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- 25 Apr 2022
- Following the December 2021 referendum results, favourable progress on the Datan Liquified Natural Gas Terminal in Taiwan, China informs our view that gas power sector expansion will carry on as per the government's plans.
- The Taiwan government's nuclear power phase-out strategy remains contested on the topic of energy security, though we expect the phase-out to continue as planned, with the result of the referendum in December 2021 against restarting the Lungmen Nuclear Power Plant supporting the government's view.
- Increasing developments in the offshore wind sector will boost Taiwan's non-hydropower renewables growth, gradually replacing nuclear capacity and generation.
Following the December 2021 referendum results, favourable progress on the Datan Liquified Natural Gas Terminal in Taiwan, China informs our view that gas power sector expansion will carry on as per the government's plans. On December 18 2021, the Taiwanese government called for a referendum to vote on four questions. One out of these four questions was on whether to relocate the Datan LNG Terminal, which was planned to be on Taoyuan's coast, near the Datan Algal Reef. For the 8.1mn voters that cast their votes, the majority voted against relocating the LNG terminal. We highlight that the total number of votes against the terminal's relocation was about 4.2mn, below the 25% mark of total eligible voters in Taiwan. While a legislative outcome is not required, the result still informs our Oil & Gas team's view that it will strengthen the current government's stance to continue with its LNG pivot, as it is an indication of the market's sentiment. Additionally, in March 2022, Taiwan's Environmental Protection Agency approved the proposal for the proposal to construct the LNG terminal, prepared by CPC Corporation. With the go-ahead of the Datan LNG Terminal, we expect it to support Taiwan's expansion of the gas power sector, more specifically the new gas-fired units for Taipower's Datan Combined Cycle Power Plant Expansion Project (which the terminal will directly feed LNG into for power generation).
Apart from the Datan Combined Cycle Power Plant Expansion Project, which will bring online more than 2GW of gas power capacity by 2025, Taiwan also has two other major developments in the pipeline for the gas power sector. We highlight the Taipower's plans to increase Hsinta Power Plant's capacity by 3.9GW with new gas power units and build the 3.6GW gas-fired Taichung Combined Cycle Power Plant. We have factored all of Taipower's gas power projects into our capacity and generation forecasts as they have been progressing well. Overall, gas power generation will experience a robust growth from 2022 to 2031, increasing from 108TWh at end-2021 to 170TWh in 2031, at an annual average growth of 4.7%. This will correspond to an increase in the sub-sector's share of the generation mix from 37% at end-2021 to 51% in 2031.
Strengthening Of Gas Power Generation's Dominance
Taiwan, China - Electricity Generation By Type, % of total electricity generation (2021-2031)
e/f = Fitch Solutions estimate/forecast. Source: EIA, National sources, Fitch Solutions
The Taiwan government's nuclear power phase-out strategy remains contested on the topic of energy security, though we expect the phase-out to continue as planned, with the result of the referendum in December 2021 against restarting the Lungmen Nuclear Power Plant supporting the government's view. The nuclear power sector has been playing a significant role in Taiwan's power market. As of end-2021, about 9.5% of the generation mix comes from nuclear power plants. However, Taiwan is experiencing a gradual phase-out of nuclear power asserted by the government, led by the Democratic Progressive Party (DPP). To put nuclear phase-out into legislation, the DPP called for the ceasing of all nuclear power plant operations by 2025, as part of the Electricity Act. While this provision in the Electricity Act was revoked in May 2019, following the result of the November 2018 referendum (which ruled to repeal the provision), we highlight that the current licensing schedule for nuclear power plants ends in 2025. The last plant on the schedule is the Maanshan Nuclear Power Plant Unit 2, with a license expiring in May 2025.
Additionally, the 2021 referendum also showed the majority of voters (about 53%, according to the Central Election Commission) favouring the government's plan to continue mothballing, and potentially cancel, the development of the Lungmen Nuclear Power Plant altogether. While the voter turnout for this question was also insufficient for the government to take legislative action, similar to the LNG terminal question, it displays an alignment with the government's nuclear phase-out plan. As a result, we expect a nuclear phase-out by end-2025 to be more certain and we maintain our view that Taiwan will not experience growth in its nuclear power sector in the coming years. In fact, Taiwan will experience an annual average contraction of 46% in nuclear power capacity from 2.9GW at end-2021 to a complete nuclear phase-out by end-2025. Decommissioning nuclear power plants will also result in a nuclear power generation contraction of 27.5TWh in end-2021 to no nuclear power generation by the start of 2026.
Nuclear Phase-Out By End-2025
Taiwan, China - Nuclear Power Capacity, MW & Generation, TWh (2016-2026)
Note: 2025's generation will come from the Maanshan Unit 2, set to be decommissioned in May 2025. e/f = Fitch Solutions estimate/forecast. Source: EIA, national sources, Fitch Solutions
Increasing developments in the offshore wind sector will boost Taiwan's non-hydropower renewables growth, gradually replacing nuclear capacity and generation. Other than an expanding gas power sector, we expect the non-hydropower renewables sector to experience a robust growth supported by Taiwan's nuclear phase-out by 2025. In order to make up for the drop in electricity capacity and generation in the power market, the project pipeline for the offshore wind sub-sector has strengthened. We highlight that about 51% of Taiwan's power project pipeline capacity consists of offshore wind power projects, marking the government's intention to capitalise on Ta