The Committee values the constructive dialogue with the Ministry of Economic Affairs (MOEA), the Energy Administration (EA), the Ministry of Environment (MOENV), the National Development Council (NDC), and other agencies over the past year. This kind of communication is crucial for maintaining energy transition momentum, strengthening energy security, and understanding the challenges faced by energy infrastructure developers and manufacturing investors in Taiwan. We are grateful to the outgoing Tsai administration for its support, welcome the incoming Lai administration, and urge a continued focus on energy policy.

While acknowledging efforts to maintain competitive energy prices compared to other countries in the Asia-Pacific region, we stress the importance of providing predictable cost changes to industrial users to foster investor trust and drive further investments.

Development of renewable energy infrastructure in Taiwan remains a challenge. Despite capacity growth to 17.9 GW in 2023, the rate at which power produced from renewables is growing is falling behind set goals. In addition, Taiwan’s attractiveness for foreign investment has decreased. To address the factors responsible for this decline, we recommend simplifying the permitting processes and revamping local content policies, as well as establishing a green tariff program to facilitate renewable energy procurement at competitive prices.

Maintaining reliable and affordable electricity supplies in the face of impending reductions in coal and nuclear power is a pressing challenge. Decarbonizing dispatchable power – leveraging technologies like carbon capture and storage (CCS), improved battery storage, and the development of hydrogen and geothermal resources – is essential to achieve carbon neutrality while ensuring energy supply reliability and affordability.

This year’s paper presents forward-looking suggestions in four critical areas: prioritizing energy policy, creating a predictable energy market, advancing renewable energy, and accelerating CCS deployment.

Suggestion 1: Form a cross-ministerial working group to coordinate energy policy.

Ambitious goals for renewable energy expansion and carbon neutrality underscore the need for an energy policy aligned with global environmental commitments, energy security, and economic competitiveness.

Effective coordination across relevant ministries, such as the MOEA, MOENV, Ministry of Agriculture, and Ocean Affairs Council, will be of utmost importance to Taiwan’s energy policy success. It ensures harmonization across various governmental bodies, from permitting and infrastructure development to environmental conservation, bankability, and international trade. Achieving a consensus among ministries would facilitate resource pooling, streamline regulatory processes, foster stakeholder engagement, and enhance policy efficacy and resilience.

Coordinating energy policy cannot be realized by the EA or the MOEA alone but can only be achieved through the collaborative effort of all relevant ministries. Enhanced cross-ministerial coordination, led by a higher-level official, can leverage Taiwan’s strengths in technology and manufacturing, positioning it as a leader in carbon neutrality and sustainable development.

The Committee proposes establishing a cross-ministerial working group led by the Vice Premier. This group should focus on resolving issues spanning multiple ministries and periodically reviewing energy policy and regulatory frameworks, such as carbon fees, permitting, and stakeholder management, with the goal of achieving net-zero carbon emissions by 2050.

Suggestion 2: Enhance the predictability and flexibility of power rate mechanisms and create an affordable renewable energy market.

Implementing a transparent electricity price review mechanism is crucial for Taiwan-based manufacturers, particularly energy-intensive companies, to plan efficiently for the long term. Consistent pricing allows businesses to allocate resources, invest in infrastructure, and strategize effectively. Abrupt price surges disrupt operations and hinder growth, which is particularly concerning for global investors seeking to maintain or grow their operations in Taiwan. The mechanism should therefore consider international industry’s assessments of the impacts of changes during the review process.

We highly commend the government’s effort in April to communicate the latest energy price adjustments and to introduce a mechanism for setting electricity rates that considers the differing conditions across industries. To ensure that such practices continue, key industry stakeholders, including foreign investors with manufacturing activities in Taiwan, should be represented in the tariff review mechanism. Whether through a government-convened price review committee or a formal industry consultation platform, this approach would provide the opportunity for the prompt and constructive exchange of pricing information and diverse views, contributing to the maintenance of an investment-friendly environment.

