The High Cost of Taiwan’s Low Electricity Prices

(AmCham Taiwan|Contributing Writer: David Stinson & Angelica Oung)  Taiwan has some of the world’s lowest electricity prices. The question is why? With no domestic energy reserves, every lump of coal and drop of liquefied natural gas (LNG) – the mainstays of Taiwanese power generation – must be imported. Yet even as the prices of those commodities have soared on the global market, the price for residential power in Taiwan has stayed at NT$2.6253 per kilowatt-hour – a number that has remained unchanged since 2018.

Although the state-run Taiwan Power Co. (Taipower) is traded on the Taiwan stock market, key decisions – including the price of power – are out of the company’s control. Instead, Taiwan’s electricity prices are set by a 17-member Power Tariff Review Committee, made up of experts and academics. The committee, which convenes twice a year, has a price formula that allows the rate to be increased by 3% every six months, or 6% annually. But for the past four years, it has consistently declined to raise prices, even as global oil prices have increased significantly since 2021.

International development bodies generally now advise against price subsidies for electricity. Experts argue that suppressing prices is an inefficient way to help people in the lower-income bracket – since the rich tend to consume more power, energy subsidies are poorly targeted. Moreover, making energy artificially cheap encourages the overuse of a scarce resource. Worst of all, taxpayers eventually end up paying the final price when electricity revenue cannot cover the cost of fuel and power generation infrastructure maintenance.

The reason for Taiwan’s continued suppression of electricity prices in the face of rising costs is political, says Chen Jong-Shun, research assistant at the Center for Green Economy at the Chung-Hua Institution for Economic Research (CIER). Low electricity prices have long been seen as an implicit part of the social contract in Taiwan – a way for the state to care for the people.

“In fact, the amounts involved are not large,” says Chen, referring to the public expenditures required to keep prices from rising, as well as the public benefits from these subsidies. “The problem is that the costs are so widespread. Any breakfast stall, for instance, can see when prices increase, so it becomes a political issue.”

Price-sensitive voters are not the only constituency lobbying for discounted electricity prices. Taiwan’s export-driven economy also benefits from the low prices, with industrial rates ranking sixth lowest in the world. This impact is particularly significant for Taiwan’s highly successful semiconductor industry, which is exceptionally power-intensive. Power subsidies are therefore historically an important part of Taiwan’s economic development, says Chen.

Passing the buck

As electricity usage rises, economic planners face urgent questions about both the environmental and financial sustainability of Taiwan’s price support policy. State-owned oil refiner CPC Taiwan Corp. posted losses of NT$43.4 billion last year due to an ongoing government-mandated freeze on the price of natural gas, despite the commodity’s rising global cost. CPC is the natural gas supplier for Taipower, Taiwan’s primary electricity producer, and sold gas to Taipower for an average purchase price of NT$8.2929 per cubic meter in 2021. According to an April 12 statement by newly appointed CPC Chairman Lee Shun-chin, by the end of April, CPC’s cumulative losses could total NT$65 billion – equivalent to about half of its paid-in capital – if prices remain unchanged.

Although CPC recently raised its sales price of natural gas for electricity generation to NT$12.0873 per cubic meter, the number is still much lower than the company’s current purchase price of about NT$20. There are few signs that international prices will decrease anytime soon, and Taipower will be unable to absorb even the current pricing on an ongoing basis.

After earning NT$48 billion from operations last year, Taipower reported operational losses for the first two months of 2022, when the price it paid for natural gas was NT$11.4033 per cubic meter. Meanwhile, lack of profits has caused the upkeep and improvement of the nation’s power grid to be neglected.

Deputy Minister Tseng Wen-Sheng of the Ministry of Economic Affairs (MOEA) said in March that at least NT$100 billion would be needed this year to increase grid stability. Premier Su Tseng-Chang noted that this sum would be paid by the government, in contrast to previous years when it showed up on Taipower’s balance sheets. However, the final allocation of costs between Tai-power and the government has yet to be determined.

The National Development Council (NDC) has proposed that the state sector invest a collective NT$440 billion in energy-related upgrades by 2030, which will be an ongoing financial burden. Taipower has accumulated reserves worth NT$40 billion, an amount that can only temporarily support the upgrades. The utility has also yet to write off the estimated NT$285 billion loss from Taiwan’s fourth nuclear power plant, following a referendum vote last December to scuttle the project. Overall, it appears that the government’s attempts to stabilize prices have only created additional instability.

