Asia Times: Taiwan: More than just a nuclear controversy


	November 1, 2000	atimes.com

Special Reports

Taiwan: More than just a nuclear controversy
By Tony Allison

The decision by Taiwanese President Chen Shui-bian on October 27 to scrap the bitterly controversial US$5.4 billion project to build a fourth nuclear power plant on the island has deep and widespread political and financial implications.

Chen's Democratic Progressive Party (DPP) ended the Kuomintang (KMT)'s 50-year rule in March polls. They inherited the Kungliao power project from the Nationalists after having made a campaign pledge to scrap it. The first of two reactors was due to open in 2005. The second reactor was to open a year later and its 2,700 megawatts was to add to Taiwan's 23,763 MW of installed capacity. The plant is one-third complete.

At face value, it appears that rival political parties are clashing over the issue of whether or not to build a nuclear plant, but a fundamental issue is whether Chen, whose DPP lacks a majority in the Legislative Yuan, has the power and authority to implement policies that lack support from a majority of KMT legislators. In other terms, the dispute has highlighted problems of a split government under which the executive branch is controlled by the DPP and the legislative branch is controlled by the Kuomintang.

Proponents of the plant, the plans for which date back 20 years, have argued that the facility in northern Taiwan is urgently needed for national security and to help sustain continued economic growth. Taiwan imports 97 percent of its energy needs. They also argue that ditching the project would be a tremendous waste of taxpayers' money. State-owned Taiwan Power Co (Taipower) has already spent $1.6 billion on the project. The implications for Taipower are severe: If it is substantially financially weakened, it will be much more difficult to privatize it, as the government plans.

Opponents of the plant argue that Taiwan is incapable of storing the waste - close to 100,000 barrels are presently stored on a small island off Taiwan - and the plant would threaten the environment, which has already been polluted by decades of policies that emphasized industrial growth.

Chen has defended the decision by saying that the government must make a "responsible decision for Taiwan's future generations", noting that the controversy has long existed. "We should not leave the difficult problem to our future generations and should instead make the right choice for them. This is a sacred mission," the president said.

Taiwan risks losing credibility among foreign investors. Japan's Mitsubishi Heavy Industries, Boston-based Stone and Webster Engineering Corp and General Electric Co are supplying the two 1,350-megawatt boiling water facilities. Earlier this year, Daewoo Engineering and Construction Co of South Korea won a $90-million contract order for the first stage in mechanical and plumbing works for the plant.

Scrapping of the plant will speed up Taiwan's reliance on liquefied natural gas (LNG) - which is a stated government policy. This could benefit Taiwan's two main suppliers - Malaysia and Indonesia.

Costs
The government, in a report released a day after the announcement to scrap the nuclear project, said the estimated loss for termination, including the amount already paid and the difference remaining in the contract, is between NT$75.1 billion (US$2.5 billion) and NT$90.3 billion. If the reactor and the turbine generator already purchased cannot be resold, then the total loss, spread over the next five years, would add an additional NT$0.12 to the cost of every kilowatthour (kWh) of electricity used. This is equivalent to increasing the monthly electricity bill of every household in Taiwan by about NT$39 per month. However, it said it was more likely that both the reactor and the turbine generator could be resold, reducing the losses. Assuming a 50 percent recapture for these two items, the additional cost of electricity over the next five years would be NT$0.07 per kWh, or approximately NT$23 per month for every household.

The report said that should the project continue, an additional NT$120 billion would be incurred, not including the cost of nuclear waste disposal, which is difficult to project.

The government also says cancelation will not result in electricity shortages. It estimates that in 2005, 2006, and 2007, Taiwan will have a reserve margin of 19.2 percent, 17.7 percent, and 12.5 percent, respectively. These reserve margin percentages are higher than during the past 10 years. The government says it will promote heat recycling by the industrial sector, construct coal power-generation plants in northern Taiwan, improve energy efficiency and utilize renewable energy sources.

