Since publication of the 2020 Taiwan White Paper, the government has continued to make solid progress in delivering on its ambitious energy transition plan to achieve a targeted energy mix of 50% natural gas, 30% coal, and 20% renewables by 2025. Furthermore, it has done so while maintaining price-competitive and reliable electricity supplies. In addition, the Committee greatly welcomes the significantly enhanced dialogue it has engaged in with the Bureau of Energy (BOE) over the past 12 months on these vitally important issues.
The rapid expansion of the use of imported Liquified Natural Gas (LNG) is critical if the government’s targets for moving to lower carbon emissions and more sustainable electricity generation are to be met. Awarding the contract for development of new combined-cycle gas turbine plants at Taichung and Hsinta was an important step, although many challenges remain in completing what will be one of the largest and most complex gas-to-power projects in the world. Ensuring adequate capacity and resilience in the LNG import infrastructure is vital if Taiwan is to secure full benefits from its major investment in combined-cycle gas turbine technology. Progress in this area in 2020 was significantly slower than anticipated, both because of delays in approving environmental permits and the frequent need for multiple rounds of bidding due to inadequate budgetary provision. It will be important for both the public and private sectors to significantly accelerate the LNG projects over the next two years.
Progress on renewables has been encouraging, with a number of major new wind and solar projects initiated and some important steps taken in developing a vibrant and competitive market. The Committee especially welcomed the announcement by the Ministry of Economic Affairs in December 2020 of new “Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Power Users Above a Certain Contract Capacity.” We were pleased to see that in finalizing the new regulations the government responded positively to proposals from large users, as well as the suggestions made in the Energy section of the 2020 White Paper.
Yet the government did not achieve its target for new renewable capacity in 2020. One reason for the slower-than-hoped-for expansion of onshore solar – despite the availability of large tracts of underused land and ideal residential roof space, especially in southern Taiwan – is the complex set of regulatory and political obstacles. Even so, a growing partnership between the government and industry has enabled important progress, including execution by the Taiwan Semiconductor Manufacturing Co. (TSMC) of its first large-scale ground-mounted solar power purchase agreement (PPA) with Vena Energy and its signing of the world’s largest corporate power purchase agreement (CPPA) with Ørsted. Both deals were made possible through government-sponsored tendering and by close cross-department coordination within the government.
The Committee believes that the government is on the correct path with its energy transition and looks forward to continuing close cooperation with the BOE to accelerate the pace of transition so that grid stability and competitive pricing are maintained as coal and nuclear capacity is reduced between now and 2025. The Committee sees a case for allowing additional Independent Power Producers (IPP) into the Taiwan electricity market to boost competition and accelerate the development of additional capacity. In doing so, it is vital for the government to set the right balance between allowing market forces to drive the development of additional capacity and encouraging new technologies, while also ensuring that the market delivers solutions that meet Taiwan’s strategic energy needs. The government will also soon need to move ahead on decommissioning the existing nuclear power plants and identifying the optimum storage and disposal routes for Taiwan’s nuclear waste.
The Committee believes that the Government should initiate a debate – both domestically and with regional partners – about developing the technologies that will be required in the long term to decarbonize energy supplies while maintaining affordable and reliable electricity. Taiwan’s power grid is an isolated network, and the long-term energy roadmap should thus acknowledge the importance of grid resiliency. Furthermore, the government should develop a clearer plan to address this issue, for example through assessing the applicability in Taiwan of grid-scale energy storage systems and carbon capture, use, and storage (CCUS) technologies.
For the sake of healthy investment in the energy sector, it is essential that the government continue to support a stable policy environment and provide the maximum possible transparency about its medium- to long-term plans. An important next step is to set out energy plans for the decade beyond 2025, including whether to retain the energy mix planned for 2025 or take further steps to transition away from coal.
More strategically, the Committee notes Taiwan’s current target of reducing carbon emissions to 50% of 2005 levels by 2050. Other countries in the region have set out significantly more aggressive plans to reduce carbon emissions to net zero by 2050 or 2060 in order to mitigate the risk posed by climate change. The Committee believes that Taiwan is well placed to contribute to the global movement towards zero carbon emissions and that the world has much to learn from Taiwan’s experience, innovative research and development, and expertise in this area. But other countries will follow Taiwan’s lead only if the government can take ever bolder steps toward a greener and more sustainable energy mix.
