Energy security has emerged as a grave concern among Taiwanese. At the end of last year, more than 300,000 households in Taipei and New Taipei City were affected due to the explosion of a substation, while in March, Taiwan faced a blackout across major cities, affecting 5 million households.
As power consumption in Taiwan has increased, the government should take energy security seriously.
Since the outbreak of the US-China trade war, many Taiwanese entrepreneurs have reshored production from China and expanded their production chains in Taiwan. The growing flow of Taiwanese manufacturers returning home, coupled with the semiconductor boom and a large-scale expansion of capital expenditure, has increased the demand for energy supply.
Additionally, Taiwan’s power consumption will likely soar due to the surge in overall economic growth. Demand has been growing, but supply has been lagging, especially with the projected shutdown of Taiwan’s last nuclear power plant by 2025, according to a report released in December last year by the Independent Commodity Intelligence Services.
Despite the restructuring of Taiwan Power Co, decades of market monopoly have hindered the establishment of clear guidelines for private energy producers.
Taiwan Mobile president Jamie Lin (林之晨) has said that “to install one wind turbine requires the approval of more than a dozen government agencies.”
Also, large and rigid bureaucracies might exclude smaller companies from establishing their own green energy capacity.
At the same time, the government’s blueprint for energy transition has been put to the test. As indicated in the plan, renewable energy sources are expected to account for 20 percent of Taiwan’s power generation by 2025.
Minister of Economic Affairs Wang Mei-hua (王美花) acknowledged that the government reduced the proportion of renewable power to 15.27 percent, suggesting that Taiwan would likely fail to meet its target. Even more nerve-racking for the government’s energy strategy is that sources of renewable energy, especially new solar and offshore wind capacity, are negligible.
The goal to hit net-zero emissions by 2050 could also be impeded by high demand from manufacturing sectors, which account for more than one-third of Taiwan’s GDP. Additionally, Taiwan’s power reserve margin percentage is too low, below 7 percent, and it could further drop to 4.38 percent by 2023.
The fall in power generation capacity during the power transition could lead to more shortages, which would likely create discontent among the public and stir a political debate ahead of this year’s local elections.
According to the American Chamber of Commerce in Taiwan’s 2022 Business Climate Survey, international companies are more concerned about Taiwan’s energy environment, and have said that “ensuring an adequate energy supply” should be the top priority of President Tsai Ing-wen’s (蔡英文) second term.
Hon Hai Precision Industry founder Terry Gou (郭台銘) has advised the government to “take its energy policy seriously” and warned about “a shortage of electricity,” while underlining the urgency of the energy transition.
Taiwan’s energy landscape is not favorable to its economic sustainability at a time when external challenges are becoming more conspicuous, with oil prices in the Middle East volatile due to a looming EU ban on crude imports from Russia, China’s COVID-19 lockdowns and the gloomy global economic outlook.
In 2020, a sweeping 98 percent of the fuel consumed in Taiwan came from overseas. Overwhelmingly reliant on energy imports, Taiwan has become more vulnerable to energy market shocks. For instance, Taiwan risks having to deal with the outcomes of lingering tensions between the US and Iran, as most of Taiwan’s oil imports come from nations in the Persian Gulf area. The worst-case scenario is that Taiwan could be trapped in a short-term supply disruption if China were to exert its influence on regional countries such as Qatar and Saudi Arabia to impose economic pressure on Taiwan.
Taiwan’s energy transition has faced enormous challenges. A report by the Carnegie Endowment for International Peace said that “renewables in Taiwan are very expensive compared to other parts of the world,” with solar power costing three times as much as in the US.
Dwindling availability of suitable land for solar power due to extensive urbanization in flat areas and extensive mountainous terrain has hindered Taiwan’s efforts to address energy security.
Politicking around energy security also looms large in Taiwan, with energy politics widening the gap between political parties, as was demonstrated last year by a fierce referendum debate over nuclear power. Taiwan’s highly politicized discourse can hinder the implementation of energy transition policies.
The additional shock of the COVID-19 pandemic also highlights the importance of sustaining Taiwan’s supply chains, given its critical role in the semiconductor industry.
Tsai’s administration should foster energy cooperation with major partners, such as the US and Australia. The US’ Indo-Pacific Strategic Energy Initiative Act underlines Washington’s willingness to support its Indo-Pacific partners to “achieve energy security through diversification of their energy sources and supply routes.”
In October last year, Australian Minister for Trade Dan Tehan underscored “the energy partnership” and expressed Canberra’s interest in helping Taiwan decarbonize.
As Washington and Canberra seem determined to assist Taiwan with its energy transition, Taipei should reach out to these partners for concrete schemes to launch trilateral collaboration on energy security.
Recruiting renewable energy experts is crucially important. The government has made efforts to enhance the use of renewable energy sources.
Nevertheless, there is a shortage of local renewable energy professionals in Taiwan, and there are many obstacles to recruiting such people.
Taiwan last year made an astute move by easing procedures to hire foreign professionals to increase the competitiveness of key industries. The government should prioritize attracting and retaining foreign talent, while recruiting local people with a specialist understanding of renewable energy technologies.
European countries such as Sweden, Finland and Latvia are success stories of green energy transition. The EU met its 2020 target of ensuring that 20 percent of gross energy consumption came from green sources. Part of the effort lies in utilizing renewable energy for transport.
Chiayi County has upgraded its transportation system to a low-carbon system. Similar policies should be activated in other local administrations to assist the nation to reach its long-term energy goals, while fully making use of Taiwan’s position in the electric vehicle supply chain. National champions such as Gogoro could aid this process.
Achieving energy security is becoming increasingly urgent. A dependence on energy imports makes Taiwan vulnerable to market fluctuations.
The Tsai administration has been ambitious in seeking to address energy security with its energy planning. Nonetheless, further steps should be embraced to tackle lingering and evolving challenges.
Huynh Tam Sang is a lecturer at Ho Chi Minh City University of Social Sciences and Humanities’ faculty of international relations, a research fellow at the Taiwan NextGen Foundation and a nonresident WSD-Handa fellow at the Pacific Forum. Lucia Gragnani is a research assistant at the Taiwan NextGen Foundation.
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