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Taiwan's Energy Dilemma

Can It Survive a Nuclear-free Future?

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Can It Survive a Nuclear-free Future?

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The uncertain fate of Taiwan's fourth nuclear power plant will have major consequences for the country's energy future. Is Taiwan really ready to go nuclear-free?

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Can It Survive a Nuclear-free Future?

By Yi-Shan Chen, Uidy Kao
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For nearly two decades, the slogan "Taipower and you creating a better future" has beamed from the fence surrounding a huge construction site in Gongliao along Taiwan's northeastern coastal highway, signaling the arrival of Taiwan's fourth nuclear power plant.

With the plant caught in a political maelstrom, however, that arrival may eventually be put on permanent hold.

On Feb. 25, Premier Jiang Yi-huah announced that the controversial project would be put to the test of a popular referendum. A day later, Taiwan's Legislature resolved that before the referendum is held, all work on the facility will be suspended except for jobs already contracted out and safety tests.

On Feb. 28 CommonWealth Magazine reporters visited the Lungmen Nuclear Power Plant, known colloquially in Taiwan as "Nuclear Four." At the site, laborers wearing safety helmets were hard at work, their sweat falling like rain, in sharp contrast to tourists enjoying leisurely rides on their bicycles along the park and beach across the coastal highway.

During the plant's noon break, several workers were having lunch and chatting at a betel nut stand next to the job site, enjoying a temporary respite from their demanding jobs. When asked if the planned referendum has affected their work schedule, they answer in unison, "That's a Taipei political issue. We still have to do the job!"

The possibility that the fourth nuclear power plant may never operate has not resulted in major changes at the construction site, but the facility remains inexorably on course to becoming the public project that has faced the most tortuous twists and turns in the country's history.

Jiang's Curve Ball

After an investment of NT$444.4 billion and many hard lessons learned, Taipei's mass rapid transit system has emerged as one of the jewels of the capital city. The country's high-speed rail line, which cost NT$460 billion to build, suffered through 10 years of construction difficulties and setbacks, but it is now redefining how people in Taiwan live and commute.

Nuclear Four, on the other hand, has experienced even more problems than those other projects but may very well never enjoy any of their glory. Since the state-run utility Taiwan Power Co. (Taipower) applied to the Atomic Energy Council for a construction permit for the plant in 1997, the project has been through two work shutdowns, three presidents, four supplemental budgets, 12 Cabinet chiefs, 16 annual budget reviews and an investment of nearly NT$300 billion, yet may never produce a kilowatt-hour of electricity.

The facility is in a precarious position politically. Soon after Premier Jiang threw a curveball in calling for a popular referendum on the plant's future, he pledged to take political responsibility for the vote, vowing to step down if it resulted in the plant's shutdown. This from a premier who had been in office for only 11 days, leaving many mystified over what was happening.

"We're really down. Our entire company is in the dumps," said one Taipower employee. Though Feb. 28 was a national holiday, all of the utility's top executives still went to work at the company's headquarters in Taipei, searching for answers.

Taipower has already begun to plan for the worst – a halt in the plant's construction mandated by the referendum. The company's Department of Finance is contemplating what to do if the NT$270 billion invested in the facility has to be written off, the Department of Power Development is taking stock of whether other power plants could compensate for the gap in power generation, and the Department of Systems Operations is considering how it will rework supply contracts with big power users if it does not have Nuclear Four to rely on.

On the other side are members of the Yenliao Anti-Nuclear Self-Help Association, who have fought the project for 20 years and are also uneasy about the popular vote.

They are concerned that the thresholds needed to be met in Taiwan for referendums to be valid are such that the vote may only land Gongliao in a deeper morass.

"The government wants to hold a nationwide referendum on Nuclear Four. This is an irresponsible referendum," contends Wu Wen-tung, the former head of the association.

Taking a highly complicated and technical issue and handing it to the people to decide has others worried as well. "The referendum seems fair, but it's actually very, very dangerous, because a number of complementary measures are required," says Irene Chen, executive director of the Fubon Cultural & Educational Foundation and one of the founders of the anti-nuclear group Moms Love Taiwan.

While Taiwan's political parties are embroiled in rhetorical sparring, accusing each other of playing politics, responsible citizens need to move forward in the debate and ask themselves how the country will manage without the fourth nuclear power plant, what the price will be if it is not completed, and what kind of a social consensus will have to emerge.

Only if the public clearly addresses the potential outcomes of blocking Nuclear Four and collectively agrees to shoulder these risks can this controversy that has troubled Taiwan for more than two decades be meaningfully resolved.

Scenario No. 1: Electricity Shortages, Power Rationing

Even the most ardent anti-nuclear activists must acknowledge that the first potential outcome of stopping construction on the fourth nuclear power plant will be a heightened risk of power shortages if nothing else is done.

According to Taipower's projections, not completing Nuclear Four and closing two generators at Linkou Power Plant on schedule in 2014 will push Taipower's reserve margin (the amount by which electricity capacity exceeds demand) below 10 percent.