Suggestion 1: Expand public-private dialogue to cover issues critical to Taiwan’s energy future.
The BOE has done an excellent job over the last 12 months in expanding the depth and breadth of engagement with users, developers, investors, and constructors across the energy sector. This engagement has been mutually beneficial, and the Committee looks forward to further developing the quality of these interactions in the future. The most important element of this engagement is discussion of Taiwan’s Energy Road Map to 2025 and beyond. We suggest that engagement in 2021-22 focus on the following areas:
Power Development Plan: Given the critical nature of the power sector, Taiwan’s Power Development Plan should include back-up plans or alternatives to cover potential shortfall scenarios, such as delays in on-shore solar due to insufficient land, delays in offshore wind power development, and delays in major gas-fired power plants or associated infrastructure, such as LNG receiving terminals and pipelines. The government should also seek to minimize re-baselining of the plan and ensure adequate rigor in assessing progress on meeting targets. Finally, the time period covered by the plan should extend to beyond 2030 (or at least for a rolling period of 10 years) and be made public at least once a year.
Progress of electricity market liberalization: With green electricity supply having been almost fully liberalized, similar steps are now to be taken for gray electricity (energy produced from polluting sources). The Committee believes that this liberalization will create enormous investment and job opportunities across the value chain. We therefore suggest that the relevant government stakeholders continue to engage with the Committee on progress, issues, and challenges. Doing so would allow industry to assess future business opportunities and encourage future investment.
Decarbonization: The Committee welcomes future dialogue with the BOE on the development of plans to achieve the current greenhouse gas-reduction target and to prepare for even more ambitious targets in future. In particular, we would welcome early dialogue on the applicability in Taiwan of relevant technologies such as energy storage, carbon capture, and new energy sources such as hydrogen. Through such dialogue, industry can provide support to government toward achieving its long-term greenhouse gas-reduction goals while ensuring reliable and competitively priced energy.
Suggestion 2: Promote affordable energy while ensuring grid resilience.
To maintain Taiwan’s economic competitiveness, one of the paramount objectives of the government’s energy policy should be to continue ensuring that exporting industries are able to acquire affordable, reliable, and increasingly carbon-free energy. Energy prices in Taiwan remain relatively inexpensive compared to other countries in the region, and it is essential that this situation continue as Taiwan transitions to greener and more sustainable electricity generation over the coming decade and beyond. The Committee believes that a more open and competitive environment will help ensure that market forces continue to keep prices affordable for consumers.
In that vein, the Committee suggests that the government ensure sufficient flexibility as it seeks to encourage the growth of a competitive renewable energy supply chain in Taiwan. Local content requirements, if applied in a rigid or unrealistic way, risk driving up renewable energy costs and stifling investment and the development of new capacity. Another approach might be to expedite splitting up the Taiwan Power Company grid to create a common carrier operated under fair market regulations.
The Committee also believes that growing corporate demand for renewable energy and establishment of a green energy market will reduce the reliance of renewable energy development on government subsidies. The Committee suggests that the government consider promoting designated solar energy development zones, similar to those adopted for offshore wind, to encourage faster buildout of solar power capacity in Taiwan.
Suggestion 3: Streamline the regulatory approval process for new energy projects.
To reach its 2025 target for transforming Taiwan’s energy mix, the government will need to accelerate the development of new generating capacity based on LNG and renewables. This development must be implemented in full compliance with environmental and other regulations. However, as encountered by several energy projects, regulatory reviews are not conducted in the most efficient and effective manner. The Establishment Permit, Work Permit, and Electricity Enterprise License (EEL) are key government approvals and good examples of where, as demonstrated in existing offshore wind projects, unanticipated delays can impede progress and even jeopardize the whole project. In mature renewable energy markets, it typically takes 10-14 days to obtain an EEL, a vital step for triggering revenue streams. In Taiwan, however, at least six months is often needed, in part due to the number of government agencies involved.
Given the growing urgency to accelerate the development of LNG and renewables, we recommend that the government, in close consultation with industry, undertake an urgent review of the regulatory procedures related to new energy development targets. The aim should be simplifying and expediting the process and making it more transparent, while retaining proper environmental controls. Wherever possible, the requirement for multiple regulatory reviews should be removed for nationally important projects, especially where these are conducted sequentially rather than in parallel, in favor of a single, time-limited regulatory process that brings together all stakeholders and information.