The Asia-Pacific Journal | Japan Focus Volume | Issue | Article ID 3954 | Dec 31, 1969

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Renewable Energy vs. Nuclear Power: Taiwan’s energy futurein light of Chinese, German and Japanese experience since3.11 再生可能エネルギー対原子力—3.11以降の中国、ドイツ、そして日本の経験に照らして台湾のエネルギー政策を考える

Mei-Chih Hu

Abstract

This article reviews the current debate inTaiwan over the future of nuclear power in thecountry’s energy mix. Rather than debate apro- or anti-nuclear stance, the authors developthe argument that Taiwan has more to gain inpromoting renewable energy industries than insticking with the nuclear option, both in termsof energy security and of building exportplatforms for tomorrow. Taiwan is justifiablyproud of its achievement in building three‘pillar industries’ in semiconductors, flat paneldisplays and PCs. Now it should be gettingready to add a fourth pillar industry, ofcomparable success – concentrated solar power(CSP) plants, solar PV, wind power, and widerrenewable energy sources industry – utilizingall the institutional and entrepreneurialstrategies perfected in Taiwan’s earlierdevelopment.

Introduction

Taiwan is presently wracked by debate over theprospect of a referendum on the country’sFourth Nuclear Power facility, currently underconstruction but subject to a ban on furtherworks. The debate is focused on the risks ofnuclear power on an earthquake-prone island(with reference to the Fukushima disaster inJapan) and the supposed cost of moving off anuclear trajectory in terms of electricity pricesand reliability of supply. It has also becomeside-tracked by a long debate over thelegalities of the referendum process in Taiwan,

and whether the present government is to betrusted in the framing of the referendumquestion(s).

What is miss ing in this debate is therecognition that Taiwan has more to gain inpromoting renewable energy industries than insticking with the nuclear option, both in termsof energy security and in terms of creating jobsand building export platforms for tomorrow.Taiwan is justifiably proud of its achievement inbui ld ing three ‘p i l lar industr ies ’ insemiconductors, flat panel displays and PCs.Now it should be getting ready to add a fourthpillar industry of comparable potential success– concentration solar power (CSP) plants, solarPV, wind power, and wider renewable energysources – utilizing all the institutional andentrepreneurial strategies perfected inTaiwan’s earlier development.

The model for such a strategy is close to hand.In China we find the world’s most strenuousand dedicated promotion of renewable energyindustries, in an extraordinarily successfulindustrial policy. Renewable energy industrieswere considered playthings – marginal players– until China got serious in promoting them, inthe mid-2000s. In one sector after another –first in wind, then in solar photovoltaics (PVs),tomorrow probably in concentrated solar power(CSP) – China has been pursuing relentlesspromotion of a ‘green’ option to balance,complement, and eventually replace its pursuitof a ‘black’ coal and oil-fired option. Itsindustrial policies, grounded in the need to

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build energy security and reduce reliance oncostly fuel imports from troubled countries,have been spectacularly successful, as it hasexported its renewable energy products allaround the world. But China is also exportingits green development ‘model’ to othercountries such as India and Brazil, and it is nowbeing emulated as well by advanced countriessuch as Germany.

China’s relevance as an energy model for theTaiwan nuclear debate is clear. China not onlyhas an effective industrial policy to support thedevelopment of new industrial sectors such asrenewables, but it is also effectively promotingthe drastic upgrading of the grid to make itable to accommodate a variety of decentralizedrenewable inputs, through investments in IT (asmart grid) and high-tension long-distanceHVDC power lines (a strong grid). The powerlines are needed to al low power to begenerated from renewable wind and solarsources in the west of the country andtransmitted over 2000 km to the easternseaboard. The state-owned China GridCorporation sees these upgrades as promotingenergy security, resilience and lower pricedpower for the whole of Chinese industry. This isa very different perception of the future fromthat of Taipower and some Taiwan big firms,which anticipate that renewables will be costlyand unreliable. China knows full well that theopposite is the case.

In this article we first review the nuclear optionin Taiwan, focusing on its real industrialdrivers, and then sketch an alternativedevelopment pathway that would build a fourthsystem – not a fourth nuclear reactor but afourth pillar industry of renewables. We willprovide evidence for the salience of thisalternative pathway in terms of activities andinvestments currently under way in China andGermany (where the non-nuclear energyrevolution is well advanced, termed theEnergiewende or Energy Transition), and usethese to rebut the usual claims made tominimize the contribution that renewablescould make. We frame our arguments in termsof industrial strategy (something that Taiwanunderstands very well) rather than climatechange and carbon emissions – although it is avery fortunate implication of the strategy thatwe advocate that it is also a low-carbonstrategy and one that will garner muchinternational support for Taiwan. Finally, wedepict the green option as one that couldprovide a new national development goal forTaiwan involving its high-tech institutions suchas ITRI and the Hsinchu Science Park and itsextensions in the Central and Southern parks,and building on the achievements alreadyrecorded, to give the people of Taiwan a senseof possessing a strong future. This is verydifferent from the climate of fear and insecurityprojected in the current pro- vs. anti-nucleardebate that is engulfing the country.

