https://www.reuters.com/article/us-china-energy/chinas-2018-coal-usage-rises-1-percent-but-share-of-energy-mix-fallsidUSKCN1QH0C4 14 https://www.forbes.com/sites/dominicdudley/2019/01/11/china-renewable-energy-superpower/ 15 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition16 https://www.economist.com/special-report/2018/03/15/china-is-rapidly-developing-its-clean-energy-technology 17 https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Mar/IRENA_RE_Capacity_Statistics_2019.pdf 18 https://www.windpowermonthly.com/article/1445638/top-ten-turbine-makers-2017 19 https://www.iea.org/weo/china/ 20 https://www.eia.gov/todayinenergy/detail.php?id=33092 21 https://www.iea.org/publications/freepublications/publication/china_wind.pdf 22 https://www.thewindpower.net/country_maps_en_9_china.php 23 http://www.chinadaily.com.cn/global/2019-04/22/content_37460821.htm 24 http://www.china.org.cn/china/NPC_CPPCC_2019/2019-03/05/content_74533026.htm

25 https://www.bloomberg.com/news/articles/2010-07-06/china-starts-generation-at-its-largest-offshore-wind-farm-xinmin-reports 26 http://www.sinovel.com/english/content/?169.html 27 https://www.4coffshore.com/windfarms/donghai-bridge-100mw-offshore-wind-power-demonstration-project-china-cn01.html 28 https://www.scmp.com/news/china/policies-politics/article/2147721/china-tightens-rules-tackle-wasted-power-wind-farms https://www.

carbontrust.com/media/510530/detailed-appraisal-of-the-offshore-wind-industry-in-china.pdf, p.17 29 https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Mar/IRENA_RE_Capacity_Statistics_2019.pdf 30 https://af.reuters.com/article/commoditiesNews/idAFL3N1ZI1C1 31 https://www.offshorewind.biz/2018/12/26/chinas-farthest-offshore-wind-farm-all-hooked-up 32 https://www.mckinsey.com/featured-insights/china/china-brief-the-state-of-the-economy 33 https://www.iea.org/weo/china/ ; https://www.economist.com/special-report/2018/03/15/china-is-rapidly-developing-its-clean-energy-technology 34 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china 35 https://www.sciencedirect.com/science/article/pii/S1364032118301072 36 https://www.iea.org/weo/china/ 37 https://www.iea.org/weo/china/ 38 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china 39 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china 40 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china 41 https://ac.els-cdn.com/S1878029612002630/1-s2.0-S1878029612002630-main.pdf?_tid=108fcf57-fe69-4be6-9679-3b6c4b487c1e&acdnat=1544103025

_6b443207ecf6f5e52ef4957cdcbdaed6, p.166 42 https://ac.els-cdn.com/S1878029612002630/1-s2.0-S1878029612002630-main.pdf?_tid=108fcf57-fe69-4be6-9679-3b6c4b487c1e&acdnat=1544103025

_6b443207ecf6f5e52ef4957cdcbdaed6, p.166 43 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china 44 http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf 45 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china 46 https://www.iea.org/policiesandmeasures/pams/china/name-162879-en.php?s=dHlwZT1jYyZzdGF0dXM9T2s 47 http://beta.iea.org/policy/energy-supply-and-consumption-revolution-strategy-2016-2030 48 https://energyiceberg.com/foreign-investment-catalog-renewable/ 49 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china, citing The Frankfurt School-UNEP Collaborating

Centre and Bloomberg New Energy Finance, `Global Trends in Renewable Energy Investment Report 2018' 50 https://www.carbontrust.com/media/510530/detailed-appraisal-of-the-offshore-wind-industry-in-china.pdf p.51 51 http://ieefa.org/wp-content/uploads/2018/08/China_Research_Brief_August-2018.pdf 52 https://www.industryabout.com/country-territories-3/2887-china/wind-energy/46384-binhai-north-h1-offshore-wind-farm 53 https://www.offshorewind.biz/2017/10/04/chinas-largest-offshore-wind-farm-goes-online/ ; https://asian-power.com/project/news/china-huaneng-

43

completes-300mw-offshore-wind-project

54 http://en.cgnpc.com.cn/encgn/c100035/2019-06/30/content_8b01bd19dc944144a1d829ad8c4533b6.shtml

