Natural Gas Plays Outsized Role in Taiwan’s Energy Transition

With renewable energy projects likely to be delayed, Taiwan will be relying even more heavily than expected on natural gas.

From its inception in 2016, Taiwan’s energy transition plan relied heavily on the use of natural gas. But with solar and offshore wind development facing possibly substantial delays, the importance of the natural gas portion has become even greater than anticipated.

The energy transition calls for the contribution of natural gas in Taiwan’s power generation to increase from its current 38% to 50% by 2025. The advantage of natural gas is that it offers the reliability of coal-fired power generation while emitting fewer pollutants and lower levels of CO2. Unlike solar or wind power, it is available regardless of weather conditions or the time of day.

Taiwan has virtually no indigenous gas supplies, however, and relies fully on imported LNG (liquefied natural gas), which requires an expensive infrastructure. For natural gas to be shipped, it must be chilled to minus 160 degrees Celsius to turn it into a liquified state, then kept at this temperature in specialized tankers for shipment to receiving terminals. From there it is piped into storage tanks as a liquid before being regasified and transported domestically via local pipelines.

While the amount of natural gas being produced globally for export has expanded dramatically over the last decade, the infrastructure to receive and store the shipments remains costly and complicated. In Taiwan, the expansion of this infrastructure has run up against local hurdles as well.

Progress in building additional receiving and storage terminals has been slowed by a complicated regulatory process, the number of stakeholders, and staunch opposition from environmental groups. As a result, Taiwan’s future natural gas supply – and therefore the sufficiency of its entire power-generation capacity – continue to face uncertainties.

Taiwan currently imports around 16.5 million metric tons per annum (mmta) of LNG to fuel five natural-gas-fired power plants that have total installed capacity of 12.3GW. It has plans to add another 8GW (with some older capacity retired). Industry sources estimate that meeting the goals will mean increasing the level of imports to between 23 and 25mmta, depending on the progress of renewable energy. 

CPC Corp., the state-owned petroleum company, has two LNG receiving terminals in operation – at Yongan in Kaohsiung and in the Taichung Port. Both have recently added significant capacity. Three underground storage tanks were added at Yongan, bringing capacity to 11mmta. Taichung has completed its Phase 2 expansion by building three more storage tanks and an additional berth, giving it capacity of 5.5mmta.

This summer CPC awarded a contract for front-end engineering and design for a planned Phase 3 expansion of Taichung. The project, scheduled for completion in 2026, will provide the terminal with two more LNG storage tanks and associated regasification facilities.

Still, these expansions will be insufficient to fuel Taiwan’s growing demand for natural gas. Work on additional facilities, held up over environmental concerns, is only now getting underway.

The longstanding plan by the Taiwan Power Co, (Taipower) to build an LNG importation terminal adjacent to CPC’s in Taichung was delayed in the Environmental Impact Assessment stage over concerns about the preservation of endangered Chinese white dolphins inhabiting nearby coastal waters. After implementing mitigation measures, the company got the go-ahead.  Last month it awarded a contract to Taiwan’s CTCI Corp. for engineering, procurement, construction, and commissioning (EPCC), reportedly for an estimated NT$19 billion (US$647 million).

The Taichung terminal expansion is necessary to supply new power-generation units being installed at gas-fired plants at Taichung at Tongxiao.

Also last month, GE and CTCI announced a multibillion-dollar deal with Taipower to supply five 1,300 megawatt (MW) combined-cycle natural gas-fired power units. Two of the units with combined capacity of 2.6GW will go to Taichung, while the other three are destined for the Hsinta Power Plant in Kaohsiung.

Tongxiao will also see three of its older 386MW gas-fired units replaced with new 893MW combined-cycle units. Due to the delays in gaining environmental impact approval, it remains unsure whether this terminal will be completed in time to fuel this added capacity.

Third terminal

Construction of a third terminal – in Guantang in Taoyuan County, adjacent to the Datan gas-fired power plant – has faced even longer delays. The location is within a sensitive marine environment that is the habitat of numerous rare species, including a unique type of algal reef.  CPC took several steps to mollify environmentalists, including moving the proposed site of the jetty for the tankers to dock and running the pipeline to the terminal over a bridge several kilometers long.

CPC also reduced the scale of development from 232 hectares to 23 hectares and pledged to monitor the area to ensure habitat conservation. Although these measures were sufficient for the project to pass its EIA, several environmentalist groups remain dissatisfied and are seeking to put the question of the terminal to a referendum.

Despite the opposition, the US$2 billion project has started. CTCI recently won the NT$18.3 billion (US$623 million) EPCC contract, while Taipower last year awarded GE the US$1.2 billion (NT$37.5 billion) contract for two combined-cycle units to add 2.24GW to Datan’s installed capacity by mid-2023. 

It is unclear whether construction of the terminal will be completed in time to supply the new Datan units with natural gas. But with capacity at the Datan plant rising to almost 6.62GW, it seems certain that the third terminal will be crucial for ensuring a long-term stable supply of LNG.

Upgrades at the Hsieh-ho Power Plant near Keelung also remain under question. Two of Hsieh-ho’s four units of oil-fired power generators have already been retired, and Taipower is hoping to replace the remaining two with combined-cycle gas units. Combined-cycle power units combine a gas turbine with a second turbine powered by the exhaust heat from the first, enabling the unit to reach high levels of efficiency.

Supplying Hsieh-ho from the third terminal would require a natural gas pipeline running beneath New Taipei City and Taipei City, which is not an option. Instead, Taipower hoped to build a smaller LNG terminal dedicated to supply the Hsieh-ho plant, but this idea has also run into opposition. Now Taipower is considering placing a floating LNG terminal off the coast of Keelung, but Taiwan’s susceptibility to typhoons poses a problem, and the pipeline would interfere with fishing activities. So far, this issue remains unresolved.

With Taiwan’s rollout of solar and offshore wind facing potential delays, the expansion of gas-fired capacity becomes more and more vital. Industry sources note that Taiwan’s gas-fired units currently operate at only around 60% of capacity. They say that level could easily be ramped up to 80% or even higher, effectively expanding power generation capacity by 3GW.

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