Venue: International Conference Hall, Tsai Lecture Hall(霖澤館), College of Law, National Taiwan University (1st Floor)
Date: 12th November, 2019
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The Risk Society and Policy Research Center (RSPRC) launched our flagship report this month (November 2019), 'Taiwan in Transformation: Initiating a Long-Term Energy Transition', to provide recommendations on the long-term strategies that Taiwan needs to undertake for its long-term energy transition. To launch the report, a media conference and forum was held on 11 November 2019 to introduce the report.
This is the fourth part of a five-part article which compiles the summary of the event.
Implementation of the Industrial Energy Efficiency First Principle by Dr. Chia-Wei Chao
The main speaker for the second breakout session was RSPRC Postdoctoral Fellow research head Dr. Chia-Wei Chao. Dr. Chao pointed to two important points for the prioritization of the implementation of the industrial energy efficiency first principle: the need for the government to advocate to businesses to include energy efficiency as part of their investment decisions and finance planning, and the importance that businesses should place in evaluating if their operations are keeping pace with international standards of energy performance.
Dr. Chao also referred to the report by the Intergovernmental Panel on Climate Change (IPCC) which highlighted that if global warming were to be maintained within a 1.5 degrees Celsius increase, it would require system transition not only in making changes to energy and industrial supply chains, but also to energy and land use as well as urban and infrastructural planning. To this end, Dr. Chao pointed out that the RSPRC's flagship report proposes four recommendations in terms of implementing the industrial energy efficiency first principle: on improving energy efficiency, emission efficiency, material efficiency, as well as the disclosure of climate and energy performance.
According to the IPCC, in order for carbon reduction to occur, global energy demand would need to fall by 30% from 2010 levels by 2050, and total industrial energy consumption would need to be reduced by 35%, which means that the energy consumption for each ton of product would need to be reduced by 20%, and the same would apply for steel, cement and raw materials production. However, Dr. Chao pointed out that the promotion of the industrial energy efficiency first principle is often faced with resistance from the steel, petrochemical and cement industries, because the abatement cost of these industries amount to about US$30, which is higher than other sectors. Therefore, such high-energy consuming industries are often given leeway in many countries when it comes to the implementation of carbon pricing. Moreover, industrial machines and equipment usually have a life span of about 40 years, and changing how things work is therefore not as simple as changing the equipment to improve energy efficiency – it would be necessary to review the overall investment structure of companies if they were to achieve the goals of energy conservation.
As such, several approaches need to be adopted for the implementation of the industrial energy efficiency first principle, such as by giving priority to energy-saving enterprises when providing government subsidies, and using carbon pricing as a means to motivate businesses towards energy-saving investments. According to the American Council for an Energy-Efficient Economy (ACEEE)'s biennial International Energy Efficiency Scorecard, Taiwan ranks seventh among 25 countries in terms of industrial energy efficiency, alongside South Korea. However, Taiwan was given a score of zero when it comes to voluntary energy efficiency improvements in the industrial sector, and a large part of the reason why is also due to the lack of regulatory measures aimed at energy conservation, which instead relies on the provision of subsidies to encourage energy conservation. Therefore, the RSPRC's flagship report also makes the recommendations that Taiwan would need to undergo energy transition in order to effectively reduce industrial energy consumption and reduce greenhouse gas emissions, and to do so, industrial policies would need to take into account energy efficiency, emission efficiency, and material efficiency in the planning parameters.
To this end, Dr. Chao pointed to two indicators used to measure the implementation of the industrial energy efficiency first principle: first, the electricity growth demand of the industrial sector grew by 2.2% from 2015 to 2019, which is markedly higher than the current carbon reduction target of 0.8%. Second, the consumption of petrochemical raw materials (per liter of oil equivalent) also increased by 2.3% in 2018, which is again divergent from the target of -1.1% for 2018. In other words, the petrochemical industry should not be allowed to keep expanding if Taiwan is to undergo successful energy transition.