55 https://www.iea.org/newsroom/news/2019/february/are-auctions-forecast-to-be-the-primary-policy-mechanism-driving-utility-scale-r.html; https://www.woodmac.com/our-expertise/focus/Power--Renewables/china-takes-a-step-closer-to-grid-parity-with-the-introduction-of-windauctions/

56 https://www.scmp.com/business/companies/article/2173530/china-explores-use-foreign-expertise-speed-deep-sea-wind-power

57 https://www.woodmac.com/our-expertise/focus/Power--Renewables/china-takes-a-step-closer-to-grid-parity-with-the-introduction-of-windauctions/

58 https://cleantechnica.com/2016/03/30/grid-parity-what-is-it-why-does-it-matter/

59 https://www.woodmac.com/our-expertise/focus/Power--Renewables/china-takes-a-step-closer-to-grid-parity-with-the-introduction-of-windauctions/

60 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china

61 https://chinaenergyportal.org/en/catalogue-guidance-development-renewable-energy-industry/

62 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china

63 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china

64 https://thelawreviews.co.uk/edition/the-energy-regulation-and-markets-review-edition-5/1136404/china

65 https://www.chinadialogue.net/blog/10574-China-is-planning-provincial-quotas-for-clean-energy-/en; https://uk.reuters.com/article/us-chinarenewables/china-sets-renewable-power-quotas-for-2019-2020-idUKKCN1SL0XA

66 https://www.reuters.com/article/us-china-renewables/china-pushes-regions-to-maximize-renewable-energy-usage-idUSKCN1VK087

67 https://www.mdpi.com/2071-1050/9/8/1454

68 https://www.mdpi.com/2071-1050/9/8/1454

69 https://www.carbontrust.com/media/510534/offshore-wind-china-mapping-existing-technology-solutions.pdf

70 https://www.researchgate.net/publication/257728623_Kickoff_of_Offshore_Wind_Power_in_China_Playoffs_for_China_Wind_Power_Development

71 http://www.sinovel.com/english/content/?169.html

72 https://www.carbontrust.com/media/510530/detailed-appraisal-of-the-offshore-wind-industry-in-china.pdf

73 https://www.researchgate.net/profile/Yanhui_Feng/publication/268151984_2013_Feng_Study_of_China's_1st_Offshore_Wind_Project/links/5462cf49 0cf2cb7e9da6562d/2013-Feng-Study-of-Chinas-1st-Offshore-Wind-Project.pdf

74 https://www.4coffshore.com/windfarms/spic-binhai-north-h2-400mw-china-cn4c.html; https://www.4coffshore.com/windfarms/jiangsu-lunengdongtai-200mw-concession-china-cn32.html

75 https://www.4coffshore.com/windfarms/huaneng-rudong-300mw---north-china-cn82.html

76 https://ramboll.com/projects/re/danish-engineers-enter-the-chinese-market-for-offshore-wind

77 https://www.norwep.com/content/download/35487/259913/version/1/file/Concept+Note+China+Offshore+Wind+Mission+June+2018.pdf 78 https://onlinelibrary.wiley.com/doi/full/10.1002/ese3.161 79 https://www.norwep.com/content/download/35487/259913/version/1/file/Concept+Note+China+Offshore+Wind+Mission+June+2018.pdf 80 https://www.carbontrust.com/media/510534/offshore-wind-china-mapping-existing-technology-solutions.pdf 81 https://thelawreviews.co.uk/edition/the-renewable-energy-law-review-edition-1/1173955/china 82 http://en.cgnpc.com.cn/encgn/c100035/2017-10/20/content_9ca6008d9d6d486f88f025df1c1ee21b.shtml 83 https://onlinelibrary.wiley.com/doi/full/10.1002/ese3.161 84 https://www.researchgate.net/publication/251560308_Offshore_wind_development_in_China_and_its_future_with_the_existing_renewable_policy 85 https://www.carbontrust.com/news/2014/09/china-offshore-wind/ 86 https://www.4coffshore.com/offshorewind/index.aspx?lat=33.211&lon=121.618&wfid=CN8D 87 https://www.powerengineeringint.com/articles/2018/08/china-set-for-first-hvdc-offshore-wind-substation.html 88 https://www.powerengineeringint.com/articles/2018/08/china-set-for-first-hvdc-offshore-wind-substation.html 89 https://new.abb.com/news/detail/8270/hvdc-technology-for-offshore-wind-is-maturing 90 https://www.upi.com/Energy-News/2018/08/29/China-pushes-wind-energy-efforts-further-offshore/9411535536630/ 91 https://download.atlantis-press.com/article/25883704.pdf 92 https://www.eu-japan.eu/sites/default/files/imce/seminars/2016-09-27-WindEnergy/2_nedo_policy.pdf 93 https://www.greentechmedia.com/articles/read/japans-softbank-invests-7m-in-the-flying-donut-from-mit#gs.7p5gni 94 https://ww2.frost.com/frost-perspectives/flying-wind-turbines-set-soar/ 95 https://www.4coffshore.com/news/batwind-battery-begins-work-nid8079.html 96 https://www.greentechmedia.com/articles/read/could-tepcos-new-strategy-spur-offshore-wind-in-japan#gs.7pb3b9 97 https://www.gov.uk/foreign-travel-advice/china/natural-disasters 98 https://www.researchgate.net/profile/Yanhui_Feng/publication/268151984_2013_Feng_Study_of_China's_1st_Offshore_Wind_Project/links/5462cf4

