In light of the US-China trade dispute, Taiwanese companies have been moving production back home. The Taipei Times on June 7 reported that since January, the Ministry of Economic Affairs has approved 69 applications by Taiwanese firms to invest a combined NT$369 billion (US$11.8 billion), which would create more than 33,000 jobs (“MOEA approves three firms’ investments,” page 12).
As Taiwanese companies — mainly in the manufacturing sector — continue to return, the business community is concerned about a surge in electricity demand and potential power shortages. Under these circumstances, power planning is essential.
The nation’s total installed power capacity is 42,133 megawatts (MW) and the system peak load is approximately 36,600MW, implying a reserve capacity of 5,533MW, or a reserve ratio of 13 percent. This means that the nation has adequate installed capacity to meet peak demand in the short run. There is no shortage problem.
However, an electricity system has a maintenance schedule or units to provide backup power. Thus, the effective reserve capacity is much less than 5,533MW. To ensure a reliable supply of power, an electricity utility must implement demand-side management initiatives to cope with surges in peak demand.
Peak demand is defined as the maximum power demand registered by a system within a period, such as a month or a year. The value might be the maximum instantaneous load or more, usually the average load over a designated interval, such as one hour, and is normally stated in kilowatts or megawatts.
If peak demand is greater than the total installed capacity in an hour, the electric system would collapse.
Industrial Technology Research Institute president Edwin Liu (劉文雄), in an interview published on June 10 by the Chinese-language Liberty Times (the Taipei Times’ sister newspaper), said that peak power demand occurs for about 200 hours yearly, less than 3 percent of the time.
If the nation can solve this huge imbalance in electricity use between peak and off-peak hours, it would not have shortages, Liu said.
Peak demand in Taiwan occurs from midday to 2pm from June to August. It is normally caused by residential and small commercial users — about 3 million households — turning on air conditioners on hot days.
To cope with high demand in summer, some demand-side management programs alleviate surges by reducing or shifting peak demand.
Demand-side management is the planning and implementation of electric utility activities that influence customers’ use of electricity in ways that will promote desirable changes in the utility’s load shape.
The traditional role of the utility has been to respond to increases in demand by building new capacity, such as high-capacity thermal and nuclear power units. This approach has led to surplus capacity and a waste of resources when increased demand did not materialize. Operations designed to meet rather than manage load have cost implications for the utility and, eventually, customers.
Under traditional planning practices, an increase in load results in the utility bringing additional generating resources online. Over time, utilities are forced to develop more expensive generating resources, such as the NT$400 billion spent on building the Fourth Nuclear Power Plant, which is now mothballed.
New developments become increasingly more expensive and, in some cases, are associated with huge environmental costs.
There are three demand-side management initiatives that could solve the nation’s power problem: load shifting, energy-efficiency improvements and interruptible load.
Load shifting refers to efforts by a utility to alter the timing of customer demand. The goal is to reduce peak demand that occurs in the daylight hours of summer. Demand is shifted to non-peak periods, but total demand is not reduced.
Load shifting is generally done through time-of-use pricing, which is structured according to peak and off-peak times, and can fluctuate in summer and winter. Under such a plan, electricity bills are determined by how much electricity customers use and when they use it. The prices and peak times vary based on the season and day of the week. For example, many utilities consider weekends off-peak. The structure often looks different in summer and winter.
If people know at what times they can save money, they might concentrate energy consumption within those periods and avoid peak hours. Energy is less expensive to produce when fewer homes are using it. Time-of-use plans mean rates align with daily decreases in electricity generation and delivery costs.
To accurately calculate time-of-use rates, buildings must be equipped with smart meters, which record power consumption by the hour and relay this information to the utility. For instance, almost every household and business in Ontario, Canada, is equipped with a smart meter, which allows people to adjust their power consumption schedule.
Taiwan Power Co (Taipower) has time-of-use rates in place. However, smart meters have not yet been installed nationwide. It installed 200,000 units last year. This figure is expected to rise to 1 million next year and to 3 million by 2024.
It is essential that Taipower monitors load shifting under its time-of-use rates to see whether the rate differentials achieve the aim of moving demand from peak to off-peak periods.
Energy-efficiency improvements aim to increase efficient use of energy to reduce power load. This type of initiative either focuses on improving the penetration of energy-efficient equipment in the marketplace or improve how electrical equipment is operated.
Air-conditioning use is the main source of peak power in summer. The government must regulate minimum efficiency for home appliances, especially air conditioners and refrigerators, and offer subsidies to replace old, inefficient appliances.
It is estimated that lighting accounts for 10 to 20 percent of total power consumption. The commercial sector is usually the largest user of electricity for lighting (fluorescent lights), followed by the residential sector (incandescent lights) and the industrial sector. It is important that all three sectors shift to new energy-efficient lightbulbs, such as LEDs.
Interruptible load is the third type of demand-side management load reduction. It is also possibly the initiative with which utilities have had the most experience. Interruptible load contracts are generally offered to large consumers of electricity that have backup generation capacity.
Usually, these are industrial or large institutional customers. In an interruptible load contract, customers receive a preferential power rate in return for accepting the risks that electricity services would be curtailed intentionally by the utility during periods of high demand and tight supply.
Demand-side management is designed to encourage customers who are using electricity inefficiently to use less, so that more electricity is available to customers that can use it productively. As demand-side management can potentially reduce new capacity requirements, it should be explored as an alternative to building new supply resources.
Lee Po-chih is a professor emeritus of economics and a former vice president of the National University of Kaohsiung.
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