Privatization and Liberalization of the Electric Power Industry

in Taiwan

Energy Commission

Ministry of Economic Affairs

October 5, 2001

ContentsContents

1. Electricity Supply Industry Structure1. Electricity Supply Industry Structure

2. Privatization of Taipower 2. Privatization of Taipower

3. IPP Programs3. IPP Programs

4. The Envisage of the 4. The Envisage of the Forth Round IPPsForth Round IPPs

5. Basic Structure of Liberalization5. Basic Structure of Liberalization

6. Energy Policy Requirements

7. Revise of Electricity Law7. Revise of Electricity Law

1. Electricity Supply Industry StructureElectricity Supply Industry Structure

IPPs8 projects, 7,220 MW

Transmission

•Power Generation 70 plants, 27,445 MW.

Distribution

Taiwan Power Company

25yrs PPA

Avoided cost

Customers

Supply obligation

self-useusers

Self-generation• co-generation• renewables

For self-

use

• Industry Structure

Thermal (17,818MW: coal 8100; oil 5404; gas 4314 MW)

Extra High Voltage Substation 345 kV Transmission Line

Peak Capacity: 29,124 MW

Peak Load: 25,854 MW

Rserve: 3,270 MW 12.6%

Shenao

1st Nuclear2nd Nuclear

3rd Nuclear

NLinkou

Tunghsiao

Taichung

Takuan Hydro

Mingtan Pumped Storage

Hsinta

Nanpu Talin

Penghu

Mailiao IPP

Hoping IPP

Ever Power IPP

Chiahui IPP

Sunba IPP

Kuokuang IPPHsintao IPP

Nuclear ( 5,144 MW)

Starenergy IPP

• Power System (2000)

Hydro ( 4,422 MW)

IPP ( 2,250 MW)

Hsiehho

Timetable:The deadline for Taipower to finish privatization was set as June 2001 but has failed.

Procedure: Taipower will be privatized by the program of “massive share offering to citizens” with keeping its original integrated business including generation, transmission and distribution.

Preconditions: The Legislature requires that Taipower won’t proceed privatization until the legislation of new Electricity Law is approved.

A tentative plan for Taipower to privatize is made. It suggests that the initial public offering will be completed in one year after the pass of Electricity Law and the government’s shares will be released down to no more than 50% in the next three years for privatization. It is likely that Taipower won’t be privatized by the end of 2005.

2. Privatization of Taipower2. Privatization of Taipower

3. IPP Programs3. IPP ProgramsPolicy Objectives•To meet power demand at reserve margin of 20%

1st & 2nd rounds (1995): 10,260 MW (1997-2002); 3rd round (1999): 2,840 MW (2003-2004)

‧ To balance regional supply and demand

•To prepare for power liberalization1st & 2nd rounds: competitive bidding (base load, medium load)3rd round: fixed price, first come first serve (gas fired, medium load)

•To follow clean energy policy

Areas Peak Demand Peak CapacityNorth 46% 25%

Central 26% 37%South 28% 38%

Fuel Type coal oil gas hydro nuclear renewable

Capacity(year 2020)

35-37% 4-5% 27-29% 9-11% 19-20% 1-3%

Company Location Fuel Type Capacity(MW)

Status

1.Mai LiaoPower

Yunlin Coal 1,800(600*3)

Operating

2.Ever Power Taoyuan Gas 900(450*2)

Operating 450MWTesting 450MW

3.Ho-ping Power Hualilen Coal 1,300(650*2)

Testing

4.Chiahui Power Chia-yi Gas 670(670*1)

Constructing09/00

5.Miao-Li Power Miaoli Orimul-sion

1,200(600*2)

Canceled

6.Hi-doer Power TaichungPort

Coal 990(495*2)

Canceled

7.HuatungPower

Hualien Coal 1,000(500*2)

Canceled

Total 7,860 Operating:2,250 MWConstruct.:2,420 MW

• First Round IPP ProjectsFirst Round IPP Projects

Company Location Fuel Capacity(MW)