90cf2cb7e9da6562d/2013-Feng-Study-of-Chinas-1st-Offshore-Wind-Project.pdf 99 https://www.windpowermonthly.com/article/1213452/chinese-typhoon-knocks-17-wind-turbines 100 https://www.swissre.com/china/China_ _first _Chinese_code_of_practice_for_offshore_wind_power_projects.html 101 https://www.swissre.com/china/China__first_Chinese_code_of_practice_for_offshore_wind_power_projects.html 102 https://www.swissre.com/china/China__first_Chinese_code_of_practice_for_offshore_wind_power_projects.html

45

Taiwan

1 https://www.eia.gov/beta/international/analysis.php?iso=TWN= 2 https://www.eia.gov/beta/international/analysis.php?iso=TWN 3 https://www.twtpo.org.tw/eng/Home/ 4 https://orsted.tw/en/News/2018/06/FOW1-financial-close; https://www.twtpo.org.tw/eng/Home/ 5 https://www.imf.org/external/pubs/ft/weo/2019/01/weodata/weorept.aspx?pr.x=12&pr.

y=18& sy=2016&ey=2021& scsm =1& ssd =1& sor t= countr y&ds =.&br=1&c=528& s = NGDP_ RPCH%2CNGDPD%2CPPPGDP%2CNGDPDPC%2CPPPPC%2CPCPIPCH&gr p = 0&a= 6 https://www.imf.org/external/pubs/ft/weo/2019/01/weodata/weorept.aspx?pr.x=12&pr. y=18& sy=2016&ey=2021& scsm =1& ssd =1& sor t= countr y&ds =.&br=1&c=528& s = NGDP_ RPCH%2CNGDPD%2CPPPGDP%2CNGDPDPC%2CPPPPC%2CPCPIPCH&gr p = 0&a 7 https://www.imf.org/external/datamapper/[email protected]/OEMDC/ADVEC/WEOWORLD/TWN 8 https://orsted.tw/en/News/2018/06/FOW1-financial-close ; https://www.4coffshore.com/windfarms/formosa-1-owf-phase-1-taiwan-tw22.html 9 https://orsted.tw/en/News/2018/06/FOW1-financial-close 10 https://www.moeaboe.gov.tw/ECW/english/content/ContentLink.aspx?menu_id=1540 See Section: Energy Supply and Demand Situation of Taiwan in 2018 11 https://www.moeaboe.gov.tw/ECW/english/content/ContentLink.aspx?menu_id=1540 See Section: Energy Supply and Demand Situation of Taiwan in 2018 12 https://www.reuters.com/article/taiwan-renewable-idUSTP2336320090818 13 https://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0130032 14 https://en.pvinfolink.com/post-view.php?ID=179 15 http://www.taipeitimes.com/News/taiwan/archives/2019/04/13/2003713323 16 https://af.reuters.com/article/commoditiesNews/idAFL8N1Y318W 17 https://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0130032 18 https://www.oedigital.com/news/465572-taiwan-offshore-wind-market-to-reach-5-5-gw-by-2025 19 https://www.evwind.es/2019/02/21/why-is-taiwan-the-next-big-offshore-wind-energy-market/66216 20 http://www.taipeitimes.com/News/lang/archives/2018/05/09/2003692737 21 https://www.openaccessgovernment.org/focus-green-energy-taiwan/63217/ 22 https://www.ft.com/content/6b429f2e-e3c6-11e7-97e2-916d4fbac0da 23 https://www.emcsg.com/f1671,123955/3_-_Dr_Chuan-Neng_Lin_Bureau_of_Energy_Taiwan.pdf 24 https://www.emcsg.com/f1671,123955/3_-_Dr_Chuan-Neng_Lin_Bureau_of_Energy_Taiwan.pdf 25 http://focustaiwan.tw/news/aeco/201708060010.aspx; https://orsted.tw/en/News/2018/06/FOW1-financial-close 26 https://orsted.tw/en/News/2018/06/FOW1-financial-close 27 https://www.renewablesnow.com/news/taiwans-formosa-i-phase-ii-offshore-wind-park-produces-1st-power-668392/

