The Energy Regulation and Markets Review: Taiwan
Taiwan, as an island, imports around 98.5 per cent of its energy,2 which is crucial to the rapidly transforming economy. Owing to a long-standing dependence on energy imports and political restrictions, Taiwan's power generation system has difficulties in creating an electricity grid network to connect with other countries or regions. Hence, since a lack or an excess of electricity generation would not be balanced with outbound and inbound electricity flows, Taiwan's electricity grid network is an independent one.
To build a 'nuclear-free home', the Tsai administration intended to reform the power sector and the whole electricity market structure through the Electricity Act 2017.3 The main goal of this regulatory reform is to ultimately phase out nuclear power, increase renewable energy in electricity generation and retailing, and examine the open market mechanism with the power sector reform. Following approval of the new Electricity Act by the Legislative Yuan, many foreign investors will be closely following these policy trends. For instance, manufacturers care about whether Taiwan is able to deliver a sufficient and stable electricity supply at reasonable prices. And other potential investors are evaluating new commercial opportunities in the procedures of power market liberalisation, generation of green energy and nuclear decommissioning.4
In recent years, the authors and colleagues have been working closely with the Taiwanese government and two major state-owned energy giants – China Petroleum Corporation Taiwan (CPC Taiwan) and Taiwan Power Company (Taipower) – on a variety of significant projects. Therefore, this chapter presents observations on the latest regulatory and policy changes, electricity market reforms, energy trade (especially liquefied natural gas (LNG)), renewable energy development and relevant commercial opportunities.
i Energy transition
Energy transition is still under way. According to the Taiwan Bureau of Energy's statistics in 2019, renewable electricity accounted for 5.6 per cent of the aggregate produced electricity and 13.93 per cent of the aggregate installed generating capacity in Taiwan.5 Although the provision of the Taiwan Electricity Act on halting nuclear power plants was abolished in 2019, the Tsai administration seems to keep moving forward with its energy policy of phasing out nuclear power in Taiwan.6 During this transition, the Tsai administration's outlook for the fuel mix for power generation in 2025 is 50 per cent natural gas, 30 per cent coal and 20 per cent renewable energy.
The ultimate goal of this transition is to achieve Taiwan's Intended National Determined Contribution,7 voluntarily published after the 2015 Paris Climate Accord, which stated that annual carbon emissions should be reduced by 20 per cent by 2030 and by 50 per cent by 2050, as compared with 2005. This ambitious goal will require a reduction of around 53 million tonnes of carbon dioxide equivalent by 2030 and 133 million tonnes by 2050.8 To achieve all these policy goals requires a well-designed regulatory framework and strong political supports.
ii The regulators
The Bureau of Energy, Ministry of Economic Affairs is Taiwan's major government authority for energy issues.9 Operating based on its statutory scope of authority, the Bureau of Energy is responsible for the design and management of Taiwan's energy policy and relevant regulation, prediction planning and promotion of supply and demand of energy, the management of energy corporations, the review of energy rates, research, development and popularisation of renewable energy and new energy technologies, the promotion of energy efficiency and conservation measures, among other things.
Taiwan set up a Office of Energy and Carbon Reduction under the Executive Yuan in 2016.10 This aim of this new office is to enhance the policy integration between different government agencies and implement concrete measures for the low-carbon energy transition.
iii Regulatory structure
In successfully implementing the above-mentioned energy policy goals, Taiwan has already established five major categories of energy laws and regulations:11 the Energy Management Act, the Petroleum Administration Act, the Natural Gas Business Act, the Electricity Act and the Renewable Energy Development Act.
Energy regulations and policies in Taiwan are therefore promulgated pursuant to the authorissation by each category of the major energy laws, and govern the promotion of various energy issues.
iv Ownership and market access restrictions
Taiwan has a long history of state-owned power supply – Taipower was established in May 1946. The electricity sector has been regulated by Taipower for several decades, and the company's position as a monopoly maintains relatively low prices.12
Since 1990, liberalisation of the electricity market has followed models and examples of reform in other developed and developing countries. However, the procedure in Taiwan has progressed very slowly and there has not been a public consensus in support of power market liberalisation. The latest revision of the Electricity Act, in 2017, mainly focused on opening up the market for green energy,13 which has made it difficult to formulate a free market in a short period or to gain support from other regional power markets, leaving several challenges still unresolved.
v Transfers of control and assignments
Taipower operates all electricity grid and transmission networks in the country and generates around 80 per cent of Taiwan's electricity. According to the Electricity Act 2017, this state-owned entity should undergo its first corporate institutional restructuring and end a 70-year monopoly on the sale of electricity.14
To improve the company's efficiency, Taipower will be separated into two major operational divisions: one for power generation and one for electricity transmission, distribution and sale. Under these two major divisions, there are four distinct units: conventional power generation, nuclear power generation, transmission, and distribution and service.15 These restructuring measures aim to clarify each unit's obligations and optimise efficiency. In the future, Taipower will also be requiring each unit to provide individual financial statements to improve cost management.