"In the past, Taipower's power development programs would never allow the reserve margin to dip below 10 percent," says Wu Ming-hung, the 28-year Taipower veteran who heads the utility's Department of Power Development.

The situation will grow even more serious in 2024, when new power plants will have yet to be completed but Taiwan's No. 1 and No. 2 nuclear power plants and one reactor at the No. 3 plant will have already been decommissioned. At that point, according to Taipower's calculations, the reserve margin will have fallen to 1.01 percent – about 480 MW of capacity. In other words, a breakdown at any power plant would force Taiwan into rationing electricity.

Other factors could also hurt the country's future power generating capacity. Based on Taipower's planning, the next 15 years represent a peak period for decommissioning and eliminating old power generators around the country. In addition, growing environmental awareness has made building any new power plant a struggle, and Taipower's increasingly shaky financial structure has left it less inclined to make new investments.

It all adds up to a potential squeeze in Taiwan's electricity supply in the foreseeable future.

Scenario No. 2: Greater Use of Thermal Power Plants

Over the next 15 years, Taipower expects to replace aging generators at thermal power plants in Linkou, Talin, Hsing-Takang and Tongsiao but has few plans to increase power generation.

Three new projects are in the pipeline – Nuclear Four and the Tatan and Shenao thermal power plants – but four plants are set to be closed – the thermal Hsieh-ho Power Plant and Taiwan's three operating nuclear power plants. Of the new capacity planned, only work on Nuclear Four has begun.

The Shenao and Tatan plants are projected to come on line in 2020, but there are reasons to be skeptical the timelines will be met. In a report published last December analyzing Taiwan's energy supply, the Bureau of Energy wrote that the coal-fired Shenao plant has yet to break ground because Keelung councilmen and the preparatory office of the National Museum of Marine Science & Technology oppose the construction of a coal wharf that would serve the facility. Taipower estimates the Shenao plant could provide 3 percent of the country's electricity.

The Tatan expansion project involves the addition of four natural gas-powered generators, but for the project to be viable, state-run oil giant CPC Corp. Taiwan needs to add gas storage tanks. At present, CPC Corp. can only guarantee enough gas to feed one generator, with no progress being made on additional storage capacity. The expansion plan should provide 6 percent of Taiwan's power.

Taipower's Wu worries that if the fourth nuclear power plant is shut down, the utility's other power projects will have to be accelerated, leaving the company at the mercy of the Environmental Protection Administration, local governments, and CPC Corp.

Two energy experts involved in government policy decisions assert bluntly that if Nuclear Four is not an option, Taiwan risks facing electricity shortages and would be left with no choice but to extend the service life of the country's No. 1 and No. 2 nuclear plants, scheduled to be decommissioned in 2018-2019 and 2021-2022, respectively.

Scenario No. 3: Low Growth in Power Consumption

When asked about the possibility of extending the operating life of the two nuclear power stations, Atomic Energy Council chief Tsai Chuen-horng sidestepped the question, saying only that several other countries have in recent years extended the operating periods of aging nuclear plants by 20 years.

But when CommonWealth Magazine caught up with Moms Love Taiwan co-founder Irene Chen before and after a recent television appearance, she had her mind made up. "I don't agree with extending the No. 1 and No. 2 nuclear plants."

She believes that if the aging facilities were allowed to continue to operate, it would only increase unease and risk and generate even more nuclear waste. The world has been unable to solve the nuclear waste problem and find places to store it, she says, and Taiwan is no exception.

Lai Wei-chieh, the executive director of the Green Citizens' Action Alliance, agrees.

"I previously thought about trading the extensions of Taiwan's three existing nuclear plants for a halt in construction of Nuclear Four. But after seeing the scope of the Fukushima Daiichi disaster, I don't think that Taiwan, in its situation, can take the risk. Not to mention that using nuclear energy could engender nuclear dependence, and as the dependence grows, the less likely other energy policies will be initiated," Lai says.

Chao Chia-wei, a board director of the Green Citizens' Action Alliance, is skeptical of government projections of Taiwan's future electricity needs, because they are based on Taiwan's existing industrial structure. The projections' assumed rate of growth in energy demand is so high, he says, that generating capacity could never keep up no matter how many power plants are built.

Instead, Chao sees the key to Taiwan's energy sufficiency as whether the government will change its thinking and curb electricity consumption.

The alliance advocates zero growth in electricity and proposes to achieve that through three main strategies. It wants to reduce the proportion of high energy-consuming industries in Taiwan and increase the proportion of electricity generated from renewable energy sources to 21 percent of the country's generating capacity, three times the government's target.

It would also target annual improvements in energy efficiency at 3.6 percent a year, from the government's 2 percent a year.

If energy efficiency can in fact be improved at a faster pace and power consumption reduced, then increases in electricity prices would be no greater than if the fourth nuclear power plant were allowed to operate, the alliance argues.

Scenario No. 4: A Changing Industrial Structure

Lai cited the United Kingdom as a country that has kept growth in electricity consumption flat through deindustrialization and putting greater economic emphasis on services, especially financial services and the creative and cultural sector.

