Taiwan's Electricity Shortage and the 'Demand Response' Solution

On July 4, after nearly 40 years of controversy and debate, the first batch of nuclear fuel rods was removed from Nuclear Power Plant No.4 (NPP4) and shipped to the United States for safe storage. The remaining fuel rods are all expected to be shipped abroad in smaller batches by 2020. This marked the decommissioning of NPP4, a move which raised some doubts around Taiwan.

Former President Ma Ying-jeou (馬英九) expressed his belief that this was a big mistake. The American Chamber of Commerce in Taipei also showed concern in its Taiwan White Paper, emphasizing the importance of an entity like NPP4 in case of emergency.

With the loss of NPP4, could Taiwan find itself in a power shortage era in the near future?

Summer came early this year in Taiwan, arriving in May and causing the average temperature of the whole island to reach 27.11°C, the highest on record over the past 55 years. As temperatures rose, the island’s electricity consumption increased with it. Throughout May, Taipower announced that the power consumption of the whole country reached a record high almost every single day. Nine of the top ten days on record for energy consumption in May occurred this year.

Photo Credit: Reuters / TPG

The successive days of high power consumption meant that Taiwan's power suppliers faced a challenge even before the summer officially began. Between December and May, there were 29 days in which the power supply warning light was on “Orange,” indicating that back-up supplies were on 6% or less. (According to the standards set by the Ministry of Economic Affairs, the back-up capacity should be at least 15% in order to be considered within the safe zone.)

However, Executive Yuan Premier William Lai (賴清德) recently said that the problem was not Taiwan's inability to generate enough power. Instead, Lai said that Taiwan is not storing enough power, meaning there is no real danger of an electricity shortage.

Despite this, reports and comments about a potential electricity shortage, or possible power rationing, have kept on raging. Every time there is a power surge* people start worrying that the government will ration power to save electricity.

Why is Taiwan running short on electricity?

“It’s not that we don’t have enough electricity, it’s just that the consumption spike happened in May,” Taipower spokesperson Hsu Tsao-hua (徐造華) told The News Lens.

Hsu was cautious when discussing the issue of electricity supply. He explained that the temperatures skyrocketed earlier than usual this year, hitting 35°C on 14 consecutive days in May without any rainfall. This meant that residential and commercial air-conditioners were running on overdrive, mirroring the sort of consumption seen during the summer months. “We had forecasted that peak electricity consumption this year would approach 36.91 MW (megawatts), yet the highest power consumption in May was already 36.77 MW,” he said. “But if consumption is that high in just May alone, then what will happen to consumption in the summer?”

It turns out that Taipower had already scheduled several generators for general maintenance in May so that they would be ready for June. However, when May electricity consumption exceeded expectations, they could not bring the generators back online in time.

There were also complications when the generators were made operational again. On May 23 of this year, generator-1 at the privately-owned Ho-ping Power Plant suffered a break in the pipeline, and Hsinta, Tatan, and Talin Power Plants each had a generator offline for repairs, resulting in a reduction of 26.78 MW of energy generation. This led to the power reserve supply being drained down to just 4.32%.

The thermal power units were reconnected at the end of May, and Nuclear Power Plant No. 2 (NPP2) generator-2 also rejoined the grid in mid-June, giving Taipower the power generation capacity equivalent to five Taichung thermal generators (approx. 2.8 MW.) Cheng You-tsai (鄭有財), an official from Taipower’s Department of System Operations, said that as long as we avoid major incidents like 2017’s 815 power outage (which caused a total of 6.68 million customers in 19 counties and cities to lose power, with the rolling blackouts altogether affecting 8.38 million users), there won't be a “problem” – even though this year's power supply is relatively tight.

This summer is not the first time Taiwan has found itself with a "power crisis." Throughout the whole of 2012, Taiwan had an abundance of reserve power, but by 2016, the number of days with full back-up capacity dropped to 126 days. In 2017, that number fell to only 53 days.

The rest of the time, the reserve power supply was either stretched or had to be monitored carefully. In the fall of 2017, between the end of September and the beginning of October, another record was broken as reserve power was on "orange" for 15 consecutive days. Even Taipower had to admit that last year’s 7.5% reserve power margin was inching close to being dangerously low.