The MOEA has recognized that the current situation is a problem. When the Power Tariff Review Committee voted to freeze the price again, MOEA Minister Wang Mei-hua described electricity prices as “too cheap.” The committee is convened under the auspices of the MOEA and the government appoints nine of its 17 members, though it is supposed to act independently.

Taiwan has made sudden corrections to electricity prices before, although politics has always been in the background. Shortly after winning a presidential election, the Ma Ying-Jeou administration raised power prices twice in 2012 and 2013, amounting to a total increase of 16.7%. The 2018 price freeze also appeared to be politically timed, occurring shortly after a minor price increase following the election of President Tsai Ing-Wen. It seems no administration dares raise rates in the runup to an election. And the present moment is particularly tricky, as campaigning for the 2024 presidential election will begin almost immediately after the “nine-in-one” local elections this November. No clear political window for rebalancing thus exists until later in 2024.

Meanwhile, the EU is considering future border carbon tariffs to harmonize international energy transformation efforts. In response, Taiwan’s Environmental Protection Agency has proposed a fee of US$10 per ton of carbon. This amount is easily eclipsed by the current price subsidies, as well as any conceivable price subsidies in the near future. Indeed, Taiwan’s practice of subsidizing electricity prices contradicts the government’s ambitious stated intentions to reach net zero by 2050. Partially as a result of the subsidies, Taiwan currently has the fifth-highest carbon emissions per capita among the world’s top 21 economies.

But system reform is in the works. By 2025, Taipower will be split into two entities: one for generation and another for distribution. This mechanism should allow for more market-based pricing, although many details remain undetermined, including practical responsibility for grid stability. This step will nevertheless mark a milestone in Taiwan’s reform of its power market.

No relief in sight

Taiwan’s energy transition will take place in an environment of persistently high fossil fuel prices. Global oil and gas prices are set to rise in the medium term as a result of pandemic recovery and, more recently, the war in Ukraine. These increases follow a long period of reduced investment in capacity after several years of pain for producers and are thus unlikely to be quickly counteracted.

Liang Chi-Yuan, an economics professor at National Central University and a former Minister Without Portfolio, anticipates that supply will decrease faster than demand as the world moves toward decarbonization, resulting in a seller’s market that could last a decade or more.

“In order to achieve net-zero greenhouse emissions by 2050, the International Energy Agency (IEA) suggests that starting from 2021, all new development of coal and oil fields should stop, which will decrease the supply of oil,” he says. “However, it also suggests that sales restrictions on news cars fueled by oil come much later, in 2035. These two factors might lead to supply shortages until 2035.”

Some opportunities for short-term adjustments by consumers exist, given functioning price signals. CIER’s Chen points to old air conditioners as low-hanging fruit, as they can become significantly less efficient after just a decade. Air conditioners were partially blamed for one of the major outages in May last year.

In the longer term, the energy transition will not only require changes in consumption patterns but also greater changes in industry structure. In some cases – such as last year’s referendum, which rejected nuclear power – prices will only be a background factor for individual decisions with complex upstream and downstream consequences. In the view of many experts, it is time for Taiwanese power consumers to start seeing its true price. Nevertheless, further steps to rationalize the market will take place in the context of financial pressure as the bills for many years of deferred reform come due.

Source: https://topics.amcham.com.tw/2022/05/the-high-cost-of-taiwans-low-electricity-prices/ 


Fixing Taiwan’s Grid Issues Requires Redistribution

(AmCham Taiwan|Contributing Writer: Angelica Oung) The immediate cause of Taiwan’s latest major blackout is indisputable – in fact, it was caught on camera. In a closed-caption video, the supervisor on shift at Kaohsiung’s 4,326MW Hsinta Power Plant is seen hovering in front of a control panel for 20 minutes before turning on a switch labeled 3541. The adjacent switch 3540 had had its insulation gas drained as a part of routine maintenance, which caused 3541 to short out when it was tripped. The video went dark shortly after as the power went out for almost 5.5 million users across Taiwan.