The nuclear debate in Taiwan

Taiwan’s nuclear industry is four decades old;construction of the first reactor began in 1972.The country’s six nuclear reactors now provide19% of Taiwan’s electric energy, from acapacity base of 4.9 GW, or 11% of Taiwan’sinstalled power generating capacity. Altogetherthere are six reactors, operating at three sites –Chinshan 1 and 2; Kuosheng 1 and 2; andManshan 1 and 2. Two of the reactors areWestinghouse pressurised water reactors(PWRs) and four are General Electric (GE)

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boil ing water reactors– the kind thatsuccumbed at Fukushima in Japan. The reactordesigns date from the 1950s. The fourthnuclear facility projected, at Lungmen[Gongliao, New Taipei City], is designed toconsist of two 1350 MW Advanced BoilingWater Reactors (ABWR), sourced once againfrom GE-Hitachi (reactors) and from Mitsubishi(turbines). While ABWR technology isGeneration III, apart from the contractingbusiness involved in actually building thereactor, there is very little Taiwan contributionor spin-off from the technology. No doubt therehas been considerable pressure from Americansources to ensure that Taiwan continues toimplement US-made nuclear technology. This iswhere the contras t w i th a ‘Ta iwan-first’renewables industrial strategy would bemost telling.

The nuclear facilities are all operated byTaiwan Power Company (Taipower), the stateutility with monopoly control of generatingfacilities. Taipower is clearly deeply committedto nuclear power – and so if Taiwan is to pursuean industrial strategy independent of nuclearpower, then alternative entrepreneurialsources need to be developed. This too wouldbe an important aspect of developing adomestic Taiwan market for renewable energysources, through the use of instruments such asfeed-in tariffs, which have proven their worth inGermany and are now being trialled in aserious way in China and, on a smaller scale, inJapan.

The contribution of renewables to Taiwan’scurrent energy mix is woefully low, makingTaiwan a severe laggard in moving to a newgreen development model. Power generation in2012 involved over 99% reliance on fossil fuelsand nuclear. This is a sorry record that doesnot stand up to comparison with China andGermany, as we demonstrate now.

China’s energy strategy

Taiwan need look no further than China to see

a powerful model of an industrial strategyfocused resolutely on building green renewableenergy industries as a means of promotingenergy security and export-oriented industriesof tomorrow. The green aspect of China’sstrategy complements its build-up of ‘black’energy industries in the short run. Moreimportant, China’s rapid build-up of renewableenergy industries and projected phase out ofreliance on fossil fuels – within the next coupleof decades – has captured the world’s attention.China’s motives for effecting this energyindustrial revolution have more to do withnational energy security than any concernsover the global environment (although theseconcerns are certainly prominent). Just what isdriving China’s energy strategy?

Charts 1 and 2 tell the story in terms of electricpower generation (which accounts for 50% ofChina’s carbon emissions).[1] The first revealsthat China has been building a vast electricpower ‘machine’ rated at more than 1 TW by2011, and generating close on 5 trillion kWh by2012 – of which 3.9 trillion kWh came fromburning coal. The serious build-up in energycapacity began after China joined the WTO in2001. The steep upward curve in coalconsumption and energy production since 2001is evident.

Fig. 1. China’s black face in powerg e n e r a t i o n

Source: Mathews and Tan

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At the same time, China has been building upits renewable energy industries – initially hydroas the main source, and to some extent nuclear(slowed after Japan’s Fukushima disaster), butincreasingly, wind and solar. Chart 2 showsthat China’s build-up in wind power startedaround 2005 and doubled every year, becomingby far the largest wind power practitioner inthe world in terms of its production of turbinesand their installation in wind farms. (Electricitygenerated is shown on the left axis (millionkWh) and electric power capacity on the rightaxis (MW). China’s wind power companies,including Goldwind, Sinovel and the latest,privately-owned addition, Ming Yang, are nowglobalizing at a rapid rate, and moving to thetop of the world’s leading wind energycompanies. China’s wind power companies areindeed moving rapidly from imitation toinnovation.2

Fig. 2. China’s green face: Chinese build-up of wind power

Source of primary data for Figs 1 and 2:U.S. EIA International Energy StatisticsDatabase; for coal consumption, NationalBureau of Statistics, China

