During the first half of 2023, the polysilicon industry experienced expansion in production capacity, resulting in an oversupply of polysilicon and a subsequent downward trend in the entire industry chain prices. However, by the end of June, the prices of polysilicon reached a near-bottom point, and both polysilicon and wafer prices stabilized, leading to a significant increase in customer demand.

Polysilicon: In the first half of 2023, the polysilicon market witnessed fluctuating prices, starting with an initial rise followed by a subsequent decline, and an underlying issue of oversupply persisted into the second half of the year.

In early January, the expansion of polysilicon production capacity coincided with weakened demand as the year-end approached, leading to a significant decline in prices. By mid-January, the polysilicon prices fell below the cost line for polysilicon enterprises. In response, leading enterprises refrained from selling polysilicon at such low prices, causing a price rebound. As February began, the operation rate of wafer production significantly increased, leading to higher procurement demands for polysilicon and consequently a sharp rise in its prices. However, by the middle of the month, most polysilicon orders for the month had been signed, dampening the stimulus for further price increases. In March, the pressure of excess inventory prompted some polysilicon enterprises to cut prices to facilitate higher shipments, resulting in a slow reduction of prices. Moving into April, the overall supply of polysilicon remained abundant, and with strong willingness among silicon enterprises to sell, prices continued to decline gradually. May witnessed a further increase in polysilicon output, causing a faster decline in prices due to inventory accumulation and pressure from crystal pulling activities. As June approached, the market faced the release of additional production capacity and a considerable accumulation of inventory. This led to polysilicon prices nearly reaching the cost line as market demand fell short of expectations. In response, some enterprises opted for temporary shutdowns, overhauls, and delayed production to reduce inventory pressure. Moreover, increased procurement volumes from crystal pulling plants helped stabilize prices temporarily.

In July, the polysilicon inventory levels experienced a decline compared to the previous period due to increased downstream demand, leading to price stabilization. However, there remains a possibility of a slight price rebound. Projections indicate that in the third quarter, polysilicon prices might rebound to more than RMB 80/KG. The second half of 2023 is expected to witness a peak in photovoltaic demand, and the current price levels within the industry chain can help stimulate this demand. However, the third quarter will also see the concentration of new production capacity from several polysilicon manufacturers entering the market. As a result, the oversupply of polysilicon is unlikely to be significantly altered. While there may be a chance for prices to rebound, both the timing and extent of such a rebound are expected to be very limited.

Monthly price trend of Polysilicon Unit: RMB/KG

Wafer: In the first half of 2023, wafer prices experienced fluctuations with an initial rise followed by a decline. As the second half of 2023 approaches, the wafer prices still face a potential downside risk.

In mid-January, downstream pullback was observed in wafer prices due to increased cost pressures and inventory consumption among polysilicon enterprises. However, early February witnessed a surge in downstream procurement demand, resulting in a slight shortage of polysilicon supply and subsequently leading to sharp price increases for wafers. By later February, the wafer market saw stability as the supply tightened due to the influence of crucible quality, leading to a decline in cell procurement speed. In early March, the supply of high-purity quartz sand remained tight, restricting overall wafer output. The rising wafer costs and limited supply provided support for a slight price increase. As April arrived, the arrival of imported sand eased the tight supply of quartz sand, leading to an increase in wafer production. However, subdued downstream demand resulted in a slight price decline. In May, to avoid losses caused by falling prices, cell companies showed reduced willingness to procure wafers, leading to an accumulation of wafer inventory. The rapid decline in polysilicon prices further contributed to a sharp drop in wafer prices. In early June, wafer enterprises responded by reducing production and cutting prices to address inventory concerns. However, the oversupply situation persisted, and with upstream silicon prices experiencing a significant decline, wafer prices followed suit and declined sharply. Towards the end of June, wafer inventory gradually rebounded to a more reasonable level, and the decline range of polysilicon prices narrowed down. As a result, cell enterprises displayed increased willingness to purchase, leading to wafer prices ceasing further declines first.

In July, there is an expected increase in the output of cell modules, and upstream polysilicon prices have stabilized. However, during this period, there are rumors of India potentially banning the export of quartz sand. Although manufacturers have confirmed that it is merely a rumor, it has still caused some short-term nervousness in the market. Consequently, wafer prices have shown slight signs of rebounding. Nevertheless, based on the current statistics from TrendForce, the effective capacity or output of wafers in a single month remains significantly higher than that of downstream cell and modules. Even if there is an explosive demand for wafers in the second half of the year, there is still a substantial amount of new production capacity waiting to be released. As a result, the market continues to face an oversupply situation, and there remains a considerable risk of declining wafer prices later on.

Monthly price trend of wafer Unit: RMB/Pcs

Cell: In the first half of 2023, cell prices experienced sharp fluctuations, with N-type cells maintaining a premium advantage.

In mid to late January, there was a significant increase in polysilicon and wafer prices, prompting cell prices to rise accordingly. Early February saw a surge in module production scheduling, driving up the demand for cells and supporting their rising costs, leading to further price increases. However, by mid and late February, the interplay between module inventory and pricing resulted in slight declines in cell prices. In March, cost pressures prompted cell enterprises to consider raising prices. However, the high inventory levels and resistance from downstream module companies, unable to sell at higher prices, led to price stability. Towards the end of the month, increased demand for G12 cells caused prices to rise slightly. Moving into April, the overall supply and demand for cells achieved a better balance, resulting in generally stable prices. G12 cells, due to tight supply and demand, commanded significantly higher prices compared to M10 cells. However, May saw a sharp decline in upstream polysilicon and wafer prices. Additionally, downstream module companies exerted pressure to reduce prices, leading to a rapid decline in cell prices. In June, as upstream raw material prices were approaching their bottom, cell prices continued their downward trend. Towards the end of the month, the stabilization of polysilicon and wafer prices, coupled with increased downstream purchasing demand, resulted in a narrower range of cell price declines.

Upstream polysilicon and wafer prices have stabilized, providing a favorable environment for the market. Furthermore, the surge in customer demand has led to a significant month-on-month increase in module production scheduling for July, which is expected to provide strong support for cell prices. If downstream demand surpasses expectations or experiences an early explosion, there is a potential opportunity for cell prices to rebound in the future market. Throughout the first half of 2023, the production capacity of N-type cells fell short of expectations, but the robust customer demand created a structural shortage of N-type products in the market. This resulted in a price gap between N-type and P-type cells. However, in the third quarter, manufacturers are gradually increasing N-type production capacity, which should alleviate the intense supply constraints of N-type products. Yet, this might further stimulate explosive demand for N-type products among customers.

Monthly price trend of cells Unit: RMB/W

Module: In the first half of 2023, overall module prices experienced fluctuations and showed a downward trend. However, expectations for the second half of 2023 are optimistic, as customer demand is anticipated to explode.

In early January, as customer projects reached their end stages, there was a gradual decrease in procurement demand. The sharp decline in upstream raw material prices impacted the modules sector, leading to price fluctuations. In February, with customer projects not yet scaling up and market demand increment falling short of expectations, module prices remained relatively stable. