Author(s)
On Jan. 13, 2024, Taiwan will elect its eighth president since holding its first direct presidential election in 1996. With incumbent president Tsai Ing-wen, a member of the Democratic Progressive Party (DPP), term-limited and ineligible for reelection, all three contenders are vying for high office for the first time: William Lai (賴清德), a member of the center-left DPP; Hou Yu-ih (侯友宜), center-right Kuomintang member; and Ko Wen-je (柯文哲), member of the centrist Taiwan People’s Party.
Cross-Strait Relations and Energy Security at Stake
The 2024 presidential election holds special significance for several reasons. First, escalating tensions in the Indo-Pacific will require the incoming president to take a judicious approach to Taiwan’s delicate relationship with China. Taiwan’s location is strategically important for regional stability, and any deviation from the status quo between the two governments risks destabilizing the region and triggering global geopolitical ramifications.[1]
Second, the new president’s energy policy will have significant consequences for Taiwan’s energy security and decarbonization efforts. Under Tsai, the government has set ambitious targets to 1) increase electricity generation from renewables from 8.3% to 20% by 2025, 2) achieve net-zero carbon emissions by 2050, and 3) completely phase out nuclear power by 2025.
Third, Taiwan plays a pivotal role in the manufacturing of semiconductors — Taiwan Semiconductor Manufacturing Corp. controls over 50% of market share in the global semiconductor foundry market.[2] Any disruptions to the island’s energy supply or political stability could ripple into supply chains and economies worldwide.
Where the Candidates Stand
On cross-strait relations, the three candidates’ views can be broadly grouped into two positions. All three candidates advocate for maintaining peace and the status quo with China. But their approaches differ: Lai echoes the DPP position on upholding independent sovereignty, while Hou and Ko have proposed increasing communication with China and largely recognize the 1992 Consensus and the “One China” principle that the agreement embodied.
Similarly, Lai’s energy platform differs from those of the other candidates. All three contenders have stressed the importance of reliable electricity supply, energy transition, and achieving decarbonization and net zero by 2050. But Lai would continue the Tsai administration’s existing policy of phasing out nuclear power by 2025, while Hou and Ko have each put forward an all-of-the-above approach that would deploy all energy sources, including nuclear power. They have each called to extend the lifetime of the island’s last operating nuclear plant and reactivate two plants that were recently retired.
Lai is consistently leading in the polls, with Hou inching ahead to close the gap. If Lai is elected and the DPP wins a majority in Taiwan’s parliament, nuclear power will disappear from the island’s energy mix in two years. If this happens, the lost supply will most likely be replaced by coal and natural gas.
This would present a serious risk for Taiwan: An increase in the island’s already-heavy reliance on imported coal and gas would compromise its energy security and decarbonization efforts.
Challenges for Taiwan’s Energy Landscape
Growing Electricity Demand
Taiwan is relatively small in population and land area. It has a population of roughly 23 million, comparable to that of Florida, with only one-fifth of the U.S. state’s land area. However, the island consumes a significant amount of energy.
Strikingly, the average person in Taiwan uses just as much electricity — 12 megawatt-hours (MWh) per year — as their U.S. counterpart, despite the fact that Taiwan’s gross domestic product (GDP) per capita is less than half of the U.S.’ GDP per capita. In 2022, GDP per capita was $32,300 in Taiwan and $80,400 in the United States.[3]
Further, Taiwan’s per capita energy and electricity demand are three times higher than average demand in Asia.[4] The country’s energy demand has recently plateaued, with a downturn in 2021 likely due to the COVID-19 pandemic (Figure 1). Similarly, Taiwan’s oil demand has shown a general downward trend since the 2007 oil shock.
Figure 1 — Taiwan’s Total Energy, Oil, and Electricity Demand, 1982–2022
Note: ktoe = kilotonne of oil equivalent.
Meanwhile, electricity consumption in Taiwan trended upward over the past decade. During this period, both total and per capita electricity demand surged by 16%, while the island’s population grew by only 0.2%. Most demand came from industry, which was responsible for 56% of total power consumption in 2022, followed by the residential (18%) and commercial (17%) sectors. Electronic components manufacturing alone was responsible for over half of industrial demand.
