TAIWAN STILL ANTI NUCLEAR POWER

C O N F I D E N T I A L SECTION 01 OF 05 TAIPEI 002601 SIPDIS STATE FOR EAP/RSP/TC, EP/ESC/IEC, NP/NE FOR ALEX BURKART, STATE PLEASE PASS TO AIT/W E.O. 12958: DECL: 06/08/2015 TAGS: ECON ENRG KNNP SENV PREL TW SUBJECT: TAIWAN STILL ANTI NUCLEAR POWER REF: A. 2005 TAIPEI 01072 ¶B. 2002 TAIPEI 03912 ¶C. 2005 TAIPEI 01640 ¶D. 2004 TAIPEI 02861 ¶E. 2005 TAIPEI 00061 Classified By: AIT Director Douglas Paal, Reason: 1.4 (B/D) ¶1. (c) Summary. In the run up to Taiwan,s June 20-21 National Energy Conference, anti-nuclear forces within the Executive Yuan are standing their ground. Many energy experts within and without the government were hoping that the Conference would result in the ruling DPP party rethinking its anti-nuclear stance. The recent appointment of Chang Kuo-long-- "the Father of the anti-nuclear movement"-- as the Environmental Protection Administration's (EPA) Minister has quelled such optimism. Chang has made clear to AIT his intentions to revisit yet again the future of the Fourth Nuclear Power Plant. Despite Chang's statements, energy experts claim that the project has made enough progress and gained enough support that it is unlikely to be halted again. However, anti-nuclear hard-liners are expected to prevail against using the National Energy Conference to reaffirm Taiwan's commitment to stay on its anti-nuclear course and to prevail in undermining ongoing efforts to extend the life-cycle of existing nuclear power plants and the building of additional reactors at any of the existing plants. ¶2. (c) Chang's appointment will likely lead to further propagation of the familiar pro-environmental/anti-nuclear rhetoric of the past five years. In the aftermath of the Conference, energy officials expect to continue to muddle through by continuing to espouse clean energy and anti-nuclear plans while completing the Fourth Nuclear Power Plant and three new coal-fired power plants. End Summary. National Energy Conference -------------- ¶3. (c) On June 20-21, Taiwan will hold a national energy conference to discuss its energy policies in light of the Kyoto Protocol coming into effect this past February. As reported in ref a, several government officials have come out publicly in favor of completing the Fourth Nuclear Power Plant. Energy experts throughout the government-- including at Taiwan's State-Owned Energy Company Taipower, the Energy Commission and the Atomic Energy Council-- were hopeful that this policy shift foreshadowed a slow but steady acceptance of nuclear power in Taiwan's future. Apparently, this is not the case. Anti-Nuclear Activist Named to Head EPA -------------- ¶4. (c) Hopes of a sustained moderation in the ruling party's approach toward nuclear power faded with the recent appointment of Chang Kuo-lung as Minister of Taiwan's Environmental Protection Administration. Dr. Chang, who officially assumed the position on June 7, is a long-time environmental and anti-nuclear activist widely known as the "father of the anti-nuclear movement." Chang has made clear his intentions of implementing an ambitious environmental agenda and of upholding Taiwan's "nuclear free homeland policies" (ref b). Chang has been active in opposing nuclear energy for the past 30 years and as the Convener of the Executive Yuan's Committee to Advocate Taiwan's becoming a Nuclear Free Homeland in 2001, played a central role in Taiwan,s decision to become a Nuclear Free Homeland (ref b). ¶5. (c) In a meeting with AIT Econ Chief and AIT ESTOFF on June 10, Chang explained his opposition to nuclear energy is based on a basic distrust of its safety. He does not see how the Atomic Energy Council (AEC) can be an effective regulator of safety when it is involved in the development of nuclear technologies (which Chang equates to promoting nuclear energy). He sees this dual role as compromising AEC's regulatory objectives and commitment to safety. AIT Econ Chief met that same day with AEC Chairman Ouyang Min-sheng to raise concerns along these exact same lines over AEC's research arm bidding on a commericial nuclear dry storage project for Taipower. Ouyang insisted that safety was always AEC's top priority and noted that Chang's appointment would mean an even greater scrutiny of AEC actions and an increased emphasis on safety (septel). ¶6. (c) With respect to the Fourth Nuclear Power Plant, Chang revealed his extreme skepticism of Taipower's management of the project due the use of so many different contractors and subcontractors. He noted that the process is very different than that used for the first three power plants, which were contracted from top to bottom to a single bidder. (Note. These concerns are shared by the Architecture and Engineer firm, Stone and Webster Asia, Inc. (ref c). End Note). ¶7. (c) Chang also commented on the budget of the Fourth Nuclear Power Plant, suggesting that the people of Taiwan will not tolerate further cost overruns. As AIT reported in ref d, supplemental budgets will be necessary to complete the project, which was originally set at a fixed price budget. Reasons for cost overruns include: i) significant price increases for inputs over the plant's 15 year history; ii) increased costs incurred due to the 2000 work