The fragility of the centralized power generation system in Taiwan has been highlighted in the recent energy rationing crisis over the past two weeks. The crisis was a consequence of the collapse of the transmission tower of Hoping Power Plant and the heat wave. Although the spent fuel pools have already reached their maximum capacity, some believe that the Unit 1 of the First Nuclear Power Plant and Unit 2 of the Second Nuclear Power Plant should be restarted to overcome the crisis .However, the research team of the Risk Society and Policy Research Center, National Taiwan University (RSPRC) believes that Taiwan should emulate Seoul's reaction to its 2011 power failure, In the face of the power blackout, the government of South Korea adopted 'One Less Nuclear Power Plant' policy model when noticing the importance of distributed energy architecture and energy conservation after the 2011 blackout in South Korea. Moreover, the recent energy rationing crisis should be utilized as a social driving force to promote energy transition in Taiwan.
A comprehensive energy transition requires a thorough review over the pre-existing local energy policies. It could be difficult for the government to carry out coherent plans for energy transition by merely setting out transition goals by 2025 or including renewable energy development in foresight infrastructure schemes. The Executive Yuan (EY) amended the Guidelines on Energy Development in April and launched the formulation process of Energy Transition White Paper in July this year.
Unlike the expert-oriented national energy conferences in the past, the EY allowed the public to engage in the formulation process this time. Voices of different groups in the society from the regional preliminary conferences and ideas online will be included; and a working group composed of different parties will translate these opinions into feasible action plans through co-production. After the completion of the first draft of the white paper, citizen and public forums, and online consultation will be held to enrich the social dialogue.
The design of this procedure is unprecedented in energy-related policies in Taiwan and therefore can serve as an example for public participation of policies. However, in terms of the impetus for the energy transition, there are three key factors deciding the effectiveness of this mechanism:
1. Integration between/among government ministries
Energy transition is highly related to carbon reduction, air pollution control, national spatial planning, and public transportation promotion. Therefore, it is necessary to achieve full integration between policy targets of different government ministries and the promotion measures.
2. Facilitation of co-production
In the past, national energy conferences usually focused on discussion regarding nuclear power and energy consumption industry. Such discussion touched sensitive topics and therefore could lead to conflictual debates easily. With this respect, it is important to stress that the purpose of White Paper is to seek a feasible way to reducing carbon emission and ensuring energy security without using nuclear power. In this sense, the delegation of government authorities, industries, academia and NGOs can co-produce instead of boycotting each other.
3. Transparency of the decision-making process
Sufficient information should be provided during the formulation process of the White Paper. For example, information with respect to energy structure, cost forecasts of different power generation technology, and natural gas unloading amount which can achieve 2030 national carbon reduction targets, should be available for the public. The transparency of information helps avoid information asymmetry which weakens trust in the society.
In the following, RSPRC first analyses how sectionalism causes of the lack of policy integration in the current White paper. After that, suggestions of action plans are provided on the three topics including energy governance, enhancing energy efficiency, and energy supply planning.
Discard sectionalism and cultivate institutional capacity
Among all documents of the White Paper, the only concrete policy target proposed is 'to achieve 20-30-50 clean energy (power generation) structure in 2025 to achieve nuclear-free homeland' However, a decisive factor in energy development, the greenhouse gas (GHG) reduction target, is missing from these documents.
If the drafting of the White Paper merely elaborates on energy structure, the goal to promote carbon reduction for transportation sector can hardly be achieved; and concerns regarding the transition of petrochemical industry, which currently takes up 14% of the total carbon emission, will not be responded. According to the Greenhouse Gas Reduction and Management Act, the Environmental Protection Administration (EPA) is supposed to propose a GHG reduction project including short- and long-term goals this year. Although Energy transition is the key to achieving carbon reduction goals of Taiwan, carbon reduction is not discussed in the draft formulation process because EPA and Bureau of Energy (BOE) are different administrations.
As a result, these two policies not only became difficult to integrate, but also failed to convince the society that whether nuclear-free homeland and carbon reduction can be achieved simultaneously.
Another example illustrating sectionalism is that the topic of energy conservation is divided into two action plans, the civilian sector and the building sector. The former action plan includes only energy conservation at regional level of counties and cities and the boost of energy efficiency of home appliances These actions belong to the jurisdiction of BOE. Whereas, the latter action plan includes promoting of green buildings and boosting building efficacy. These belong to the jurisdiction of Ministry of the Interior (MOI). Such division is made for facilitating the differentiation of duties between jurisdictions and therefore actions echoing the international policy instruments for energy transition of residential and commercial sectors, including building energy disclosure, formulating regulation on nearly zero-energy building (NZEB), promoting Energy Performance Certificate (EPC) and integration of financing on energy conservation.