A s imi lar s tory can be to ld for so larphotovoltaics, where early leaders (some ofwhom are now in financial difficulties) arebeing joined by later arrivals such as Hanergy

and Giga Solar, which are growing andglobalizing rapidly. China has yet to make itsmark in concentrated solar thermal, but initialinterest could rapidly translate into worldleadership, taking over from Spain. Indeed theNational Development and Reform Commission(NDRC) has recently set a target of Chinaadding 3 GW of CSP capacity by 2015 (morethan doubling global capacity to this point) andup to 10 GW by 2020 – meaning that CSPtechnology would be driving down the costreduction curve as production expands – withbeneficial results for China and for othercountries looking to involve themselves inrenewables. Taiwan should be among them.

While the choice between nuclear and ‘new’renewables has not yet been made definitivelyin China (as it has in Germany, to be discussedin a moment), it is clear where the trends aretaking China. In Fig. 3 we compare electricitygenerated from nuclear with that from windpower, demonstrating that wind surpassednuclear in 2011. Even if grid-connection forwind power in China is problematic, China’stargets are for an ever-increasing proportion ofelectricity to come from wind, far surpassingwhatever might be derived from nuclearsources.

Fig. 3. Wind- and nuclear-generatedelectricity in China, 1995-2012

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Source: Earth Policy Institute ( link(http://www.resilience.org/stories/2013-02-27/wind-surpasses-nuclear-in-china) )

Strong and smart grid

China is not just building new energy-generating products (and energy-efficiencyimproving systems) but is also investing vastsums in updating the electric power grid toaccommodate a variety of such sources. Chinacalls this the ‘smart and strong’ grid, in that itwill be IT-enabled and be able to carryprodigious quantities of electric power from thedeserts of the west, where wind and solarpower abound, to the eastern seaboard,through new High Voltage Direct Current(HVDC) cables. The targets for investment ingrid upgrading by the State Grid Corporation ofChina (SGCC) are emblematic of the huge pushbeing made to accommodate renewables. SGCCis the world’s largest utility, and one of the 10largest companies worldwide – yet it is stillbarely known outside China.3

The major element of China’s upgrading is thebuilding of long-distance power lines utilizingadvanced HVDC technology, which loses muchless power in transmission than conventionalAC lines. In Fig. 4 we reproduce a chart from

China that shows how the grid will change asthe SGCC investments are implemented. Theupgraded grid will have several east-west andnorth-south ‘trunk routes’ for carrying ultra-high voltage cables (depicted as red and blue).Clearly provinces that are not depicted asbeing connected to these HVDC long-distancelinks will nevertheless be connected to theupgraded grid. And the grid can be expected tobe modular and cellular, making it eminentlyrobust and resilient. China clearly sees vastnew business opportunities opening up with itssmart grid, and is already gearing up thetechnical standards that wil l fashioninternational competition in this sector.

Fig. 4. China’s projected strong and smartelectric power grid

Source: the State Grid Corporation ofChina (SGCC), available at Caixin.com

There are several reasons to expect that thesechanges unleashed in China will be permanentand will lead to still further changes favouringrenewables over both fossil fuel and nuclearpower systems. The first concerns industrialdynamics. China’s build-up of renewables is

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unlikely to follow a simple linear progression,and instead can be expected to follow logistic,or S-shaped, industrial dynamics. This meansthat as investments in renewable systemsaccumulate, they will become self-reinforcing,and lead to further such investments as theydrive down the price. Taiwan has directexperience of this process in the way that itsbuild-up of the semiconductor, flat paneldisplay and PC/IT industries all followedlogistic industrial dynamic pathways.

Other countries have built renewable energymarkets – such as Germany’s efforts to enhanceconsumer demand for renewables via feed-intariffs. But China has, from the start, focusedon building the industries that producerenewable energy systems; together with thevalue chains of components and materialssuppliers. The 12 th Five Year Plan statesexplicitly that China’s seven targeted industriesfor its clean technology revolution will accountfor 8% of GDP by 2015, rising to 15% by 2020and expanding rapidly thereafter. Only Koreahas formulated a comparable green growthindustrial strategy, focused on the building ofgreen industries as platform for the future. Inthese comparisons, Taiwan lags far behind.

Now the remarkable thing is that China is notalone in effecting an energy revolution. It isbeing paid the compliment of emulation bynone other than Germany, pre-eminentindustr ia l power o f the EU, wi th i t sEnergiewende (“energy transformation”),through which nuclear power is being phasedout and renewables are being installed at arapid rate.

