Taiwan will hold a referendum this month that could have far-reaching implications for global semiconductor supplies.
Taiwan is home to the world’s largest chip maker, Taiwan Semiconductor Manufacturing Co., and plays a vital role in the global electronics supply chain. The logistical growl caused by the pandemic showed the importance of the island to keep auto and technology production lines going. Now a longer-term threat is emerging: the energy supply.
Energy security and reliance on imported fossil fuels have long been central policy issues for Taiwan, and have grown increasingly violent after the government committed to net zero emissions by 2050. Only Australia is more dependent on coal-fired power plants among the world’s advanced economies.
Two power outages earlier this year raised concerns about Taiwan’s ability to meet electricity demand, which is growing at an annual rate of 2.5%. Although the outages were at least partially due to human error, they highlighted the government’s challenge to decarbonize its grid, reduce reliance on imported energy, and resolve a longstanding debate about nuclear power. For the electronics factories that drive the economy, they were a powerful reminder that they will soon have to find new sources of green energy in order to expand production.
Taiwan’s goal of increasing the share of green energy to 20% by 2025 is still a long way off. Last year the island imported almost 98% of its energy. About 82% of the electricity came from thermal power plants, the rest mostly came from two aging nuclear power plants. Renewable energies only generated 5.5%.
Power consumption at TSMC, which is planning a new two-nanometer wafer foundry near its headquarters in Hsinchu, could double in three years, according to a report by Bloomberg Intelligence analyst Charles Shum. TSMC became the first in its industry to join the RE100 renewable energy initiative last year, pledging to use 100% renewable energy by 2050. Delta Electronics Inc., United Microelectronics Corp. and others followed suit.
The December 18 referendum will ask citizens four questions – two related to energy: whether a fourth nuclear power plant, which was mothballed in 2015, should be activated and where a new natural gas terminal should be built. The results could increase the island’s reliance on imported coal and make it more difficult to meet increasing demand from factories.
Protesters against a fourth nuclear power plant in front of the President’s office in Taipei on Saturday. | BLOOMBERG
The nuclear issue has been a thorn in the side of government policy for years. The ruling Democratic Progressive Party (DPP) had pledged to end nuclear power by 2025, when the last of the currently operating plants should be shut down. The opposition Kuomintang (KMT) argues that nuclear power is necessary to produce zero-emission base-load electricity, and without it, Taiwan could face blackouts.
“We support nuclear power because it is free of CO2 taxes and provides stable energy,” said Tsai Lien-sheng, general secretary of the Chinese National Industry Association in Taiwan.
Nuclear option
Anti-nuclear groups say renovating the fourth facility would be prohibitive and unnecessary, not to mention concerns about nuclear waste disposal and the safety of operating reactors on an earthquake-prone island.
“Proponents of nuclear power have used this trick repeatedly – to fuel fear of energy shortages,” said Paul Jobin, Associate Research Fellow at the Institute of Sociology, Taiwan Academia Sinica. “It is technically impossible to start this spirit of a plant.”
In a November poll by the Taiwanese Public Opinion Foundation, 43.5% supported the commissioning of the fourth nuclear power plant, while 45.9% opposed it. In a referendum in 2018, the continued use of nuclear energy was decided.
A second referendum topic aims to encourage CPC Corp. to build a $ 2 billion LNG terminal. block on the coast of Taoyuan. Critics say the facility would damage a 7,000-year-old algae reef, while proponents say the terminal is vital in replacing imported coal with less polluting natural gas. Taiwan’s two existing LNG terminals are already at full capacity.
“If construction of the facility is stopped, it will be a major blow to stable power supplies and plans to reduce emissions,” said the Bureau of Energy.
Workers stand next to solar panels at a solar plant in Yunlin County, Taiwan on July 26, 2018. | BLOOMBERG
The government has proposed moving the terminal 455 meters offshore to protect the reef. But even that could delay the project by 2.5 years and undo efforts to increase natural gas to 50% of the electricity mix by 2025, said Liang Chi-yuan, professor of management at National Central University.
“If nuclear power is to be abolished, increasing gas power generation to 50% of the electricity mix is not just a goal, it’s a must,” said BloombergNEF energy analyst Wei Hanyang. “Without the third gas receiving terminal, Taiwan will likely not have enough electricity by 2025.”
In the November opinion poll, 42.3% of those polled said they would vote to protect the Taoyuan reef, while 36.7% support the construction of the terminal. The other two referendum questions concern the importation of pork and the planning of future referendums. A defeat of President Tsai Ing-wen’s DPP on all four issues could affect the ruling party’s prospects in next year’s local elections.
In the longer term, the vote could undo Taiwan’s efforts to combat global warming. Its per capita emissions are among the highest in the world, said Niven Huang, managing director of KPMG Sustainability Consulting Co. in Taiwan. The Energy Bureau predicts that Taiwan’s electricity consumption will increase by an average of 2.5% per year between 2021 and 2027, almost double the growth rate from 2011 to 2020.
Electricity offers
TSMC said it is pursuing “carbon reduction measures, including green production, implementing energy saving projects, buying renewable energy and carbon credits” to meet its 2050 target. It is estimated that the semiconductor giant consumed around 6% of Taiwan’s electricity in 2019.
While TSMC and other large manufacturers are looking to buy renewable energy, many of their contractors still rely on state-owned network operator Taiwan Power.
“Companies in science parks have included diesel generators in their emergency plans in addition to uninterruptible power supplies after power outages in May,” said Hander Chang, president of the Allied Association for Science Park Industries. “Energy scarcity is more important than national security.”
The headquarters of Taiwan Semiconductor Manufacturing Co. in Hsinchu, Taiwan | BLOOMBERG
Taiwan’s green options include solar, wind, hydro, and geothermal. In the 1950s hydropower generated more than 90% of electricity in Taiwan, but most large conventional hydropower plants have already been developed and production is expected to grow only marginally.
Located on the so-called ring of fire and dotted with hot springs, Taiwan could potentially generate up to 32 GW of geothermal energy, according to the Taiwan Geothermal Association. So far, however, only one system is in operation, a privately built 4.2 MW system that went into operation in Yilan County in October.
Taiwan’s land shortage and self-sufficiency policies also create barriers to solar energy. While companies like TSMC equip their systems with panels, large solar parks have to compete with agriculture for space.
“I understand the government is under pressure to meet its renewable energy goal,” said Liu Wan-yu, distinguished professor in the Forestry Department at National Chung Hsing University. But it should “decide first what land is suitable for solar energy,” including the effects of loss of crops, biodiversity, landscape and irretrievable loss of farmland.
Taiwan’s best bet is wind. With a capacity of almost 21 GW by 2035, the island is the largest offshore wind market in Asia excluding China, predicts the Global Wind Energy Council.
But even if Taiwan can increase its share of wind and solar power, both are weather dependent, which could make supplies unstable without more traditional sources. “This is a universal problem,” Citigroup said in a July report. To meet the rapidly increasing demand, “more base load capacity and delays in decommissioning power plants may be required,” the bank said.
“The referendum is an opportunity for the government to visit Taiwan’s energy policy, which requires fundamental change,” said Liang of National Central University. “In the long term, we should consider whether the nuclear phase-out is the right thing to do and whether there is a better and safer technology.”
In a time of misinformation and too much information, Quality journalism is more important than ever.
By subscribing you can help us get the story right.
SUBSCRIBE NOW
Comments are closed.