Status

1.Hsin Tao Power Hsinchu Gas 600 To be testingDec., 2001

2.Chang-hongPower

Yilan Orimul-sion

1,500 Canceled

3.Full Power Yilan Oil 600 Canceled

4.Fu Bau Power Hualien Coal 550 Canceled

Total 3,250 Construct.: 600 MW

• Second Round IPP ProjectsSecond Round IPP Projects

• Third Round IPP ProjectsThird Round IPP Projects

Company Location Capacity(MW)

OperationDate

Kuokuang Taoyuan 480 2003/6/30

Energystar Changhwa 490 2004/4/30

Sunpa Tainan 980（490*2）

2004/4/30

Ever Light Taoyuan 960（480*2）

Suspended

Total 2,910 1,950MW inprogress

• Status of IPP ProjectsStatus of IPP Projects

Items IPP

CapacityStatus

PolicyAchievement

Capacity(MW)

Preparatory1,950

Constructing 3,020

Operating2,250

ReserveMargin willbe 20% in

2004

FuelTypes

Gas4,120

Coal3,100

Gas Sharewill be 33%

in 2004

Areas

7,220(20% of

Total36,680MW in2004)

North3,280

Central490

South3,450

North will beself-

sufficient in2006

•Rules on applications for a preparatory permit·Required capacity:

1. Year 2007: 1000 MW, gas fired and in the North only

2. Year 2008-2009: 3200 MW ( 1500 MW reserved for TPC)

·Requisitions (Construction planning plus the following 6 documents):

1.Environment Impact Assessment 2.General agreement from local government3.Agreement of fuel supply4.Agreement of power interconnection5.Agreement of land use6.Letter of intent on financing

4. The Envisage of the 4. The Envisage of the Forth Round IPPsForth Round IPPs

•Rules on Power purchase•Purchase prices:

The Price will be decided by bidding process held by Taipower .

•Dispatch rules:1. Year 2007, medium load2. Year 2008-2009, base load

•Transmission constraints: Taipower should announce its transmission constraints in one month since this program is implemented.

Integrated Utility

transmission

Distribution

Generators1st, 2nd round IPPs3rd round IPPs

(Non-utility)

Supply Obligation

GenerationExisted PlantsUnder-constructionApproved ProjectsFuture Projects

Wholesale

5. Basic Structure of Liberalization5. Basic Structure of Liberalization

After PPA terminated

ISO

Bilateral Contract

Generators•IPP's new units•New IPPs

(Non-utility)

Self-generators

Captive Customers

(Unregulated tariff)(regulated tariff)

Contestable Customers

Direct Users

(Unregulated tariff)

Self-useUsers

Direct

Supply

Captive Customers Contestable Customers

Direct Users

Self-useUsers

6. Energy Policy RequirementsIntegrated Utility

Generators1st, 2nd round IPPs3rd round IPPs

(Non-utility)

Supply Obligation

Generation

Bilateral Contract

§Generators are required to have gas-fired and renewable capacity through： 1.installation, 2.purchase by PPA, or 3.pay fund

§required to install hydro and nuclear power.§require to have gas- fired and renewable capacity through：　 1.installation, or　 2.PPA.

ISO

Generators•IPP's new units•New IPPs

(Non-utility)

Self-generators

§Exempted from the obligation when its capacity less than the assigned

Direct

Supply

Wholesale

– To allow Taipower to be vertically integrated and independent of the privatization process.

– To allow new industries such as generation, transmission, and distribution to enter the market as soon as the law is passed.

– To establish the Independent System Operator(ISO).

– To allow electricity customers to choose their suppliers.

– To require electricity industries to install certain percentage of clean energy capacity.

– To require Integrated utility and distribution company have the obligation of guaranteed supply of electricity.

– To allow generators to supply power directly to nearby users through private power lines.

7. Revise of Electricity Law7. Revise of Electricity Law

THANK YOUTHANK YOU