Taiwan’s Electrical Grid and the Need for Greater System Resilience

Taiwan’s Electrical Grid and the Need for Greater System Resilience

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Taiwan’s Electrical Grid and the Need for Greater System Resilience

Taiwan is engaged in a multifront effort to add resilience to its electrical grid. The centerpiece of this campaign is the Grid Resilience Strengthening Construction Plan (強化電網韌性建設計畫), announced by Taiwan Power Company (Taipower, 台灣電力公司) in September 2022. The essence of the plan is to reduce the likelihood of vulnerable chokepoints making wide swaths of the system susceptible to blackouts when things go wrong. In other words, the plan is to decentralize and compartmentalize Taiwan’s grid. “The new project aims to enhance power grid resilience by deploying microgrids, rather than relying on major grids for electricity supply,” Taipower acting Chairman Tseng Wen-sheng (曾文生) told members of the media in September. This Taipower decentralization initiative pairs with broader political efforts to eliminate nuclear power and reduce coal-dependence, in favor of the distributed generation provided by wind and solar power.

Rising Power Consumption in Taiwan

The catalyst for the NTD $564.5 billion (USD $18.1 billion) plan was Taiwan’s recent history of major power disruptions. Blackouts in 2017, 2021, and 2022 have revealed a concerning degree of grid vulnerability for an economy that is uniquely dependent on electricity. 

Based on 2021 GDP and population numbers from the World Bank and the International Energy Agency’s (IEA) most recent electricity consumption figures, Taiwan’s economy is more electricity-intensive than those of its contemporaries. This can be observed by comparing units of electricity consumption per unit of economic output—for example, kilowatt-hours per US dollar (kWh/$). In Taiwan’s case, this metric comes out to around 0.348kWh/$. For such an advanced economy, this is rather high, placing Taiwan about halfway between South Korea (0.309kWh/$) and the People’s Republic of China (PRC) (0.418kWh/$ )—a much poorer economy per capita. Japan, Germany, and the United States, meanwhile, log kWh/$ figures of 0.196, 0.124, and 0.176, respectively. [1]

These figures highlight the different economies’ relative places in today’s global industrial system. While Japan, Germany, and the United States have seen manufacturing as a portion of their economies shrink to less than 20 percent as services have become predominant, manufacturing remains more central to the economies of South Korea, China, and Taiwan. According to the World Bank, South Korea’s manufacturing constitutes 25 percent of its economy; the PRC’s constitutes 27 percent; and Taiwan’s constitutes a stunning 34 percent.

The Taiwan manufacturing sector’s prominence has translated into broad economic growth, with its national economy now close to the top 20 globally in GDP, despite its population being outside of the top 50. In 2021, Taiwan’s economy grew at an astonishing 6 percent. And while 2022 saw the economy slow down as global demand slumped, Taiwan still grew at more than 3 percent year-on-year. This economic growth has resulted in a power-consumption increase of 10 percent in less than a decade.

Taiwan’s world-beating manufacturing sector, anchored by firms like Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) and Formosa Plastics (台灣塑膠公司), has a voracious appetite for power. According to the Bureau of Energy (BOE, 經濟部能源局), industrial production accounts for 57 percent of total electricity consumption in Taiwan, up from 49 percent 20 years ago. Of this 57 percent, electronics manufacturing (including chipmaking) accounts for 37 percent, or more than one fifth of the island’s total. TSMC alone accounted for 6.4 percent of Taiwan’s electricity consumption in 2021.

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Image: An intersection in Taipei’s Neihu District during a rolling blackout, which was necessitated by high levels of power consumption that strained the electrical grid (May 17, 2021). (Image Source: Taipei Times)

The Threat of Black Outs

In August 2017 a malfunction at the large Tatan natural gas power plant (大潭發電廠) knocked out power for 151 companies in industrial parks and export processing zones, resulting in losses of NTD $87.47 million (USD $2.89 million). More than 6 million households, or close to half of Taiwan’s total, lost power as well. According to the natural gas supplier CPC Corporation Taiwan (台灣中油), the trigger for the event was a human error that occurred during the replacement of equipment. In May 2021, a malfunction at a high-voltage substation in Kaohsiung knocked four generators at the Hsinta Power Plant (興達發電廠) offline, resulting in rotating power outages for 4 million households. Four days later, the problem recurred. 