This significant institutional arrangement of Taipower means that other power suppliers will be able to sell electricity directly to consumers. Under the previous system, private companies could only sell electricity to Taipower, which charged a transmission handling fee and would then distribute it at a price it had set.16 However, not all the details have been worked out at this stage, and the idea of privatising Taipower will require further study. The whole process began in 2017 and will take another three to six years to complete.
Transmission/transportation and distribution services
Taiwan's electricity market has not been fully liberalised. Currently, the island's electricity transmission and distribution networks are all operated by Taipower. However, a number of articles in the Electricity Act 2017 foresee the future direction of reform.
i Vertical integration and unbundling
To achieve the goal of a steady supply of electricity, Taipower will need to be restructured as a parent holding company, which will set up two subsidiary companies to oversee (1) electricity generation and (2) electricity transmission and distribution.17
ii Transmission/transportation and distribution access
Like Taipower, the electricity transmission and distribution enterprise will be a state-owned corporation and a single entity. The scope of its business operation covers the entire country.18 The electricity transmission and distribution enterprise will be responsible for managing the dispatch of electric power by giving priority to the grid connections that allow access to the renewable energy on the condition that the power systems remain safe and stable.19
The new enterprise may not engage in the generation or retailing of electricity and cross holdings of shares in the enterprises will not be permitted. However, the engaging restriction would not apply if the electricity industry regulatory authority approves otherwise. In those circumstances, the electricity transmission and distribution enterprise would be permitted to run the electricity retailing utility enterprise concurrently.20
The electricity transmission and distribution enterprise may engage in business pursuits other than those in the electricity industry on the condition that those business pursuits neither affect the operation of the corporation as an electricity transmission and distribution enterprise nor compromise the maintenance of fair competition. It would also require approval by the electricity industry regulatory authority.21
To perform the tasks assigned in the preceding paragraph, the electricity transmission and distribution enterprise shall prepare a draft of regulations to govern the 'scope, item, procedure, norm, cost-sharing, emergency response and information disclosure of the electric power dispatching' in line with the electric power dispatching principals drawn up by the regulatory authority. This draft shall be submitted to the electricity industry regulatory authority for approval. A similar review process shall also apply to any future amendment of these regulations.22
A renewable energy-based electricity generating enterprise, or a retailing enterprise that requires the power grids to distribute the power generated or purchased for sale, may request the service of the electricity transmission and distribution enterprise for electric power dispatching, and pay a service fee based on the total amount of electricity dispatched.23 Further, the electricity transmission and distribution enterprise shall charge the respective enterprise that uses its electricity supply infrastructure a fee based on the amount and the rates of the resupplied electricity.24
The two aforementioned fees shall be assessed according to the Electricity Carbon Emission Factor and submitted to the Electricity Tariff Examination Council for review and approval.25 A discount may be given on the prescribed fees, based on the Electricity Carbon Emission Factor. The rules governing any such discount shall be established by the central competent authority.26
To ensure a safe and stable supply from the power system, the electricity transmission and distribution enterprise shall provide the ancillary services required to meet the needs of the electric power dispatching by applying to the electricity generation enterprise and employing self-use power generation equipment as required.27
The electricity transmission and distribution enterprise may charge fees for these ancillary services, which will be based on the Electricity Carbon Emission Factor and submitted to the Electricity Tariff Examination Council for review and approval.28
Renewable energy and conservation
i Development of renewable energy
To achieve the 2025 renewable energy target, the Tsai administration is keen to focus on an expansion of solar PV installation and offshore wind farms. In particular, the projection is an increase in solar PV installed capacity to 20GW by 2025. Following the completion of its two-year solar PV promotion plan,48 the government's focus is on three main short-term strategies: encouraging rooftop PV installation, promotion at both central and local levels, and generating polar power from aquaculture facilities.49
To incentivise solar power installation, the government has promoted a combination of the feed-in tariff mechanism and the 'photovoltaic-energy service company' operational model. On 31 December 2019, the government announced that the 2020 feed-in tariff rate for solar PV generation, plus the cost of solar panel recycling, is reduced to between NT$3.9408 per kWh and NT$5.7788 per kWh, a drop of between 0.34 per cent and 2.44 per cent compared to the 2019 feed-in tariff rate. Further, the 2020 feed-in tariff rate for solar PV systems with a capacity of under 20kW is reduced to NT $5.7788 per kWh.50
The boom in Taiwanese offshore wind energy is driven by the government's ambitious renewable energy plan, the Thousand Wind Turbines Project (the Wind Project).51 This project has three stages: (1) Demonstration Round (2016–2020); (2) Transition Round (2019–2025); and (3) Zonal Development Round (2026–2035). The idea behind this initiative is 'demonstration first, then zones of potential, and finally zonal development'.