Germany’s Energiewende

The Fukushima nuclear disaster struck Japanon March 11, 2011. While Japan was stillclearing away the rubble, Germany was alreadyrebuilding its energy system. Within a monththe Chancellor, Angela Merkel, had reversed anearlier decision in favor of slowly phasing outnuclear power, and in June the German

parliament voted to abolish nuclear poweraltogether. This marked the beginning of themost fundamental transformation in energyinfrastructure unleashed by any advancedindustrial power.

Nuclear power is now a dead issue in Germany.Generation of nuclear power still accounted for16% of total German electricity in 2012 – but itis falling (down from 17.2% in 2011) and willcontinue to fall. Seven reactors were shut downimmediately as a result of the Chancellor’sannouncement. No new reactors are to bebrought on stream, and all existing reactorswill have been completely phased out withinten years. Following the turnaround on thisissue by the Christian Democrats andChancellor Merkel, there is no longer anypolitical support for reviving the nuclearindustry in Germany.

To plug the gap, renewables are being rampedup at a tremendous pace. Generation of solarPV electricity increased 48% to 27.6 TWh in2012, while wind power held steady at 46 TWh– making for 11.9% of all electricity in 2012.Other renewables (bio and hydro) alsoincreased, meaning that total renewables roseto 21.9% in 2012 – and they are rising fast. Theproportion of renewables in capacity additionsfor 2012 is much higher – indicating thatrenewables will be taking more and more of theload. It is notable that Germany’s promotion ofrenewables has moved on from marketexpansion policies (like feed-in tariffs) toindustry promotion policies – taking a leaf outof China’s book. German industry supports thisshift.

True, in the interim there are ‘bridging’ powerarrangements that have involved marginallymore coal being burnt – with brown coal(lignite) rising 1% to 25.6% of German electricpower generation in 2012, and black coal rising0.6% to 19.1%. Coal thus accounts now for44.7% of electricity – but it is destined to fallquickly as the renewables are ramped up, and

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fewer new coal-fired power stations areenvisaged. Gas has been forced out of theGerman (and mostly European) electricitymarket because of high prices, and becausethere has been no ‘fracking’ revolution (as yet)in Europe. To claim that the Energiewendemeans simply that more coal is being burnt –and more carbon emitted – is to miss the pointthat fossil fuels are marked for elimination.[4]

As in China, the national power grid is beingdrast ical ly upgraded, to enable i t toaccommodate higher and higher levels offluctuating (renewable) power sources. Officialestimates are that 20 billion Euros will need tobe invested in grid upgrading over the courseof the next decade, with the Bundestag optingfor three major north-south connections to bebuilt first – consisting of high-voltage (380kV)lines.[5] Installing and equipping the smart gridis recognized as the huge new growthopportunity in Germany.

So there is no doubting the scale of thechanges unleashed by the energiewende – andtheir long-term impact. Within the next decadeGermany will have shifted from a coal-and-nuclear powered industrial economy with fourlarge, centralized power producers to athriving, decentralized system generatingpower from renewable sources all over thecountry, and managing it all through amodernized and IT-enhanced smart grid. All theindications are that this is supported byGerman industry. There is little complaintcoming from industry that this will lead tohigher electricity prices or to lack of reliabilityin supplies (the usual arguments in Taiwan). Onthe contrary, it is a fossil-fuelled energy futurethat is seen as unreliable and prone to rapidprice fluctuations.

All of this is being done in the name of the low-carbon economy. Yet it is striking how quickly‘low-carbon’ becomes marginalized as a goalonce the industry-promotion stakes areentered. The new Green growth strategies

emerging in China and Germany will prove tobe far more effective at lowering carbonemissions than the Kyoto treaty with itsnominal carbon reductions. And this is as itshould be: the cleaning of the industrialeconomy was always going to be a state-mandated industry-policy driven strategy.

Declining costs – learning curves

Many governments (and internationalorganizations) still harbour an outdated viewthat renewable energy, and in particular solarPV energy, is more expensive than traditionalthermal (coal-fired) energy. But in reality thecosts have been falling at a rapid rate. In manyparts of the world the cost of generatingelectric power from wind or solar PV is nowless than or comparable to the cost ofproducing power from gas, and will very soon(by 2015) be comparable with the cost of powerfrom the cheapest, dirtiest coal.[6] The view thatthe choices are difficult because of the costs isnow outdated.

The data that now need to be considered inframing any energy strategy are those relatingto the falling costs of power produced fromrenewable sources. The Bloomberg/NewEnergy Finance team in London produced aWhite Paper on ‘Re-considering the economicsof photovoltaic power’ (Bazilian et al. 2012)where they make some very important points.Consider Fig. 5 showing falling costs for solarPV over the past 35 years.