Energy transition involves jurisdictions of several government ministries. Therefore, whether the formulation of the White Paper this time can make energy transition a major focus in government ministries is the key to follow-up energy governance. However, the action plans proposed by the transportation sector, which accounts for 12% of energy consumption, does not include the promotion of electric vehicles (EVs) or low carbon maritime transport. Instead, the electrification of round-the-island island railways and seaports and airport facility are included. These actions are not driven by energy transition and have insignificant impacts on it. The response of the transport sector this time seem to be less cooperative than how it reacted to the Strategy for Air Pollution Control proposed in April.
For instance, the Ministry of Transportation and Communications (MOTC) proposed to increase the rail transport capacity in the Strategy. However, for the project the MOTC does not show strong willingness to translate energy transition into its major policies, which is significantly different from the past attitude of Minister Hochen.
Therefore, RSPRC hereby suggests that the follow-up formulation of the White Paper should be fully integrated with the formulation of national GHG reduction action plan, and the 2030 carbon reduction commitment should be listed as the policy target of the White Paper to avoid the lack of integration between Guidelines on Energy Development and National Climate Change Action Guidelines, which resulted in having almost no substantial effectiveness.
Moreover, the EY should instruct the government ministries to make the Energy Transition White Paper one of their important policies to facilitate spontaneous responses to the proposals of different participating parties in the preliminary conferences and make energy transition as a mainstream target to cultivate the overall institutional capacity.
Establishing social legitimacy of transition from external cost
In Taiwan, energy transition, energy revolution, or the transformation of energy system are usually associated with transitional justice that has caused great cost in the society Namely, the so-called energy transition indicates entails that Taiwanese people need to deal with huge external costs such as climate change, nuclear disaster risks and air pollution. In the White Paper, policy instrument of energy tax is proposed to internalize the external cost from the aspect of energy governance. However, because it takes long time to accomplish tax reformation and thus other measures should also be planned to foster system effectiveness. RSPRC hereby proposes the following four suggestions.
1. Emulating the national green income account to regularly publish estimation of external costs from energy system:
The government should revise the estimate coverage and assessment methods of current national green income and incorporate energy system external costs. In addition, when the annual estimates are published, based upon the provisions of Article 34 of Budget Act, the government/experts should provide budget and policy recommendations.
2. External cost must be included when assessments regarding energy policies are made
When the National Development Council published the regulatory impact assessment manual, the results from the EPA 2012 research project "Establishing an assessment model of social benefits and cost of environmental policies and development plans" should be integrated and environmental external costs should be included in policy and regulatory impact assessments.
3. A comprehensive/thorough review of fossil fuel subsidies and a schedule of reformation
According to the results of Asia-Pacific Economic Cooperation (APEC) experts' group, the five fossil fuel subsidies submitted by Taiwan were inefficient. To improve this problem, the EY should refer to APEC Fossil Fuel Subsidy Review Program define the scope of review to instruct the government ministries to effectively cooperate and produce reports for public communication.
4. Enacting laws with regard to energy tax to validate carbon pricing
The government should carry out a clear schedule for energy tax enactment. The energy tax should properly reflect external costs, tax neutrality promotion of industrial restructuring and so on. The amount of tax should follow the suggestion of effective carbon rates from Organization for Economic Co-operation and Development (OECD), which should not be less than 30 euros per ton.
An 'Efficiency first' transition strategy
Although the White Paper aims to reach the power generation goals by 2025(with 20% renewable, 30% coal and 50% gas), the government seemingly dodged a key issue: the energy consumption should remain the same as 2015, if the capacity of renewable energy climbs up to 51.5 billion kWh which accounts for 20% total generation in 2025. As initiated by NGOs, the addition in energy demand must be net zero. However, energy consumption keeps growing over the past two years. Energy consumption in 2016 increased by 2.16% compared with 2015. Also, energy consumption in the first half of 2017 grew 1.7% compared with the same period in 2016.
This trend shows that the energy conservation policies in Tsai's administration cannot offset the impacts due to better economy and rising temperatures.
As energy conservation has reached the highest level of consensus among the parties in terms of the energy transition targets and the cost of energy conservation is also the lowest, RSPRC proposes the following four action plans on energy conservation:
1. An 'National Energy Efficiency Action Plan' should be introduced to drive the "efficiency first" transition strategy
The government has proposed short-term to mid-term goals for the development of renewable energy, improving energy efficiency is not included in any of these goals. In addition, the current jurisdiction of energy conservation policies is disorganized and lacking effective integration between government ministries. In this sense, the Taiwanese government should consider following the EU way of achieving energy efficiency. The EU asked their members to propose their national energy efficiency action plans in the EU Energy Efficiency Directive which includes short-term to mid-term targets of energy efficiency improvement, policy measures and budget planning.
2. To improve industrial energy efficiency with industrial restructuring and circular economy
Industrial sectors consume the most energy and electricity in Taiwan. Therefore, structure adjustment of energy consuming industries has always been the key of energy policy. However, the policy target as well as complementary measures of ratio reduction of energy consuming industries have not yet been proposed in current industrial energy policy planning, The action plans proposed for industrial sector this time still belong to existing measures and ignore the innovation strategy of improving material efficiency through circular economy to reduce energy demand of industrial sector, which is highly valued by the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA).
