Taiwan’s electricity sector is undergoing a revolution. The legislature early this month passed draft amendments to the Electricity Act (電業法), which are aimed at liberalizing the electricity market, promoting a “renewable” supply and terminating nuclear power by 2025.
While this is the most fundamental legal change in three decades of pushing competition in the sector, questions remain as to whether the amendments go far enough and how more reform could be implemented.
Globally, many governments fail to achieve energy security, energy equity and environmental sustainability simultaneously, which is referred to as the “energy trilemma.” The power sector has proved even more difficult to reform in light of the challenges posed by climate change.
Looking at the revised energy bill, it might be pointed out that recent electricity reform in Taiwan has mainly focused on the supply side, and powerful economic incentives remained non-existent for the demand side. In fact, demand-side participation is particular important in energy policy, where the public is expected to contribute by changing their lifestyles.
Demand-side participation refers to policy instruments that aim to reduce end-user energy consumption by clear price signals over time or to modify electricity demand from peak to off-peak.
A more active demand side can reduce costs and lower resource requirements at every stage of electricity supply. Ideally, end customers, including large industrial users and residential consumers, should be well informed about the opportunities for cutting costs through demand reduction and efficiency improvement.
The US’ 1992 Energy Policy Act established the basis for utility investments in demand-side management and energy efficiency technologies. In the US’ Energy Policy Act of 2005, Energy Independence and Security Act of 2007 and in other key orders issued by the US Federal Energy Regulatory Commission, regulators further recognized the economic benefits of demand-side participation and its importance for improving the competitiveness of wholesale electricity markets.
In the EU, the value of demand side is clearly reflected in the European Network Codes, Energy Efficiency Directive and other energy consumption provisions. In addition, the UK launched an electricity capacity auction in late 2014, and is now experimenting with a variety of initiatives for long-term demand reduction.
All these measures view demand-side flexibility as a critical enabler of efficient supply, consumer empowerment and integration of renewable energy sources. Furthermore, demand response can create new business models and promote innovative technologies, such as low-energy consulting services, “smart” meters and home energy management appliances.
Taiwan’s industrial demand for electricity still accounts for more than 50 percent of supply — compared with 29 percent in the UK and 26 percent in the US. These figures remind decisionmakers of a high potential for demand-side management and its high-reward benefits to reduce energy costs and greenhouse gas emissions.
Relatively low electricity prices in both residential and industrial sectors make the timing of this reform politically difficult.
Based on the experiences of other nations, it is possible reforms will be proposed sooner rather than later, and demand-side considerations should be integrated into new policy thinking more explicitly.
Yang Chung-han is a doctoral researcher at the University of Cambridge’s Centre for Environment, Energy and Natural Resource Governance.
The headline of this piece has been changed since it was first published.
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