Anti-nuclear sentiment has been matched by enthusiasm for renewable energy and efforts to help combat global climate change.
On June 15, the Legislative Yuan passed the landmark Greenhouse Gas Reduction and Management Act (GGRMA), clearly confirming Taiwan’s commitment to the fight against global climate change. The bill, which had been pending in the legislature since 2006, calls for Taiwan to halve its 2005 levels of greenhouse gas emissions – mostly carbon dioxide (CO2) – by 2050.
Environmental Protection Administration (EPA) Minister Wei Kuo-yen called the legislation a “milestone” that “brings the country more in line with international policymaking.” He said he expects the law to “enhance national competitiveness and spur development of the green sector,” while preventing the nation’s exports from being the target of potential tariffs or boycotts aimed at high emitters.
The international community was quick to laud the move. At a climate change forum on August 21, Robert Forden, deputy director of the American Institute in Taiwan (AIT), called the legislation “a significant step forward in Taiwan’s climate efforts.” The European Chamber of Commerce in Taiwan (ECCT) congratulated Taiwan for marking “a legal commitment to take action to cut carbon emissions” and sending “an important signal to the international community” that Taiwan is willing to shoulder its share of the burden of mitigating climate change.
Several weeks later, Taiwan marked another milestone, but this one less laudable. On July 2, demand for electricity peaked at within 2% of Taiwan’s total reserve capacity for power generation, putting both industry and households at risk of power shortages. Nominally, the state-owned Taiwan Power Co. (Taipower) maintains a 15% reserve, but drought conditions this spring impacted output from Taipower’s hydroelectric plants, while one of the reactors at the Jinshan Nuclear Power Plant (NPP1) has been offline since late last year. A number of fossil power plants were also offline for repairs or upgrades.
More importantly, though, Taiwan’s energy demand has continued to rise alongside economic growth, but almost no new power-generating capacity has been added in recent years, bringing Taiwan’s effective reserve margin to dangerously low levels. Demand for primary energy has increased over the past decade by an average of 1.9% annually, while power demand increased 1.8% year-on-year in 2013 after a slight dip in 2012, and the release of 2014 statistics will likely show a further increase. With Taiwan’s aging fleet of nuclear reactors nearing retirement starting in 2017, and with little push for license extensions that would enable them to continue generating power for another 20 years, Taiwan stands to lose some 18% of its power generation. Only part of that shortfall can be made up by coal-fired units currently under construction or planning, and these projects are also likely to meet opposition from environmentalists.
With Taiwan’s aging fleet of nuclear reactors nearing retirement starting in 2017, and with little push for license extensions that would enable them to continue generating power for another 20 years, Taiwan stands to lose some 18% of its power generation.
These developments will make it harder for Taiwan to meet its commitments under its greenhouse gas (GHG) emissions-reduction strategy.
The desire to honor its role as a developed economy in the fight against global warming – while still maintaining a sufficient and affordable energy supply – is the core of Taiwan’s energy challenge. The issues involved are always highly political, and can be expected to become even more so as Taiwan nears the presidential and legislative elections next January. Both the ruling Kuomintang (KMT) and opposition Democratic Progressive Party (DPP) agree that Taiwan needs to reduce its energy demand and carbon footprint, and the stated goals of both parties with regard to promoting renewable energy are also quite similar.
DPP candidate Tsai Ing-wen has committed to allowing the existing nuclear power plants to continue operating only until their 40-year licenses expire. The two units of NPP1 are scheduled to reach retirement in 2017 and 2018, NPP2 (Guosheng) in 2019-2020, and NPP3 (Maanshan) in 2024-2015. If Tsai is elected and stands by her commitment, Taiwan will need to sharply reduce demand or find an equal volume of energy – some 18% of Taiwan’s current total electricity consumption – as a replacement. To meet the objectives committed to in the GGRMA, this replacement power would need to be emission-free or at least carbon-neutral renewable energy.
Save for severely limited natural gas and coal deposits, the island is almost completely devoid of energy resources and imports 98.4% of its primary energy supply.