However, a key report contradicts these figures. The Taiwan Research Institute concluded in a report released in May, and undertaken at the request of the Taiwanese Atomic Energy Council (AEC), that the loss of the plant's capacity would result in either tax increases or a rise in electricity prices which may in turn lead to economic recession. The report found that if the government did not to resort to a tax increases, a rise of 6 to 8 percent in the price of electricity would occur. This would have an adverse effect on the competitiveness of domestic industries, and in turn would reduce Taiwan's annual economic growth by 0.2 to 0.3 percent. A non-nuclear power facility would take five to six years to complete, thus Taiwan would face a period of serious power shortages, discouraging domestic as well as foreign manufacturers from making new investments on the island.

Taiwan's energy sector
As Taiwan lacks sufficient domestic energy sources, it is almost totally dependent on energy imports. Taiwan has experienced rapid growth in energy consumption in recent years due to high levels of economic growth. Government figures show that annual growth in consumption has averaged 5.0 percent over the past few years and is expected to maintain this rate. GDP growth was 5.3 percent for 1999 and is projected at 7.7 percent for 2000.

Oil is the dominant fuel in Taiwan, accounting for half of total primary energy consumption. Coal also plays an important role (30 percent of total energy consumption), followed by nuclear power (11 percent), natural gas (6.0 percent), and hydroelectric power (3.0 percent). The country's industrial sector accounts for more than half of total energy demand but this share is declining as the country's economy moves toward new, less energy-intensive industries. The transportation sector accounts for one-quarter of total energy demand.

Oil: Chinese Petroleum Corporation (CPC), Taiwan's national oil company, is the dominant player in all sectors of the country's petroleum industry, including exploration, refining, storage, transportation, and marketing. However, significant competition began in July 2000 with the opening of a refinery at Mailiao owned by Formosa Petrochemical Group (FPG), a subsidiary of the private Taiwanese petrochemical firm Formosa Plastics. The first phase of production from FPG's Malilao refinery began in mid-2000 at 150,000 barrels per day (bpd). By early 2001, the refinery will reach its full capacity of 450,000 bpd, adding 58 percent to Taiwan's previous capacity.

LNG: Taiwan imported 203 billion cubic feet (Bcf) of liquefied natural gas (LNG) in 1999. Indonesia and Malaysia are the two suppliers, with Indonesia accounting for 114 Bcf and Malaysia 89 Bcf. CPC operates Taiwan's only LNG receiving terminal at Yungan, Kaohsiung and it has a capacity is 220 Bcf per year. The government plans to triple LNG consumption by 2010 for environmental reasons, as natural gas is the cleanest burning fossil fuel. Following the decision to scrap the fourth nuclear plant, the government said it would liberalize the operation of natural gas plants and expedite the completion of a third power transmission line project to improve the supply of power from the south to the north.

Market liberalization has made possible the construction of competing LNG import terminals. The Tuntex Group has proposed building an LNG import terminal and signed a preliminary memorandum of understanding in November 1999 with Australia's Woodside Petroleum for the import of LNG from Australia's Northwest Shelf. Taiwan's government made a decision to reopen bidding on the project in August 2000, in order to allow a bid to be submitted by CPC, which had previously been excluded from the bidding process. TotalFinaElf announced in late September 2000 that it intends to join CPC in its proposal on the project. A decision on the awarding of the project is expected in December.

Coal: is used for electric power generation as well as steel, cement and petrochemical industries. Taiwan produces small quantities of coal, but the bulk of its 40.3 million short ton demand (99.8 percent) is met with imports, primarily from Australia.

Electricity: Taipower, the state-owned electric power utility, dominates the electric power sector. However, its monopoly status has been eroded since 1994 when independent power producers (IPPs) were allowed to provide up to 20 percent of Taiwan's electricity.