This considerable growth in the electric load primarily originated from inadequate electricity tariffs and a lack of conservation incentives. Indeed, Taiwan charges one of the lowest electricity tariffs in the world.[5]
In 2015, the government implemented a cost-reflective tariff that is reviewed twice a year, with the rate of change capped at 3%. Since the Tsai administration took office in 2016, electricity tariffs have increased only three times, resulting in a total increase of almost 24%. Notably, the tariffs were frozen eight consecutive times between the second half of 2018 until the first half of 2022, following Russia’s invasion of Ukraine, which drastically impacted global energy markets.[6]
In the most recent review in October 2023, Tsai’s government strategically froze the tariffs until after the presidential election, this time specifically for residential customers.[7] These recurring price freezes have prevented Taipower, the state-owned electric utility, from recovering costs through tariff revenues, resulting in the government subsidizing the deficit.
Power Supply and Reliability
The substantial growth in electricity demand underscores the need to establish appropriate market signals through ongoing pricing adjustments. But it also stresses the importance of resource adequacy and broader electric reliability, which are both at risk in Taiwan. In fact, in the past two years, the island experienced three large-scale blackouts that impacted millions of households.
In May 2021, infrastructure equipment faults caused two blackouts within four days of each other. The remaining available supply failed to meet unexpected record load during simultaneous heat waves before the summer season, causing Taipower to execute multiple rolling blackouts on both occasions. The unavailability of solar power after sunset and low hydroelectric power output amid a record 56-year drought further compounded the evening blackouts. In March 2022, the third blackout was caused by a human error at a coal plant and a subsequent grid failure. Once again, the waning solar output in the evening exacerbated outages across Taiwan.
Although solar plants supplied essential power during the daytime throughout the outages, Taiwan does not rely heavily on intermittent solar energy. Coal has been the predominant fuel in Taiwan’s electricity generation mix since the early 1990s. In 2022, coal represented the largest share of total generation capacity at 34%, followed by natural gas (31%) and solar (15.7%). The remaining 19% comprised hydropower (7.6%), nuclear (4.7%), oil (3.4%), wind (2.6%), and other renewables (1.2%).
Taiwan’s heavy reliance on thermal generation, specifically coal and natural gas, is even more pronounced when it comes to actual generation. The two fuels collectively supplied 80.9% of the total power demand in 2022, followed by nuclear (8.2%). Solar, by contrast, only generated a minimal 3.7% of the total electricity demand due to its significant derating factor (Figures 2 and 3).[8]
Figure 2 — Taiwan’s Installed Capacity by Fuel Versus Average and Peak Load, 1982–2022
Figure 3 — Taiwan’s Electric Generation by Fuel Versus Average and Peak Hourly Load, 1982–2022
Foreign Energy Dependence
In addition to being highly dependent on fossil fuels, Taiwan is almost entirely reliant on energy imports. The island imports about 97% of its energy needs, exposing it to global price fluctuations and disruptions in commodity markets.
For that reason, Taiwan uses a diverse group of import sources to fulfill its fossil fuel demand. For instance, its main coal import sources are Australia (52.7%), Indonesia (29.1%), and Russia (11.1%). Regarding liquefied natural gas (LNG), Taiwan imports 36.9% of its annual demand from Australia, 26.1% from Qatar, 10.5% from the U.S., and the remaining 22.2% from six other countries — including Papua New Guinea and Russia. Despite having 45 contracts of various terms, natural gas prices in Taiwan were affected by the price shock triggered by the Russia-Ukraine war in 2022.[9]
Nonetheless, similar to electricity tariffs, fuel prices are reviewed and set weekly by government-run oil company CPC Corp. CPC started linking domestic fuel prices to international markets in 2006. However, as a state-owned company, CPC does not transfer the entire cost to end consumers. For example, it caps the price change ceiling at the lowest price set among neighbors Japan, Hong Kong, Singapore, and South Korea.[10] CPC has also stabilized domestic fuel prices with partial cost pass-through during high oil price periods by absorbing additional costs when the oil price was high and recovering them later when the price declined.
The 40-Year Story of Nuclear Energy
Besides rising energy demand and high import dependency that put Taiwan’s energy security at risk, now enter the decade-long debate on nuclear power.
The Fourth Plant and Rise of Antinuclear Attitudes
Taiwan began constructing nuclear power plants primarily as a measure of energy security and diversification in response to the 1973–74 oil embargo. By 1985, six units were operating across three plants, totaling 5 gigawatts (GW) of capacity and generating roughly 50% of the country’s power demand. Afterward, the nuclear fleet steadily generated an average of 4 GW per hour, although its contribution to overall power generation gradually decreased as more coal-fired power plants were developed to meet increasing energy demand in Taiwan. By 2014, nuclear energy was responsible for about 16% of total generation.