Since the amendment of the Electricity Act in 2017, corporate power purchase agreements (PPAs) have been available for businesses to procure renewable energy. A utility green tariff program allows larger commercial and industrial customers to purchase bundled renewable electricity from a specific project through a special utility tariff rate. Such a program broadens the portfolio of procurement options and can alongside PPAs serve as a useful instrument in addressing diverse customer needs with different energy consumption profiles (usage patterns and volumes) and credit ratings. At the same time, it helps in unlocking clean energy, particularly offshore wind projects that have large volumes and seasonal variations in power generation.

Similar programs in other markets like the United States and Japan allow public utility companies to offer renewable energy certificates (RECs) bundled with electricity as the consumer specifies. This flexible pricing system benefits businesses that face renewable energy procurement challenges due to current high PPA prices, that do not qualify for a PPA due to their load profile, or that have low credit ratings from international financial institutions. A utility green tariff program would provide an additional procurement option for consumers seeking renewable energy. It would help satisfy the bankability requirements for project financing, greatly improving the development potential of renewable energy.

The escalating cost of renewable energy is challenging Taiwan’s high-tech industry’s ability to reduce its carbon footprint. The regulatory framework partially contributes to these high prices, inadvertently increasing costs and creating barriers to efficient renewable energy deployment.

Suggestion 3: Improve the investment environment for renewable energy.

Renewable energy developers in Taiwan face challenges even before the construction phase, especially due to the longer and less predictable development timelines compared to other jurisdictions. This issue is exacerbated by ambiguous and often inconsistent policy implementation, the large amount of time spent engaging with or satisfying stakeholders’ social and environmental needs, and the frequent need for coordination between central and local governments. Externally, offshore wind developers internationally face inflationary pressures and must also consider the increasing demand for wind energy development in Europe. These challenges have led to significant cost increases, putting immense pressure on developers.

3.1   Remove or ease local content requirements for renewable energy development. The Committee suggests that the government enable developers to achieve financial bankability and lower costs by removing or easing local content requirements and enhancing off-takers’ credit ratings to meet the requirements of international banks. These measures would involve implementing the contract for difference mechanism, wherein minimum compensation is guaranteed and revenues capped (long established in more mature markets), strengthening the off-taker’s bankability, and providing discounted rates for green energy off-takers through the established carbon pricing system. These steps, reflecting the actual market situation, would promote healthy renewable energy development.

The Committee understands the reasoning behind the local content policy. However, we call for removing or easing local content requirements, adopting flexible alternative solutions, and removing regulatory barriers. At minimum, the penalties for failure to achieve localization targets should be reduced. Grid-related costs, such as grid enhancement, reserve capacity, and Taiwan Power Co. (Taipower) wheeling fees, should also be reviewed to prevent inequitable or double charging and allow more flexibility in payment. We recommend waiving these charges during the early stages of deployment.

We look forward to the establishment of the green banking system announced by President Lai that will improve carbon disclosure, enhance sustainable finance, and speed up industry’s low-carbon transition through carbon pricing and market mechanisms.

3.2   Improve coordination with local governments for renewable energy development. Much-needed cross-ministerial coordination with local governments necessitates the establishment of a renewable project single contact window and a stakeholder communication platform to streamline multiple reviews by different government agencies. We call upon the MOEA, the Ministry of Transportation and Communications, Taipower, and CPC Corporation, Taiwan (CPC) to support the continued development of renewable energy projects.

Specifically, the MOEA should establish a policy framework that includes defining stakeholders or creating a platform to engage local government, industry, and key stakeholders. On the local government level, we urge the establishment of a stakeholder communication platform, which could involve hosting meetings with developers, NGOs, and local communities, to facilitate dialogue and actively promote renewable energy development within cities, towns, and communities.