In April 2018, the government announced that the original 3GW offshore wind energy target for the Transition Round was increased to 5.5GW capacity, which is estimated to stimulate US$32 billion in investment.52 The allocation process for the total 5.5GW capacity target was allocated through two phases: Phase 1: selection mechanism for an initial 3.5GW and Phase 2: competitive bidding for the remaining 2GW.
The Phase 1: selection mechanism allocated the 3.5GW capacity with a fixed feed-in tariff for 20 years by adopting the Guidelines for Grid Allocation promulgated by the Taiwan Bureau of Energy in January 2018. The selection criteria include several considerations, such as construction capability, engineering capability, operation capability and, particularly, the promotion of local content and the connection to Taiwanese financial institutions.53 On 30 April 2018, the government allocated the grid connection of the initial 3.5GW capacity to 10 offshore wind farms proposed by seven investors through the selection mechanism.54
The selected offshore wind farms are required to enter into a wind power purchase agreement specifying a 20-year fixed feed-in tariff with Taipower. In December 2019, the government decided to decrease the 2020 feed-in tariff rate for offshore wind power by 7.6 per cent, as compared to the 2019 rate. Thus, the 20-year fixed feed-in tariff for the offshore wind power purchase agreement signed in 2020 is set at NT$5.0946 per kWh. However, the offshore wind power developers have an option to sell the generated power at NT$5.8015 per kWh for the first 10 years and at NT$3.8227 per kWh for the second 10 years.55
During Phase 2, allocation of the remaining 2GW capacity (the final figure was 1.644GW) was based on competitive bidding. In contrast to the selection mechanism, there was no local content requirement for this bidding round and the major consideration was the lowest offtake tariff. On 22 June 2018, the government announced that four wind farms proposed by two investors were awarded the 1,644GW capacity in total through the competitive bidding process. The bidding price for the four wind farms ranged from NT$2.2245 to NT$ 2.5481 per kWh.56
Beyond the Wind Project's 2025 target, the government is further expected to launch a target of 10GW offshore wind energy capacity to be operational by 2035. Those policies give positive signals to local and foreign investors that there will be huge developments in offshore wind power and promising business opportunities in Taiwan in the coming decades.
ii Energy efficiency and conservation
Faced with growing energy demand, Taiwan's current energy efficiency management systems set up mandatory programmes and voluntary programmes. The major policy tools adopted for mandatory programmes include: Minimum Energy Performance Standards (MEPS), Energy Efficiency Rating Labelling and Energy Management and Audit. The MEPS were introduced in Taiwan in the 1980s and have been continually updated. Currently, the government has specified 27 product categories for the MEPS requirements.57
Apart from the mandatory programmes, the government also endeavours to increase public awareness, education and promotion about energy efficiency and conservation. These incentive programmes include subsidies and tax rebates. For example, as part of an amendment to the Taiwan Commodity Tax Act, the government announced an incentive package in 2019. Now customers who purchase selected appliances with high energy efficiency between June 2019 and June 2021 are eligible for a tax rebate of NT$2,000 for each appliance.58
iii Technological developments
Widespread adoption of smart grid technology in Taiwan has played a vital part in the forthcoming evolution of the Taiwan electricity market. To improve the quality and stability of renewable energy supplied to citizens, the government launched a Smart Grid Master Plan in 2012. This long-term plan covers a period of 20 years and aims to develop Taiwan's smart grid in three stages: (1) Technology Test Stage (2011–2015); (2) Technology Implementation and Promotion Stage (2016–2020); and (3) Technology Extensive Application Stage (2021–2030).59 An estimated NT$139.9 billion will be invested in this Master Plan.