Less clear is what the position of the KMT may be toward the role of nuclear power going forward. The party’s presidential candidate, Hung Hsiu-chu, has called for more public discussion of the issue to try to forge broader consensus.
Looking at the background
Providing sufficient energy has long been a challenge for Taiwan. Save for severely limited natural gas and coal deposits, the island is almost completely devoid of energy resources and imports 98.4% of its primary energy supply, mostly in the form of fossil fuels such as crude oil and liquefied natural gas (LNG) sourced primarily from the Middle East, and coal from China and other countries. The near-total dependence on imports is a problem for Taiwan’s energy security.
Adding to the challenge, energy-intensive industries such as petrochemicals, steel, and most significantly semiconductors and other Information Technology (IT) products, form the pillar of Taiwan’s economy. Directly or indirectly, their energy consumption is 50% of the total. Consequently, energy imports are equivalent in value to 12% of GDP (though that figure is down from a high of 13.87% in 2012, reflecting falling oil prices).
In 2014, Taiwan had 41.18 gigawatts (GW) of installed power-generation capacity – meaning that if all facilities were running at full capacity, they would generate 41 gigawatts of power per hour (GWh). That number represents “nameplate” capacity, however, and no power plants can run at 100% for an extended period. In Taiwan, the utilization rate for nuclear power is the highest, at over 90% annually.
Of the total capacity, 77.6% (31.96 GW) belongs to Taipower, while 22.4% (9.21 GW) is owned and operated by independent power producers (IPPs). Taipower is the sole operator of the nation’s power transmission and distribution grid, though a small amount of power is utilized off-grid by Taiwan’s largest manufacturers. Power plants running on fossil fuels make up 72.4% of the combined installed capacity (Taipower plus IPP), consisting 37% of liquefied natural gas (LNG), 27.4% coal, and 8.1% oil. Nuclear power occupies 12.5% of the total installed capacity, while conventional hydroelectric take up 4.4% and “pumped storage” hydro 6.3%. Wind and solar photovoltaic (PV) provide 2.5% of capacity, and another 1.5% is in cogeneration plants using waste and methane.
The proportion of capacity does not necessarily translate into an equivalent proportion of actual power generation, however. Several factors may account for the difference, including the price and availability of the relevant energy resource. In 2013 (the latest year for which data is available), relatively cheap and efficient nuclear power generated 18.8% of Taiwan’s total power generation of 213,429 GWh, far higher than its 12.5% of installed capacity. Coal-fired plants produced 38.4% of power in 2013, while efficient but expensive LNG plants generated some 31%. Expensive and unreliable renewables, which include conventional hydro but not pumped storage, generated only 3.4% of the power supply, while pumped storage hydro also underperformed at 1.5%.
In 2014, Taiwan’s overall power demand increased by 2.7% over the previous year to reach 219,200 GWh, and since 2001, power demand has increased by more than 38%. The Bureau of Energy (BOE) of the Ministry of Economic Affairs reports that last year, the per capita electricity consumption came to 10,791 kilowatt hours (kWh), a 2.21% increase compared with 10,557 kWh in 2013.
In the face of both increasing power demand and the commitment to reducing carbon emissions, the question is how Taiwan can continue to supply sufficient energy to industry and households at a reasonable cost. According to the DPP, the answer is increased efficiencies. The party’s secretary general, Joseph Wu, in a letter to The Wall Street Journal in response to an editorial criticizing the DPP’s plans to phase out nuclear power, wrote that “current power demand levels could already be reduced by 10% by implementing existing conservation methods” and that “additional energy savings facilitated by new technologies such as smart grids and smart meters will also feature prominently in our long-term plans.”
Taiwan generated some 250 million tons of greenhouse gases in 2013, including not only carbon dioxide but also methane and nitrous oxide. That equaled about 10.9 tons per capita, down from a historical high of 256 million tons in 2007.