3.3   Establish regulations governing the surrounding sea areas. The Committee suggests establishing regulations assigning special status to areas around wind farms to ensure maritime safety, including the maintenance of safe distances. We urge the government to strengthen stakeholder management by adopting a transparent and efficient fishery compensation mechanism similar to the fisheries compensation and cohabitation funds. In addition, we recommend a comprehensive review to simplify permit procedures and enhance administrative efficiency.

Suggestion 4: Accelerate carbon capture and storage (CCS) technology deployment in support of Taiwan’s 2050 net-zero target.

The government has set a 2030 target for CCUS (carbon capture, utilization, and storage) of 1.7 million tons per annum (MTA) as a baseline goal and 4.6 MTA as a positive goal, with a primary focus on permanent storage of captured CO2, according to the NDC. The Committee notes the deployment of the two onshore CCS demonstration projects led by CPC and Taipower. We also welcome the MOENV initiating the drafting of CCS regulations pursuant to the Climate Change Response Act. These actions signal Taiwan’s commitment to CCS deployment and pave the way for the next phase – commercial-scale CCS deployment to support the 40.2 MTA target as part of Taiwan’s 2050 net-zero ambitions. When considering any carbon-reduction technology, whether CCS or other alternatives, it is important to take into account the full life cycle of decarbonization achieved through the technology’s deployment.

Taiwan has the geological potential for CO2 storage. This ability to assist existing industries in decarbonization and promote the development of new industries by establishing domestic CCS value chains will provide a competitive advantage that may help mitigate the impact of the EU’s Carbon Border Adjustment Mechanism. CCS technology can be applied in hard-to-abate sectors (such as steel and cement), as well as power generation and petrochemicals. Leveraging CCS technology will greatly benefit Taiwan’s industries and accelerate the country’s decarbonization journey. The Committee therefore recommends the following:

4.1   Establish a regulatory framework for CCS. As a critical first step, the Committee recommends accelerating CCS development by creating a robust and commercially viable regulatory framework by the end of 2024. Improving policy clarity will enable different government departments to implement policies consistently.

International energy companies have been developing and deploying CCS safely and efficiently, in addition to setting up feasible value chains, since the 1970s. A well-structured regulatory framework would provide appropriate oversight and verification of CCS projects, gaining public trust and support for the technology.

The regulatory framework should include permitting and licensing processes, long-term liability measures, and monitoring and verification rules. Commercial-scale decarbonization projects require certainty regarding long-term licensing and permitting to support long-term investment and ensure that storage sites are used effectively for CO2 sequestration. The Committee encourages broadened efforts at cooperation and engagement with different stakeholders through consultation sessions. Leveraging frameworks developed internationally would facilitate Taiwan’s achievement of its net-zero target.

4.2   Establish an incentives policy to spur the growth of the CCS industry. The Committee recommends that the MOEA establish an incentive policy package to assist the introduction and promotion of CCS value chains in the same way that such measures have accelerated growth for renewable energy. The implementation of safeguards to ensure that projects align with policy objectives is fundamental to such a policy. The Committee would welcome dialogue with the government on incentives needed to drive this growth.

4.3   Develop a policy to promote Carbon-Free Electricity Certificates (CFECs). The Committee recommends that the MOEA support the development and introduction of CFECs. These certificates would provide a market-based approach modeled after the Taiwan Renewable Energy Certificate (T-REC). They are a mechanism to verify and quantify the amount of carbon-free electricity generated by thermal power plants equipped with CCS technology. CFEFs provide power users with constant, dispatchable, carbon-free power as a decarbonization option and can be expanded to support the decarbonization of other industries. Such a market-based mechanism can create tangible market value, incentivizing the adoption of CCS and supporting investment in CCS value chains. As part of the process, analysis and industry engagement would be conducted to develop the criteria for CFEFs.

4.4   Broaden stakeholder engagement for CCS development. The Committee underscores the importance of broadening stakeholder engagement for CCS development. We support efforts by the government to engage with the public by educating them about the safety and reliability of CCS technology. More importantly, it is vital to explain how CCS contributes to Taiwan’s decarbonization goals.