Smart grid installation is proceeding at a rapid pace in Taiwan. According to the latest statistics, 300 intelligent substations (nearly 50 per cent) will be completed in 2020 and a further 603 (100 per cent) will be completed in 2030. In respect of automatic power distribution switches, 24,000 (86 per cent) switches were completed in 2018 and another 28,000 (100 per cent) will be completed in 2030. In addition, all high-voltage advanced metering infrastructure (about 25,000 households) has been completed and 230,000 low-voltage advanced metering infrastructure was installed in 2018. The government has announced that it will accelerate the installation of one million low-voltage smart meters by the end of 2020.60
As almost half of Taiwanese households are already equipped with smart meters, the technological developments on smart grid will move to focus on the management of demand and innovation on commercial application.61 For example, Taipower has introduced a tiered pricing mechanism that provides discounted tariffs to off-peak users. Further, the Taiwan Renewable Energy Development Act provides a default cost-sharing mechanism between the electricity transmission and distribution companies and the renewable energy generators.62 Thus, a better integration of renewable energy in a sustainable smart grid is a major challenge that must be addressed.63
i Electricity market reforms
Amendments to the Electricity Act approved by the Executive Yuan in October 2016 relaunched reforms of the electricity market and demonstrated that the procedure would need to be implemented in two stages.
RESTRUCTURING THE POWER SECTOR
The aim of the first stage of power sector reform (from 2017 to 2020) was to allow renewable energy producers to sell their electricity directly to customers, either via their own transmission and distribution lines or through the existing electricity grid network set up by Taipower. Taiwan has ambitious goals for developing renewable energy. The Tsai administration has invested around NT$1.4 trillion for 20 gigawatts (GW) of installed solar photovoltaic (PV) and 5.5GW of offshore wind by 2025. Liberalising the green power market in this first stage is recognised as being key to accelerating development of renewable energy without causing increases in prices for consumers or the ruination of Taipower's finances.
Under the Taiwan Bureau of Energy's plan, the second stage of reform is to be carried out over six years (from 2019 to 2025), including the restructure of Taipower into a holding company with two entities: a power generation corporation and a transmission and distribution corporation. Although electricity generation will be further opened up for private investment, both entities under Taipower would still be run and regulated by the state.
The effects of this restructuring of Taipower could be even more far-ranging. The government has scheduled the separation of the accounting system from the power enterprise within two years and completion of the separation of corporates within six to nine years. This institutional change would set the foundation for subsequent reforms.
POSSIBLE EFFECTS ON ELECTRICITY RATES, POWER MARKETS AND SOCIETY
For a long time, electricity in Taiwan has been supplied by the vertical integration of the state-run Taipower. According to statistics for 2017 compiled by the International Energy Agency, the power price rate for households was the second lowest in the world and its industrial power price rate was the seventh lowest globally.
Before launching the new round of power sector liberalisation, the government stated that it would not increase electricity prices; further, the amendments to the Electricity Act cover price regulation and provide for a special fund to stabilise electricity prices. The amendments also guarantee annual net profits for electricity generators, suggesting that if the market does not allow for payment of a premium for green energy, the government will purchase the electricity.
Currently, the government still has a monopoly in the market and it can easily control electricity prices by Taipower's vertical integration. As open market mechanisms are introduced, the opening up of power generation and sales in stages may not be allow for a fully competitive market to be created immediately. Also, as commentators have pointed out: 'Opening the market would increase the exchange costs, combining with the government's feed-in tariff and system cost to promote renewable energy, the electricity price is bound to go up.'
Based on developments in the power market so far (between 2017 and 2020), the relevant green power procurement regulations are not yet attractive enough to activate a whole new electricity market. For instance, detailed regulations relating to the Renewable Energy Portfolio Standard (RPS) have not been published.
At this stage, there are still very few private power retailers in Taiwan's electricity market, which may also be a result of the lack of specific qualifications and clear review criteria for electricity retailers. Therefore, power generators still cannot enjoy the full advantages of electricity market reform if they wish to sell electricity to end consumers through Taipower's current transmission and distribution grid lines. Taipower should consider pushing forward the liberalisation of the electricity market by supplying renewable-based electricity to end users, rather than just functioning as an electricity retail utility company.
For the next stage of power market reform to succeed, many relevant regulations and policies need to be revised and improved. In addition to the implementation methods for the RPS, energy regulations regarding power transmission and distribution, application standards and requirements for power retailers should be the priorities for future power policy planning. Experiences in countries that have undergone power sector reform demonstrate that establishing a regulatory ecosystem of fair market competition is a necessary condition for the success of reform in Taiwan, and for the benefit of society and citizens.
ii Liquefied natural gas trade and gas markets
Because of the limited availability of renewable energy and the need for backup power generation capacity in the island, the role of liquefied natural gas (LNG) in Taiwan's power generation mix will grow significantly by 2025.
