[Energy Doppelganger Taiwan Trip] (Part 1) Nuclear Plant Shutdown Imminent... Anxious Companies Warn "Power Shortage Crisis Approaching"

Maanshan Nuclear Power Plant Unit 2 to Shut Down on May 17
Concerns Rise Over Complete Nuclear Phase-Out
Power Reserve Margin Fell to 11% Last Year
LNG Power Generation to Expand After Nuclear Phase-Out
Energy Security Crisis Expected to Worsen

Panoramic view of Taiwan Maanshan Nuclear Power Plant. Image source=Taiwan Power Company

Editor's NoteTaiwan resembles South Korea in that it is an 'energy island' unable to receive energy supplies from outside. Both countries rely on advanced manufacturing industries such as semiconductors to support their national economies. They are also similarly exposed to constant threats of attacks from neighboring countries. The governments of South Korea and Taiwan often refer to each other's energy policies. Taiwan will become a fully nuclear-free country on May 17, when it shuts down its last remaining nuclear power plant. The Taiwanese government plans to fill the gap left by nuclear power with renewable energy sources such as solar and offshore wind power. Electricity consumption is exponentially increasing in the era of artificial intelligence (AI), prompting a more aggressive expansion of renewable energy. Some domestic voices still advocate for nuclear phase-out and suggest benchmarking Taiwan's offshore wind policy. But can Taiwan's energy transition policy proceed smoothly? Considering the increasing electricity consumption, Taiwan's nuclear phase-out experiment could serve as a reference for securing future energy sources. This article features a two-part series based on direct interviews in Taiwan with senior government energy officials, senior executives of Taiwan Power Company, private experts, and offshore wind developers.

"The Taiwan Lai Ching-te Democratic Progressive Party (DPP) government emphasizes two things to foreign-invested companies: first, manpower, and second, stable energy supply."

On the 19th of last month in Taipei, Taiwan, Lee Young-ki, head of the KOTRA Taipei Trade Center, shared the local atmosphere. At the foreign-invested companies' year-end party hosted by Premier Su Tseng-chang (equivalent to South Korea's Prime Minister) in January, the focus was also on delivering these two messages.

Stable energy supply is currently the biggest issue in Taiwan's industrial sector. The only operating nuclear power plant, Maanshan Nuclear Power Plant Unit 2, is scheduled to be shut down on May 17. This means a complete nuclear phase-out thereafter. As nuclear power, which provided cheap and stable baseload electricity, ceases operation, concerns among local Taiwanese companies and foreign-invested firms are growing.

Taiwan currently faces chronic power supply issues despite operating nuclear power plants. It has experienced four major blackouts over the past eight years. In addition, numerous small and large power outages continue to occur. In 2022 alone, there were 313 power outages. Taiwanese citizens reportedly think, "They must be diverting electricity to TSMC again" whenever a blackout happens. Joseph Webster, a researcher at the Atlantic Council's Global Energy Center, diagnosed in June last year on CNBC that "Taiwan is simultaneously experiencing energy shortages and a power crisis."

Taiwan's power shortage is also evident in statistics. Taiwan's power reserve margin was 16.8% in 2019 but dropped to 11.0% last year. Generally, an appropriate reserve margin is considered to be between 15% and 20%. Son Sun-yong, who has lived in Taiwan for eight years, said, "Companies and industries are worried that a power shortage crisis could occur."

Nuclear power once accounted for as much as 52.4% of Taiwan's power generation in the 1980s, establishing itself as a major power source. However, after the Fukushima nuclear accident in 2011, anti-nuclear sentiment surged in Taiwan, strengthening the nuclear phase-out policy.

Especially, the previous Tsai Ing-wen administration pushed forward the nuclear phase-out policy despite 59.5% opposition in the 2018 referendum on the issue. To continue operating nuclear power plants, the government should have prepared early by extending the lifespan of nuclear reactors and making institutional and technical arrangements, but ultimately missed the timing.