Why are we in this situation? Cheng was very frank, saying: “The surge of electricity consumption was far beyond our expectations. In addition to the growth in the economy being a considerable factor, the result of the extreme weather, such as the high temperatures at the end of May this year, also contributed to setting the highest electricity consumption records in history over this same period.” According to Taipower's data, as of June 13 of this year, the electricity consumption has risen by 4.18% compared with the same period last year.

So if reducing electricity consumption is not an option, then what are we doing about electricity generation?

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Taipower told us that energy transformation and generating electricity requires a predetermined length of time, as building a power plant is no easy task. Between initial planning, the environmental impact assessment, and the construction itself, the process takes between 8 to 10 years to complete. After observing the rising temperatures and increased electricity consumption of the past two years, Taipower has also admitted that they are “indeed a little behind” in their electricity generation, resulting in the low margin of reserve power in recent years.

Hung Shen-han (洪申翰), the deputy secretary-general of the Green Citizen Action Alliance (綠色公民行動聯盟), which oversees Taiwan’s energy policy), also pointed out that in addition to generating electricity, it is crucial to efficiently dispatch that power to achieve a balanced process.

“The traditional practice is to look at the demand [for electricity], and then generate that amount, because demand cannot be adjusted,” Hung said. However, he also said: “Investing in many power plants, for the sake of coping with the very few peak months of usage, is an incredibly inefficient system, because maybe all I need is just that one hour of [peak time] electricity.”

He also explained that Taiwan’s electricity crisis is not an everyday occurrence. These potential shortages are concentrated within the hottest days of the year, and mainly within those peak hours of the day. This surge in consumption considerably overloads the system and causes a shortage in the power supply. Chao Chia-wei (趙家緯), a researcher at the National Taiwan University’s Risk Center, has pointed out that although the orange warning light lit up on 102 days in 2017, it was only illuminated for 99 hours, which accounts for only 1.13% of the hours within a year.

Which users are causing these power shortages?

In the past five years, beside a short one-off dip in 2015, Taiwan’s power consumption has soared by 2% almost every year, exceeding the 1.5% increase that Taipower expected. While the rise in industrial use was the highest, residential consumption rates have also increased yearly, almost reaching the levels of commercial sector. In 2016, residential electricity consumption took an unusual leap, increasing by 5.46% within a year and marking its highest yearly consumption level in the past decade.

According to statistics from the Bureau of Energy, Taiwan's largest consumer of electricity is still the industrial sector. It accounted for 53.98% of the total national electricity consumption, the bulk of which came from the electronics industry. Last year, on its own, the electronics industry accounted for close to 20% of the total national electricity consumption.

With that said, the high electricity consumption of the industrial sector is not the only reason for Taiwan's reserve power warnings.

According to Taipower's analysis, the main users that caused the sudden spike in peak power consumption were low-voltage residential users. In 2015, although low-voltage electricity only accounted for 30% of the electricity consumption, low-voltage peak time loads accounted for 51.63%, mostly due to heavy demands for air-conditioning.

Hung explained that, although the power consumption of factories is relatively large all throughout the year, motors require only a certain amount of energy to run, which means they cannot suddenly start consuming more energy just because it is summer. “If people are very concerned about a possible lack of electricity during the peak summer months, then small and medium load users should also do their share [of saving energy], because taking up more than 50% of peak season electricity consumption cannot be considered low usage,” he said.

“Last year,” Hung continued, “the Executive Yuan restricted all public service professionals from using the air-conditioning from 1 p.m. to 3 p.m. each day, which left a very bad impression, as everyone imagined that energy saving meant swimming in sweat pools... but this is not what we mean.”

“Of course we are not encouraging this, as everyone turning off the air-conditioning during the afternoon is unreasonable,” he said. “Although, I do suggest that you increase the air-conditioning temperature by 2°C. If my building has good heat insulation and air circulation, or it's equipped with ventilation fans, then even when the air-conditioning is raised by 2°C, the temperature will not feel much different. The Bureau of Energy has announced that setting your air-conditioning 1°C higher could reduce daily consumption by 6% to 8%.”

He also cited the implementation of a successful energy management scheme used by other nations, like the “Demand Response” system in use in the United States, as possible methods that would help Taiwan cope with its summer power shortages.

Energy as an asset: Can we save electricity while making money?

“Some people will distort the idea of energy management as only electricity shortages and electricity bans, but that’s incorrect,” said Hung. He said that in the future, energy management will include a higher proportion of renewable energy in the system, and the intermittency of renewable energy generation is something we will inevitably all have to adapt to.