stoppage by President Chen; and iii) the slowed work schedule caused by political foot-dragging. (ref d) End Note. ¶8. (c) Prior to assuming his new posting, Chang taught physics at National Taiwan University. Other positions Chang has held include: Deputy Minister of the Examination Yuan; chairman of the environmental NGO, Environmental Protection Union; and Advisor to the Taipei County Government (particularly on environmental matters). As EPA Minister, Chang will be one of the key sponsors of the Conference (along with the Ministry of Economic Affairs (MOEA) Energy Commission, MOEA's Bureau of Industrial Development and the Ministry of Interior). Nuclear Free Homeland Remains Strong -------------- ¶9. (c) Robert Zhuang of the Energy Commission (STRICTLY PROTECT),the chief organizer of the upcoming National Energy Conference, informed AIT that the appointment of Dr. Chang was a clear indication that the anti-nuclear activists within the DPP have prevailed. That being said, Zhuang believes that enough progress has occurred at the Fourth Nuclear Power Plant to make it unlikely that construction will again be halted. This view is shared by both GE and Stone and Webster, Asia (two major U.S. contractors involved in the project). Stone and Webster, which has significant concerns about the management of the project (ref c) points out that, due to contractual obligations, "if the project were canceled, the financial obligations would be as a large as if not larger than if the project were completed." ¶10. (c) While there is general agreement the Fourth Nuclear Power Plant will be completed, the road can be expected to remain bumpy. At the current time, it appears anti-nuclear activists within the government are interfering in the release of an integrated work schedule for the project. While everyone knows the project is no where close to its initially projected completion date of 2006, both GE and Stone and Webster contacts mentioned that Taipower is dragging its feet on releasing a new integrated project schedule with a revised completion date. Stone and Webster hinted that Taipower's new schedule will probably indicate a two and a half year delay, which Stone and Webster sees as unrealistic. In Stone and Webster's estimation, the project is at least three to four years off schedule. ¶11. (c) Even if anti-nuclear hard-liners fail again to stop the Fourth Nuclear Power Plant, there is little question that they will prevail in undermining ongoing efforts to extend the life-cycle of existing nuclear power plants and the building of additional reactors at any of the existing plants. In addition, according to Zhuang, it is possible that Chang and other anti-nuclear activists will stymie efforts by Taipower to increase storage capacities at the existing nuclear plants. Without increased storage capacity for high level nuclear waste, the first nuclear power plant may be forced to shut down by 2010. ¶12. (c) Comment. Another bad omen for the future of nuclear energy in Taiwan is the Chen Administration's proposed government reorganization, which if approved by the Legislative Yuan (far from a foregone conclusion) would place Taiwan's nuclear regulatory agency, the Atomic Energy Commission (AEC),under an upgraded Ministry of the Environment and Natural Resources (ref e). An AEC contact once told AIT ESTOFF that calling nuclear safety into question is one of two concerted strategies among anti-nuclear hardliners to win support for their cause (the other is to engender public opposition to nuclear energy by ensuring waste depositories are not found). The Chen Administration's Energy Commission has already put out one publication which states that "over 6 million people in Taiwan are now living in the shadow of insecurity because of the nuclear time bombs in their back yards." The nuclear "time bombs" refer to Taiwan's nuclear power plants. Placing the AEC under an anti-nuclear Environment Minister could result in a biased regulatory process which might overstate safety concerns in order to win public support for an anti-nuclear agenda. End Comment. Green Conundrum -------------- ¶13. (c) Environmental NGOs are stepping up pressure on Taiwan to both reduce carbon emissions in line with the Kyoto Protocol and to fulfill commitments to reduce reliance on nuclear energy. On June 5, World Environment Day, over 1000 environmentalists island-wide staged a protest. The focus of the protests were several development projects that threaten to greatly increase Taiwan's already high rates of carbon dioxide emissions. ¶14. (u) With the world's 17th largest GDP, Taiwan is currently the world's 23rd largest emitter of greenhouse gases. Completion of several planned development projects would result in an increase in Taiwan's current annual carbon emissions of 240 million tons by as much as 20 percent. These projects include: a steel plant in Yunlin County (by the Formosa Plastics Group),Taiwan's 8th Naptha Cracker Plant (by the China Petroleum Corporation(CPC)) also in Yunlin County and three new coal-fired power plants one each in Changping, Linkou and Shenau (by Taipower). The Formosa Plastics steel plant is anticipated to emit 15 million tons of CO2/year, the CPC Naptha Cracker Plant