Taiwan had planned the development of a fourth plant. Yet, the Lungmen Nuclear Power Plant —with two reactors designed by General Electric and totaling 2.7 GW of capacity — was never brought online. The initial plant proposal was introduced in the 1980s with the plan to accommodate six units at the site in New Taipei County in northern Taiwan. Since the 1986 Chernobyl accident led to global anti-nuclear sentiment, the plant has undergone some turbulent 30 years of back-and-forth with sporadic progress on construction. For instance, in 2000, the plant’s development was suspended by the anti-nuclear administration of President Chen Shui-bian, a member of the DPP, before resuming just months later following action by the parliamentary opposition.[11]
The Fukushima disaster in 2011 mounted safety concerns worldwide and reignited anti-nuclear attitudes. Under public pressure and after decades of delays and numerous rounds of budget increases, the government announced in 2014 that it would begin mothballing the Lungmen plant’s completed first unit and halt construction of the second unit.[12]
Nuclear Phaseout
In 2016, Tsai secured her first presidential term and began implementing a policy to phase out nuclear power by 2025. Since 2018, the government has decommissioned four reactors from the first and second nuclear power plants as they reached their 40-year life expectancy, a loss of 3.2 GW. The lost nuclear capacity has been primarily replaced by coal and natural gas.
In 2022, nuclear contributed to only 8% of electric generation. Taiwan’s third and only remaining operating nuclear power plant is scheduled to retire by 2025, should the nuclear phaseout policy continue.
Multiple referendums have been held over the years regarding the future of Lungmen Nuclear Power Plant and overall nuclear power in Taiwan. Their results have been mixed. A referendum held in 2018 favored nuclear power, but the Tsai government continued with the phaseout process. The latest referendum, in December 2021, asked voters if they supported restarting the mothballed Lungmen plant. Voters rejected the proposal to resume construction.[13]
Other Countries Move to Expand Nuclear Energy
Taiwan’s plan to phase out nuclear energy stands in contrast to a global trend toward nuclear power expansion, including in neighboring countries. The energy crisis triggered by the Russia-Ukraine war in 2022 propelled energy security to the top of government agendas worldwide, forcing many countries to reexamine their nuclear energy policies.[14]
Notably, Japan and South Korea, which are heavily reliant on energy imports, now consider nuclear power a clean, reliable, and secure energy source. South Korea reversed its nuclear phaseout policy in 2022 after its presidential election; it now aims to generate 30% of its electricity from nuclear by 2030 by extending existing plants and building new ones. Similarly, although Japan reduced nuclear generation to 1% of total power supply in 2015 following the 2011 Fukushima incident, it has more recently set a target to generate up to 22% of total power supply with nuclear by 2030 with existing reactor restarts, extensions, and new builds, the result of mounting energy security concerns, net-zero goals, and the risk of power shortages.[15]
The Reality of Net-Zero Goals
In addition to the nuclear phaseout policy, the Tsai administration has set ambitious renewable and net-zero targets. These include 1) generating 20% of Taiwan’s electricity from renewables by 2025, an increase from 6.2% in 2022 and 2) achieving net zero by 2050. However, as most of Taiwan’s renewable energy comes from intermittent wind and solar power, rapid renewable expansion currently requires significant dispatchable backup capacity from coal or natural gas, which already produce almost 81% of electricity annually and both emit carbon dioxide. In addition, with existing technologies, large-scale energy storage that can store sufficient power for an extended period is unlikely. As such, the government’s current strategy of expanding renewable capacity with new capital investment, rather than maximizing existing infrastructure by safely extending the operating licenses of nuclear plants, lacks economic practicality and diminishes supply reliability.
Energy Security Beyond the Election
With the challenges to its energy landscape in mind, Taiwan must recognize the critical role of nuclear energy as a low-cost, clean, stable, and reliable baseload power source.
Nuclear power is unlikely to be the deciding factor in the January 2024 election; past referendums have indicated that public sentiment is roughly split equally. If nuclear energy is phased out by 2025, Taiwan will risk an expanded carbon footprint, higher exposure to global energy prices, and potential supply insufficiency. Until renewable and energy storage capacity are developed and can operate at scale, coal and natural gas will likely continue to fill the gap left by the phaseout of nuclear power, especially if it is fully eliminated from Taiwan’s energy mix.
