US embassy cable - 05TAIPEI2601

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