28 https://www.moeaboe.gov.tw/ECW/english/content/ContentLink.aspx?menu_id=1540 see section titled `Energy Supply and Demand Situation of Taiwan in 2018'

29 https://www.takassocies.com/single-post/2017/01/16/Major-Amendments-to-the-Taiwan-Electricity-Act-2017

30 https://www.offshorewind.biz/2018/04/30/taiwan-selects-eleven-offshore-wind-projects/; https://www.jonesday.com/files/Publication/391679ef9fca-4142-a4c1-df4e06b1d574/Presentation/PublicationAttachment /ebe8c0f b-1e42-4d95-be45-f914d4a6f1f9/Taiwan%20Offshore%20Wind%20 Farm%20Projects%20White%20Paper.pdf p.9

31 https://www.jonesday.com/files/Publication/391679ef-9fca-4142-a4c1-df4e06b1d574/Presentation/PublicationAttachment/ebe8c0fb-1e42-4d95be45-f914d4a6f1f9/Taiwan%20Offshore%20Wind%20Farm%20Projects%20White%20Paper.pdf p.9

32 https://www.energytrend.com/news/20180704-12369.html

33 https://topics.amcham.com.tw/2018/08/green-energy-challenges-and-opportunities/

34 https://www.taiwannews.com.tw/en/news/3584619 ; https://www.taiwannews.com.tw/en/news/3585975

35 https://topics.amcham.com.tw/2019/09/nuclear-power-faces-2025-deadline/

36 https://topics.amcham.com.tw/2018/08/green-energy-challenges-and-opportunities/

37 https://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0130032 REDA Article 6

38 https://www.openaccessgovernment.org/focus-green-energy-taiwan/63217/

39 https://www.openaccessgovernment.org/focus-green-energy-taiwan/63217/

40 https://www.4coffshore.com/windfarms/w2n---eolfi-taiwan-tw71.html

41 An Integrated Assessment Framework of Offshore Wind Power Projects Applying Equator Principles and Social Life Cycle Assessment, Sustainability 2017, 9, 1822; doi:10.3390/su9101822.

42 https://asian-power.com/regulation/commentary/taiwan-offshore-wind-series-part-1-%E2%80%93-allocation-offshore-windfarms-in-taiwan

43 https://taiwantoday.tw/news.php?unit=8&post=109422; https://www.twtpo.org.tw/eng/intro/goal.aspx

44 https://www.4coffshore.com/news/first-taiwanese-offshore-wind-generation-license-issued-nid5725.html

45 https://www.offshorewind.biz/2017/11/28/orsteds-greater-changhua-offshore-wind-project-clears-first-eia-hurdle/; https://renews.biz/50763/ orsted-hits-pause-button-in-taiwan/; https://orsted.com/en/Company-Announcement-List/2019/04/1812262

46 https://www.4coffshore.com/windfarms/Taiwan/project-dates-for-yunlin-tw10.html

47 https://www.lexology.com/library/detail.aspx?g=d78ac5fd-cd61-4c49-b395-8fb2ea5da35d

48 https://cityriskindex.lloyds.com/explore/

49 https://cityriskindex.lloyds.com/wp-content/uploads/2018/06/Lloyds_CRI2018_APAC.pdf

50 https://www.taiwannews.com.tw/en/news/3450071

51 See: "14 Shades of Risk in Asia-Pacific" available at: https://www.marsh.com/my/insights/research/14-shades-of-risks-navigating-the-risklandscape-in-asia-pacific.html

52 https://cleantechnica.com/2018/05/27/taiwan-emerges-as-offshore-winds-next-power-base-with-3-8-gigawatt-tender/

440

Partners

1,800

Lawyers

4,000

Total staff

50+

Offices worldwide*

www.clydeco.com

*includes associated offices Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP 2019

J469982 - September 2019