IEEJ：April 2016○ｃ IEEJ 2016

Special Bulletin
A Japanese Perspective on the International Energy Landscape (268)

April 22, 2016

Taiwan’s Energy Policy Challenges Just before the Regime Change (1)Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn April 21, the 12th Japan-Taiwan joint seminar on energy cooperation took place inTaipei. The seminar has been held in Japan and Taiwan alternately since the first one in 2001 todiscuss their energy policy challenges and bilateral cooperation in solving these challenges. Morethan 30 Taiwanese representatives attended the seminar, including senior officials from the Bureauof Energy at the Ministry of Economic Affairs, from energy-related think tanks such as the Industrial
Technology Research Institute and the Taiwan Institute of Economic Research, and fromgovernment-run companies.
As is well known, Tsai Ingwen, leader of the opposition Democratic Progressive Party,
won a landslide victory in Taiwan’s presidential election on January 16, forcing the Chinese
Nationalist Party known as Kuomintang to transfer power for the first time in eight years. Theseminar to discuss the energy situation and energy policy challenges in Taiwan came at a very
interesting timing just before the Tsai Ingwen administration will be inaugurated on May 20. In thefollowing, I would like to summarize Taiwan’s energy policy challenges that were particularly
impressive to me at the seminar.
The most important point is that nuclear power generation, which accounts for 16% ofpower output in Taiwan, has great uncertainties and challenges that could have various impacts on
Taiwan’s future energy and environment problems. While the first to third existing nuclear powerstations have stably and efficiently operated in Taiwan, the future course of nuclear power generation
has become uncertain on people’s growing concern about nuclear safety since the 2011 Fukushima
accident. The Taiwanese government has grown more cautious about nuclear energy. In July 2015,
the government decided to freeze the fourth nuclear power station construction, which is close tocompletion. The three existing nuclear power stations are now scheduled to terminate operation
around 2020. Nuclear energy has played key roles as one of Taiwan’s energy policy options to secureenergy security and reduce global warming gas emissions, but its future course has grown more
uncertain.
If the existing three nuclear power stations terminate operation without the fourth one
being counted, Taiwan will have to prepare an alternative electricity source. It now faces key
challenges for its three Es (Energy security, Economic efficiency and Environmental protection)
including maintenance of energy self-sufficiency, climate change measures and restrictions on1

IEEJ：April 2016○ｃ IEEJ 2016energy prices to maintain and enhance the Taiwanese economy’s competitiveness. Energy security
involves international energy supply and demand problems that are difficult to foresee, althoughcurrent energy prices are low. Regarding climate change measures, Taiwan has submitted its
intended nationally determined contribution (INDC) to cut greenhouse gas emissions by 50% fromthe business-as-usual level in 2030.
Through discussions at the seminar, I felt that great expectations are being placed onmeasures to take advantage of and enhance Taiwan’s industrial and technological infrastructure,promote energy conservation and renewable energy, and develop and diffuse innovative technologies.
Regarding energy conservation, Taiwan has decided on various measures to reduce energy
consumption per gross domestic product, or energy intensity, in 2025 by 50% from 2005, including
tougher efficiency standards for energy-consuming equipment, energy conservation labeling, smart
energy systems and electricity saving targets for large industrial users. High expectations are placedon renewable energy. Taiwan plans to boost renewable energy power generation capacity from 4.3
gigawatts (GW) in 2015 to 17.3 GW in 2030 mainly by expanding solar photovoltaics and offshore
wind power plants. However, I felt that as expectations are great on renewable energy, Taiwan may
raise the renewable energy power generation capacity target further depending on future energy
policy discussions.
From the viewpoint of innovative energy measures, I felt that great expectations are being
placed on lower-carbon power generation, and carbon capture and storage (CCS) technologies ascoal accounts for about 50% of Taiwan’s power generation. I also felt that Taiwan is greatlyinterested in the development and diffusion of fuel cells and the relevant building of ahydrogen-based society. At present, these technologies are subject to strategic initiatives for Taiwan
or other economies in the world. Taiwanese participants in the seminar enthusiastically asked
questions on Japan’s present and future situations regarding fuel cells and hydrogen-based society,indicating their great interest in these technologies and their ambition to cooperate with Japan in theadvanced, innovative technology area. Interestingly, some Taiwanese participants noted they wereconcerned that the present low oil prices could reduce incentives for enhancing and promoting
further energy conservation and renewable energy development and stepping up innovative energy
initiatives. The seminar gave me an opportunity to appreciate that given that Taiwan along withJapan is a net energy importer depending heavily on energy imports, Taiwanese energy policy
planners are cautious of adverse effects of the present low oil and liquefied natural gas prices thatnow economically benefit Taiwan.
Lastly, I would like to take up the LNG issue. Taiwan is the world’s fifth largest LNG
importer, increasing LNG imports steadily over recent years. Given that Taiwan faces uncertainties
about future nuclear power generation, depends heavily on coal power generation, has submitted an
INDC for GHG emission cuts and is expected to take much time before getting great contributions
from renewable and innovative energy, LNG is likely to play a greater role in Taiwan over a medium
term. Therefore, Taiwan is now constructing its third LNG receiving terminal following the existing
two. At the same time, Taiwan is required to procure LNG at more competitive prices and more2

IEEJ：April 2016○ｃ IEEJ 2016

flexibly to meet the great expectations placed on LNG and cope with uncertainties about nuclear
energy. The seminar indicated anew that Taiwan under such requirement has great ambition tocooperate with Japan and other Asian LNG importers in developing the Asian LNG market andimproving market liquidity and functions. Japan and Taiwan have a similar energy supply anddemand structure and similar energy policy challenges and are expected to promote their cooperation
for the mutual benefits and prosperity.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3