DEVELOPMENT OF TAIWAN'S LNG TRADE
Taiwan has only about 0.78 per cent indigenous natural gas production for its consumption, and imports 99.22 per cent of its requirement from other jurisdictions. In 2016, Taiwan imported more than 700 billion cubic feet of LNG, which makes Taiwan the world's fifth-largest LNG importer.
The major suppliers are Qatar, Malaysia, Indonesia, Australia, Papua New Guinea and the United States, accounting for about 90 per cent of LNG imports in 2016. Taiwan purchased much of its LNG under long-term contracts. For example, Qatar, the world's leading exporter of LNG, supplies Taiwan in this way, and has even established a joint venture between its state-owned company RasGas and ExxonMobil (based in Houston, US).
CPC Taiwan is the major importer of LNG. In recent years, CPC Taiwan has continued to diversify its gas supply sources after signing long-term LNG supply contracts and joint ventures with the capacity owners in Australia, the United States and Papua New Guinea. In 2014, Taipower was given government approval to procure LNG itself. In the future, some of the new gas-fired projects will use LNG bought by Taipower. For instance, Taipower signed long-term contracts and completed the procurement process with several international LNG suppliers for Taipower's Taichung and Hsieh-Ho projects before the end of 2019.
Regarding LNG procurement strategies, both CPC Taiwan and Taipower mainly apply long-term contracts, supplemented by spot purchase. To diversify the types of LNG suppliers, both portfolio suppliers and project suppliers are taken into consideration (although portfolio suppliers are preferred) during evaluation to secure supply and ensure competitiveness. Current policy aims to purchase at least 20 per cent of contract volume from the United States. Finally, in respect of diversification on price index, the contract price is linked to both the Japan Crude Cocktail and Henry Hub to avoid the risk of a single price index.
NATURAL GAS MARKET AND REGULATION
CPC Taiwan currently owns almost all the LNG unloading, transmission and storage facilities in Taiwan and is therefore still the largest natural gas supplier to the power generation sector.
CPC Taiwan reviews changes in the cost of imported LNG monthly, in accordance with the government-regulated gas pricing system. If the range of the monthly adjustment is within 3 per cent or less than 6 per cent accumulated for three consecutive months, CPC Taiwan has its own full authority to decide the price adjustment and, after an adjustment is announced, CPC Taiwan just needs to report to the Ministry of Economic Affairs for information purposes. However, if the range of adjustment exceeds the aforementioned authorised range, CPC Taiwan will need to ask the Ministry of Economic Affairs for approval of its decision.
There are two major types of contracts for sales of natural gas on the domestic market: United Contract and Tatan Exclusive Contract. All natural gas supplied to Hsinta, Talin, Nanpu, TungHsiao and Tatan (except for the quantity supplied under the Tatan Exclusive Contract) is under the United Contract system. Pricing under a United Contract is now based on CPC Taiwan's monthly published price. Pricing under a Tatan Exclusive Contract, on the other hand, is in accordance with the contract formula and is calculated monthly. In 2019, the gas pricing system required Taipower to reduce the cost of electricity generation from gas for gas-fired power purchased from independent power producers (IPP) from NT$3.7 per kilowatt hour (kWh) to NT$2.64/kWh. This level is still significantly higher than the NT$1.9/kWh paid for coal-fired generation purchased from independent power producers but only slightly above Taipower's average electricity rate to customers of NT$2.56/kWh.
NEW TRENDS IN THE LNG TRADE AND INFRASTRUCTURE DEVELOPMENT
The rapid growth of US shale gas on the global energy market is generating speculation that Taiwan might soon become a main customer. In fact, CPC Taiwan has been purchasing US gas on the spot market since 2017. More recently, the Trump administration has made decreasing US trade deficits with main trade partners a policy priority, and increased sales of LNG is usually viewed as a possible solution for dealing with the trade imbalance.
It still is not certain whether Taiwan would be a big buyer of US LNG. The first factor is the price. If the US LNG price remains significantly higher than that of other global competitors, the amount of LNG imported from the United States would be constrained. Additionally, both CPC Taiwan and Taipower need to compete for LNG tanker shipments internationally with Japan, Korea and mainland China. This situation also leads to an interest in reducing Taiwan's LNG trade surplus with the United States.