In comparison with the RE100 groups of companies which have committed themselves to using 100% renewable energy and the EP100 companies which have committed to improving energy productivity, Taiwan's companies pale in comparison, Dr. Chao pointed out. Among the top 10 highest carbon emitters in Taiwan, only the Taiwan Semiconductor Manufacturing Company (TSMC) has established a science-based target for greenhouse gas reduction. In addition, only TSMC and the Formosa Chemicals & Fibre Corporation have adopted internal carbon pricing in 2019. Not only that, the white paper released by the Chinese National Federation of Industries (CNFI) in 2018 also called for Taiwan's renewable energy and natural gas targets to be weakened, and is also opposed to the Renewable Energy Development Act requiring energy intensive companies to install renewable energy on their facilities. However, the International Energy Agency (IEA) has said that using artificial intelligence for industrial energy conservation could help improve energy conservation by 10% to 30%. In contrast to CNFI has claimed that energy transition would result in higher costs and unfavorable competition.
Nonetheless, successful industrial energy transition is possible, to which Dr. Chao outlined four strategies for the implementation of the industrial energy efficiency first principle, which should include economic incentives and regulatory tools:
- Strengthening energy efficiency standards: as current electricity prices are too low, businesses are not incentivized to invest in energy conservation and there is therefore a need to strength energy efficiency standards
- Adoption of innovative decarbonization technologies: the lack of innovative regulatory mechanism and incentives, as well as uncertainty with the management of greenhouse gases and implementation of energy taxes therefore require innovative technological solutions
- Adoption of the circular economy: the current short- and long-term targets for energy conservation are not well-integrated and the adoption of the circular economy could therefore aid in developing a consolidated strategy
- Disclosure of corporate energy performance: information on industrial energy consumption and carbon emissions should be integrated, and together with corporate energy performance, be made available for public scrutiny, so that the finance industry could evaluate if companies applying for loans are taking steps for climate action.
Finally, Dr. Chao highlighted the importance of near-term action, he suggests that Taiwan would need to strengthen regulations for high-energy-consuming industries to encourage the adoption of green energy, and that companies applying for subsidies under the 'Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan' should be required to undergo an energy assessment.
Taiwan in Transformation Forum: Initiating a Long-Term Energy Transition by Marlon Wang
The next speaker was energy consultant to Delta Electronics Marlon Wang. He pointed out that the industrial sector in Taiwan accounted for about 60% of Taiwan's electricity consumption, and emphasized on energy conservation as the most efficient way for Taiwan's industries to undergo energy transition. In comparison, building a solar farm would take a longer time, he said. However, he pointed out that as businesses are only concerned about their profits, discussion about energy conservation with businesses would therefore be focused on the costs (whether it is expensive) and effectiveness.
Mr. Wang then pointed to Delta Electronics as a case study as to how energy conservation can be successfully implemented. In 2019, Delta Electronics founder Bruce Cheng decided that he wanted to reduce the company's power intensity by 50% of 2009 levels by 2014. Even though the target was considered to be "mission impossible" by many observers then, the goal was eventually achieved on time and on target, primarily because the top management was committed to seeing through the target implementation, and the ISO50001 international standard was adopted to guide Delta Electronics' energy management systems and used to systematically streamline the processes and facility operations within the company.
One of the first things that Delta Electronics did was to set up an energy management system (EMS) in order to understand how energy was being used in the company. However, during the consultations Mr. Wang conducted with employees, he found that many of them did not know the sectors which were using the most energy, and this hindered understanding of the areas where energy can be conserved from. As such, energy technological systems such as the Internet of Things and artificial intelligence were adopted in order to extract data for analysis. Energy management instruments were then installed to track energy use and to look at how energy can be conserved. Mr. Wang pointed out that while there are concerns among businesses about how the installation of energy systems would be costly, he explained that cost savings will be achieved via energy conservation, and that these savings will accumulate over the years. For example, Delta Electronics spent NT$2.6 million removing 2,000 Fan Filter Units (FFU) and transferring them to other departments upon Mr. Wang's recommendation, and as a result was able to save NT$14 million in equipment savings, as well as annual savings of NT$700 million in electricity.
Mr. Wang also explained that installing an EMS does not mean having to invest in expensive equipment. For example, simply closing an air inlet for an air conditioning system actually helped to reduce NT$3.2 million in electricity costs for Delta Electronics. Mr. Wang also shared that Delta Electronics' energy conservation initiative was so successful that it has set another goal of reducing energy use by 30% from 2015 to 2020.
