Editorial: Taiwan’s Energy Environment

October 17, 2018

Taiwan’s Energy Environment:
Sunshine and Fair Winds Ahead?

(Arlington, Virginia, October 17, 2018)

Editorial by Lotta Danielsson – Global Taiwan Brief

Reliable access to cost-effective energy has long been a concern in Taiwan, not only for the Taiwan government and populace, but also for the businesses operating there—particularly given the island’s dearth of indigenous energy resources and with an economy dependent on energy-intensive industries like electronics manufacturing and semiconductor fabrication.
A secure, reliable, and stable power supply is critical, as unstable and costly power can be a drag both on industries and on the overall economy. Foreign and domestic companies want to continue successful operation on the island, and need reassurances that Taiwan will be able to provide them with the necessary energy resources in the short, medium, and long-term. Energy is also a national security issue for Taiwan, as the island relies on imports for the vast majority of its energy supply, with only 2 percent derived from indigenous sources.

Generating capacity in Taiwan has been weakening, as older coal- and oil-fired power plants have been decommissioned, while nuclear power plants have been mothballed or development halted. Meanwhile, as Taiwan’s economy has continued to flourish, the demand for energy has also risen in both the commercial and consumer sectors. With soaring temperatures creating demand spikes, Taiwan has continued to set new records for peak electricity consumption, with several of those records coming during the summer of 2018. This issue already came to a sharp head last summer, when 6 million households and numerous businesses experienced a power blackout, resulting in several hours of power rationing (for the first time since 2002) and a few production line stoppages. The August 15, 2017 blackout is estimated to have caused at least US$3 million in losses for local businesses.

The 2017 blackout brought the many questions about Taiwan’s energy future to the forefront. Will there be enough resources to meet both industry and residential demand? Are energy costs in Taiwan regionally and globally competitive? How can Taiwan balance the national security risk associated with its dependence on imported energy and its current reliance on fossil fuels with an unstable cross-Strait environment and an environmentally-conscious population with no appetite for CO2 emissions?

The blackout also spotlighted the issue for Taiwan of reserve margins, the amount of spare capacity that the power grid has available at a given time above its current demand. The recommended reserve margin lies between 10-15 percent, but in August of 2017 Taiwan’s spare capacity fell to under 2 percent. Consistently low reserve margins increase the risk for additional blackouts and outages, since the system is unable to meet surges in demand or to compensate for generator breakdowns. The state-owned Taiwan Power Company (Taipower) appears to have been able to keep the reserve margin above 6 percent during the summer of 2018, but that still falls far short of ideal levels.
Renewable energy appears to offer a potential solution to at least some of the questions about Taiwan’s energy future, and Taiwan has indeed been attempting to increase their renewable energy supply at least since the Renewable Energy Development Act was enacted in 2009. The current Taiwan government under President Tsai Ing-wen is now increasingly focused on actively developing green energy, increasing the share of renewables in total electricity generation, expanding natural gas availability—including by accelerating the construction of liquefied natural gas (LNG) receiving terminals, and revising the Electricity Act to help aid energy transformation.

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