Elections will not halt green push

I have been to Taiwan many times, viewing with great interest the island’s highly successful strategy to achieve industrialization and wealth. What has caught my most recent interest is the way that Taiwan is shifting decisively in a green direction, shedding its past dependence on coal power (and until a couple of weeks ago, its commitment to nuclear) and moving towards green power and a circular economy. What is striking is that Taiwan is doing this with the full panoply of industrial strategies that it utilized to catch up in industries like electronics, semiconductors, IT and telecommunications.

When I was in Taiwan on these recent visits it was clear that the country was starting a decisive move in this green direction – as Prof Mei-Chih Hu and I described in an article we published in Asia-Pacific Journal in 2016: https://apjjf.org/2016/19/Hu.html This was followed up by an article in APJ co-authored with PhD candidate Justin Chou: https://apjjf.org/2017/21/Chou.html

I visited Taiwan in March 2017, giving talks and engaging with the promoters and opponents of the country’s green push. My visit and the argument was carried in the Taipei Times, here: http://www.taipeitimes.com/News/feat/archives/2017/03/16/2003666853

Now most recently I visited Taiwan again, in the week running up to the critical “9 in1” elections of mayoral positions, being staged along with a referendum on whether the government’s proposed closures of nuclear power stations should be continued. The outcome was widely seen as a setback for Taiwan’s government (which is to go to the national polls next year). But in my talks this time around, I was emphasizing that Taiwan’s green shift is very much alive and intact. This is the argument carried in a piece that was published in Taipei Times on 9 Dec, “Elections will not halt green push”, here: http://www.taipeitimes.com/News/editorials/archives/2018/12/09/2003705762

The full text of the article follows (carried with permission).

Taiwan’s green development model suffered a setback with the success of the referendum calling for a suspension of the closure of nuclear reactors. The Democratic Progressive Party government has responded appropriately, announcing that it would scrap its regulations calling for closure of reactors by 2025.

Whether or not the reactors can be brought out of mothballs safely is a separate matter, and in this sense their future remains uncertain.

However, what is not uncertain is the strength of the government’s resolve to take Taiwan in a green direction, both in terms of building up renewable-energy capacity and shifting to a circular economy. Nothing in [Nov. 24’s nine-in-one] election results could be interpreted as a rebuff to Taiwan’s green shift, which has a clear and understandable foundation in industrial strategy.

Building circular-economy loops, connecting industrial outputs to other processes — such as is being experimented with in Kaohsiung — would enhance Taiwan’s resource security. It will need continued research support, such as that provided by the Industrial Technology Research Institute.

Building renewable energy capacity, such as through offshore wind and solar photovoltaic power, if combined with adequate energy storage capacity (eg, through various kinds of batteries), will enhance the country’s energy security and make it more feasible to address the question of the future of nuclear power when the opportunity presents itself again.

Taiwan has decades of experience in building new industries like semiconductors, flat-panel displays, IT and ICT [information and communication technology], all of which have moved rapidly from imitation to innovation, becoming strong contributors to Taiwan’s development. In this sense Taiwan’s model is grounded in realistic national goals rather than in abstract and less immediate goals, such as contributing to the mitigation of climate change.

At the same time, Taiwan’s green strategies have the effect of reducing pollution and relieving geopolitical constraints imposed on the country by the past necessity of importing fossil fuels.

Take the case of offshore wind power. This is a clever move, as it targets a sector where Taiwan has abundant resources — wind speeds and energy are elevated in the Taiwan Strait — and available sites that do not conflict with existing agricultural or industrial activities on land.

The government, through the Ministry of Economic Affairs (MOEA), has specified a target of 5.5 gigawatts (GW) of offshore wind power capacity to be built and operating by 2025. This target and target date remains intact, unaffected by the referendums.

Offshore wind is a strategic choice in that its costs are still higher than for onshore wind and there are as yet few players to act as an obstacle to Taiwan’s technology leverage and catch-up efforts.

However, Taiwan’s experience in manufacturing means that ministries like the MOEA understand that costs for offshore wind turbines will fall as the market expands, and that it is smart to claim a position in the industry early in its trajectory.

The government is pursuing a clever strategy by creating conditions where companies with offshore wind power technology can be attracted to Taiwan. It stages public auctions of grid-connected capacity at which foreign specialist companies are encouraged to bid.

This was achieved by the middle of this year, with the announcement of successful bids for 3.5GW of grid-connected offshore wind power, including overseas majors such as Orsted; wpd from Bremen, Germany; Copenhagen Investment Partners (CIP), Macquarie Capital from Australia; and Northland from Canada.

The major obstacle to such companies becoming involved in Taiwan — apart from a lack of local knowledge concerning Taiwanese manufacturing — is the monopoly over the state grid held by Taipower, which has been deliberately relaxed by the government in preparation for the public auctions, meaning that successful offshore wind power bidders will be able to sell direct to customers via the grid, without having to sell to Taipower.

The next step, drawing on Taiwan’s experience in industrial strategy, would be to ensure that all aspects of the value chain involved in offshore wind power are to be covered — particularly local manufacturing of turbines and the establishment of supply chains feeding into local turbine assembly.

The authorities have drawn the successful foreign bidders, like CIP and wpd, into negotiations over local sourcing, using intelligent strategies that are unlikely to fall foul of WTO rules.

An additional step involves finance, with government backing for firms to specialize in green finance that can support the creation of the new industry.

Numerous steps can be cited in support of the greening of finance in this way: The role of the National Development Fund (eg, in supporting the creation of consolidated photovoltaic company United Renewable Energy Co); the role of leading banks like Bank of Taiwan; and the granting of permission to foreign banks to issue green bonds — such as French insurance company Societe Generale’s issue this year of NT$1.6 billion (US$51.9 million) in green bonds.

Behind the scenes, Taiwan is adept in smoothing the way for a new industry to be created and flourish. The MOEA is given carriage of the process and is responsible for coordinating the input of other government departments, such as the Ministry of Foreign Affairs and the Ministry of Transportation and Communications (which would ensure that offshore wind farms do not create air traffic hazards) and the Fisheries Agency to ensure that fishing activities are not interfered with by offshore wind.

With its abundant experience in industrial policy formulation and execution (and the now superseded “thousand wind turbines” program), Taiwan looks to be well placed to utilize its green shift as a new and exciting chapter in its economic evolution.

The government has every incentive to move the green shift forward with ever greater determination.

John Mathews is a professor emeritus in the Faculty of Business and Economics at Macquarie University in Sydney. He had a series of talks in Taiwan in the week prior to the nine-in-one elections on Nov. 24. His Web site is: www.globalgreenshift.org