3. To accelerate the improvement of building energy efficiency and promote NZEB as the core of building energy policy
According to the international think tank Climate Action Tracker (2016), to achieve the targets of Paris agreement, OECD countries have to reach 5% of floor space renovated per year and new buildings that were constructed after 2020 should be zero-energy buildings. The average age of residential houses in Taiwan is 28.9; at the same time, this entails that more than 45% of houses need to renovate and reconstruct within next 20 years. Therefore, to improve building energy efficiency, supplementary strategies to accelerate energy conservation renovation should be proposed.
4. To accelerate energy conservation in residential and commercial sectors by exerting the jurisdiction of local governments
The contribution of residential and commercial sectors to energy demand has grown within recent years. However, both sectors are not regulated in the Energy Administration Act. Therefore, in the White Paper, we should integrate local government to accelerate the energy conservation behaviors of residential and commercial sectors. Also, we can pay more attention construction regulations and community mobilization that government can do. Feasible measures should be proposed and assistance should be given to establish institutional capacity.
'Lock-in effects' should be avoided in electricity planning
The key question in power planning is whether the Stable Power Supply Program will be able to fulfill simultaneously short-term stable power supply, the requirement of air pollution reduction and 2025 electricity target, and 2030 GHG reduction commitment. Moreover, constructions of new power plants and natural gas unloading facilities during the period should not face the carbon lock-in effect, which may become the obstacles of achieving 2050 carbon reduction target. RSPRC proposes the following three suggested action plans.
1. To establish the mechanism for the outlook and the review of power supply and demand in summer based upon the experiences/ cases of Japan and South Korea
The crisis of energy supply in recent two summers were both due to the lack of dedicated planning and insufficient information. The crisis has negative effects upon the society to learn during the process of energy transition. Therefore, in reference to deployment from Japan and South Korea, the authority should provide the outlook for power supply and demand at summer peak before summer, and design dedicated plan to contain peak load for different types of users. Review of summer peak supply and demand strategy should also be conducted after summer to clarify which part of policies can be further strengthened to make sure the short-term power supply is stable.
2. The long-term energy source development program of Taipower should include carbon reduction and air pollution control
The current energy source development program of Taipower could not fully respond to requirements on carbon reduction and air pollution control. According to its latest 2017 long-term energy source development program (Case 10605), the capacity of coal-fired power plants will reach a net increase of 2.3 GW in the next decade/ten years, which violates the target to reduce coal-firing to 30%. Therefore, in the follow-up formulation of the program, Taipower should make estimations on carbon reduction and air pollution control. In response to the trend of increasing percentage of renewable energy, a dedicated plan on effectively integrating solar and wind energy during summer loading peak should also be done to ensure the implementation of the guideline of (i) Diversification, Energy Autonomy, and Low Carbon on the Supply Side, (ii) Smart System Integration, and (iii) Green Economy in the Guidelines on Energy Development.
3. The expansion of natural gas supply should be planned properly base on the bridge fuel
According to the plan that increasing natural gas-fired power generation to 50% by 2025, natural gas demand in Taiwan will increase to nearly 30 million tons. Therefore, CPC and Taipower both proposed plans for natural gas station construction. It is expected that Taiwan's natural gas reception in 2030 will reach up to 31 million tons. However, international studies have pointed out that the percentage of energy generation from natural gas, which is widely used as a bridge fuel, will significantly decline after 2030. To meet the reduction target in Greenhouse Gas Reduction and Management Act, the percentage of natural gas must be reduced after 2030. That is to say, putting up/excessive expansion of new natural gas receiving stations can be risky since these stations are likely to become stranded assets in 2030sTherefore, the BOE should re-estimate the annual demand for natural gas as well as the capacity and output of gas-fired power plants from 2018 to 2050. The expansion plans of Taipower and CPC should also be adjusted accordingly.
To seize the window of opportunity to make energy transition happen
In addition to the three policy suggestions above, other suggestions on local energy governance, renewable energy development and follow-up amendment to Electricity Act are listed in the Appendix. RSPRC would like to highlight that that energy transition does not only focus on the development of green energy technology but also whether the adjusted electricity price is affordable. Energy transition requires new governance mechanisms and thorough supporting policies. The White Paper is a roadmap toward systematically constructing energy transition after one and a half years of Tsai's administration. Therefore, RSPRC urges citizens who are concerned about energy transition to keep focusing on the formulation of the White Paper. Finally, the public sector should see the conference this time/the publish of White Paper as an opportunity to carry out social dialogue, and actively put forward innovation in governance to accelerate energy transition in Taiwan.
Risk Society and Policy Research Center, National Taiwan University
August 9, 2017