To achieve net zero emissions by 2050, an efficient energy market is essential: Taipower chair

Taipei, July 3 (CNA) Taiwan needs an efficient energy market if it is to achieve net zero emissions by 2050, Taiwan Power Co. (Taipower) Chairman Tseng Wen-sheng (曾文生) said during a climate summit on Wednesday.

The Taipower chairman said developing renewable energy requires new technologies and investments, “decisions about which are multi-faceted.” However, the government must consider many factors that can make decision-making slow and inefficient.

If renewable energy industries are allowed to develop in line with market logic, decisions can be made more efficiently, “but it all comes down to whether (renewable energy) can be traded in an (efficient) energy market,” Tseng added.

Taiwan’s Electricity Law was amended in 2017, taking the first step towards liberalising the green energy market by allowing power generated by renewable energy plants to be sold directly to consumers.

Large Taiwanese companies that need large amounts of green electricity, such as members of RE100 — a global initiative calling on companies to commit to using 100% renewable energy — have largely chosen to enter into corporate power purchase agreements (CPPAs) that last for up to 20 years with renewable energy producers such as offshore wind developers.

However, renewable energy producers have concerns about the ability of weaker buyers to honor long-term contractual obligations and are therefore less willing to sign CPPAs with them. These concerns have prompted the Ministry of Economy to develop a plan to introduce a government-backed renewable energy loan guarantee program.

The program is intended to help reduce the risk of corporate energy buyers going bankrupt, which could discourage renewable energy developers from signing contracts with them.

Tseng suggested an alternative.

He said 20-year “one company, one generator” contracts could be “painful for any purchasing manager” because there is a chance that green energy will become cheaper in the future but there is no way to trade that purchased green energy over the next 20 years.

The Taipower chairman said an “intermediary mechanism” should be established to “equalise the risk of uncertainty” the company may experience during the contract years.

The indirect mechanism requires two parties to cooperate, Tseng said. “One side is the supply side, which is financial institutions that can help remix different batches of energy products into a product with a relatively stable price.”

“The other side is the demand side,” he noted. “Since buyers may need different amounts of green electricity in different years, efficiency can only be achieved if they can freely transfer the purchased energy to others.”

Only such an energy market will enable a balance between supply and demand, Tseng said.

He added that he expects Taipower, as a renewable energy producer, will first cooperate with large state-owned enterprises as large consumers, trying to stimulate the further development of the green energy market.