Figure 5. PV module experience curve,1976-2011

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Source: BNEF Bazilian et al (2012), Fig. 1

In this chart, based on and updating the charton experience curves contained in the recentIPCC report on Renewable Energies (IPCC2012), the overall experience curve is shown inthe upper blue line, indicating that costs hadfallen to the long anticipated point of $1 perwatt by the end of 2011, bringing solarphotovoltaic (PV) power within the range ofmainstream power production. The yearsimmediately preceding this show that costshovered for several years (2004 to 2008) ataround four times this level ($4/W) – aphenomenon now understood to be due tosuppliers being able to command feed-in tariffrates locked at these levels, while restrictedsilicon supplies meant that there was littleprice competition. It was this that led many tobelieve that costs of renewable energies wouldalways exceed those of conventionally fuelledpower. But as silicon supplies became morewidely available, manufacturers reduced theirprices, which in turn reduced input costs forsolar cell producers, and their prices fell aswell. The message is clear: the costs of solar PVcells are falling at around 45% per year.

The second blue line in the chart represents thecost curve for thin-film (TF) solar cellproducers, dominated by the US firm FirstSolar, but now featuring Chinese firms likeHanergy which is acquiring TF PV assetsaround the world (e.g. Solibro from distressed

Q-Cells in Germany and Mia Sole in SiliconValley in the US). Because TF PV cells utilizemuch lower quantities of silicon, their costshave always been lower – but do not yet enjoythe economies of scale of amorphous siliconcells. And because TF solar cells use aproduction process very similar to flat paneldisplays, there is vast experience in Taiwan inthis approach which could be exploited inbuilding a ‘next generation’ thin-film solar PVindustry.

Wind energy as well exhibits powerful learningcurve advantages, with costs declining foronshore wind at the rate of 7%. The experiencecurve for wind is shown in Fig. 6, revealinghow wind power is well on the way to having agenerating capacity of 1,000,000 MW, or 1 TW– the size of the current entire US or Chinesegenerating capacity overall. As it does so, the7% cost reduction curve will make wind powermore and more attractive for countriesendowed with the resource. Again, such costreductions make it inevitable that this powersource will eventually be adopted as a defaultoption, ousting its fossil fuel competitors inareas suitable for wind power.

Figure 6. Wind costs decline, 1984-2011

Source: Bloomberg NEF

An alternative Taiwan renewables strategy

With this as background, we can now sketch aquite different strategy from the one being

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pursued by both political camps in Taiwan – theKMT with its pro-nuclear stance and the DPPwith its anti-nuclear stance. Our approach isone that views renewables as the next ‘pillarindustry’ of Taiwan. This is based on extendingthe successful Hsinchu model that has been thebackbone of Taiwan success in high-technologyindustries.

To illustrate our proposition, let us supposethat the Taiwan government said today that theentire nuclear power fleet would be phased outover five years, and would be replaced by aseries of concentrated solar power (CSP)plants, rooftop solar PV, and wind power. Thescare stories are that this would cover Taiwanin photovoltaic cells and wind turbines; that itwould be prohibitively expensive; and that itwould be unreliable since power could begenerated only when the sun shines or the windblows. All these claims are false. The reality isthat just a few mirror farms using molten salttechnology as heat sink would be needed,taking advantage of the fact that China is nowcommitted to CSP and will be driving down thecosts. (See our article on CSP (co-authoredwith Ching-Yan Wu) at Japan Focus here(http://www.japanfocus.org/-Ching_Yan-Wu/3946)) The land area needed in Taiwan would beno more than 62.5 square km (a square of sidesless than 8 km) – which is as nothing whencompared with Taiwan’s land area of 32,260km2, and comparable to the land currentlydevoted to Taiwan’s advanced science andtechnology parks. The Hsinchu park totals 650hectares; the Central Taiwan park 1400hectares; the southern Taiwan park 1608hectares – totalling 3900 ha or 39 km2. CSPplants generating half the entire nuclear outputwould occupy an area only marginally largerthan this – and generate power 24/7 in a waythat is infinitely more reliable and safer thanthe current nuclear facilities. And – this is thecentral point – this would catapult Taiwan intoa world-leading position as supplier of CSP keytechnologies and equipment while creatingdomestic job opportunities as well. Such a

strategy would also facilitate Taiwan’s urgentneed for industrial transformation from a lowerto higher value-added innovator.