Some households in Kaohsiung, the most severely affected region, lost power for more than 12 hours. Although it is difficult to estimate the actual economic damage, the state-owned Taiwan Public Television Service quoted a figure of NT$6 billion (US$204 million). There was a human toll too, as two older men in Kaohsiung passed away after the outage caused their respiratory support equipment to fail.

The incident occurred at 9:16 a.m., when Taipower was showing a comfortable 24% in operational reserves, and electricity output from Hsinta Power Plant accounted for less than 3% of Taiwan’s grid. So then how was it possible for one user error to cause the collapse of Taiwan’s power supply in such a catastrophic manner? The authorities and experts agree: At least part of the problem lies with Taiwan’s increasingly fragile grid infrastructure.

Loss of power at Hsinta was the first of a series of unfortunate events that triggered the island-wide rolling blackout, according to Taipower’s report to the legislature following the incident. A protective relay – a component designed to trip a circuit breaker when a fault is detected – should have taken Hsinta off the grid, but ironically the new digital protective relay misinterpreted the signals from Hsinta’s older equipment, and the crisis point reached the Lunchi Ultra High Voltage (UHV) substation, near Tainan.

Even then, disaster might have been averted if the Lunchi Substation had not been undergoing major maintenance at the time. Four of Lunchi’s eight connection buses were offline, reducing the substation’s ability to separate the rest of the grid from the effects of Hsinta’s blackout. All major power stations south of Lunchi took themselves offline as a protective measure, as any “backflow” of electricity could cause significant damage to power-producing equipment.

The grid north of Lunchi was successfully isolated from the cascading collapse. But unfortunately, the Lunchi substation was the southernmost node that collected energy from the power-producing south to the power-consuming industrial north. The grids of northern and central Taiwan were forced to enter rolling blackouts because they were starved of power imports from the southern part of the grid, though they managed to recover more quickly as no power plants north of Lunchi needed to be taken offline.

Taiwan’s grid is both isolated and relentlessly centralized, with heavy reliance on larger plants like Hsinta in the south to be the workhorses that power the island. Of the more than 30 high-power voltage substations that gather and distribute power, two stand out in particular: Lunchi in the south and the Longtan UHV substation in the north, with the Zhong Liao switching station in between. Together, those three critical pieces of infrastructure form Taiwan’s electric superhighway, and traffic flows only one way: from south to north. If any of the three nodes falter, as one wrong switch flipped at the Hsinta power plant caused Lunchi to do, there is no way around this massive central artery. The result? An electrical heart attack.

“Taiwan must accelerate the development of regional smart grids that can operate both independently and in tandem with one another to improve grid resilience,” says Chiang-Chien Le Ren, professor of electrical engineering at National Cheng Kung University (NCKU). “If regions of the grid can self-isolate and protect the provision of electricity locally, we can reduce the spread and impact of future blackouts.”

The goal of a smart grid is to automatically monitor energy flows and adjust to changes in energy supply and demand in real-time with the aid of digital connectivity and battery energy storage systems. In good times, smart grids can be power savers as they enable electricity to be aggregated and distributed more seamlessly. This is important for accommodating intermittent electrical generation from increasingly important renewable energy sources. It can also aid in “demand response” – shifting electricity demand from peak to off-peak hours. In the case of a systemic failure, smart grids would make Taiwan’s grid more robust by allowing regional grids to function in the event of central failure.

However, Taiwan still has a long way to go before achieving such a system, according to Yeh Tsung-kuang, a professor at National Tsing Hua University’s Department of Engineering and System Science. “The persistent reliance of northern Taiwan on electricity imports from the south is both the biggest source of fragility in the grid and something that cannot be solved through grid improvements alone,” he notes.

Before finalizing any plans for better grid distribution, the authorities will also need to ensure that power plants are distributed in clusters in the island’s north. “We have an enormous amount of power going from south to north – around three gigawatts in the summer,” says Yeh. “That amount is only going to increase.”

On the day of the 303 blackout (named for March 3, 2022, the date on which it occurred), Taiwan’s grid north of the Lunchi UHV substation could have been spared if the north generated enough electricity to meet its own needs, notes Yeh. “It’s true we have underinvested in our grid infrastructure, but while we have a grid problem, we also have a capacity problem,” he says. “Our capacity problem will make the grid worse; however, just making the grid better will not solve our power generation capacity problem.”

