As Taiwan moves toward its goal of nuclear decommissioning and increasing renewable energy use, it is threatened with an insufficient electricity supply. To fend off what some say is an imminent crisis, Taiwan must accelerate its development of solar and wind power.

When President Tsai Ing-wen ran for Taiwan’s top office, one of her signature policies was a bold plan to transform the island’s energy mix. In line with her electoral promises for a “nuclear-free homeland,” Tsai laid out a vision that saw nuclear energy phased out by 2025 while boldly setting a roadmap for increasing renewable energy sources such as solar and offshore wind. By 2025, Tsai promised, Taiwan’s energy mix would be 50% natural gas, 30% coal, 20% renewables, and zero nuclear.

“Taiwan will not run short of power,” Tsai told the press in 2015. “What we need is proper management. Under my administration, we will strengthen our electricity infrastructure and accelerate our energy transition. Renewable energy will gradually replace nuclear energy until the year 2025 when it will reach 20% of our energy mix.”

Five years later in 2021, on an unusually hot May afternoon during President Tsai’s second term, Taiwan was hit with five hours of rolling blackouts. The official explanation: a hapless employee flipped the wrong switch, causing the mighty Singda power plant to go offline. There was no mention of an electricity shortage.

Not another week passed before a second round of rolling blackouts occurred. This time, the state-run Taiwan Power Co. (Taipower) admitted that “unusually high electricity usage was a factor” in the loss of power.

Were the two blackouts in May in the span of a week merely freak accidents? Or were they worrying harbingers of a chronic power shortage in the years to come? The answer, it turns out, is more complicated than a simple “yes” or “no.”

What Tsai could not have reasonably predicted during her candidacy was the unusual power binge Taiwan would later find itself in. Between 2009 and 2019, the average annual growth of power usage was a tidy 1.34%. But in 2020 alone, electricity use saw an increase of 2.1%. The latest annual power resource report from the Ministry of Economic Affairs’ Bureau of Energy (BOE) predicts even higher growth in the years to come: 2.5% per year for the next seven years.

The reason for this increase is Taiwan’s similarly unexpected gangbusters economic growth, widely expected to top 6% in 2021. The U.S.-China trade war started a wave of “reshoring” for Taiwanese manufacturers who moved their production facilities back home from China. In addition, as COVID-19 spread, economies worldwide were suffering while Taiwan’s tech sector thrived on the increased demand for laptops and other electronic devices to meet work-from-home needs. And just as the world finally reopened its economies, everybody noticed, seemingly all at once, that a global shortage had developed of semiconductor chips – for which Taiwan accounts for a 63% global market share.

“The goal eventually, of course, is to decouple economic growth from growth in electricity use,” says BOE Deputy Director-General Lee Chun-li. “However, that is hard to do while Taiwan is still primarily an industrial economy. Eventually, as our economy transitions toward service and financial sectors, it will be possible to maintain economic growth without using more electricity.”

But until that happens, he notes, “the job of the BOE is to support economic growth by providing Taiwan with enough electricity.”

Electricity supply is unlike any other commodity – excess supply cannot easily be stored for later. With very marginal exceptions, power is a delicate dance between supply and demand, and ensuring the two always meet requires a persistent excess of supply. This margin is called “reserve capacity,” and it can be likened to the members of a ball team who are not on the field. The equivalent to the proportion of players on the bench ready to go on at any time is called “spinning reserve.”

“It’s Taiwan’s policy to keep capacity reserve at 15% and spinning reserve at a 10% minimum at all times,” says Lee, although he admits that in reality this benchmark is not always met. When spinning reserves dip below 10%, Taiwan is on “amber alert”’ for electricity supply, while levels under 5% constitute a red alert.

On May 13, however, Taipower data shows that Taiwan was at “green” for spinning reserves, meaning the island theoretically had more than 10% spinning capacity. How did that not prevent Taiwan from a five-hour blackout?

“Even spinning capacity takes time to go online,” explains Lee, adding that the fact that Taiwan did get its power back after five hours means it was “not short on power.” But looking ahead, the BOE’s own report anticipates capacity reserve dipping to 12.7% in 2023. “It is close enough to 10% that we will find a way to make it work,” he says.

One weapon in the government’s arsenal to match supply and demand and thus provide power stability at lower reserve capacities is called “demand response.” It is a way to make electricity use smoother and more predictable. This way, the dance of supply and demand can also be controlled on the demand side. Already, industrial users are given incentives to shift their production to off-peak hours, and independent power producers are encouraged to time their production to peak demand. Lee described this approach as “shaving the peaks to fill in the valleys.”

