Taiwan’s Nuclear-Free Policy Raises Security Risks

According to the Taiwan government, all nuclear power facilities on the island will be closed by 2025. In response, Taipei’s energy plan currently anticipates an expansion in the use of renewable energy sources. However, their adoption faces considerable bureaucratic, regulatory, infrastructural, climatic, and security obstacles. Pamir assesses a nuclear-free policy will very likely exacerbate Taiwan’s dependence on external sources of energy, adversely impacting Taiwan’s energy security and, ultimately, national security. 

A nuclear-free policy will also fail to address Taiwan’s rising energy cost and its power shortages. These developments will make it more costly for Taiwan industries, especially its semiconductor industry, to meet global demand efficiently. Many Taiwan companies, notably those in the semiconductor industry, occupy critical positions in the global supply chain. In light of this fact, US companies that rely on Taiwan producers for key technologies should develop plans that anticipate the potential impact of Taiwan’s changing nuclear energy landscape on their business operations.       

Taiwan Shuts Down Remaining Nuclear Power Plant

On 27 July, the number one reactor of Taiwan’s sole nuclear power plant, the Maanshan Nuclear Power Plant, was shut down after 40 years of operation. The closure removed 951 megawatts from Taiwan’s power supply and reduced the share of nuclear energy in Taiwan’s overall power supply from 6.3% to 2.8%. The Taiwan government said it has negotiated with the independent Sun Ba Power Corporation to make up for the nuclear energy shortfall with liquefied natural gas (LNG)-generated power. Taiwan’s last remaining nuclear reactor is scheduled to shut down in May 2025.

• In 2020, nuclear power accounted for 12% of Taiwan’s total power supply. In 2016, after the Democratic Progressive Party (DPP) won the presidential election, the Taiwan government made the phasing out of nuclear power by 2025 a key component of its policy agenda. Since 2018, two of Taiwan’s three nuclear power plants and five of its six reactors have ceased operation. The DPP-led government’s plan is to completely remove nuclear energy from Taiwan’s power supply. The plan’s goal in terms of power supply distribution is as follows: 50% from LNG, 30% from coal, and 20% from renewable energy sources. 

The ruling DPP has adopted an anti-nuclear energy position since its founding in 1986. This policy position was incorporated into the DDP’s founding charter. The previous DPP administration (2016-2024) under President TSAI Ing-wen upheld the anti-nuclear pledge. 

• In April 2021, the Taiwan government declared its goal is to become carbon neutral by 2050. 
• In December 2021, Taipei set the target to be about 24% carbon neutral by 2030. 

Some Taiwan business leaders and scientists have expressed their pessimism about the feasibility of these targets. The general public shares concerns about the impact of a nuclear-free energy policy for Taiwan, especially its implications for Taiwan’s energy security, energy cost, and ability to meet its energy requirement. 

Energy Security: Taiwan’s Dependence on External Energy Sources

Taiwan is highly dependent on external energy sources – 99% for LNG and 100% for coal. This dependence makes Taiwan susceptible to geopolitical tensions that can negatively impact global energy prices. In addition, Taiwan’s energy infrastructure is located on the island’s west side, which houses the vast majority of the Taiwan population and all of its urban centers but also faces mainland China, making Taiwan’s energy infrastructure vulnerable to Chinese military hostilities. On 12 June, Taiwan’s Minister of Economy testified in a legislative hearing that Taiwan could sustain its power supply for 48 hours if a war breaks out across the Taiwan Strait.

• At present, Taiwan has only two LNG receiving terminals – one in southern Taiwan’s Kaohsiung and one in central Taiwan’s Taichung. Taiwan is building a third LNG receiving terminal in Taoyuan, located in northern Taiwan. All three terminals are on the west side of the island.

Energy Cost

Taiwan’s dependence on external energy sources subjects Taiwan to energy price fluctuations in the global market. For many years, the state-owned Taiwan Power Company (TPC), which is the sole provider of electricity in Taiwan, has kept energy prices low due to political pressures. However, in April 2024, TPC raised the prices of electricity by an average of 11%, including a 25% increase for large industrial users such as Taiwan Semiconductor Manufacturing Corporation (TSMC). The average price hike for industrial users was 14%. 

Some Taiwan commentators believe that phasing out lower-cost nuclear power will result in even higher energy costs for all Taiwan consumers, especially industrial users. 

• According to Taiwan media reporting, the unit cost of electricity generation per kilowatt-hour is 1.12 New Taiwan Dollars (NT$) for nuclear power, NT$2.73 for coal, and NT$3.04 for LNG.

TSMC, which has a commanding share of the global semiconductor chip manufacturing market, estimated that it would have to pay at least an additional NT$17 billion in energy costs each year due to the recent price increase. 

Growing Demand for Power

Taiwan’s demand for electric power is projected to grow at an annual average of 2.8% until 2033. However, the demand for power is likely to increase even more significantly as Taiwan’s semiconductor industry ramps up its production to meet rising global demand. 

• A 10 June 2024 CNBC report projected that Taiwan’s semiconductor industry’s demand for electricity will increase 236% by 2030. 
• In 2022, TSMC experienced a 16% rise in power consumption. On 4 June 2024, the TSMC chairman said that his company consumes 8% of Taiwan’s power supply, which is expected to rise to 10%-12% by 2030. 
• Also in June 2024, Jensen Huang, head of NVIDIA, remarked during a visit to Taiwan, “Power limitation [in Taiwan] is a challenge.” NVIDIA is the top global supplier of artificial intelligence hardware and software and is planning to set up a second R&D center in Taiwan.

It appears that Taiwan’s current system is already having difficulty supplying sufficient power to its users. According to TPC, there were three major power outages in Taiwan in the past seven years. In addition, there were 313 power outage incidents in 2022. In July, all major cities in Taiwan experienced power outages without prior warning. 

• The Taiwan government stated that Taiwan has a surplus of electricity. It attributes the outages to the system’s age and the weather.

According to a December 2023 survey published by leading Taiwan news magazine CommonWealth, 49.5% of the CEOs representing 2,000 large Taiwan corporations do not support the Taiwan government’s nuclear-free policy, and 85% of them said they were concerned that the government’s policy would lead to more power shortages. Global View Monthly, another major Taiwan news magazine, reported that 84.5% of the Taiwan people already believe that Taiwan has a power supply shortage.