Earlier this month Economic Affairs Minister Kuo Jyh-huei (郭智輝) proposed buying green power from the Philippines and shipping it to Taiwan, in remarks made during a legislative hearing. Because this is an eminently reasonable and useful proposal, it was immediately criticized by the Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP). KMT Legislator Chang Chia-chun (張嘉郡) said that Taiwan pays NT$40 billion annually to fix cables, while TPP heavyweight Huang Kuo-chang (黃國昌) complained that Kuo wanted to draw public attention away from Taiwan’s renewable energy ratio. Considering the legal troubles currently inundating the TPP, one would think Huang would welcome distractions.
‘SHARED ASPIRATIONS’
Kuo said that the idea of mutual supply of green power had been suggested by friendly countries in the southeast Asian region. In January, business leaders from the region, hosted by the World Economic Forum, called for a common power infrastructure in a joint “Shared Aspirations” statement. It proposed accelerating “the region’s energy transition to deliver an equitable, secure and sustainable energy future while bolstering socioeconomic development.”
Photo: Lin Ching-hua, Taipei Times
The statement identified urgent problems such an initiative faces, including clean energy financing, decarbonization of energy production and power infrastructure development, from grids to electric vehicle (EV) charging stations.
These are all domains where Taiwan could play an important role, expand its links to the region and gain access to cheap power. The Philippines has a particularly important place in this scheme for Taiwan.
As I have noted before (“Another Future for Taiwan’s Energy,” May 31, 2021), the Philippines is rich in geothermal resources, and shipping power to Taiwan via undersea cable would be child’s play. This is already happening elsewhere in the region. Australia and Indonesia agreed to cooperate on energy and green minerals through a program known as KINETIK, and Australian investors will be permitted to hold majority shares in Indonesian geothermal plants.
Taiwan could easily form a similar relationship with the Philippines. Just as Indonesia is a huge producer of nickel, an important metal in the green energy transition and battery production, the Philippines is too — the world’s number two producer last year. Like Taiwan, the Philippines has major geothermal resources. Roughly between Baguio and Laoag City, in mountains on the west side of northern Luzon, lies a belt of accessible high temperature geothermal resources, close to Taiwan. On Camuguin de Babuyanes in the channel between Luzon and Taiwan there are lower temperature resources.
We’ve missed the boat on solar power, ceding that realm to the People’s Republic of China (PRC). But geothermal power, with its massive potential in Taiwan, represents an industry still in its infancy. The government should already be attempting to foster software, hardware and services to seize the high ground in the coming geothermal wave.
BENEFITS
A KINETIK-like agreement between Taiwan and the Philippines would have massive benefits for both sides. Investment in new geothermal, wind and solar power by Taiwan would help the Philippines address its own notoriously unreliable grid and frequent blackouts. It would help train a cadre of engineers and technicians who would be familiar with Taiwanese management practices — recall that Taiwan is going to be short thousands of technical workers in the next few years. The Philippines, with its massive deposits of copper, cobalt and nickel, could be a key source of raw materials for Taiwan’s battery producers. Some mines in the Philippines have strong involvement of Japanese firms, companies Taiwanese are very comfortable working with.
The political advantages of an energy agreement are obvious. Polls show that 7 of 10 voters in the Philippines will not support pro-China political candidates. Taiwan, a center of resistance to Beijing’s expansionism, has a unique intangible advantage in positioning in Philippines. Moreover, other southeast Asian countries, confronting Chinese expansionism across a variety of domains, are going to be looking for reliable alternative investment partners. Successful cooperation with Manila would open other doors for Taiwan.
COMPLICATIONS
Several issues may complicate Taiwanese investment in the Philippines. The first is the involvement of firms from the PRC in management of the Philippines electric grid. In 2007 the State Grid Corporation of China (SGCC) purchased a 40 percent stake in the National Grid Corporation of the Philippines. It is the largest single shareholder along with two Philippines firms, each of which has a 30 percent stake. The SGCC cooperated with local elites, who in turn suppressed criticism of the deals on national security and other grounds. In PRC planning, this was merely the first step to control of larger portions of the Philippine’s economy.
Despite PRC seizure of the Philippine territories in the South China Sea, and the recent problems with offshore gambling operations run by Chinese (48,000 visas for PRC nationals canceled), many players in the energy sector remain convinced of the necessity of PRC investment, seeing PRC tech capabilities as useful. However, many in the industry seek alternative sources of technology and expertise. Here Taiwan could play a role.
An issue with financing renewables in the Philippines for power sales to Taiwan (and to local buyers) is the complex and evolving regulatory system. For example, Manila Electric uses its sole buyer leverage to secure cheap fossil fuel power for the city via long-term contracts with fossil fuel producers, and does not buy from the wholesale spot market, where renewable energy is sold. The structure of the contracts under the law discourages investments in battery systems, which solar power facilities in the Philippines will need if they are to sell power to Taiwan. A boom in solar in the south driven by generous feed-in tariffs lead to the government placing portfolio standards that acted as ceilings on renewable energy purchases, due to transmission and grid connection issues. This also reduced investment in renewable energy.
The deep involvement of the PRC in the Philippines power sector is likely not clear to pro-PRC actors in Taiwan, or they would instead be demanding that PRC firms lay the submarine power cables between Taiwan and Luzon (as they have done elsewhere in the Philippines, notably in the Mindanao-Visayas Interconnection Project, run by a consortium of three PRC firms).
A report leaked to CNN in November 2019 said that in the event of a conflict the PRC can turn off the entire Philippines grid, and that 24-48 hours would be needed to restore power. The SGCC switched the grid to Huawei devices, which the CNN story said were proprietary and operated solely by PRC engineers. The Senate hearings also revealed that some manuals existed only in Chinese.
The PRC position in the Philippines is a powerful security threat to Taiwan. If only to counter it, Taiwan should be busy expanding its presence in our neighbor to the south. It is symptomatic of Taiwan’s blindness to its southern neighbors, and its ardent chasing of presumed status, that former president Tsai Ing-wen’s (蔡英文) first trip since leaving office was to Europe.
It should have been to Manila.
Notes from Central Taiwan is a column written by long-term resident Michael Turton, who provides incisive commentary informed by three decades of living in and writing about his adoptive country. The views expressed here are his own.
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