The threat of blackouts emerged once again in March 2022. The incident, now known colloquially as the “303 Blackout” (303停電事故), raised the political salience of grid resilience to a level that demanded the subsequent Taipower plan. According to Taipower’s own reporting, the 303 Blackout also started at Hsinta Power Plant when an operator committed an error that caused a chain reaction from an extra high-voltage substation further south in Tainan. Subsequently, generators at the Chiahui plant (嘉惠電廠), the Maanshan nuclear plant (馬鞍山核能發電廠), the Talin plant (大林發電廠), and the Nanpu plant (南部發電廠) also went offline. As a result, Taiwan’s power grid lost a third of its capacity, and more than 5 million households were left without electricity. Moreover, the semiconductor, petrochemical, and steel industries suffered disruptions estimated to have cost more than NTD $5 billion

Each of these examples highlighted the centralization problem that Taipower has created for itself. Taiwan’s power is generated mostly in the south—such as at the Hsinta plant outside of Kaohsiung—but needed mostly in the urban centers of the north. As the power is moved via a central transmission system, what should be isolated errors can instead become cascading island-wide cataclysms. 

To avoid such chain reactions in the future, Taipower has instituted the Grid Resilience Strengthening Construction Plan for “promoting distributed grid projects,” “improving grid reinforcement projects,” and “strengthening grid protection capabilities.” The total investment of NTD $564.5 billion will come in installments over 10 years. 

Additionally, the plan will attempt to protect the industrial parks from disruptions in the wider grid with its plank of “Direct Electricity Supply from Power Plant to Science Parks.” The plan will, for example, provide electricity directly to the Hsinchu Science Park (新竹科學園區, home to TSMC) from the Tunghsiao power plant (通霄發電廠) and offshore wind farms; the Taichung power plant will supply electricity directly to the Central Taiwan Science Park (中部科學園區); and the Hsinta plant will supply electricity directly to the Southern Taiwan Science Park (南部科學園區) and the Kaohsiung Ciaotou Science Park (橋頭科學園區). Taipower also argues that reducing the power transmission distance is among the best ways to reduce risks to the power grid, and it will therefore seek to reduce stress on the major south-north cables.

Gaps in Power Generation

But despite the well-documented travails of power transmission and the plan’s focus on resolving them, Taiwan also continues to face looming questions regarding power generation. Taipower spokesman Chang Ting-shu (張廷抒) revealed as much in the wake of the May 2021 blackout, stating that “We calculate our expected electricity needs based on historical demand, but yesterday’s demand was much higher and was not far from the all-time record.” Taiwan not only needs to deliver power more effectively—it also needs the firm capacity to generate more of it.

As of a 2022 Bureau of Energy report, coal generated 42.5 percent of Taiwan’s power, natural gas generated 38.1 percent, nuclear power generated 8.5 percent, and renewable sources—including hydropower, wind, and solar—generated 8.1 percent, with the remainder generated by assorted small categories. This electricity mix is just the latest makeup in an ever-changing Taiwanese power landscape.

In the 1970s, coal was Taiwan’s dominant power source, contributing more than 75 percent of the island’s generation. However, amid Chiang Ching-kuo’s (蔣經國) drive for modernization in the 1980s, nuclear energy ascended in importance. By the mid-1980s, nuclear power from three plants in New Taipei and Pingtung County contributed more than half of Taiwan’s power. This relative crest was to be short-lived, however, with the Democratic Progressive Party (DPP, 民進黨) staking out an anti-nuclear stance that has persisted to this day.

As Taiwan’s electricity demand continued to rocket upward through the 1990s and into the new millennium, nuclear power generation remained stagnant. President Tsai Ing-wen (蔡英文), with her promise of a “nuclear-free homeland,” consigned the zero-carbon resource to terminal decline. The Tsai power plan, released shortly after her 2016 election, called for a generation mix of 50 percent natural gas, 30 percent coal, and 20 percent renewables by 2025. It left no place for nuclear power. Given its emphasis on natural gas generation, the Tsai Administration has, to its credit, improved natural gas infrastructure in the north of Taiwan. However, its plan to replace nuclear power with wind and solar courts disaster. 

