Net Zero by… When?

Reaching net zero carbon emissions within the next 30 years would require a drastic energy transformation and extensive policy amendments.

When President Tsai Ing-wen on Earth Day in April last year first announced Taiwan’s commitment to reach net zero carbon emissions by 2050, my initial reaction as a reporter covering energy was one of skepticism.

Although the government at the time had not yet backtracked its target of reaching 20% renewable power by 2025, those of us covering the energy beat already knew that the goal – set as a part of Tsai’s energy policy when she ran for office – would not be met. Taking on a far bigger commitment with an ambitious timeline seemed bold. On the other hand, the climate emergency is real and must be addressed.

At the UN Climate Change Conference (COP26) in Glasgow in 2021, 130 nations pledged to work toward net zero. Japan (the world’s fifth largest emitter) and Korea (seventh) both committed to reaching net zero by 2050. Even China, the world’s number-one emitter, is committed to reaching that goal by 2060. From that perspective, Taiwan’s commitment, as the world’s 21st top emitter, to achieve zero emissions by 2050 seems ambitious but necessary. (Taiwan was, of course, prevented from declaring its commitment at COP itself since it’s not a UN member.)

In addition to being a good global citizen, Taiwan has pressing financial reasons to embrace decarbonization. As a manufacturing powerhouse, it supplies everything from chips to laptops for tech giants like Apple, Google, and Microsoft – all of which have taken the RE100 pledge.

RE100 is a global initiative for large companies pledging to use 100% renewable electricity by 2050 at the latest, with many opting for an earlier deadline. When those commitments kick in – as early as 2030 for Apple – global corporations, some as wealthy as nations, will be responsible for decarbonizing their entire supply chain.

Alisha Lee, RE100 representative for Taiwan, says suppliers that fail to adapt in time risk being cut off from supply chains. So far, at least 23 companies in Taiwan have joined the global initiative, including big names like Acer, Asus, AUO, Delta, and – the biggest of them all – Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest pure-play chip foundry.

“All our other members are worried about where to buy their renewable energy because TSMC is sweeping up all the available Corporate Power Purchase Agreements (CPPAs) and driving the price of T-recs (Taiwan Renewable Energy Certificates) through the roof,” says Lee. “Everyone is saying, ‘we can’t compete with TSMC.’”

According to Bloomberg, TSMC alone accounted for 6% of Taiwan’s electricity usage in 2020, and that volume is expected to rise to 12.5% by 2025. The government’s initial goal was to see renewable energy accounting for 20% of Taiwan’s energy mix by 2025, but it admitted earlier this year that it would not meet the target, revising it to 15.1%. Industry sources widely accept that even the lowered target might not be met. Renewable energy use in 2021 stood at just 6%.

“The companies were planning alongside the government’s plan, almost using it as a benchmark,” says Lee. “So, to realize we’re not going to come close to meeting it is very disheartening.”

The roadmap

According to “Taiwan’s Pathway to Net-Zero Emissions in 2050,” released by the government in March this year, Taiwan needs to increase the portion of renewable energy from that 6% of the energy mix to at least 60% by 2050 to reach net zero.

The Pathway assumes Taiwan’s growth in energy demand to be quite flat between now and 2050, with an average annual increase of only 0.2%. Meanwhile, electricity consumption is projected to go up by 2% per year as people swap their gasoline cars for electric vehicles and otherwise electrify their lifestyles. By 2050, demand for electricity will increase by 50%.

The Pathway calls for Taiwan’s decarbonized 2050 grid to be fueled 60-70% by renewables, 9-12% by hydrogen, 20-27% by natural gas (with the emissions supposedly made neutral through Carbon Capture Utilization and Sequestration (CCUS) technology), and 1% pumped storage hydro.

The remaining 22.5 megatons of emissions from uses other than power generation are to be offset by forest carbon sinks. In addition, hydrogen and biomass technologies will be employed to decarbonize industrial processes such as steelmaking.

I sit down with Liang Chi-yuan, an energy economist who is a chair professor at National Central University, to ask his opinion of the government’s roadmap.

“If it is looking this ugly for 2025, I don’t see how it can be beautiful in 2050,” says Liang. “The gaps between the goals and reality are just too vast.”

Nuclear power, which still accounts for 10% of Taiwan’s electricity generation, is a low-carbon power source. As soon as nuclear is phased out in 2025, it will immediately put Taiwan in the hole not just for greenhouse gas emissions but for overall power supply stability, says Liang.

Energy economist Liang Chi-yuan is critical of the government’s net zero plan, which depends on the successful implementation of untested technology.

The goal of 60-70% renewable energy is also extremely challenging; Taiwan is densely populated at 640 people per square kilometer, compared to 345 in Japan, which is also struggling to meet its renewable goals. The amount of land available for solar farms is extremely limited. Meanwhile, Liang notes that the government’s localization policy is hindering the growth of the offshore wind industry, whose large projects far from shore are relatively less contentious.

Taiwan’s localization policy requires that certain components be made in Taiwan and certain services provided by Taiwanese sources. Although the aim is to ensure that renewables development feeds back into the local economy, the Taiwanese supply chain is too weak to sustain the furious pace of construction needed to fulfill Taiwan’s goals, says Liang.

