Taiwan’s LNG Development Overpowers Its Renewables Ambitions


Taiwan’s LNG Development Overpowers Its Renewables Ambitions

The Taiwanese government has earmarked some USD 32 billion for renewables, hydrogen and carbon capture and storage (CCS) investments to move the country’s energy development in the right direction. However, it also continues a major liquefied natural gas (LNG) build-out as part of its long-term energy mix strategy, putting the country in an energy supply and climate mitigation quandary.

01 June 2023 – by Tim Daiss   Comments (0)

While Taiwan continues to seek more renewable energy development, it is also continuing a major liquefied natural gas (LNG) build-out as part of its long-term energy mix strategy.

The Taiwanese government justifies this continued reliance on LNG as a move to replace coal – the world’s dirtiest burning fossil fuel. However, when used for power generation, gas emits at least half of the carbon dioxide (CO2) as coal.

In addition, gas is an enormous methane emitter across its entire production and value chain. And methane is more than 25 times as potent as CO2 when it comes to trapping atmospheric heat.

Renewable Energy in Taiwan

The Taiwanese government has been touting its plan to increase the share of renewable energy in its power generation mix. Admittedly, it seems promising. It’s planning what’s been called a “massive clean energy spending spree” through 2030 to redouble climate efforts. This includes earmarking some USD 32 billion for renewables, hydrogen and carbon capture and storage (CCS) investments.

Laying aside the climate change mitigation argument against hydrogen development and CCS, the country’s renewable energy move is heading in the right direction. Renewable energy sources are expected to make up some 10% of the country’s total electricity production this year, up from 8.6% last year.

Moreover, Taiwan built more solar farms in 2022 than any previous year, and the pace of construction of offshore wind turbines increased, as local contractors gained experience.

This would put Taiwan within reach of the government’s revised target of boosting renewable energy sources to 20% of electricity production by 2026, the country’s Ministry of Economic Affairs said earlier this year. The government also projects that 27 GW of renewable energy will be generated by 2025.

Taiwan Energy Mix

The justification for more liquefied natural gas infrastructure development, even to replace coal, falls woefully short. It is simply not the ideal transition fuel. This is borne out by the increasing support for a straight transition from coal to renewable energy, skipping gas altogether. Such a move also saves money.

However, by mid-decade, 50% of Taiwan’s electricity is set to be generated from LNG, with the remaining supply coming from either coal (30%) or renewable sources (20%). Power generation accounted for 83.6% of total LNG demand in 2022, up 3.4% year-on-year. LNG generates 35% of the country’s electricity – with coal and nuclear generating 45% and 12%, respectively. Meanwhile, oil and pumped storage make up the rest of the mix.

Taoyuan LNG Terminal Development

Taiwan has also demonstrated that it is pushing ahead with more LNG development. On March 28, Tokyo-based JFE Engineering said it secured a contract to build a new LNG import terminal located 1.2 km off the coast of Taoyuan City. The date of completion of this LNG receiving terminal is slated for 2025.

Not surprisingly, the liquefied natural gas terminal is said to be in line with the current sustainable energy policy promoted by the Taiwanese government.

Taichung LNG Terminal

Moreover, an Osaka Gas subsidiary recently won a construction contract for the fourth phase of the Taichung LNG expansion project. The project is slated for completion in 2029 – just one year before Taiwan hopes to see a 23-25% cut in its greenhouse gas (GHG) emissions from 2005 levels. Osaka Gas is one of Japan’s largest gas utilities and is a major LNG importer and re-seller.

An Energy Supply Quandary

The intersection of renewable energy development and more LNG investment shows the energy supply and climate mitigation quandary facing Taiwan.

Since Taiwan has no energy resources of its own, it has been – and continues to be – heavily reliant on geopolitically sensitive and costly imported fossil fuels. In 2021, 98% of its energy was imported.

This fossil fuel usage also comes at an exorbitant environmental cost. Taiwan’s carbon emissions in 2021 were 288.157 million tonnes, making it among the top-ranked polluting countries per capita. 

Taiwan LNG Carriers Fleet

Taiwan is also building a national fleet of up to 16 new LNG carriers. Taiwan’s Maritime and Port Bureau said that the shipping build-out is to cater to increasing liquefied natural gas supplies and demand and will better control its shipping capacity.

Reliance on Liquefied Natural Gas Imports

From January to December 2022, Taiwan imported some 19.96 million tonnes of LNG. That marks a 2.7% year-on-year increase. The country consumed 25.12 billion cubic meters (bcm) of LNG in 2022, up 3.6% year-on-year and accounting for 94% of total LNG imports.

Taiwan currently has two LNG receiving terminals owned by the Taipei-based CPC Corporation Taiwan. Based on the government’s infrastructure expansion and newly constructed projects, there will be five LNG receiving terminals in the future. Taipower is also working on Taiwan’s first LNG receiving and regasification facility not owned by CPC Corp.

Despite a population of only 24 million people, Taiwan is the world’s fifth-largest LNG importer after Japan, China, South Korea and India.

Where Does Taiwan Import LNG From?

Taiwan mainly imports LNG from Qatar, Australia, Russia, and the US.

In 2021, CPC signed a new 15-year LNG supply deal with QatarEnergy. It also started LNG import under a long-term contract with US LNG producer Cheniere Energy.

The Case for More Wind Power Development

Clearly, the way forward for Taiwan to pivot away from the over-reliance on natural gas is by investing more in renewable energy.

Undeniably, the country has limitations for solar power project development due to a lack of available land.

However, Taiwan, as an island state in the South China Sea, has ample coastline for wind power development. The country boasts a coastline of some 1,566 km.

Wind Power Development Hurdles

Taiwan’s western coast is considered the best in the world for wind power development. However, challenges remain regarding the development of more wind power infrastructure, including a lack of experience and funds. This has forced it to rely heavily on foreign capital.

To date, the government has created more entry requirements and tried to subsidise local companies to invest more in the industry. Yet, those efforts haven’t proven successful.

This also presents a Catch-22 situation that the government needs to remedy.

Namely, Taiwan will still have to rely on foreign direct investment to advance its wind power sector. But, foreign investors may still run into potential roadblocks, such as possible restrictions on equity transfer and issues with intergovernmental administrative contracts. Until these issues are remedied, Taiwan’s wind power sector will not live up to its potential.

by Tim Daiss

Tim has been working in energy markets in the Asia-Pacific region for more than ten years. He was trained as an LNG and oil markets analyst and writer then switched to working in sustainable energy, including solar and wind power project financing and due diligence. He’s performed regulatory, geopolitical and market due diligence for energy projects in Vietnam, Thailand and Indonesia. He’s also worked as a consultant/advisor for US, UK and Singapore-based energy consultancies including Wood Mackenzie, Enerdata, S&P Global, KBR, Critical Resource, and others. He is the Chief Marketing Officer (CMO) for US-based lithium-sulfur EV battery start-up Bemp Research Corp.

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