In early April, Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co. (TSMC), told his audience at the Ketagalan Academy in Taipei that energy will be the biggest challenge to future economic growth. Chang said he was strongly convinced that oil prices would soon hit a price of US$100 per barrel.

Scientists have clearly warned that global warming is inseparable from the drastic increase of greenhouse gas emissions due to humankind’s use of fossil fuels. Global warming has spurred countries around the world to reinvent their energy strategies. The United States is keen to develop new energy technologies to free itself from its “fatal dependence” on petroleum. China is also searching high and low for oil and gas.

Ultimately, Taiwan’s energy problems can be attributed to three major obstacles.

Taiwan’s Three Major Energy Obstacles:

1. Excessive dependency on imported energy

As much as 97 percent of Taiwan’s energy is imported. Over the past two decades Taiwan’s energy dependency grew faster than the island’s GDP, at an annual rate of 6.3 percent. Even though the government has been offering incentives and subsidies to entice companies to develop renewable energy sources, in twenty years, those renewable energies are still forecast to account for only a meager four percent of Taiwan’s energy mix.(See Chart 6)

2. Low energy prices

Energy is too cheap in Taiwan. This is a truth that the Taiwanese people don’t want to hear. From electricity to oil to natural gas, in Taiwan energy is sold plentiful and cheap. Kow-Lung Chang, head of the Environmental Protection Administration (EPA), notes that while Britain is the sixth largest oil producer in the world, oil is twice as expensive in Britain than in Taiwan.(See Chart 4)

At the beginning of this year, Taiwan implemented a floating price adjustment mechanism for oil, but electricity prices have not been raised for twenty years. In Taiwan one kilowatt hour of electricity costs just NT$2.35, which means that electric power is cheaper than in Singapore and South Korea, and costs just half as much as in Japan. In the absence of relevant energy conservation campaigns and given the low electricity fees, the average citizen in Taiwan has neither the habit nor the awareness to conserve energy.

Politics - the Natural Enemy of Higher Electricity Fees

Politics are the natural enemy of higher electricity fees. Energy economist Chi-yuan Liang, a research fellow at the Institute of Economics at the Academia Sinica, puts it bluntly: “Taiwan’s energy prices don’t reflect supply and demand in the market, but electoral considerations.”

Environmental economics authority Daigee Shaw, president of the Chunghwa Institution for Economic Research (CIER), argues that Taiwan could solve its global warming-related economic and energy problems “if it only hiked energy prices to the level of neighboring countries.” Shaw believes that higher energy prices would make enterprises and ordinary citizens save energy. “It’s a policy that we would not have to regret.”

Figures best prove Taiwan’s waste of energy. Over the past 15 years, Taiwan’s energy consumption has doubled, while average per capita electricity consumption has tripled.(See Chart 1)?B(See Chart 2)

When it comes to the Taiwanese people’s careless use of energy, even soft-spoken EPA minister Chang cannot hold back his frustration. “Energy is so inexpensive in Taiwan that people don’t feel sorry about wasting it,” he says.

Taiwan also trails behind the rest of the world when it comes to energy efficiency. According to calculations by Yang Zhi-yuan, head of the EPA’s Department of Air Quality Protection and Noise Control, Taiwan generates 850 tons of carbon dioxide per every US$1 million of its GDP. This ratio is not only 40 percent higher than for heavy polluter China, but also roughly the same as the oil-producing Middle East.

“Taiwan makes money at a snail’s pace, but consumes energy at lightning speed. It’s simply living off its own fat,” comments Prof. Chung-ming Liu, director of the Global Change Research Center at National Taiwan University, with visible concern.

3. An increasingly homogenous energy mix

As the carbon reduction movement sweeps the world, in Taiwan carbon dioxide from energy use still accounts for 70 percent of total carbon dioxide emissions. Among these, carbon dioxide emissions from thermal power generation account for 30 percent of total emissions nationwide and are still on the rise.

Taiwan is growing more dependent on coal-fueled power generation, due to the government’s basic policy to eventually phase out the island’s nuclear power plants, as well as rising prices for petroleum and natural gas. Coal-fueled power generation has almost doubled over the past two decades. Based on the outcome of a nationwide energy conference two years ago, the ratio of coal in Taiwan’s energy mix will even further increase from 34 percent to 42 percent.

It’s not that we cannot use coal, but burning coal is increasingly “politically incorrect” as the whole world is asked to reduce carbon. Defying this trend, Taiwan is walking in the opposite direction.(See Chart 3)?B(See Chart 5)

In Taiwan carbon dioxide from energy consumption accounts for 70 percent of the island’s greenhouse gas emissions.

Rethinking Taiwan’s Energy Mix

Lin Chih-sen, president of the Green Productivity Foundation, points out that one kilowatt hour of electricity generated by burning coal produces 0.9 kg of carbon dioxide emissions, higher than oil (0.73 kg) and natural gas (0.43 kg). Lin, who has been active in the energy conservation movement for 30 years and looks back on a career in the Economic Ministry’s Industrial Development Bureau, points out that “low carbon power generation is an international trend.” He is convinced that “we need to reconsider our energy mix.”

So-called “clean coal” technologies for power generation have already been developed. But building such a clean coal-fired power plant costs NT$30 billion. As long as Taiwan’s electricity fees are not raised, the operation of such a plant would incur annual losses of more than NT$40 billion. So it should come as no surprise that highly polluting “dirty coal” power plants seem much more attractive.

But what can Taiwan do to overcome the three major obstacles that have been thwarting a shift to a cleaner energy mix?

Ancestral Energy Saving Solution

Until scientists find the “holy grail” of infinite cheap energy – an ultimate alternative energy backstop technology – apart from instituting an energy tax, the best approach is still that of our ancestors – conserving.

One example is the island’s old capital, Tainan City. Three years ago the Tainan City Government asked experts from the Taiwan Green Productivity Foundation to design an energy conservation plan for the city. It switched lighting facilities to highly efficient energy-saving lamps, installed thermal storage air conditioning systems to balance peak and off-peak electricity demand, and fitted parking lots with ventilation systems that kick in when certain carbon dioxide concentrations are reached. In three years the environmentally friendly changes helped Tainan save 19 percent of its energy consumption – a reduction of nearly NT$3 million in electricity fees and 790 tons of carbon dioxide.

Ultimately, energy saved can be money earned.

Translated from the Chinese by Susanne Ganz

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Chinese Version: 台灣能源的三大罩門