Mr. Wang pointed out that while some have asked whether it is necessary to invest in energy conservation since Taiwan's industrial electricity price is considered cheap, he explained that companies where energy costs amount to NT$100 million will be able to see cost savings of NT$30 million if they were to be able to conserve energy by 30%. In addition, it would help enhance the corporate social responsibility (CSR) image of the companies, in addition to reducing greenhouse gas emissions and waste, as well as help reduce the foreign exchange disbursement for energy requirements.
Mr. Wang added that instead of using the law to regulate businesses, it would be a better idea to encourage businesses to do so via:
- Addressing the misconception that business owners hold about energy conservation by raising awareness that it is possible to both conserve energy and save money while doing so
- Providing incentives to businesses for the installation of an efficient EMS
- Using company EMS data for energy audits
- Assisting companies to implement EMS by adopting industrial process energy saving solutions
- Raising awareness on the benefits of energy conservation to spur business owners in speeding up their implementation of industrial energy conservation strategies
Finally, Mr. Wang surmised that in order to successfully undergo energy transition and work towards the goal of a nuclear-free homeland in Taiwan, instead of "using nuclear to go green", it is a better idea to adopt energy conservation to become green. In this way, energy conservation would enable nuclear energy to become less important and redundant.
Mr. Wang also shared that he would be willing to assist any company in their efforts if they were to decide to set a target of 30% energy conservation.
The Black Carbon Costs of the Electronics Industry by Alynne Tsai
The next presentation was given by Alynne Tsai, Director of Greenpeace Taiwan's Energy Project Campaign. Ms. Tsai pointed out that from 2003 to 2018, the total electricity consumption in Taiwan increased by 31.8%, of which the industrial sector accounted for 75.1% of the electricity growth demand and the electronics manufacturing sector accounted for 51.7%.
Not only that, the electricity growth demand of the industrial sector also accounted for 70% of the growth of thermal power.
In addition, when Greenpeace performed a simulation of the PM2.5 air pollution produced by coal-fired power plants in Taiwan, its simulation showed that even though coal-fired power plants are only located the parts of Taiwan, the air pollution produced is being carried around by wind currents and spread across the whole of Taiwan.
Ms. Tsai highlighted that if the electronics manufacturing industry can switch to using renewable energy, there could be a reduction of 100 cases of pollution-related chronic diseases and premature deaths, as well as NT$9.1 billion savings in health costs every year. She also pointed out that if Taiwan continues to hold onto the belief that it needs to rely on the coal-fired power produced by the Taiwan Power Company, then it would not be possible to reduce air pollution in Taiwan. As such, companies should seek to find solutions for themselves to diversify their energy sources. Ms. Tsai also pointed to the example of RE100 where a group of more than 200 global companies have committed themselves to using 100% renewable energy, and highlighted that a select group of RE100 companies that Greenpeace studied showed that they were willing to invest 5% to 10% of their net profits in renewable energy in order to reap the benefits, which she said is a benchmark Taiwanese businesses can follow.
Using the Taiwan Semiconductor Manufacturing Company (TSMC) as an example, she said that based on its net profits of about NT$35/ kWh, Greenpeace calculated that if TSMC were to invest 5% to 10% of its profits into renewable energy, this would amount to only NT$1.65-NT$3.31/kWh. Even if TSMC were to invest 5% of their net profits in renewable energy, the company would still be able to generate more than 40% of its electricity from renewable energy today, and close to 60% by 2030.
Finally, Ms. Tsai pointed out that in order to encourage the use of renewable energy, green bonds and carbon tax implemented on a national level, in addition investments in renewable energy such as via the issuance of renewable energy certificates should be promoted. Finally, companies should also produce their own energy or purchase power via power purchase agreements (PPA).
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Links to Other Sections:
Part 1: Media Conference: Launch of the Taiwan in Transformation Report
Part 2: Special Lecture 1: Taiwan in Transformation – Initiating a Long-Term Energy Transition
Part 3: Breakout Session 1: Innovation in Energy Governance
Part 5: Special Lecture 2: Achievements and Challenges of Taiwan's Energy Transition
Article Links to Other Sections Videos Slides Download Photos
Implementation of the Industrial Energy Efficiency First Principle by Dr. Chia-Wei Chao
Taiwan in Transformation Forum: Initiating a Long-Term Energy Transition by Marlon Wang
The Black Carbon Costs of the Electronics Industry by Alynne Tsai
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