Can the Philippines send electricity to Taiwan? The challenge isn’t technical—green energy and submarine cable firms highlight regional grid hurdles.

《RECCESSARY》 interviewed Walsin Lihwa, the first Taiwanese company to venture into the submarine cable sector, and Hongde Energy, a renewable energy retailer expanding into the Philippines, to analyze the opportunities and challenges Taiwan faces in establishing a regional power grid.

Industry experts pointed out that setting up a regional power grid involves more complex cable layouts, requiring comprehensive feasibility studies. Additionally, Taiwan's electricity trading regulations remain incomplete, lacking frameworks and experience for regional power grid transmission.

Challenges in Regional Power Grid Cabling Exceed Offshore Wind Farms: Feasibility Studies Are Key

Seeing the potential in Taiwan’s offshore wind power industry, Walsin Lihwa announced a partnership in September 2023 with Denmark’s NKT HV Cables AB, one of the world’s top three submarine cable manufacturers. The two companies jointly established Walsin New Energy Cable System (referred to as WECS), introducing NKT’s advanced submarine cable manufacturing technology and operational model. The company has leased land at Kaohsiung Port to build a factory, with plans to begin trial production of high-voltage export cables and medium-voltage AC submarine cables for offshore wind power by the end of 2025, and officially start operations in 2027.

Walsin Lihwa’s cable business will celebrate its 60th anniversary in 2026. According to Walsin Cable Systems’ Chief Operating Officer Justin Wong, the submarine cable industry has high technological barriers and limited suppliers. By 2027, Walsin Lihwa aims to rank among the world's top 10 submarine cable manufacturers, with only three such companies in Asia excluding Mainland China.

As Taiwan’s first company to enter the submarine cable industry, Liu Zhongyou, Deputy General Manager of Walsin Lihwa’s Corporate Strategy Development Center, explained that submarine cables lie on the deep seabed, making frequent maintenance impossible. The cables cannot simply be laid flat on the seabed but must be buried. Thus, submarine cables include various communication components such as fiber optics and sensors, and their joints must withstand water pressure, waterproofing, corrosion resistance, and insulation.

Additionally, seabed surveys and geological investigations require an entire year to assess seasonal changes. The seabed can shift due to earthquakes, necessitating meticulous design and planning. The process heavily relies on professional engineering designs before environmental impact assessments can be submitted to ensure no harm to marine ecosystems. The technology is highly demanding, and projects are interdependent.

Justin Wong explained that each submarine cable project is unique, requiring customization based on seabed depth, geological conditions, and client needs. The government must conduct extensive feasibility analyses and systematic investigations in advance.

Compared to offshore wind farms, interconnecting regional power grids between countries is far more complex. It involves longer distances, deep-sea topography, and high technical demands. For instance, the Luzon Strait reaches depths of up to 3,000 meters and faces challenges from the Kuroshio Current, typhoons, and earthquakes. Justin Wong pointed out that there are currently only two submarine cable projects worldwide at depths exceeding 2,000 meters—one by Italy’s Prysmian and another by Denmark’s NKT. However, as submarine cable technology advances, industry players believe the realization of regional power grids depends on stable market mechanisms and cross-border regulations. Early-stage market and economic evaluations are crucial.

Abundant Green Energy in the Philippines: Cross-Border Cooperation Brings New Opportunities for Taiwan’s Renewable Energy

Beyond submarine cable investments, the Philippines' abundant renewable energy resources and relaxed regulations have attracted attention. In December 2023, Hongde Energy partnered with Asia United Bank and San Miguel Corporation’s (SMC) energy subsidiary, SMGP, to sign an investment term sheet for a solar project.

The Philippines enjoys year-round sunshine. In 2023, Luzon Island's peak power demand reached 12.6GW, with an installed capacity of 19.9GW, but renewable energy accounted for only 15%. The country aims to increase the share of renewable energy to 35% by 2030 and 50% by 2040. Policy support includes removing foreign ownership restrictions on renewable energy projects, allowing 100% foreign ownership, and providing a "Green Lane" to fast-track project approvals.

In fact, before returning to Taiwan to establish the company in 2014, Hongde Energy had already been exploring the Philippine market. Asia United Bank, an EPC contractor in the Philippines, has deep knowledge of local relationships, land integration, and regulatory changes. Through its partnership with Asia United Bank, Hongde Energy connected with San Miguel Corporation and plans to monetize solar assets through power purchase agreements.

Regarding Taiwan’s regional power grid ambitions, Hongde Energy’s General Manager, Chou Shichang, agrees that technology is not the biggest obstacle. Instead, cross-border electricity trading presents numerous challenges, including:

• Power plant locations

• Installing submarine cables in international waters

• Establishing a business mechanism beforehand (pricing, transmission fees, import duties, and restrictions on Chinese-made products)

Government agencies must conduct thorough evaluations in advance.

Taiwan’s Power Market Develops Slowly: Cross-Border Regional Power Grid Still Premature

Although industry experts agree that regional power grids are technologically feasible, a well-established market mechanism is essential. In Europe, cross-border power grids are supported by robust trading mechanisms, with each transmission line having physical capacity limits. For example, the daily maximum transmission capacity between Spain and France is 2GW, whereas Spain's electricity demand is as high as 90GW. Consequently, cross-border electricity accounts for a relatively small proportion of national consumption. Every country has different energy considerations, and cross-border power transmission requires a multinational market mechanism and holistic planning.

Furthermore, developing a regional power grid demands diverse electricity trading rules. Chou Shichang pointed out that, compared to Australia’s highly liberalized electricity trading market, Taiwan lacks regulations for interregional power supply, intercompany trading, a spot market, and a futures market. Thus, discussing a cross-border regional power grid is premature.

"Rules must be in place before operations can proceed," said Chou Shichang, who believes Taiwan can learn from Australia’s experience. Australia plans to phase out coal-fired power plants by 2030 and then focus on balancing regional renewable energy supply and grid stability. Australia already has multiple electricity trading methods, including a real-time spot market, long-term contract markets, and electricity financial derivatives markets. Clear rules, safeguards, and restrictions are necessary for a regional power grid to function effectively.

Looking ahead, Taiwan should first focus on improving its electricity trading regulations and making the green electricity market more dynamic. Doing so would enhance the flexibility of renewable energy dispatching while also preparing for future regional power grid operations.

Translated from: 區域電網新機遇3》菲律賓送電回台可行嗎？問題不在技術，綠電、海底電纜商曝區域電網最大挑戰 | 新聞 | Reccessary