“The government does not seem to notice that their two goals are acting in opposition to each other,” he says. “Similarly, it is calling for net zero while electricity and fuel prices are still being kept artificially low, which increases usage and puts our state-run energy companies into huge debt. Meanwhile, the plan is hoping for untested technology like carbon capture to come through.”

Even if Taiwan can somehow manage to ramp up renewable energy quickly, the government’s plan does not prepare Taiwan’s already fragile grid to transmit this electricity where it is needed, nor ensure sufficient storage to deal with the intermittent nature of renewables, says Liang.

He notes that most of Taiwan’s renewable energy resources are located in the south, while the heaviest power usage is in the north. “So how come – despite plans for hundreds of billions of New Taiwan Dollars going into grid improvement – there is no provision for improving the infrastructure for sending renewable energy from the south into the industrial north?” he asks. “We talk about decentralized grids, smart meters, and ‘using the power where it is made,’ but the top demand for power is not where it is made.”

Another area of concern is vulnerability to blackouts. Taiwan has experienced several high-profile rolling blackouts in recent years, including two in 2021 and one in March this year. Each event should have prompted a top-to-bottom systemic analysis, says a senior energy consultant who prefers to remain unnamed.

Instead, the blame tended to be placed on operator errors. But in a properly functioning grid, it shouldn’t be possible for a single human error to cause so much disruption, the consultant notes.

For Professor Liang, “the inability of Taiwan to deliver grid stability when it is still running on 90%-plus dispatchable power is very concerning because it is going to be much, much harder to maintain stability with mostly renewable energy, which is variable, on the grid.”

If use of nuclear energy were to be continued, would it be accepted as a part of the RE100 commitment that so many major multinationals have made? Not currently, though “things are not set in stone,” says Lee of RE100. “There is a possibility here, especially if the demand cannot be fulfilled by renewables alone.”

Industry perspective

“Net zero is a new thing – nobody has done it anywhere, and globally we are all facing a lot of the same challenges,” says Mark Hutchinson, APAC director for the Global Wind Energy Council. While agreeing that Taiwan’s Roadmap is far from solid, he says the national commitment to the global challenge is welcome.

“My biggest criticism is probably the reliance on carbon capture, but what we are working with here is policy guidance. A lot of the technology we’ll need has not even been invented yet.”

Because of the intermittent nature of solar and wind power, storage solutions are needed to ensure a consistent energy supply. Hutchinson foresees hydrogen taking over from Liquefied Natural Gas (LNG) at some point. And despite difficulties, including localization, he notes that Taiwan is still a regional leader in terms of offshore wind development.

“It’s actually a good problem that we have here in Taiwan,” says Hutchinson. “While it’s true that significant changes are needed, investors see opportunities here, and the government is willing to have an open dialogue.” He adds that when it comes to wind, other countries in the region often ask: “So what does Taiwan do on this issue?”.

In addition to technological advancements, Hutchinson foresees market developments easing the way to the expansion of renewables. Taiwan is slowly transforming its electricity market from a power monopoly under the state-run Taiwan Power Co. to one with a wholesale market for power, much like the EU, Australia, and the U.S.

Li Shih-rong, assistant vice president of Ksolare, expects Taiwan’s power storage market to grow in the upcoming years.

A wholesale electricity market will ease the pressure on renewable projects to find a corporate power purchaser with a solid credit rating that will bulk-purchase their entire output, a set-up that strongly favors TSMC as the largest and most creditworthy buyer.

Hutchinson suggests that T-Recs should be made tradable. Now they can only be sold once from the producer to the buyer. Tradability would make it possible for “retail” buyers of T-recs to easily purchase them from an intermediary rather than dealing directly with a project.

Hutchinson expresses hope that organized advocacy from green power buyers will sway the government. “It’s tricky for us to lobby for changes without sounding like ‘give us more stuff,’” he says.  “When it’s coming from the buyers, it’s more clearly an industrial competitive issue.” Taiwan should also consider it an energy security issue, he adds. “Every megawatt-hour of renewable energy represents some avoided LNG import. No one can shut off the sun and the wind.”

That the renewable energy industry is making headway in Taiwan is evident at the annual Energy Taiwan exhibition, which seems to get bigger by the year. At this year’s event at Taipei’s Nangang Exhibition Hall in mid-October, energy storage systems took up more space than ever.

“Right now our systems help Taipower balance the frequency of the power in the grid,” says Li Shih-rong, assistant vice president of Ksolare, an international grid-tie and hybrid inverter company that exhibited at the show. “But as we get more and more renewable energy on our grid, we hope to bring bigger systems to market that can help store power from solar and wind for when it’s needed.”

Asked what he thinks of the government’s Net Zero 2050 drive, Li says “it’s definitely having a positive impact on business for sure,” adding that “with a clear policy objective, private businesses know better where to invest.”

But does he think the government’s plan will be successful? 

“We definitely won’t make progress if we don’t set goals,” he says. “It’s like being back at school. You must always aim for 100 points, even if you don’t always achieve it. Besides, it’s not the government’s responsibility to do it all. The private sector and the people all have to work together.”