The Implementation Program of IPPs in Chinese Taipei

APEC Energy Working Group nineteenth Meeting

6-7 April, 2000

Bandar Seri Begawan, Brunei Darussalam

Background

For more than 50 years since 1946, Taiwan Power Company (TPC), a state-owned electric utility, has been responsible for the generation, transmission and supply of electricity to consumers in Chinese Taipei.

In recent years, the rapid economic growth has been boosting the demand of electric power. The peak load of power system grows about 1,200 MW every year and went over the capacity of 20,000 MW in 1998. However, variousdifficulties in building new power plants and transmission lines due to the public concerns about safety and environment protection has made our net peaking capacity terribly insufficient. The reserve margin of TPC installed capacity declined to below 10% in recent years, far below a reasonable rate of 15-20%. Thereby, power shortage frequently occurred during summer peak season.

IPP Participation

To cope with the trend of privatization of public utility andsolve the problem of electricity shortage, the Ministry of Economic Affairs (MOEA) started to privatize the electric utility with the aims of achieving a competitive environment with a stable and liberalized power market.

MOEA promulgated “Operational Guidelines for Deregulation of Power Generation Industry” on September 3, 1994 as the operating standards for independent power producers.

More specifically, MOEA announced a six-year power purchase plan aiming to increase the market share of IPPs up to 20% and the reserve margin up to around 20%. Chinese Taipei published “Application Guidelines for Establishing Independent Power Plants(IPPs)” on January 1,1995.

Private enterprises have to assess the feasibility of selected construction site and construction schedule and then submit the application projects of establishing IPP on a proposed site to local governments for approval. The local government will then forward such applications to MOEA for further review. After receiving these applications, IPP Review Committee organized by MOEA will review the documents, qualifications and technical issues. The company whose project has passed the preliminary review could tender for selling electricity to TPC. According to TPC’s base and peak load requirements, the actual purchase price is determined by tendering and is subject to the price ceiling of TPC.

There have been two rounds of IPPs program in Chinese Taipei. 7 IPPs with 15 generation units totaling 7,050 MW capacity were approved in the first round in July 1995. Since the power supply between 1997 and 2000 was predicted to be insufficient, MOEA declared the second round of IPPs in August 1995. Four firms with 6 generation units of 3,250 MW capacity were approved in this round by January 1996. Totally, eleven IPPs with a total capacity of 10,300 MW were approved in the two-round applications.

The commercial operation of these IPPs is expected to be between 1998 and 2002. However, three IPP projects were canceled and the remaining 8 projects are undergoing with the capacity of 7,050 MW. Five of the eight approved IPPs including Mai-Liao, Ever, Ho-ping, Hi-doer and Hsin-Tao Power Company have obtained the work permit and started its construction plan. Among them, two units of Mai-Liao Power were commercialized with 1,200 MW in May and September 1999, respectively. Ever Power has been running for test since June 1999. And Chia-hui Power has gotten the approval of environmental assessment from EPA and is applying for land development permit.

For encouraging investors to build natural gas-fired power plants and solving the urgent problem of power shortage, MOEA promulgated “Program for private sectors to apply for building power plants in current stage” in 1999. The private firms can only apply for building gas-fired power plant. The proposed total capacity in this stage is about 2,800 MW. The IPPs approved in current stage are guaranteed capacity payment and energy payment for reserve margin below 20% and energy payment for reserve margin above 20%. Eleven firms have filed their applications.

Since MOEA announced the third round of application for IPPs in January 1999, nine firms has submitted the application for new power plant with total capacity of 7,500MW and have passed the environmental assessment.

The first private natural gas-fired power plant, Hai-Hu power plant, started its commercial operation on June 26, 1999. Hai-Hu power plant has an installed capacity of 900 MW and is a first private power plant located in the north. The fifth private natural gas-fired power plant started construction on August 3, 1999. Up to this stage, the role of the government has moved into a new phase to assist and monitor the construction and operation management. The total installed capacity of completed power plant and the power plant under construction has reached 6,260MW, which will secure the power supply of Chinese Taipei.

Liberalization of electric utility

To realize TPC privatization program, MOEA started the program of liberalization on electric utility and opened the business of power generation to private investors. Based on the program, the revised draft of electricity act was proposed and submitted to MOEA for review. The liberalization program will widely open the operating pattern of power generation. In the program, the integrated utility, transmission utility, and distribution utility all are allowed to set up. The monopoly of TPC will be eliminated in order to establish a competition mechanism and enhance operating efficiency. The major concepts of the liberalization planning are:

Electric utilities will include integrated utility, power generation utility, transmission utility, and distribution utility and have obligation to supply power. To protect public interests, the electricity rates are under regulation.

The power generation utility can wholesale the generated electricity to any utility and construct its own transmission line to deliver electric power directly to customers.

Consumers can purchase electricity from any utility.

All signed Power Purchase Agreement (PPA) between existing IPPs and TPC will still be effective until the expired date.

The power of government agencies in charge of reviewing the electricity rates, monitoring the power distribution, and implementing the energy policy will be intensified to keep a fair competition market.

Revision of Electricity Act

The major concepts of the revision of electricity act are:

Power generation utility and integrated utility have the obligation to generate certain percent of electricity from natural gas and renewable energy resources.

Establish “Independent System Operator”, a unified dispatching center, to dispatch power of grid system independently.

Set up legal basis of “compensation for construction of overhead line” for transmission utility and integrated utility.

Prescribe the obligation of grid interconnection and rules of technical security to assure the stability and safety of grid system.

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