I Love x Courage x Energy I The Evolution of Energy Transition: Shifting from "Why" to "What Actions Must We Take?"

　    After working in government think tanks and management consulting in the energy sector for about four years, I still find its complexity to be something I navigate and can't see the whole picture of it. On one occasion, while hosting an enterprise visit from Taiwan's top-tier universities, I casually asked, "What do you think energy transition is all about?" The responses I received were diverse and intriguing: "It's a technological issue," "It's an industrial development matter," "It's an international relations concern," and someone even humorously remarked, "I know, it must be a political issue!". However, I continued, "Indeed, all of these aspects are integral to understanding the importance of energy transition."

　　When discussing energy transition, it can be divided into a three-part sequence: "generation," "storage," and "energy management." Currently, the most familiar and primary focus in Taiwan is the topic of "generation." From the perspective of energy supply, the key question to address is, "What types of power generation can achieve long-term, stable, and cost-effective electricity supply?" In the past, we were accustomed to energy sources such as coal, natural gas, and nuclear power. However, within a series of energy transition plans, the power generation structure is set to undergo a significant transformation. By 2025, renewable energy sources are expected to account for more than 20% of the total, and by 2050, the goal is to achieve a 60~70% share of renewable energy. Coal and nuclear power will gradually be phased out or transformed, with natural gas becoming the primary baseload power generation source.

　　In the past, when discussing this topic with friends, most people supported moving towards renewable energy sources. However, as the penetration of renewable energy has increased in recent times, we have also heard some voices questioning, "Why should we use renewable energy?" and "Why not continue with nuclear power?" It's important to emphasize two key concepts: electricity supply is not a matter of choosing between nuclear or green energy but combination and proportion. In other words, it's about how we allocate the proportions of various energy sources for power generation to meet our electricity demands.

　　Another significant driver of recent energy transition efforts is the changing landscape of "electricity demand." In the past, the primary considerations were stability, affordability, and safety. However, in recent years have emerged two critical factors: "corporate green energy demands" and "national security considerations." Internationally, in response to the ongoing worsening of global warming, proactive measures to reduce carbon emissions have gained momentum to mitigate the deterioration of greenhouse effects. These measures have evolved from advocacy to increasingly enforceable regulations, border control measures, and even supply chain management initiatives. European and American countries, while leading efforts to reduce carbon emissions, have identified that a significant portion of their carbon emissions originates from international supply chains, including many businesses in Taiwan. Consequently, they have begun to require carbon reduction efforts throughout the supply chain. The pressure for control and compliance has been growing stricter because companies that fail to reduce carbon emissions risk losing orders. As a result, major enterprises in Taiwan have started actively implementing carbon reduction measures, with the adoption of green energy playing a pivotal role. This is because electricity sourced from coal or natural gas involves certain levels of carbon emissions, while renewable energy sources like solar and wind power offer a carbon-free electricity supply option. Establishing a power supply model centered around green energy has thus become the cornerstone and clarion call of recent years' energy transition efforts.

　　Renewable energy sources such as solar and wind power are highly dependent on weather conditions. When there is no sun, there is no solar energy. When there is no wind, there is no wind energy (in Taiwan, wind power generation primarily relies on the northeast monsoon, with the majority of electricity generated during the winter months). On several occasions during forums, I have cited somewhat exaggerated examples. For instance, by the year 2025, when renewable energy accounts for over 20% of the energy mix, the electricity consumption of four TSMC-sized entities will need to be powered by green energy. Does this mean that in the future, we will have to live our lives synchronized with the sun, relying solely on daylight hours?