Regarding the natural gas infrastructure, the government's official timetable for gas-fired generation expansion is looking precarious. The approval, design, engineering and construction of new natural gas infrastructure projects all take a considerable amount of time. Taiwan's LNG receiving capacity is one of the major stumbling blocks for any increase in LNG demand. Currently, Taiwan has two major receiving terminals, which already need to receive more LNG shipments than their designed capacities. To allocate the increasing LNG demand, the Tsai administration plans to create a third LNG receiving terminal. Taipower aims to add 13.5GW of gas-fired capacity by 2025 (and a further 3.5GW by 2028), though any delays in completion of infrastructure will test the anticipated growth in demand
The year in review
The current period of energy development in transition is largely policy driven. Following the successful re-election of Ms Ing-Wen Tsai as President in January 2020, energy transition in Taiwan will continue to introduce substantial power generation capacity from renewable sources, especially solar and wind, and the current policy to phase out nuclear energy will remain.
In early 2019, amendments to the Renewable Energy Development Act imposed a regulatory position statement on large power users. However, it failed to provide further specifications about either power users or renewable energy targets. Further, the renewable energy procurement methods are not clear enough. Whether it is through a renewable energy retailing enterprise or Taipower's grid, there should be a clearer description of the procurement methods so that the market can operate properly.
The energy policy referendums in November 2018 clearly demonstrated a strong dissatisfaction with coal and air pollution.64 Nuclear energy, on the other hand, found favour with voters. Citizens favoured lifting a ban on nuclear energy past 2025. Despite popular support for environmental protection and renewable energy, several polls show the population's resistance to a price rise. From 2012 to 2013, higher fuel prices compelled the government to adjust electricity prices, which faced very strong opposition from citizens and a slump in the level of support for the ruling political party, KMT, making it difficult to lower consumption with higher prices. According to Taiwan's referendum law, the government is obliged to respond to the measures that pass,65 which illustrates the interesting relationship between democracy and energy policy in Taiwan.
Conclusions and outlook
The decarbonisation of energy systems represents not only great regulatory and policy challenges for Taiwan but also increasing business opportunities for international investors. Several major projects are currently being implemented under Taipower's long-term Power Development Plan, which aims to construct new power plants, and to renew and expand current facilities until 2028. There is great potential for the market, if any foreign entity is able to promote well-proven solutions and commercially available energy technologies for Taiwan's transition.
Energy from waste (EfW) is a new type of renewable energy, which accounts for around 1.25 per cent of the total electricity generation in Taiwan.66 Between 2017 and 2022, Taiwan invested NT$9 billion in upgrading 11 EfW incinerators and related treatment facilities and technologies, such as mechanical biological treatment, centralised anaerobic digestion and highly effective decentralised composting. Government policy encourages foreign business partners to participate in the development of growing the EfW industry, which provides opportunities for local–foreign partnerships and other collaborations.
As Taiwan is achieving its 'free-nuclear homeland' goal, nuclear power plant decommissioning and nuclear waste management also bring many commercial opportunities. For the successful management of nuclear waste and the decommissioning of nuclear plants, Taiwan requires overseas exemplariness and expertise. Taiwan has explored all possible means and the most viable mid-term and long-term solutions; further international cooperation in the nuclear power regime is indeed imperative for Taiwan.
The 2025 deadline for phasing out nuclear power in Taiwan is approaching. This situation requires proven sources of green energy that can be installed on a large scale within a relatively tight timeframe, as Taiwan moves towards its goal of 20 per cent of electricity generation from renewable energy sources. Also, natural gas will have a more critical role in Taiwan's future energy mix. It is believed that the amendments to the Electricity Act are potentially transformative, but how well the new system would work remains to be seen. We will be updating Taiwan's reform progress in future editions of this volume.
1 Chung-Han Yang and Chengkai Wang are partners at Dentons Taiwan.
2 Bureau of Energy, Ministry of Economic Affairs Taiwan, 'Energy Statistical Annual Report 2018', at https://www.moeaboe.gov.tw/ECW/english/content/ContentLink.aspx?menu_id=1540.
3 Department of Information Services, Executive Yuan, 'Amendments to the Electricity Act' (January 2019), at https://.english.ey.gov.tw/News3/9E5540D592A5FECD/216f6992-1527-4258-8be0-3fe3d21a6e6a.
4 See Paim, M-A and Yang, C-H, 'Nuclear decommissioning in Brazil and China: regulatory development, incompleteness and future synergy', The Journal of World Energy Law & Business (2018), 11(3), pp. 220 to 236, at https://academic.oup.com/jwelb/article-abstract/11/3/220/4985465.