Solar power, for example, generates the largest amount of electricity at midday during summer. However, after 2 or 3 p.m., the amount of electricity it can generate will gradually decrease. Therefore, energy systems should not only adhere to one-dimensional supply and demand models. Instead, they need to incorporate efficient energy management to accommodate the different characteristics of renewable energy. “The trend of the future is that we will be able to schedule and adjust our electricity for our individual energy needs,” Hung said. “This is what we mean by Demand Response.”

Hung mentioned that management methods such as Demand Response can dispatch electricity more efficiently during periods of intensive power consumption, mitigating the need to construct so many large power plants and thus create more pollution. “This is what almost every country is trying to do,” he said.

In the United States, Demand Response was implemented nearly 30 years ago. It is also used to address energy generation shortages by the United Kingdom, France, Japan, South Korea, and other countries.

In South Korea, during the fall of 2011, the sudden spike in temperatures caused the power grid's workload at the peak consumption hours to soar, exceeding all expectations of the state-owned power company. This caused a national blackout which lasted several hours and affected more than six million users, even leading to a professional baseball match being cancelled. After the blackout, the South Korean government passed legislation in 2014 allowing companies to offer Demand Response packages in the electricity market. South Korea currently has 3,580 Demand Response users, who have the potential to save 4.3 MW of electricity for South Korea; energy which is equivalent to the output from seven generators the size of Nuclear Power Plant No. 1 (NPP1) generator-1.

Demand Response is not a new concept in Taiwan. In 1979, Taipower rolled out Demand Response initiatives such as seasonal or summer electricity prices, and users were encouraged to use electricity during less concentrated times. Then, in 2015, they introduced “Demand Response Bidding,” where usage quotas are used to encourage major consumers to balance their consumption. When necessary, it allows Taipower to buy back electricity already contracted out. In 2017, by relying on such measures, they were able to alleviate peak power consumption by 860 KW, which amounts to the power of 1.5 thermal-electric generators.

However, Demand Response Bidding is still only available, through a contract, to high-voltage users with a capacity of more than 1 kilowatt. The participation rate is not as good as was hoped: As of the end of last year, only 3% of high-voltage users signed up to participate in the scheme.

This does not only relate to the industrial sector, however. Residential households can also participate in Demand Response by installing smart meters and sending real-time electricity usage data back to energy management companies. This way, small and medium load users can play an important role in energy conservation, especially during “power shortages.”

“I am not restricting your use of electricity; this is just a business model,” said Hung. “You may participate because you can make money, but you can also not participate.”

Hung reminded us that home appliances like refrigerators, air-conditioners, and lighting equipment may well be energy-storing units in the future. “Energy service companies will contract you, and when the power company needs to relieve the load on the grid, they will be able to help you reduce your power consumption, remotely,” he said. “For instance, switching your fridge off for two hours, [because] if you’re not at home even if it’s not on, it won’t affect you; so you’re willing to let the manufacturer do this, especially as you will get some cash reward.”

Photo Credit: Reuters / TPG

In the past, people in Taiwan paid little attention to energy issues, believing that Taipower would simply take care of everything.

But people have become more aware of energy dispatch and distribution. In the future, when foreign energy management companies enter Taiwan’s energy market, we will have the knowledge to choose the most efficient Demand Response setup and treat household energy management as a form of money management.

There are 14.01 million energy consumers in Taiwan, so Taipower cannot manage the consumption habits of every single user. Due to this, Taipower intends to launch an “Aggregator” system and find foreign energy management companies to represent user groups. It plans to sign up many light-consumption users, organizing and then scheduling Demand Response in place of Taipower. This is an initiative they are currently tendering bids for, and the results are expected to be revealed in mid or late July.

Hung insisted that he was not a technology enthusiast, but he said: “There are some areas [of technology] that are really developing well and have a good chance of being implemented in the future.”

* [Note] According to Taipower's analysis of the power surges during May, the problem was apparently caused during energy transmission and distribution and was not caused by a shortage of electricity. 70% of the problems that cause regional blackouts are due to external factors (such as accidental animal contact, contact from trees, accidental damage during construction work, etc.) whereas the rest are caused by failures in Taipower's aging equipment (including cable feeders, switches, transformers, etc.).

This article originally appeared on the Chinese-language Taiwan edition of The News Lens. The original can be found here.

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Translator: Zeke Li

Editor: Nick Aspinwall