Human errors

One way grid and power generation capacity issues intersect is in the human element of the grid: the Taipower staff who physically operate the equipment. Due to operator error – the proximate cause of both the 303 blackout and last year’s 513 blackout – Taipower staff have come under unprecedented scrutiny. In fact, the Kaohsiung Ciaotou District Prosecutors’ Office announced it would investigate the three staff members involved in the 303 blackout for violation of Article 176 of the criminal code – intentionally or negligently causing the destruction of something by means of gunpowder, steam, electricity, gas, or another explosive substance. The charge’s seriousness reflects the damage done by the outage, but frontline Taipower employees say they are terrified and exhausted as they work overtime in their struggle to keep the lights on.

“It’s like we are walking on a high wire,” says one Taipower engineer who wishes to remain anonymous. “Because power supply is so tight, we’ve been pressured to shorten the maintenance period for our power plants.”

In engineering, there is an old saying: If you don’t schedule your maintenance, it will schedule itself. And no one is more aware of that than the engineers and technicians at Taipower. “From the point of view of system stability, the maintenance period should never be skimped, says the engineer. “The inevitable result will be more accidents. And once another accident inevitably occurs, the blame will fall on another lower-level Taipower staff. This is a gross injustice.”

A culture of high-pressure deadlines and blame, including the possibility of facing criminal charges, has crushed the morale of Taipower workers, says another frontline employee. “We’re scared. We seem to be to blamed no matter what happens. And for the sake of our jobs, we stay silent, but if things go on like this, a lot of Taipower staff will go elsewhere. We don’t feel safe.”

But help is on the way, said Deputy Minister of Economic Affairs and Taipower Interim Chairman Tseng Wen-sheng in a briefing to the legislature in March. During the briefing, Tseng said an infusion of NT$100 billion from the general budget would be allocated to improving Taiwan’s grid.

Due to the woeful state of Taipower’s finances, driven in part by Taiwan’s low electricity prices, the company, while well-aware of grid issues, has not been able to address them. In the wake of gangbuster economic growth and increased demand for power, it is essential for the Taiwan government to allocate resources to help the wounded giant.

The draft plan to improve the grid has three main goals. The first is to alleviate the pressure on the “south-to-north superhighway” with additional power transmission lines. The second is to connect power plants with industrial and technology parks directly, allowing some industrial power use to bypass the main grid completely. The third is to initiate the installation of smart grids, like those suggested by NCKU’s Chiang-Chien. But Tseng posits that the current budget allocation is still insufficient. “It will probably take more than NT$100 billion,” he says. Parts of the ambitious overhaul will also take time – as long as 10 years for some reforms. In addition, Taiwan’s power problems are more than grid-deep, notes Tseng. “As long as we are relying on using power generated in the south up in the north, the burden on the central north-south artery will continue.”

(Source: https://topics.amcham.com.tw/2022/05/fixing-taiwans-grid-issues-requires-redistribution/)


How Can Taiwan Avoid an Energy Crisis?

(AmCham Taiwan|Contributing Writer: Angelica Oung) Last September, an article in Taiwan Business TOPICS posed the question of whether Taiwan is facing a looming power crunch. Just half a year later, the question has changed to “is Taiwan’s power crunch already here?” Indeed, the authorities have also rephrased their assurances from future tense (“Taiwan will not run short of electricity”) to present tense (“Taiwan isn’t short of electricity”). Despite the reassurances, repeated outages, pressure to curb consumption, and government projections all show that the adequacy of Taiwan’s power supply is becoming increasingly precarious.

A major blackout in early March added to the list of recent major outages, which also included two island-wide rolling blackouts that occurred within a week in May last year. Even before the March incident, however, AmCham’s 2022 Business Climate Survey found that energy security was a top-of-mind issue for members, with 61% asking the Tsai Ing-wen administration to prioritize energy even over COVID-19 pandemic control, cross-Strait relations, and trade agreements with the U.S. and other partners. A total of 78% of respondents expressed concern about power supply sufficiency, while 70.9% said they worried about the resiliency of Taiwan’s grid.