6 The amendment to Article 95 of the Taiwan Electricity Act is effective as of May 2019. In theory, Taiwan is no longer obliged by law to eliminate nuclear power by 2025. However, the Tsai administration has expressly rejected the extensions of the two operational nuclear power plants, both of which will reach the end of licensures by 2025.
7 See Submission by Republic of China (Taiwan): Intended Nationally Determined Contribution, at https://ghg.tgpf.org.tw/files/team/Submissiom_by_Republic_of_China_(Taiwan)INDC.pdf.
9 Bureau of Energy, Ministry of Economic Affairs, 'Responsibilities', at https://www.moeaboe.gov.tw/ECW/english/content/Content.aspx?menu_id=960.
10 Executive Yuan, Department of Information Services, 'Executive Yuan to set up energy and carbon office' (June 2016), at https://english.ey.gov.tw/Page/61BF20C3E89B856/f5e3677e-a7df-4b99-b850-319482c49b8f.
11 Bureau of Energy, Ministry of Economic Affairs, 'Energy Regulations', at https://www.moeaboe.gov.tw/ECW/english/content/ContentLink.aspx?menu_id=977.
12 'Electricity rates to remain unchanged, ministry says', Taipei Times (19 September 2019), at https://www.taipeitimes.com/News/biz/archives/2019/09/19/2003722528.
13 'Major Amendments to the Taiwan Electricity Act (2017)', Tak Associes – Ecovis (16 January 2017) at https://www.takassocies.com/single-post/2017/01/16/Major-Amendments-to-the-Taiwan-Electricity-Act-2017.
14 'Taiwan Nuclear Power Reduced, Taipower Restructures: Restructuring Plan for Taipower', Taiwan Business TOPICS (17 February 2016, American Chamber of Commerce in Taipei), at https://topics.amcham.com.tw/ 2016/02/taiwan-nuclear-power-drops-with-reactor-stoppage/.
15 See Electricity Act 2017, Article 6, fourth paragraph.
16 'Liberalisation of the energy sector proceeds smoothly', The Economist, Intelligence Unit (13 January 2017), at https://www.eiu.com/industry/article/1604995544/liberalisation-of-the-energy-sector-proceeds-smoothly/ 2017-01-13.
17 Electricity Act 2017, Article 6, fourth paragraph.
18 id., at Chapter 1, Article 5, first paragraph.
19 id., at Article 8, first paragraph.
20 id., at Article 6, first paragraph.
21 id., at Article 6, second paragraph.
22 id., at Article 8, second paragraph.
23 id., at Article 10, first paragraph.
24 id., at Article 10, second paragraph.
25 id., at Article 10, third paragraph.
26 id., at Article 10, fourth paragraph.
27 id., at Article 9, first paragraph.
28 id., at Article 9, second and third paragraphs.
29 'Major Amendments to the Taiwan Electricity Act (2017)', Tak Associes – Ecovis (16 January 2017) at https://www.takassocies.com/single-post/2017/01/16/Major-Amendments-to-the-Taiwan-Electricity-Act-2017.
30 'Taiwan Undertakes Power Market Reforms', Anemone Ventures blog (12 December 2016), at
32 'Taipower to restructure for first time in 70 years', Taipei Times, at https://www.taipeitimes.com/News/biz/archives/2016/01/05/2003636433.
34 Tsay, I-S and Chen, P-H, 'A dual market structure design for the reform of an independent power grid system – The case of Taiwan', Science Direct, Energy Reports, Vol. 5 (November 2019), pp. 1603 to 1615.
35 Vivoda, V, 'LNG import diversification and energy security in Asia', Science Direct, Energy Policy, Vol. 129 (June 2019), pp. 967 to 974.
37 'Energy in Taiwan: Uncertainty in Liquefied Natural Gas', The News Lens, (13 November 2017), at https://international.thenewslens.com/article/83145.
39 Vivoda, V, (2014) 'LNG import diversification in Asia', Energy Strategy Reviews (January 2013), Vol. 2 (3-4), pp. 289 to 297. See also Gao, A M-Z, Regulating Gas Liberalization: A Comparative Study on Unbundling and Open Access regimes in the US, Europe, Japan, South Korea and Taiwan', Kluwer Law International BV (November 2010).
40 Traditionally, buyers in the Asia Pacific have bought LNG at a price indexed to crude oil, a pricing mechanism known as Japan Crude Cocktail.
42 The pricing formula is first proposed by the Taiwan Institute of Economic Research and officially approved by the Electricity and Natural Gas Pricing Committee at the Ministry of Economic Affairs – see https://www.moeaboe.gov.tw/ECW/english/content/Content.aspx?menu_id=1696.
