Taiwan's nuclear phase-out could face election, policy headwinds

Nuclear power support is building up

Taiwan is expected to push through with its nuclear phase-out policy despite amendments to a provision in Taiwan's Electricity Act made in May 2019, which stipulated that all nuclear power generation facilities "shall cease to operate by 2025," said Fitch Solutions.

This followed the referendum results held in November 2018, where 59.5% of the electorate supported the measure to abolish it.

Another referendum proposal is also currently underway that would address the question of Taiwan's Fourth Nuclear Power Plant, the Lungmen Nuclear Power Plant, which has been stalled since 2014 due to public opposition at that time.

"Nuclear power supporters have now suggested to restart the project amid rising concerns of power shortages. The referendum is expected to be held in 2019, although no dates have been released," Fitch Solutions added.

However, the nuclear phase-out policy is likely to get a stronger backing due the ongoing commitment by the existing DPP government to achieving a nuclear-free Taiwan. "Following the results of the initial vote, numerous government officials have confirmed that the DPP’s phase-out plan will progress, including the Executive Yuan spokeswoman Kolas Yotaka and Lee Chun-li, deputy director general of the Bureau of Energy at the Ministry of Economic Affairs, and this was reflected in the new energy reform plan released in January 2019," said Fitch Solutions.

Most notably, in February 2019, it was announced by the Ministry of Economic Affairs, Shen Jong-chin, that the decommissioning of the Chinshan units will continue, and the operating licences of the Kuosheng and Maanshan units will not be extended.

"The current licensing schedules align with our view, as they only enable Taiwan's nuclear reactors to operate until 2025 at the latest. At present, we forecast nuclear-powered generation to fall from an estimated 11.5% of the total power mix in 2018 to 0% in 2025, with Taiwan's reliance on thermal fuels and non-hydro renewables to increase to make up for the shortfall in generation," Fitch Solutions said.

However, the firm noted that The DPP's poor performance in the November local elections leaves it in a tough spot leading up to the 2020 General Elections, in which nuclear debate is expected to become a prominent theme.

"However, we also note that a valid nuclear licensing extension usually requires significant administrative time to process, which will reinforce our view with every passing year, particularly in the event of a DPP victory in the 2020 electons," Fitch Solutions said.

"Should the nuclear reactors successfully get extended operating permits and remain online, we highlight that this will likely take a hit on thermal generation facilities, particularly for coal, amid growing concerns about pollution. Notably, the Taiwanese population has previously voted to curb coal-fired power growth in the market in 2018," it added.