The three major blackouts, now known as 513, 517, and 303 for the dates on which they occurred, have been joined by a series of minor outages that have become a staple of media coverage.

“Power outages don’t mean we have a power shortage,” said Minister of Economic Affairs Wang Mei-hua in a recent television appearance. “Rather, we need to improve on aspects of our power delivery.” Operator errors, a fragile grid, and animal disturbance of electrical equipment are to blame, said the minister – not insufficiency of power generation.

Yeh Tsung-kuang, a professor at National Tsing Hua University’s Department of Engineering and System Science, disagrees. “Accidents have always happened, but now they have an outsized impact because we no longer have enough spare power capacity in our system to act as a buffer,” he says. As long as the government remains “in denial” about Taiwan’s “escalating power shortfall,” Taiwan’s power woes will only worsen, he adds. “As it is, it’s already too late for Taiwan to avert a crisis.”

To back up his assertion, Yeh points to a report on Taiwan’s electricity supply and demand published by the Bureau of Energy last May. Specifically, he points to a graph showing power-producing facilities that are slated to either go offline or be added to Taiwan’s grid through 2027.

This graphic from Taiwan’s Bureau of Energy shows power-producing facilities that are slated to either go offline or be added to Taiwan’s grid through 2027. Between 2022 and 2027, 9.06GW of coal (magenta), oil (gray), nuclear (salmon), and gas (green) power-generating capacity will be taken offline, while 10.86GW of gas and renewables (blue) will come online. Source: Bureau of Energy

According to the graph, 9.06 Gigawatts (GW) of capacity will be going offline between 2022 and 2025, while 10.86GW will come online, a seemingly manageable scenario. But while the schedule appears definite for the power-generating facilities scheduled to be shut down – including Taiwan’s three remaining nuclear reactors plus six aging coal-fired plants – the timing for the addition of new capacity seems much less certain.

Although two “Additional Natural Gas Generators” (with installed capacity of 1GW and 1.5GW, respectively) are due to start up in 2024 and 2025, no further details are available about the projects. “Those projects haven’t been planned, let alone approved, and it’s already 2022,” says Yeh. “We just won’t be able to build them that fast.”

Six more natural gas plants totaling 7.23GW should be completed according to the schedule. But Yeh warns that there is unlikely to be enough fuel to keep them running. “In a way, it doesn’t matter how many new natural gas generators we build,” he says. “Until 2025, we won’t be able to import enough gas to satisfy more than our existing generators.”

The use of natural gas for power generation is a crucial part of President Tsai’s energy policy. When she came into office in 2016, Tsai announced that nuclear power, which then accounted for 12% of Taiwan’s power mix, would be phased out by 2025. The use of dirty, polluting coal would decrease from around 45% to 30%. The proportion reserved for gas, which burns cleanly and releases only around half the greenhouse gas that coal does, would be raised from about 31% to 50%. The remaining 20% would consist of renewable energy sources.

For this “50/30/20 by 2025” plan to work, Taiwan will need to “step on the gas.” But every single molecule of natural gas coming to Taiwan will have to be in the form of liquefied natural gas (LNG), and the infrastructure to receive those shipments is already stretched thin.

Taiwan receives about 300 LNG shipments a year, according to a major energy executive who wishes to remain anonymous. “We can’t afford to miss a single one,” he says.

There are currently only two LNG receiving terminals in Taiwan, both operating at above 100% of their registered capacity. Together, they can hold around a 14-day supply of gas in the winter, and seven days in the summer, when demand is higher. It is impossible to safely reduce that reserve, the executive says. And at the earliest, relief will not come until 2025 when construction of the third LNG terminal, in Taoyuan’s Datan, is due to be completed.

Will a third terminal solve Taiwan’s gas shortage problem? Not completely. Ideally, six terminals would be required to accommodate the amount of natural gas Taiwan aspires to burn, while allowing a one-month supply of LNG to be kept in reserve. But the fourth and fifth receiving terminals have not yet emerged from the Environmental Impact Assessment planning stage, and the location of the sixth remains a question mark.

The problem has been years in the making. It seems that nobody in Taiwan wants to live near any kind of power infrastructure. Local NIMBY (“not in my backyard”) opposition and environmental concerns have been a potent combination that has stalled the construction of everything from LNG terminals to wind farms. It takes at least 48 months to build an LNG receiving terminal after all the permissions have been obtained, estimates the executive.