Natural gas already plays a vital role in Taiwan’s energy supply, fulfilling over one-third of the island’s electricity demand. Regardless of the fate of nuclear power, natural gas will likely persist in displacing coal and serving as backup capacity for renewables. It will be the dominant fuel source for years to come, leading to increased imports and exposure to market fluctuations.
With the upcoming presidential election, Taiwan faces critical decisions about its energy future in a highly politicized environment. The potential elimination of nuclear power could significantly impact Taiwan’s energy mix, increase its reliance on fossil fuels, and potentially jeopardize its energy security.
Notes
[1] For research on this topic, see Gabriel Collins and Andrew S. Erickson, “Reaping the Whirlwind: How China’s Coercive Annexation of Taiwan Could Trigger Nuclear Proliferation in Asia and Beyond” (Houston: Rice University’s Baker Institute for Public Policy, October 25, 2023), https://doi.org/10.25613/FBM1-JE11.
[2] Statista, “Semiconductor Foundries Revenue Share Worldwide From 2019 to 2023, by Quarter,” September 2023, https://www.statista.com/statistics/867223/worldwide-semiconductor-foundries-by-market-share/.
[3] International Monetary Fund, “GDP per Capita, Current Prices,” https://www.imf.org/external/datamapper/NGDPDPC@WEO/ADVEC/WEOWORLD/TWN/CHN.
[4] Enerdata, “Taiwan Energy Information,” https://www.enerdata.net/estore/energy-market/taiwan/.
[5] Taipower, “2022年各國平均電價比較,” October 17, 2023, https://www.taipower.com.tw/tc/page.aspx?mid=213&cid=351&cchk=1b3221ee-37c3-4811-9d4d-a1bb215f33c8.
[6] “電價終結連8凍？3張圖看台灣用電概況【圖表】,” PTS News, June 27, 2023, https://news.pts.org.tw/article/587508.
[7] “電費10月到明年3月仍凍漲 百貨餐飲等高壓戶恢復原價,” PTS News, September 19, 2023, https://news.pts.org.tw/article/657717.
[8] The fraction of the nameplate capacity that represents realistic electric generation — what can be expected after considering all output losses.
[9] Taiwan imports most of its liquefied natural gas (LNG) through medium- and long-term contracts and fills remaining demand with short-term and spot contracts (CSR Sustainable Development Zone, “天然氣採購,”https://www.cpc.com.tw/csr/cp.aspx?n=3000). According to Enerdata, Taiwan currently has four short-term, one medium-term, and 14 long-term LNG contracts.
[10] CPC Corporation Taiwan, “國內汽、柴油浮動油價調整機制作業原則,” July 1, 2014, https://bit.ly/3NyGadT.
[11] The ensuing court case centered on whether the Executive Yuan, Taiwan’s executive body, could withhold the decision to suspend construction of the fourth nuclear power plant from the Legislative Yuan, Taiwan’s parliamentary body — the Legislative Yuan is responsible for approving the state budget. See the court’s final ruling at https://cons.judicial.gov.tw/en/docdata.aspx?fid=100&id=310701.
[12] Taipei Economic and Cultural Representative Office in the United States, “Lungmen No.1 Nuclear Reactor OK’d for Sealing,” August 2, 2014, https://www.roc-taiwan.org/us_en/post/4366.html.
[13] “四大公投案不同意完勝. 最終數據、分析圖表一次看,” United Daily News, https://topic.udn.com/event/1218_referenda.
[14] “Energy Crisis Revives Nuclear Power Plans Globally,” Reuters, August 4, 2022, https://www.reuters.com/business/energy/energy-crisis-revives-nuclear-power-plans-globally-2022-08-04/.
[15] Enerdata, “Japan Plans to Build New Nuclear Power Plants and Restart Reactors in 2023,” August 25, 2022, https://www.enerdata.net/publications/daily-energy-news/japan-plans-build-new-nuclear-power-plants-and-restart-reactors-2023.html; Kenneth B. Medlock III and Peter Hartley, “The Role of Nuclear Power in Enhancing Japan’s Energy Security” (Houston: Rice University’s Baker Institute for Public Policy, September 1, 2004), https://www.bakerinstitute.org/research/the-role-of-nuclear-power-in-enhancing-japans-energy-security.
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