How do we get the 62.5 km2 figure? Considerthe world’s currently most advanced CSPfacility (in terms of scale and output), theShams1 plant, commissioned in the UnitedArab Emirates that came on stream early in2013. This is a 100 MW installation, covering250 hectares in parabolic mirrors and tubescarrying oil for heating. (An even moreadvanced design utilizes molten salt as the heatconductor, as in the Spanish Gemasolar plantinvolving a power tower, built by Torresol; theUAE has announced plans to build CSP plantsalso utilizing this more advanced molten salttechnology). The Gemasolar plant is shown inFig. 7.

Fig. 7. Gemasolar power tower plant inSpain

Source: Gemasolar

If 100 MW needs 250 hectares, then 1 GWneeds 10 times this (2500 ha) and 2.5 GWneeds another 2.5 times (6250 ha, or 62.5 km2).This is actual data based on current realoperating conditions – not abstract ortheoretical calculations. The total of 62.5 km2 is1/512 of the land area of Taiwan – or 0.02%. Ifthe required land could be dispersed across

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several sites, and could be supplied from landcurrently held by the military (in the name ofenergy national security) there would be noland resource obstacle standing in the way ofsubstituting the entire output of the currentnuclear sector in Taiwan by CSP installationsutilizing currently available technology(particularly molten salt for heat storage).7 Butof course, we do not see CSP as the solealternative to nuclear. In practice, there wouldbe rooftop installations all over Taiwan utilizingsolar PV, as well as (off-shore) wind power andother sources, together with upgrading of thegrid to accommodate these fluctuating sourcescomfortably.To supply 2.5 GW of electric powerfrom rooftop solar PV would be well within thecapacity of the Taiwan solar PV industry. It isalso the goal of the Taiwan government – whichwould need only modest market developmentstimulus policies such as feed-in tariffs totranslate this into actuality.8 Integrating theCSP, rooftop solar PV, and wind turbinestogether simply demonstrates the ways inwhich Taiwan could fruitfully move off thenuclear pathway.

Extending the Hsinchu Model

Taiwan’s high technology industrial successrests on a capacity to leverage resources andpursue a strategy of rapid catch-up; it is whatwe have called a ‘fast follower’ strategy, aimedat providing complementary capability (i.e.process innovations) for the internationalleaders that excel in product innovations --along the whole value chain. Taiwan’s firms tapinto advanced markets through various formsof contract manufacturing at the beginning,and are able to leverage new levels oftechnological capabi l i ty from thesearrangements so as to create a market nicheand become (process) innovators in the globalvalue chain.9 This is an advanced form oftechnological learning, in which the mostsignificant players have not been giant firms(as in Japan or Korea), but aggregated smalland medium-sized enterprises whose

entrepreneurial flexibility and adaptabilityenabled their specialization at each stage of thevalue chain. The collective process innovationscomposed of the flexible and specialized supplychain as a whole became the key to Taiwan’ssuccess. Underpinning this success were theefforts of public sector research anddevelopment institutes, such as Taiwan’sIndustrial Technology Research Institute (ITRI),and the creation of the Hsinchu Science park.

Hsinchu Science Park

Since its founding in 1973, ITRI and itslaboratories have acted as a prime vehicle forthe leveraging of advanced technologies fromabroad, and for their rapid diffusion ordissemination to Taiwan’s firms. Thiscooperation between public and privatesectors, to overcome the scale disadvantages ofTaiwan’s small firms, is a characteristic featureof the country’s technological upgradingstrategies, and the creation of new hightechnology sectors such as semiconductors. Wesee ITRI as playing a central role in helping tobui ld Taiwan’s next s tep to a ‘greendevelopment’ industrial strategy.

Hsinchu itself was a conscious attempt on thepart of the Taiwan government to seed a newkind of advanced technology cluster, with thegovernment playing the role initially ofcollective entrepreneur, both in leveragingtechnology from likely sources (particularly in

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Silicon Valley) through the institutional vehicleof ITRI, and in leveraging venture capital, againthrough vehicles initially established expresslyby the Taiwan government. The steady hand ofgovernment as collective entrepreneur isneeded to make the breakthroughs necessary,and to provide the ‘new shoots’ (hsinchu) ofindustrial development to maintain thepressure in the long process of change fromimitation to innovation, and from contractmanufacturing to full-branded enterprise – aswell understood in East Asian countriesincluding Taiwan.[10]

In China the influence of the Hsinchu model isunmistakeable. All the Chinese high-techindustrial parks – from Suzhou to Tianjin toBeijing and Shanghai – treat the Hsinchuapproach to collocation of flagship firms, pluscomplementary suppliers and design firms,with national R&D institutes and leadinguniversities, combined with access to venturecapital and various kinds of government-mandated subsidies, tax concessions andinducements, as a template.

