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