Electricity Act amendments promote green energy, transform energy industry

  • Date: 2017-01-17

I. Background

Developing “green” energy sources and transforming Taiwan’s existing energy model are top policy priorities in the government’s quest to fully implement the Basic Environment Act. That means gradually becoming a nuclear-free country, and achieving the goals stipulated in Greenhouse Gas Reduction and Management Act by reducing greenhouse gas emissions to 50 percent below 2005 levels by the year 2050.


To create a developmental environment that generates electrical power using green sources, the Ministry of Economic Affairs formulated a two-stage plan to amend the Electricity Act. First-stage amendments promote liberalization of the green energy market and open access to the power transmission and distribution grids. Second-stage amendments will follow after first-stage operational schemes and mechanisms have matured. The government hopes that step-by-step power industry reform and transformation of the domestic energy model will gradually lead to complete power industry liberalization, while also promoting the development of Taiwan’s green industries.


On October 17, 2016 the policy coordination committee expressed its support for the two-stage plan to amend the Electricity Act. Three days later the Executive Yuan passed draft amendments, and sent them to the Legislative Yuan for deliberation. On January 11, 2017, the draft amendments passed their third and final reading.


Within one to two-and-a-half years after the passage of the first-stage draft amendments, complete liberalization of the renewable energy market should be achieved, allowing the sale of renewable energy to users via wheeling (the transfer of electric power from one service area to another), direct sales and renewable energy sales firms, and lifting previous restrictions on renewable energy sales; within six to nine years, Taipower will be transformed into a holding company, and institute a division of labor by establishing two subordinate companies, one to handle power generation and a separate company to handle power transmission and distribution.


II. Key amendments

A. As a matter of principle, the power generation market shall give precedence to the adoption of green energy sources. The first step is to allow sales of green energy to users via wheeling, direct supply, and renewable energy sales firms.


B. The power transmission and distribution industry will be a state-run operation that ensures fair, public access. The electricity sales mechanism will give users freedom of choice, and allow them to purchase power from public power sales, renewable energy generation, and renewable energy sales enterprises.


C. The competent authority of the central government will designate a regulatory agency to manage and supervise the market for electrical power, stipulating that electricity rates charged by public power sales enterprises be subject to regulatory controls, and establish an energy price stabilization fund to minimize price volatility.


D. To maintain the enterprise integrity of Taiwan Power Company (Taipower) and provide a stable supply of electrical power, after the company is divided into two major functional lines, Taipower may become a parent holding company and set up two separate enterprises under its corporate jurisdiction, one for power generation, and one for power transmission and distribution.


III. Provide a stable supply of electricity while diversifying supply, ensuring “fair use” and the freedom to choose suppliers

A. Diversifying supply: After the amendments to the Act are passed, communities, water conservancy associations, agricultural groups, county and municipal governments, and renewable energy vendors will be allowed to jointly establish renewable energy enterprises, creating a localized, decentralized, community-based electricity industry. As the first-stage amendments have been passed, all public power sales enterprises are subject to carbon emission controls. So in addition to initiating investments in renewable energy, Taipower may also cooperate with renewable energy firms and form partnerships. Going forward, this transformation of Taipower and the energy industry as a whole will give Taiwan a far more diversified energy supply.


B. Fair use: The electric power transmission and distribution industries will still be state-run. Power dispatching will be conducted based on principles prescribed by the regulatory authority to ensure that the electric grid is operated on a fair use basis for all power enterprises, and the relevant fees, including wheeling and dispatching fees, will be collected based on approved rate schedules.


C. Freedom of choice: All users of electric power will have the right to choose their power provider, selecting from public power sales, renewable energy generation, and renewable energy sales enterprises. After second-stage amendments to the Act are passed, in addition to Taipower, users will be permitted to purchase electrical power from private-sector power plants.


IV. Conclusion

The government has made the development of renewable and green energy industries a key component of administration policy, and promoting green energy was thus given precedence for the first round of Electricity Act amendments. Those amendments passed their third and final reading in the Legislature on January 11, 2017, lifting restrictions on the generation, direct supply and sales functions for green energy sources, including solar and wind power, while establishing a market for diversified energy supplies that supports the development of green energy industries.


This first round of amendments will help Taiwan achieve energy diversification and autonomy that is environmentally friendly and sustainable, while protecting livelihoods, end users, and the development of innovative industries. After complementary management measures are in place, the legal system is operating smoothly, and the energy market matures and development is stable, the second round of amendments will lift restrictions on the direct power supply and wheeling functions, as well as power sales enterprises, for other traditional powers sources, with step-by-step amendments to the Electricity Act paving the way for energy industry reform.