IPPs have to sign power purchase agreements with Taipower, which distributes the power to consumers. However, new regulations issued by the government in July 1998 allow foreign investors to play a greater role in Taiwan's electric transmission and distribution sector. The new rules raised the level permitted of foreign investment in these sectors to 50 percent from 30 percent.

At the end of 1999, Taipower operated 70 power plants with a total installed capacity of 28,480 MW, of which 66 percent was thermal and 18 percent nuclear, according to Taipower's figures. Taipower retains exclusive control over nuclear and hydropower plants. The government will continue to own these assets after Taipower is privatized. Taipower currently has 4,884 MW of nuclear generating capacity at three plants (Kuosheng and Chinshan stations in the north and Maanshan station in the south). The northern plants and the incomplete fourth plant are all located on the perimeter of the greater Taipei metropolitan area. More than 6 million people live within the 50 kilometer emergency zone of the plants.

Legislation allowing for the privatization of Taipower is being drawn up by the DPP government, which came into office in May. Under the basic framework, Taipower would retain a monopoly on transmission and distribution networks, but its generation assets would be split into several firms. Taipower has been unable to build up sufficient capacity to keep pace with demand, which led to a power crisis during 1999. The expected date for Taipower's privatization was 2001 but this is now uncertain.

Taiwan has a stated policy goal of reducing emphasis on nuclear power, replacing it with LNG. Indeed, the new government has stated it planned to approve only LNG-fueled projects in the future and plans to increase LNG's share of Taiwan's power generation to roughly one-third by 2010.

Waste
Nuclear waste is another major concern. Taipower stores "low-level" radioactive nuclear waste on Orchid Island, home to an indigenous minority under threat of cultural extinction, about 65 kilometers off Taiwan's southeast coast. The nuclear waste, encased in cement, is stored in low-carbon barrels in trenches on the island. Taipower admits that 3,000 of the 99,000 barrels are already showing serious signs of corrosion and leakage into the immediate environment. An estimated 20,000 more barrels of low-level radioactive waste would be produced from the fourth nuclear plant.

Taipower has been trying to dump the waste on other countries, such as North Korea, Russia and the Marshall Islands as the AEC says it cannot stay on the island. Newspaper reports in Taiwan earlier this year said a memorandum had been signed with the Russian Kurchatov Institute to transfer nuclear waste to Russia. The Kurchatov Institute is pushing a project to build a radwaste storage site at Simushir Island, one of the Kuril Islands in the Russian Far East.

Taipower signed a contract with a state-run North Korean trading firm in 1997 to transport 60,000 barrels of low-level nuclear waste to North Korea within two years. The waste was to be buried in Pingsan in South Hwanghae province, about 90 kilometers from the border with South Korea. Seoul bitterly opposed the shipment and it never happened.

Taiwan has no long-term plan to deal with its high-level nuclear waste (irradiated nuclear fuel). Reportedly, the United States supplies enriched uranium for Taiwan's nuclear rectors and retains control over the discharged irradiated nuclear waste as it contains weapon-usable plutonium. The US has so far not allowed Taiwan to engage in reprocessing either on the island or in Europe and the spent fuel is stored at reactor sites.

World trends
The termination of nuclear power plant construction is a world trend. Except for South Korea and Japan, 27 of the 29 countries which belong to the Economic Cooperation and Development organization and which have 80 percent of the world's nuclear power plants, have not had any new plans to build nuclear power plants since the Chernobyl disaster in 1986 in the Ukraine, then part of the USSR. Even Japan has begun to moderate its policy of relying on nuclear power and has announced that it will abandon 38 planned nuclear power plants. In 1996, South Korea canceled two generating units for Yong-gwang. Countries that were actively developing nuclear power plants, such as Sweden, Russia, Italy, Germany and France will not build any new plants and are also beginning to shut down old plants. Recently, Germany has closed a new plant and announced it would become a non-nuclear country in 2020.

(Special to Asia Times Online)

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