That direction is a worthy objective, and in fact Taiwan’s BOE has been promoting greater efficiencies in the power generating and industrial sectors for years. As early as June 2008, the government inaugurated the Framework for Sustainable Energy Policy, aimed at reducing the energy intensity of Taiwan’s industries and power sector. The policy included a number of programs aimed at promoting energy efficiencies, including subsidies for industrial upgrades, energy audits, public education, and mandatory regulations and standards. The BOE notes that energy intensity – the measure of how much energy is required to generate a certain amount of GDP – had consequently declined by 20.8% as of 2014, an annual reduction of about 2.46%. Without reductions in energy intensity, energy demand grows in parallel with GDP growth, as happened for most of Taiwan’s recent development history.
Energy savings are also reflected in reductions in Taiwan’s GHG emissions. According to the BOE and EPA, Taiwan generated some 250 million tons of greenhouse gases in 2013, including not only carbon dioxide but also methane and nitrous oxide. That equaled about 10.9 tons per capita, down from a historical high of 256 million tons in 2007. CO2 intensity has declined alongside energy intensity, from 0.0197 kilograms of CO2 per US dollar of GDP in 2007 to 0.0163kg per dollar in 2013, according to the EPA. These savings reflect advances in manufacturing and power generation technologies that allow for greater productivity.
Siemens, recognized as a world leader in producing energy savings in manufacturing, notes for example that electrical drives account for two-thirds of industrial power consumption and that the introduction of variable speed drives can reduce energy use by 70%. The company also offers software called Powerrate that incorporates Big Data to “help in making energy flows visible in production plants and derive the matching, important energy savings potential.”
Siemens says the energy-savings solutions it offers to Taiwan’s manufacturers have been well-received, and that demand for “energy saving and productivity solutions in Taiwan’s industrial production are increasing, as industries are striving to stay competitive and environmentally friendly.”
More can be done as well on the consumer side. Opower, a U.S.-based energy software firm, employs “data management, insightful analytics and behavioral science” to produce substantial reductions in power demand. According to Opower, its methods of engaging consumers directly in their energy consumption through transparent, real-time analytics has saved some 8,000 GWh of power to date around the world.
But could such efforts be enough to drive down Taiwan’s total power consumption by 10% over the next eight years? President Ma has spoken frequently of decoupling energy demand from GDP growth, which seems to be happening, as Taiwan’s GDP growth rates have generally outpaced energy demand growth in recent years. Energy intensity has declined, partially due to the previously mentioned greater efficiencies in manufacturing but also to the ongoing decline of manufacturing in Taiwan and the rise of a far less energy-intensive service-based economy. Services account for some 70% of Taiwan’s GDP but consume only 10% of its primary energy supply.
According to Taipower, the average selling price for power in Taiwan is NT$2.89 (9 US cents) per kWh. Power prices in the energy-rich United States, by contrast, range from 19.71 US cents in New England to 11.03 cents in coal-rich southern states.
Nevertheless, although the rate of growth in power demand has slowed, the demand for both primary energy and electrical power still continues to rise.
Among the main obstacles retarding further improvements in energy efficiencies is the low price per kWh that Taipower is allowed to charge. The cost of energy in Taiwan, particularly electricity, is among the lowest in the world for developed nations. According to Taipower, the average selling price for power in Taiwan is NT$2.89 (9 US cents) per kWh. Power prices in the energy-rich United States, by contrast, range from 19.71 US cents in New England to 11.03 cents in coal-rich southern states. In Japan, the average cost is the equivalent of 22 US cents. One of the few markets where the price of electricity is even lower than in Taiwan is South Korea, at the equivalent of 6 US cents, in large part because of the continuing commitment to nuclear energy. In China and South Korea, new nuclear facilities are being built, and Japan is restarting plants that suspended operations after the Fukushima disaster.
Taiwan’s pricing policy has been explained as the need to support industry with cheaper energy to increase the island’s competitiveness. It is also a legacy of the Republic of China’s founding principle of stressing social welfare. According to economists, cheap energy over the years has come to be seen as an element of public welfare.
But the relatively low price of energy has undoubtedly also constituted a key obstacle hampering the development of alternative energies such as solar and wind power.