Delayed renewables

At the start of the Tsai administration, renewable energy was held out as the solution to the power production gap that would be left by the phaseout of nuclear energy. However, Minister Wang told the legislature in March that Taiwan would miss its target of renewable energy accounting for 20% of power generation by 2025; she subsequently lowered the expected proportion to 15%. “The goal for installed capacity remains unchanged,” said Wang. “The denominator just got bigger.”

In other words, Taiwan is projected to use a lot more electricity in 2025 than initially anticipated. The government has taken advantage of the U.S.-China trade dispute to welcome home manufacturers pulling up stakes from China or reducing the amount of production there. Amid a global chip shortage, Taiwan Semiconductor Manufacturing Co. (TSMC) and other semiconductor manufacturers also moved to expand production in Taiwan. Chipmaking is an especially energy-consuming industry.

In terms of solar energy, the government is retaining its goal of 20GW of installed capacity by 2025, and recently added a new goal of 30GW by 2030. These are ambitious targets that many in the solar industry consider unrealistic.

“Here we are in 2022 with around 8GWs, having already missed a number of previous goals,” says Lisa Cheng, head of Taiwan investment at Vena Energy, a renewable energy company with solar projects in Taiwan. “It’s not that government goals can’t be met, but we’re not going to do it under the current regulatory conditions.”

Developers of solar in Taiwan quickly discovered that it is almost impossible to build large-scale ground-mounted projects that are completed quickly and give the best returns. For example, the Council of Agriculture has blocked large solar projects that it believes encroach on its territory by taking up farmland, even if the land is not currently under cultivation. Instead, solar development in Taiwan has been relegated to initiating projects that are smaller and less controversial but also slower to install and less efficient, such as rooftop installations and aquavoltaics (solar panels placed above fish farms).

The situation never fully returned to normal after the 513 and 517 blackouts of 2021. Veteran energy reporter Liu Kwang-yin happened to be in the office of a petrochemical executive the day after the 303 blackout when an aide came in with a message from the Vice Premier: would the executive take a call from a manager at Taiwan’s state-owned energy utility, Taipower?

“Absolutely not!” said the executive unequivocally, “I won’t take calls from any of them!”

Liu, who wrote about the incident for Commonwealth Magazine, explains that Taipower was hoping to persuade the executive to cut production during peak hours, when demand on the grid is most likely to exceed supply.

There is already a “demand response” mechanism in place to tempt significant users to shift their power use to off-peak windows. Taipower offers a discount of up to NT$10 per kilowatt-hour (kWh), almost five times the usual commercial rate, for large users not to use power when the grid is likely to be stressed. But that is generally not enough of an incentive for industry, which loathes taking production offline.

“Each Taipower manager is responsible for negotiating with their own list of large users,” explains Liu. “They try to form relationships so that when push comes to shove, those large users are more inclined to help out.” The calls started around the time of the 2021 blackouts and have since become routine.

This is not the only extreme measure Taipower has taken to make electrical ends meet since the blackouts. If you live in Taiwan and notice your lights dimming slightly before returning to full strength, you are not imagining things. Taipower sometimes reduces the grid’s voltage as a last resort if the island is running low on power. Legally, it can drop the voltage by up to 3%.

“They are doing that more and more often, and it could harm appliances such as compressors for refrigerators,” says Yeh. “But what’s more serious is that it shows how tight the power supply already is right now.”

“What’s interesting is that the voltage reduction sometimes happens even while Taiwan’s grid is ‘green’ for adequate capacity,” says Liu. “Why is that?”

Electricity is a unique commodity that in practice must be produced just before it is consumed. (Although storage is a potential future option and battery technology for electric storage systems has advanced in recent years, such facilities are still too expensive and limited in capacity to have an impact at grid scale). Because of the disastrous consequences of demand outpacing supply, more electricity must always be produced than consumed. To ensure a surplus of energy, utilities such as Taipower maintain what is called an “operating reserve,” or the ability to generate power beyond the anticipated peak demand.