　　The concept of electricity supply can be succinctly summarized as a constant balance between supply and demand, requiring real-time adjustments every day, every hour, every minute, and every second. It's a matter of supplying precisely what is needed at any given moment. However, as we integrate solar and wind energy into our power supply today, instant power shortages can occur due to something as simple as a passing cloud. Conceptually, there are three directions to consider when addressing this challenge. First, find another rapid power supply solution; Second, store “power” during off-peak times, much like a reservoir, and release it during moments of peak demand; Third, promptly reduce demand when supply falls short. The latter two directions are essential components of the three-part energy transition sequence. The future development of "energy storage" and "electricity dispatch" (comprising energy management and demand response) will become increasingly critical. Although it may be challenging for consumers in Taiwan to envision right now, the electricity dispatch of future power companies might include various user-side management measures. To enhance economic efficiency, rather than maintaining excessive power reserves or an excess of power plants to address short-term fluctuations like a passing cloud, it might be more cost-effective to engage consumers in using less electricity temporarily. This could involve actions such as turning off air conditioning, electric water heaters, or temporarily halting the charging of electric vehicles. These measures can achieve the same effect of balancing supply and demand in the electricity grid while preserving the economic viability of the power supply.

　　As Taiwan gradually moves toward the scenarios described above, effective management becomes a crucial topic. Historically, the electricity supply system in Taiwan has been managed in a centralized manner, with a single utility company, such as Taiwan Power Company (Taipower), overseeing dozens of conventional power plants (including coal, gas, and nuclear facilities). However, with a future power supply primarily based on renewable energy sources, there will be a proliferation of various-sized renewable energy facilities. These range from offshore wind farms, large-scale solar installations, rooftop solar panels on households and commercial buildings, to an extensive network of high-voltage industrial users, millions of low-voltage residential consumers, air conditioning units, and electric vehicle charging stations. The transition to a "decentralized" resource dispatch paradigm requires significant adjustments in management approaches. Centralized resource management relies heavily on the stability provided by technical expertise. However, in a decentralized system, balancing efficiency, convenience of service, and fostering innovation become critical considerations. This represents a substantial challenge for Taiwan, as it seeks to adapt to this new energy landscape. It necessitates innovative solutions for effectively managing and optimizing a diverse and distributed array of energy resources, making it one of the country's most significant challenges in its energy transition journey.

　　In the past, the electricity market in Taiwan was predominantly comprised of the state-owned Taipower and a limited number of private power generation companies. However, in the evolving landscape of a decentralized market, it is essential to involve more companies to enhance efficiency and foster innovation while maintaining reliable service. Currently, the market has seen the emergence of numerous new roles and entities, including renewable energy generators, renewable energy sellers, and qualified trading participants in the electricity trading market. In the future, many renewable energy facilities and energy storage devices will be operated not only by Taipower but also by a significant number of private enterprises. Defining the rights and responsibilities of each role, ensuring the health of the market system, and creating an environment in which industry players are willing and confident to participate are crucial challenges. Balancing the use of both carrots and sticks, as well as adjusting regulations with flexibility, can introduce an element of uncertainty into the electricity supply stability. Apart from the variability associated with weather-dependent renewable energy sources, the willingness of private enterprises to continue investing in the market is another challenge. The government faces a dilemma in regulation – on one hand, it worries about companies making excessive profits that could negatively impact public perception, and on the other, inconsistent or sudden tightening of regulations that affect profit margins can lead businesses to exit the market. Investments in various electricity infrastructures are capital and time-intensive, and any misstep can be challenging to rectify. Managing these complexities requires careful planning, a well-balanced regulatory approach, and effective collaboration between the government and private sector stakeholders to ensure a stable and sustainable electricity supply for Taiwan's future.

　　Japan's energy transition has highlighted five critical issues and challenges, often referred to as the 5D framework. These aspects, including decarbonization, decentralization, and deregulation, can serve as valuable lessons for Taiwan's development. As renewable energy continues to grow in its share of the electricity supply, Taiwan has limited time to deliberate on why these transformations are necessary. In the face of challenges related to the stability of power supply during energy transition and the global pressure for zero-carbon transformation, more people need to become aware and engaged in discussions. We need to ask ourselves what we should do and, perhaps even more critically, what more we can do to accelerate this process.