is anticipated to generate a million tons of CO2/ year, and the three coal-fired power plants are anticipated to produce a combined 27 million tons of CO2 per year. While most of these projects have already been approved, many argue that the Premier could intervene to stop them by requiring new environmental-impact assessments. ¶15. (c) In addition to opposing the above-mentioned carbon-intensive projects, Taiwan,s environmental activists are also pushing Taiwan to reduce its reliance on nuclear energy and not to complete the Fourth Nuclear Power Plant. These demands by the DPP's traditional grass roots environmental base of support are putting policy makers in a difficult position. According to energy experts, with Taiwan's current economic growth rates, by 2010 Taiwan will not be able to meet its energy needs without all three coal-fired power plants and the Fourth Nuclear Power Plant coming on line. Fulfilling the demands of environmental activists would impact Taiwan's economic growth. Rhetoric -------------- ¶16. (c) Ruling party policy makers have decided to try to appease their environmental base by claiming that the Chen Administration will both reduce its reliance on carbon based fuels and follow through on its commitments to make Taiwan nuclear free. To accomplish this task Taiwan leaders are promising to shift towards clean energy. In fact, at a recent international conference on energy economics held in Taipei, Vice President Annette Lu stated that the government is planning to raise the ratio of reusable energy generation to 10 percent of total power generation by 2010. ¶17. (c) Energy experts say this is simply not possible. Hydropower now provides 5.7 percent of Taiwan's total installed capacity; other renewable power constitutes a negligible 2 MW towards Taiwan's installed capacity of 33 gigawatts. Furthermore, according to Taipower, "Due to ... geological and environmental restrictions.... the percentage of conventional hdyro power in the entire system will be decreased from 5.7 percent in 2003 to 4.3 percent in 2015." With respect to the potential of other renewable energy sources, Taipower claims that it plans to increase capacity from 2 MW now to 2,393 MW (4.4 percent) in 2015. ¶18. (c) While these policies were published in 2004 and goals could change in light of the conclusions of the upcoming energy conference, it is unrealistic to claim that renewable energy sources could occupy 10 percent of Taiwan,s installed capacity by 2010. At this stage, Taiwan's only potential renewable energy option other than hydro is wind and wind is not reliable as a base-load source since it is unpredictable. At 2.5 New Taiwan Dollars (NTD)per kilowatt hour (kwh),wind is also expensive. It is Taiwan's most expensive power source next to LNG (LNG has skyrocketed to 5 NTD/kwh). Other less expensive sources are: hydro at 1.8 NTD/kwh, oil at 2.0/kwh, coal at 1.0 NTD/kwh and nuclear at .67 NTD/kwh. ¶19. (u) While in the short term the goal of replacing nuclear and petroleum based energy sources is not feasible, Taiwan is increasing its investment in renewable energies, which could lead to technological advances that would enable Taiwan to become more "green" in the long-term. On World Environment Day (June 5),Taiwan,s Bureau of Energy Chairman Ye Hui-ching announced plans to invest USD 96.77 million each year beginning in fiscal year 2006 for research, development and application of clean reusable energy sources including: solar, biomass, wind and marine. Energy Pricing -------------- ¶20. (u) Complicating matters for policy makers are Taiwan,s artificially low electricity prices. Taipower has not imposed any significant price increases for electricity in 23 years. As a result, largely due to a sharp rise in coal prices in 2004, Taipower lost NTD 9 billion (USD 290 million) in 2004-- the first loss in its history. If political promises not to hike electricity rates are held, Taipower could lose approximately NTD 19 billion (USD 613 million) in ¶2005. Note. World coal prices nearly doubled in 2004 due to supply problems in China, Indonesia and Australia. China's Shanxi province suffered mining accidents, heavy rain in Indonesia reduced production and inadequate port infrastructure in Australia slowed exports. End Note. Political Will -------------- ¶21. (c) Comment. Energy experts had hoped that the June 20-21 National Energy Conference would result in an adjustment to Taiwan's energy policies to attain more realistic goals, including increased reliance on nuclear energy in an effort to reduce dependence on carbon-intensive fuels. However, the appointment of Chang is a clear indication that the Chen Administration remains unwilling to admit publicly that Taiwan,s continued economic growth depends on continued reliance on both nuclear and carbon-based fuels in at least the short term. As a result, the National Energy Conference will likely further propagate the familiar pro-environmental/anti-nuclear rhetoric of the past five years. In its aftermath, energy officials expect to continue to muddle through by continuing to espouse clean energy and anti-nuclear plans while completing the Fourth Nuclear Power Plant and three new coal-fired power plants. End Comment. PAAL