Although Lungmen Unit 1 was completed, it has not been operated, and construction of Lungmen Unit 2 was halted following a 2021 referendum. The current law must be followed. Wu Zi-wei, a department head at Taiwan's Ministry of Economic Affairs Energy Bureau, recently told Asia Economy in an interview, "The current law stipulates the lifespan of nuclear reactors as 40 years."

LNG Power Generation Replacing Nuclear Power

After the nuclear phase-out, Taiwan chose liquefied natural gas (LNG) as its power source. Chai Tzu-meng, Vice President of Taiwan Power Company (TaiPower), explained, "We are well aware of the concerns about nuclear power plant shutdowns. Adding six new LNG power plants will sufficiently compensate for the power lost due to reactor decommissioning and coal power plant shutdowns."

According to Taiwan Power Company, the power lost due to reactor and coal power plant shutdowns by 2033 will be 13.06 GW. On the other hand, newly added LNG power generation capacity will reach 30.92 GW. Therefore, power capacity will actually increase by 17.86 GW. Taiwan plans to use LNG power generation as baseload power because it emits less carbon dioxide than coal power and can supply electricity stably.

Former President Tsai Ing-wen announced a plan to transform the power generation mix to 50% natural gas, 30% coal, and 20% renewable energy by 2025 under the vision of making Taiwan a 'nuclear-free country.'

However, the share of renewable energy such as solar and wind power has not increased as much as expected. Over the past eight years, the renewable energy share rose by 6.8 percentage points from 4.8% to 11.6%, while gas power increased by 10.9 percentage points from 31.5% to 42.4% during the same period. To compensate for the slow adoption and fundamental intermittency of renewable energy, LNG power generation was expanded. The share of coal power only slightly decreased from 45.9% to 39.3%.

The Taiwanese government and Taiwan Power Company explain the expansion of LNG power generation as a "cost that must be chosen as a transitional measure to shift to renewable and eco-friendly energy." Chai Tzu-meng said, "LNG power generation emits less carbon, and it is easy to secure sites and construct plants. LNG will provide stable power for the next 10 years until renewable energy adoption expands."

Wu Zi-wei also explained, "LNG serves as a bridge to transition to renewable energy." Taiwan plans to eventually convert LNG power generation to hydrogen power.

Despite the expansion of LNG power generation, Taiwan's energy security crisis appears to be increasing. LNG is mainly imported from Australia, Qatar, and the United States. If the Taiwan Strait is blockaded, LNG supply could be cut off. This concern surfaced immediately after the Chinese People's Liberation Army conducted encirclement drills around Taiwan in May last year. At that time, S&P Global analyzed, "Taiwan imports most of its oil, gas, and coal," and "the market expects LNG to collapse first if an actual blockade occurs."

The Taiwanese government is aware of these concerns. Wu Zi-wei said, "Taiwan imports 97% of its energy and has an isolated power system, so we always closely monitor international situations," adding, "We plan to increase stockpiles from 11 days to 14 days."

The expansion of LNG power generation also faces opposition from local environmental activists. As LNG power generation increases, the overall share of fossil fuel power generation rose from 77.4% in 2016 to 81.8%. This runs counter to the government's goal of achieving carbon neutrality by 2050. At an environmental impact assessment review meeting for a new LNG terminal construction held last February, physical clashes occurred between supporters and opponents.

Ongoing Nuclear Power Conflicts

Accordingly, the Taiwanese industrial sector continues to argue for maintaining nuclear power plant operations. Tong Zhi-xian, chairman of Pegatron, a Taiwanese electronics company, appeared before the Legislative Yuan (parliament) in January and emphasized the importance of nuclear power, saying, "Nuclear energy is very important for Taiwan, which has a small land area and a densely populated population."

According to a public opinion poll conducted by the opposition Kuomintang (KMT) in February, 73.6% of respondents supported extending the operation of nuclear power plants, while only 20.7% opposed. Based on this, the KMT plans to propose legislation to extend the lifespan of nuclear reactors from the current 40 years to 60 years.