Yang Jyh-shing, senior director of the Industrial Technology Research Institute's Industrial Economics and Knowledge Research Center, has closely studied energy efficiency for years and questions the practicality of Lai's vision.

"Britain has dramatically reduced the relative weight of industrial production in its economy. It may not be an appropriate model for Taiwan," cautions Yang, who says that aside from the U.K., there are no other examples of countries keeping electricity consumption growth at or below zero.

He agrees, however, with the alliance's push for greater energy efficiency, urging the government to devise policies that will encourage factories to more efficiently use energy resources, but believes the alliance's target is unrealistic.

The more developed a country is, Yang argues, the harder it is to improve energy efficiency. In Germany, widely recognized as one of the world's most environmentally oriented countries, energy efficiency has improved an average of 1.9 percent a year. In Massachusetts, which has the strictest environmental standards of any state in the U.S., the rate of improvement has been 2.4 percent a year, and the target of 2.6 percent annual improvement set by former South Korean president Lee Myung-bak was the highest set in the world.

But approaches exist that could help Taiwan get more out of every kilowatt-hour it uses.

"Facing potential structural shortages of electricity, Taiwan should consider policies mandating energy efficiency," Yang suggests, citing as an example industrial electric motors that consume half the electricity used in Taiwan. European Union standards on motor efficiency have already progressed to a third generation that is stricter than the first two. But while South Korea and China have already adopted the second generation standard, Taiwan continues to use the more tolerant – and wasteful – first generation standard.

Scenario No. 5: Higher Electricity Prices

If the fourth nuclear power plant is forced to close down, Taipower will suffer a severe financial blow, finding itself stuck with NT$270 billion in bad debts that it has to write off immediately. As of the end of January, Taipower had NT$330 billion in paid-in capital, but only NT$191.7 billion after accumulated losses were deducted from the total. In other words, if the Nuclear Four project is canceled and the government does not inject new capital into the state-run utility, Taipower will be bankrupt.

Even if taxpayers are willing to foot the bill and pour new capital into the ailing electricity provider, the nuclear plant's closure means greater reliance on natural gas and coal to generate power, which will inevitably push the company's energy costs per kilowatt-hour produced higher. If electricity prices cannot be increased because of political and economic constraints, Taipower's losses will only widen.

Taipower's Wu says bluntly that as the company's deficits have mounted in recent years, its debt-to-equity has approached 90 percent, forcing it to postpone many necessary investments. It had planned on spending NT$500 billion to NT$700 billion at Taipei Port, for example, but the investment had no chance of receiving board approval under present circumstances and was dropped. Meanwhile, the plan to add natural gas-fired generators at Tatan was rejected by Taiwan's State-owned Enterprise Commission because electricity prices are so low that the project was sure to operate at a loss.

"The weakened state of Taipower is the most serious factor and the one that should be given the greatest consideration in looking at the Nuclear Four issue. Don't forget, Taiwan has an isolated power grid. If Taipower goes bust, nobody comes out a winner," say one high-tech executive.

Confronting a future without the Gongliao plant means Taiwan will have to raise electricity prices, and figure out how.

According to Bureau of Energy calculations, if Nuclear Four is sidelined and Taiwan becomes a nuclear-free country in 2025, and natural gas is used to replace nuclear power, power generation costs will increase by 40 percent. If the higher costs are fully reflected on electricity bills, a family paying an average of NT$2,000 every two months (the frequency at which Taipower bills its customers) will see its bills rise NT$800, or nearly NT$5,000 a year.

Lai, the head of the Green Citizens' Action Alliance who is one of the main spokesmen for the nationwide anti-nuclear rallies slated for March 9, believes that the Nuclear Four debate offers an opportunity for Taiwanese society, including the government, to fully examine energy policies that "are hard to do or that nobody dares to do but should be done."

"The government might as well set far-reaching goals so that we are not held hostage by nuclear power," said Irene Chen of Moms Love Taiwan after finishing her television appearance. The people and society must collectively conserve energy in their daily lives and try to cut power usage by at least 10 percent to offset some of the electricity generated by the country's nuclear power plants, she suggests.

Back at the Nuclear Four construction site, Wu Wen-tung, of the Yenliao Anti-Nuclear Self-Help Association, is asked about what life would be like if citizens vote to stop work on Nuclear Four. Walking on the beach across the highway from the nuclear facility, Wu says local residents simply hope to enjoy the area's natural coastline and bring back the summers when Yenliao and Fulong were packed with tourists. He envisions a future when the region's tourism and aquaculture sectors are reborn and the land can be sustainably developed.

Like Wu, most everybody in Taiwan wants to live in a nuclear-free homeland, but before that goal can be attained, many thorny questions need to be confronted. The people of Taiwan need to find the answers to those questions before any referendum on the fate of the fourth nuclear power plant can be held.

Translated from the Chinese by Luke Sabatier


Referendum Thresholds

Article 30 of the Referendum Act stipulates that for a referendum to be passed, over half of the country's eligible voters must cast ballots, and a majority of valid ballots cast must support the measure. If the turnout fails to meet the 50 percent threshold, or the measure does not receive a majority of votes cast, the initiative is rejected.

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