In the future, ordinary citizens will also be involved. A cloud data center under construction in Changhua County will one day enable households to participate in demand response. With the help of smart meters, people will be rewarded for shifting their electricity consumption out of peak use hours.

“As solar power increasingly helps take care of our midday peak, the real peak use is likely to shift into the evenings when people come home from work,” says Lee. “We can use demand response to incentivize them to shift their use away from the second peak.”

Liang Chi-yuan, a minister without portfolio in charge of energy from 2009 to 2011 under former president Ma Ying-jeou, strongly disagrees. “The government is being way too optimistic with their projections,” he says. “As for demand response, if our industrial users are already doing it, then adding consumer users will not make such a big difference.”

Liang adds that as a rule of thumb, the spinning reserve is about 5% below capacity reserve. “Therefore, according to the BOE’s own numbers, is Taiwan going to spend all of 2023 under amber alert?”

The report does see the capacity reserve recover to above 15% by 2025, but Liang is skeptical about the feasibility of these projections. As late as 2020, Taiwan generated 11% of its electricity through nuclear power plants. That figure has fallen to 7.5% this year and will continue to fade until effectively reaching zero by 2025. Meanwhile, notes Liang, the construction of liquefied natural gas (LNG) plants and renewable energy have not caught up.

While BOE’s Lee says that Taiwan is still “on track” to reach 20% renewable energy by 2025, Liang has his doubts. “We are a small island with very limited land; this means our solar is becoming increasingly built out,” he says. “Meanwhile, offshore wind construction is extremely behind.”

Threat to stability

Simply being able to keep the lights on will not be enough for Taiwan if it wants to maintain its position as a manufacturing powerhouse. In addition to taking the place of nuclear energy in Taiwan’s electricity mix, renewable energy sources will be essential for Taiwanese manufacturing giants that want to continue exporting to customers like Apple and Google, which are increasingly scrupulous about the use of renewable energy up and down their supply chains.

In short, Taiwan’s offshore wind development, slated to come in at 5.5GW of installed capacity by 2025 with a further 15GW planned, will be a key factor in Taiwan’s ability to both keep the lights on and support the manufacturing sector well into the future.

Hai Long Offshore Wind’s project director, Felipe Montero, who previously worked on projects in Germany, says it will be difficult for Taiwan to make up for the delays caused by the impact of COVID-19 during the 2021 construction season. But the real long-term challenge, notes Montero, is the Taiwanese government’s local content requirement, which was established to help Taiwan eventually become an exporter of wind farm components.

Sourcing domestically generally raises costs. “In trying to do too much, Taiwan might end up getting less than it should,” says Montero. “We are already seeing that Germany is facing a trilemma: how to decarbonize, phase out nuclear energy, and keep rates reasonable all at once. Here in Taiwan, you add another challenge by forcing developers to source locally.”

Taiwan’s need for power, especially green power, should take priority, argues Montero. And localization is not a headache only for international developers. To achieve localization, the government has been playing matchmaker, pairing them up with local partners, many of whom sign on with some reluctance.

“We are asking the government for some trust and some flexibility when it comes to localization, especially in the upcoming third round, where there will be an auction and localization requirements,” says Montero.

The worry is that an auction would encourage a crowded field of developers to be too aggressive in terms of price and localization promises. “When the craziest bidders win, the problems might not be apparent until five years down the line,” says Montero.

Former Minister Liang asserts that Taiwan will “hit a bottleneck when it comes to electricity output by 2023, and it’s only going to get worse from there.” On the other hand, the BOE’s Lee expresses confidence in the government’s ability to provide the island with sufficient power. “We have our roadmap to stability until 2027, and we will ensure stability of supply,” he says.

Time will tell whether Taiwan will actually face a serious and persistent power crisis as Liang predicts. However, a series of challenges to Taiwan’s energy transition is foreseeable. For now, Taiwan must catch up on its goals for renewables, strengthen the resilience of its grid, and use modern power management techniques like demand response in order to ensure stability of its electricity supply in the coming years.

However, Taiwan will not be alone in facing up to those challenges. As countries increasingly take decarbonization seriously as a goal, they must also reckon with increased complexity of the grid as they wean themselves off fossil fuels and onto mostly variable renewable energy. “It will not be easy,” says Lee. “But we can’t keep going on like we used to forever.”