If the 1980s was the founding decade forTaiwan’s move up the value-added ladder toencompass industries such as electronics, ITand semiconductors, and the 1990s was thedecade when the IC industry flourished in theHsinchu park, followed by the flat-panel displayindustry flourishing in the following decade,then what of the 2010s? There are alreadyclues as to the new direction to be taken inTaiwan – in the form of new R&D alliances andindustry promotion efforts in such sectors assolar photovoltaic cells (PVs) and concentratedsolar power (CSP) systems, in Electric Vehicles(EVs) and associated energy storage (e.g.lithium-ion batteries), in energy-efficientlighting (e.g. LEDs) and other energy-efficientoptoelectronic systems(PVs and LEDs) areperfect complements: one converts light intoelectric current, the other converts electricityto light; they also share several manufacturingsteps.[11] What is common to all these sectors is

a new focus on renewable energy and energyefficiency, combined with new industries for alow-carbon emissions future.

So far there are promising signs of ‘new shoots’in these directions – but not yet any sense of acomprehensive commitment on the part of theMinistry of Economic Affairs (MoEA) and itsIDB to launch a new industrial revolution inTaiwan, one that will take the island’sindustries beyond the 20th century and into anew low-carbon emitting, energy-efficient andrenewable energy system – or ‘green business’for the new century.

What the new industrial paradigm wouldrequire is not just promotion of new industries(as is being done for solar PVs, LEDs and EVs)but promotion of a domestic market as test-bedfor the new products and services. Here it hasto be said that Taiwan is lagging behind itsgiant competitors including China, Germanyand Japan, in the formulation of suchconceptual tools as the Feed-in Tariff neededfor an energy industrial revolution. All of thiswould encourage entrepreneurial initiative andcreativity in the service of building a newindustrial system for the 21st century, one thatis expanding in terms of opportunity whilemaintaining a sustainable relationship with itsnatural setting – an economy of sustainableenterprise. Here is a grand project for Hsinchuand the new Science-based industry parks tofocus on for the next decade and the followingcentury.[12]

In summary, our vision for Taiwan is neitherpro-nuclear nor anti-nuclear. Our vision is pro-green, and we urge that the country’s existinginstitutions and development experiences beutilized in fashioning a new green developmentmodel that will both solve Taiwan’s power andenergy problems and also create a technologyand production platform for the next century.From the perspective of a decade hence, whenTaiwan could be expected to have a thrivingsolar PV industry and a concentrated solar

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power industry, as well as a world-class smartand strong grid, the current debates over thenuclear option will seem irrelevant.

John Mathews Macquarie Graduate School ofManagement, Macquarie University SydneyN S W 2 1 0 9 A u s t r a l i a . E m a i lj o h n . m a t h e w s @ m g s m . e d u . a u(https://apjjf.org/mailto:john.mathews@mgsm.edu.au)

Mei-Chih Hu, Institute of TechnologyManagement, National TsingHua University,Hsinchu, Taiwan. Email mchu@mx.nthu.edu.tw(https://apjjf.org/mailto:mchu@mx.nthu.edu.tw)

Recommended citation: John Mathews and Mei-Chih Hu, "Taiwan's energy future in light ofChinese, German and Japanese experiencesince 3.11," The Asia-Pacific Journal, Vol. 11,Issue 23, No. 4, June 10, 2013.

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• Andrew DeWit, The US Military, GreenEnergy, and the SPIDERS at Pearl Harbor(https://apjjf.org/-Andrew-DeWit/3909)

• Andrew DeWit, Abenomics and EnergyE f f i c i e n c y i n J a p a n(https://apjjf .org/-Andrew-DeWit/3900)

• Andrew DeWit, Distributed Power andIncent ives in Post -Fukushima Japan(https://apjjf .org/-Andrew-DeWit/3861)

• John A. Mathews, The Asian Super Grid(https://apjjf.org/-John_A_-Mathews/3858)

• Andrew DeWit, Japan’s Energy Policy at aCrossroads: A Renewable Energy Future?(https://apjjf.org/-Andrew-DeWit/3831)

• Andrew Dewit, Japan’s Remarkable Energy

Drive (https://apjjf.org/-Jeff-Kingston/3822)

• Andrew DeWit, Megasolar Japan: TheProspects for Green Alternatives to NuclearPower (https://apjjf.org/-Andrew-DeWit/3679)

• Peter Lynch and Andrew DeWit, Feed-inTariffs the Way Forward for Renewable Energy(https://apjjf.org/-Peter-Lynch/3654)

• Sun-Jin YUN, Myung-Rae Cho and David vonHippel, The Current Status of Green Growth inKorea : Energy and Urban Secur i t y(https://apjjf .org/-Sun_Jin-YUN/3628)

• Son Masayoshi and Andrew DeWit, Creating aSolar Belt in East Japan: The Energy Future(https://apjjf.org/-Andrew-DeWit/3603)

• Andrew DeWit and Sven Saaler, Political andPolicy Repercussions of Japan’s Nuclear andN a t u r a l D i s a s t e r s i n G e r m a n y(https://apjjf .org/-Andrew-DeWit/3525)

References

Chang, T.P. 2009. Electrical energy generatedby a photovoltaic module installed on east-westtracked panel, International Journal of AppliedScience and Engineering, 7 (2): 133-142.

