Taiwan’s energy conundrum

Author: Paul Pryce, UPH Analytics

The newly elected Taiwanese government led by President Tsai Ing-wen and the Democratic Progressive Party (DPP) will be faced with significant challenges in energy policy. Most urgently, viable replacements for Taiwan’s ageing fleet of nuclear reactors must be found.

Thousands fill Ketagalan Boulevard in Taipei, Taiwan on March 14, 2015 as they rally against nuclear power in their country. (Photo: AAP).

Electricity generation in the island nation reached 260 terawatt-hours in 2012. According to the United States Energy Information Administration, 47 per cent of this was generated by coal-fired power stations, 29 per cent by natural gas and 16 per cent by nuclear power. The 16 per cent share of electricity generated by nuclear power came from just three plants built in the 1970s and 1980s (Jinshan, Kuosheng and Maanshan) which are expected to begin decommissioning in 2018.

Construction of a fourth station, Lungmen Nuclear Power Plant, began in 1999 but was halted indefinitely in 2014 due to widespread protests and fears stoked by the 2011 meltdown of Japan’s Fukushima Daiichi Nuclear Power Plant. The paramount question for Taiwanese policymakers should now be: what, if anything, will replace nuclear power?

It is unlikely that the new DPP government will press for a resumption of construction on Lungmen Nuclear Power Plant. In 2014, former DPP chairman Lin Yi-hsiung went on a two-week hunger strike in protest against that facility and opposition to nuclear power has long been part of the DPP platform.

Taiwan is not party to the United Nations Framework Convention on Climate Change (UNFCCC). But Taiwanese officials did take part in the United Nations Climate Change Conference, COP21, hosted by France in December 2015, at which a hard line was taken against coal. As such, with mounting pressure to phase out this energy source, it is doubtful that Taiwan could simply turn to coal-fired power generation to replace nuclear power in the coming years. This is especially true as 47 per cent of the country’s electricity is already generated by coal. An expanded role for coal is even less attractive for the DPP, which seeks to reduce Taiwan’s economic reliance on China. Although there have been some year-to-year fluctuations, China has consistently been Taiwan’s leading supplier of coal, reaching as high as 47.7 per cent of Taiwanese coal imports in 2003.

Surrounded as it is by the waters of the South China Sea, the Philippine Sea, Luzon Strait and the East China Sea, one possibility is to harness the power of the waves. Taiwan has taken some steps in this direction. In 2012, the Scotland-based European Marine Energy Centre entered a partnership with the National Taiwan Ocean University with a view to install a wave-energy converter capable of generating 200 megawatts by 2025.

The previous Kuomintang (KMT) government also enacted plans to establish 600 offshore wind turbines by 2030, with an estimated capacity of 3000 megawatts. But once Jinshan Nuclear Power Plant, the oldest of the Taiwanese fleet, is fully decommissioned in July 2019, there will be a pressing need to make up for the 1208 megawatts it currently generates. Tidal power and offshore wind simply will not be ready in time.

Onshore wind power is also far from being ready to replace Taiwan’s nuclear energy. As of 2013, total installed onshore wind capacity reached only 530 megawatts. Penghu Island’s Low-Carbon Island Wind Power Project is expected to reach completion by the end of June 2016 but will add only 33 megawatts to that onshore wind capacity.

The KMT government seemed to place its hopes on solar power, setting out the lofty goal in late 2015 of reaching 4500 megawatts of solar capacity by 2020. But these plans were oriented toward encouraging micro-generation through incentives for residences to install photovoltaic (PV) panels. There were no specific proposals for facilities capable of generating solar power on a large enough scale to support industrial operations in the way that Taiwan’s nuclear power plants have. Total installed capacity, notwithstanding PV cells installed on residential and commercial buildings, is currently closer to 750 megawatts.

Considerable damage to key infrastructure during the 1999 Jiji earthquake has also curtailed Taiwan’s hydroelectric power capacity.

Perhaps the sole remaining option for Taiwan lies in liquefied natural gas (LNG). Taiwan produces only a small amount of natural gas each year, averaging between 1.2 and 1.4 billion cubic feet. In contrast, Taiwan imported 650 billion cubic feet of LNG in 2014, primarily from Qatar, Malaysia and Indonesia.

China Petroleum Corporation (CPC) — which currently holds a monopoly on LNG imports for Taiwan — has signed long-term supply contracts with the owners of LNG projects in Australia, Papua New Guinea and the United States. This will ensure CPC’s ability to meet Taiwan’s LNG needs, although it will not reduce Taiwan’s economic dependence on China, which concerns many Taiwanese. CPC and Taipower are currently constructing a third regasification facility terminal, which converts LNG back to natural gas, near Taipei. It is expected to reach completion in 2018 — just in time for the start of Jinshan Nuclear Power Plant’s phase-out.

Even so, relying on a steady supply of LNG is a risky move. Demand for LNG in the Asia-Pacific region is expected to grow 60 per cent over 2014 levels by 2025. Such a spike in LNG consumption will undoubtedly be accompanied by a spike in prices, and so Taiwanese officials should not assume LNG will always be so affordable. Furthermore, Taiwan is already the world’s fifth largest LNG importer and an increased volume of energy imports will worsen Taiwan’s trade imbalance with other regional partners. Instead Taiwan should seek to diversify its energy sources and invigorate domestic energy production.

The DPP should conduct an intensive review of national energy policy as soon as possible. This review should determine the best policy to extract the utmost value from Taiwan’s domestic energy sources, including investments in wind, both onshore and offshore, and in solar power. If Taiwan is to continue to meet its energy needs, amid a decline in nuclear power, it is crucial that it gets the energy mix right.

Paul Pryce is Political Advisor to the Consul General of Japan in Calgary and a researcher for Jakarta-based research institution UPH Analytics.

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