The eight-year schedule to install 5.6 gigawatts of offshore wind capacity and the target of 1.5 gigawatts of battery storage by 2025 have both been knocked off track by manufacturing challenges, cost overruns, and local opposition. While remaining committed to the planned phase out of nuclear power, the Tsai Administration has had to lower its 2025 target for renewables to 15 percent.

This trajectory leaves Taiwan vulnerable to slim reserve margins and the recurrence of rolling blackouts as demand consistently challenges supply. Circumstances such as those seen in 2022—when peak power usage of 40.74 gigawatts jumped beyond the Bureau of Energy’s peak projection of 39.7 gigawatts—could become commonplace. 

The Nuclear Option

Taipower’s strengthening and construction plan will make needed improvements to the island’s grid resilience. However, those upgrades must be accompanied by sober analysis of the power generation side of the equation. Variable generation from wind and solar power, even if it reaches capacity targets, cannot replicate the attributes of baseload power from the coal and nuclear plants Taiwan is phasing out. Batteries at the scale necessary are not yet within the realm of possibility. Natural gas, the new workhorse of Taiwan’s power plan, presents its own problems, be they from global price volatility or the threats that exist to its import.

In December 2021, voters spurned nuclear power in a referendum, rejecting the idea of restarting construction of what would be Taiwan’s fourth nuclear power plant, the Lungmen nuclear facility (龍門核能發電廠). However, recent geopolitical developments have created a new political opening for nuclear power initiatives that could support Taiwan’s grid. Just three months after that referendum, Russia initiated its war of aggression against Ukraine—sending Europe into an energy spiral and prompting a global rethink of the turn away from nuclear, as exemplified by Germany’s energiewende. [2]

Though DPP spokesman Chang Chih-hao (張志豪) said in late May that the party’s promise of a “nuclear-free homeland” remains unchanged, current vice president and 2024 party nominee for the presidency Lai Ching-te (賴清德) has flirted with the possibility of renewing nuclear generation “in the case of an emergency.” New Taipei City Mayor and Kuomintang (KMT, 國民黨) presidential nominee Hou You-yi (侯友宜) has also indicated openness to nuclear power.

Ending the planned phase out, restarting decommissioned reactors, and putting Lungmen into service could yield nearly 8 gigawatts of total dispatchable nuclear capacity, equivalent to almost 20 percent of Taiwan’s peak demand.

Exogenous Threats

Taiwan’s grid also faces risk from a triad of exogenous factors that deserve mention: seismology, weather, and regional geopolitics.

Taiwan’s biggest electricity failure prior to the 2017 outage resulted from an earthquake in 1999. Typhoons also pose a risk, particularly when high winds damage power lines. This threat was demonstrated in 2009, when Typhoon Morakot left more than 1.5 million Taiwanese without power; and again in 2016, when Typhoon Meranti wreaked similar havoc. Fortunately, while the United Nations Intergovernmental Panel on Climate Change projects that the peak wind speeds from tropical cyclone activity will increase globally in the coming decades, the northwestern portion of the Pacific Ocean, where Taiwan sits, is expected to experience a meaningful decrease in tropical cyclone activity. This phenomenon is due to an observed merging of high-pressure zones in the upper atmosphere over the Pacific and Southeast Asia, which Taiwanese climatologist Chia Hsin-hsing (賈新興) has called a “golden bell force-field.”

The geopolitical risks to the fuel supplies of Taiwan’s electrical network (as discussed in a previous Global Taiwan Brief article) need not be rehashed here. Suffice it to say the physical security of offshore resources and the delivery of fuels like natural gas are increasingly vulnerable. The grid’s cybersecurity vis-à-vis geopolitical contingencies is also a pressing issue. Ongoing and future efforts to shore up these vulnerabilities must further be considered as part of securing greater resilience for Taiwan’s electrical grid.

The main point: Taiwan’s electricity-intensive economy demands a world-class power system—which in turn will require both investment in grid upgrades and a re-embrace of reliable sources of electricity generation, such as nuclear power.

[1] Figures based on the author’s research.

[2] Energiewende, or “energy transformation,” refers to Germany’s “planned transition to a low-carbon, nuclear-free economy.”