43 'Product and Pricing, Natural Gas', CPC Taiwan, at https://en.cpc.com.tw/News_Content.aspx?n=2671&s=2375.
46 Elms, Deborah and Sriganesh, Bhargav, 'Trump's Trade Policy: Discerning between Rhetoric and Reality', Asian Journal of WTO & International Health Law and Policy, Vol. 12(2), (September 2017).
47 Guthrie, Craig, 'Taiwan's useful LNG ally', Petroleum Economist (August 2018), at https://www.petroleum-economist.com/articles/politics-economics/asia-pacific/2018/taiwan-s-useful-lng-ally.
48 The two-year solar photovoltaic promotion plan, implemented between July 2016 and December 2018, focused on the construction of demonstration projects and the simplification of operating procedures.
49 More information in 'Promotion of solar energy', a statement made by the Department of Information Services, Executive Yuan, on 29 October 2019, at https://english.ey.gov.tw/News3/9E5540D592A5FECD/777fcee7-90db-4b72-9927-573eecf9ea9e.
50 The 2020 feed-in tariff rate was effected on 1 January 2020 – see the official statement at https://www.moea.gov.tw/MNS/populace/news/News.aspx?kind=1&menu_id=40&news_id=88058.
53 See Guidelines for Grid Allocation at https://www.moeaboe.gov.tw/ECW/populace/Law/Content.aspx?menu_id=5841.
54 Of the 3,836MW, a total of 738MW is to be completed by the end of 2020. The remaining 3,098MW is to be completed between 2021 and 2025. See official statement about the allocation (dated 4 July 2018) at https://www.moea.gov.tw/MNS/english/news/News.aspx?kind=6&menu_id=176&news_id=79434.
55 The new feed-in tariff rate came into effect on 1 January 2020. The reduction in the feed-in tariff was claimed to reflect 'technological progress and international development trends'. The 2020 feed-in tariff rates for all renewable energy in Taiwan are set out in an official statement made on 31 December 2019 – see https://www.moea.gov.tw/MNS/populace/news/News.aspx?kind=1&menu_id=40&news_id=88354.
56 See official statement about the bidding result and the bidding price at https://www.moeaboe.gov.tw/ECW/populace/news/News.aspx?kind=1&menu_id=41&news_id=15061.
57 To encourage customers to purchase products with high energy efficiency, the government first launched a voluntary energy labelling system in 2001. As of March 2019, there are 301 manufacturers with 6,649 products effectively certified with the Energy Label. The mandatory Energy Efficiency Rating Labelling system, which was launched in July 2010, focuses on energy-consuming equipment and appliances, such as air-conditioning units, automobiles and motorcycles. As of March 2019, there are 12 categories of products successfully registered in the mandatory Energy Efficiency Rating Labelling system. For more information about Taiwan's Minimum Energy Performance Standard requirements, see https://www.moeaboe.gov.tw/ECW/english/content/Content.aspx?menu_id=1535.
59 For more information about the Smart Grid Master Plan, see https://www.moeaboe.gov.tw/ECW/english/content/Content.aspx?menu_id=8678.
60 Department of Information Services, Executive Yuan, 'Smart power grid to ensure stable power supply' (7 November 2019), at https://english.ey.gov.tw/Page/61BF20C3E89B856/27f4ba64-fe9b-47dc-b183-8f2a9718034e.
61 Gan, Jasmine, 'The future of Taiwan's smart grid' (5 August 2019), at https://govinsider.asia/smart-gov/taiwan-smart-grid-chen-yen-haw-virtual-power-plant/.
62 Article 8 of the Renewable Energy Development Act provides: 'In the situation in which an electricity enterprise connects to the power grid according to the preceding paragraph, the costs of bolstering the power grid in addition to the existing networks may be shared by renewable energy-based electricity generating enterprises and electricity transmission and distribution enterprises.'
63 Liou, Hwa Meei, 'The Development of Electricity Grid, Smart Grid and Renewable Energy in Taiwan', Smart Grid and Renewable Energy, 8, 163-177 (23 June 2017), at https://doi.org/10.4236/sgre.2017.86011.
64 '2018 Referendums: Proposals against DPP's energy plans sail through', Taipei Times, https://www.taipeitimes.com/News/taiwan/archives/2018/11/26/2003704953.
65 See Taiwan's referendum regulation at https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=D0020050.
66 Lee, Shang-Hsiu (WTERT/Earth Engineering Center of Columbia University), 'Waste-to-Energy Facilities in Taiwan', at www.seas.columbia.edu/earth/wtert/sofos/Lee_TW.pdf.