Chu, W.W. 2009. Can Taiwan’s second moversupgrade via branding? Research Policy, 38 (6):1054-1065.

Mathews, J.A., Hu, M.C. and Wu, C.W. 2011.Fast-follower industrial dynamics: The case ofTaiwan’s Solar PV industry, Industry andInnovation, 18 (2): 177-202.

Notes

1 See the contribution by John Mathews andHaoTan to Asia-Pacific Journal, in December2012, here (https://apjjf.org/-Hao-Tan/3881).

2 For example, Sinovel’s direct traction windturbines, eliminating the use of gears, arecheaper and more reliable than their more

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complex competitors.

3 SGCC has committed 4 tri l l ion yuaninvestment over the course of the 12th and 13th

Five Year Plans (i.e. up to 2020) – that isaround US$642 billion, far more than isprojected by any other country.

4 Europe’s dirty secret: The unwelcomerenaissance, The Economist, Jan 5th 2013, here(http://www.economist.com/news/briefing/21569039-europes-energy-policy-delivers-worst-all-possible-worlds-unwelcome-renaissance/print).

5 Dagmar Dehmer, ‘The German Energiewende– the first year’, The Electricity Journal, Jan/Feb2 0 1 3 ( 2 6 ( 1 ) ) : 7 1 - 7 8 , h e r e(http://www.sciencedirect.com/science/article/pii/S104061901200317X).

6 The Deutsche Bank has lent its name to sucha prediction; see Becky Beetz, ‘Deutsche Bank –Sustainable solar market expected in 2014’, pv-m a g a z i n e , 2 8 F e b 2 0 1 3 , h e r e(http://www.pv-magazine.com/news/details/beitrag/deutsche-bank--sustainable-solar-market-e x p e c t e d -in-2014_100010338/#axzz2NJVDi3wr).

7 Although Taiwan does not appear on worldcharts on the most insulated regions bestsuited to CSP, the technology has been shownto work extremely well in temperate zones thatare much cooler than Taiwan. In any case,observed solar irradiance in Taiwan under lessthan ideal conditions is 1000 kWh/m2, which iswell above the 5 kWh/m2 considered aminimum level of irradiance. See Chang (2009).

8 In 2012, the MOEA launched the ‘MillionR o o f t o p P V s a n d T h o u s a n d W i n dTurbines’program, aiming at installing 3GWrooftop PVs and 4.2 GW wind turbines by 2030.

9 One of the key examples is Foxconn, theworld’s No.1 EMS (Electronic ManufacturingServices) company, which specialized first inOEM activity, and eventually came to leverageand recombine various resources to build itsniche in optimizing supply chain efficiency (e.g.global sourcing, logistics, and sales servicemanagement) in the global electronics industry.

10 The shift up the value curve from OEM toODM to OBM has stalled at several junctures inTaiwan, and this remains the single biggestobstacle to further industrial advance on theisland. Chinese firms are able to utilize theirglobal reach to build (or acquire) global brands,but this avenue has not been available toTaiwan firms, as yet. For a discussion of theissues involved, see Chu (2009).

1 1 On the emergence of Taiwan’s solarphotovoltaic (PV) industry, in comparison withwhat is happening in China, see Mathews, Huand Wu (2011).

12 The Ministry of Economic Affairs hasannounced substantial programs for support oflow-carbon industrial initiatives (e.g. MoEAGreen Energy Industry Promotion program)and new Greenhouse Gas emissions reductiontargets. But the targets for renewable energies(e.g. 3 GW for wind power by 2015) are punycompared with comparable targets being set inChina, and Taiwan remains dependent on fossilfuels for over 99% of its primary energyrequirements. One major obstacle tomodernization and decentralization of the gridappears to be the monopoly position of theState-owned power company Taipower. DeWiti n A J P J a p a n F o c u s ( h e r e(https://apjjf.org/-Andrew-DeWit/3936)) showswell the tremendous the Japanese electricpower giants, above all TEPCO . . . but he alsoshows how local governments and smartprivate capital have been moving ahead.