Renewable energy reform in Taiwan : an overview of the macroeconomic environment and cost-benefit analysis of economic viability

Abstract

Taiwan has a scarcity of natural resources, resulting in a strong dependence on importing fossil fuels and an energy security problem. Furthermore, the public fears and opposes the usage of nuclear power plants, forcing the government to have a serious debate that has lasted for years. As a consequence of this, the Tsai Ing-Wen administration is determined to change the status quo and reform the electricity sector. One of the new government’s key goals is to increase renewable energy contributions to 20% of the overall electricity mix by 2025. This paper aims to answer the question of whether or not the new renewable energy policy in Taiwan is economically viable. The research is integrated into a cost benefit analysis of the three main types of renewable energy outlined in this plan, which are wind power, solar power, and small hydropower, respectively. The paper adopts (1) net present value (2) benefit-cost ratio and (3) internal rate of return and (4) payback period as decision criteria to be used in appraising the monetary costs and benefits associated with this plan, from the private sector perspective. The paper also covers non-monetary costs and benefits, which are also extremely important when going through the decision-making process. The results of the analysis contained in this report prove that both wind and solar PV are both economically viable options, while small hydropower is not. The paper concludes with some insights into how the Taiwanese government can leverage public policy and make strategic decisions that will both attract private investors into this space and bring Taiwan closer to ensuring clean and reliable access to electricity for its people.