At an operating reserve of 10%, the grid is considered to be at a “green light.” When the operating reserve reaches 6-10%, the grid is at a “yellow light.” If it ever dips below 6%, that is grounds for an “amber light” and is considered an emergency. And yet, both the 513 and 303 blackouts happened during a “green light,” while only 517 occurred at a time of “yellow light.”

“The daily operating reserves are a sham,” says Yeh. “If you cannot ramp up a power-producing asset quickly, it shouldn’t be counted as operating reserves, but that is what Taipower does now as a matter of course.”

Power plants that are slow to ramp up and down, like coal or nuclear, are known as “baseload.” Plants like combined-cycle gas turbine facilities take a moderate amount of time to warm up and are considered “mid-load.” Finally, power sources that are quickly adjustable, such as hydroelectricity and open-cycle gas turbine generators, are considered “peak-load.” In order to maximize grid stability, operators generally rely chiefly on solidly-firing baseload generators, while leaving slack in the mid-load and peak-load for either unforeseen demand or an accident that unexpectedly interrupts power generation or transmission.

This scenario is not necessarily the norm in Taiwan, however. Because coal plants are so polluting and contribute to serious health complications for nearby residents, there is tremendous political pressure to burn as little coal as possible while vigorously turning to gas-fired plants to meet demand.

An unexpected surge in demand is the biggest challenge. If the source of the operating reserve is a combined-cycle gas plant, production can be ramped up in less than 30 minutes. But if the operating reserve comes from an inactive coal plant, it could take at least three to six hours before any electricity is produced – too long to prevent a blackout. Nevertheless, Taipower includes spare coal capacity in its daily operating reserves.

In the case of 513, even the hydroelectricity capacity in the operating reserve failed to come through. Taiwan was in the middle of a historic drought last spring, and Taipower was unable to use that reserve as nearly parched dams needed the water. Yeh estimates that if Taipower counted only capacity that could truly be dispatched in a timely manner in its calculation of the daily reserve, Taiwan’s operating reserve would be “under 6% most days.”

Taipower’s response

“I don’t think the media scrutiny is fair,” says Taipower Spokesman Chang Ting-shu. “If some bird strike causes a localized outage, that is seized upon as more proof that we’re out of power. The press magnifies every minor incident.”

The official Taipower response is that operator errors caused the 513 and 303 blackouts, while 517 was caused by “a faulty estimate of peak use” due to an unseasonably hot May last year. Basically, the utility denies that insufficient power supply was ever the issue for those events, though Chang confirms that Taipower does make calls to large users to request that they avoid using power at peak times.

“Demand response is a legitimate avenue of power management, something that advanced countries do and something Taiwan is trying to do more of,” he says. “It’s about shaving the peaks and filling in the valleys.”

As for voltage drops, Chang notes they have become less common this year, as the rainy 2022 Taiwan is enjoying allows for the liberal use of hydropower to bridge any last-minute gaps between supply and demand.

“It’s true that last year when it was very dry, we had a lot of difficulties,” says Chang. “Supply got tight, and we had to drop voltage quite a few times.” However, with the dams replete with water that can be used for hydroelectric generation almost instantaneously, he is cautiously optimistic. “I think we are going to be okay this summer,” he says.

To Liu of CommonWealth, it is not productive to dwell on whether Taiwan is indeed short on electricity. “If a household has to make calls every day to make sure they don’t default on their loans, we can argue whether that family is technically solvent, but obviously they are not in great financial shape,” she says. And just like a struggling household, the first order of business for Taiwan should be to implement some fiscal discipline. “There are so many things they should do, but the first must be to raise the price of electricity,” she maintains.

Tsing Hua’s Yeh, who is also a professor of nuclear engineering, has a different view. “The most obvious thing would be to not retire the power plants we plan to retire,” he says, suggesting Taiwan’s existing nuclear power plants could have their life extended by 20 years or more. “Many plants just like them have received such extensions in the U.S., but I’m afraid they’ll just extend the life of the coal plants instead.” Meanwhile, Vena’s Cheng posits that with greater political will from the government, renewable energy could be a more effective option. “Please give us the land and let us build,” she says. “We could be doing so much more, faster.”

(Source: https://topics.amcham.com.tw/2022/05/how-can-taiwan-avoid-an-energy-crisis/)

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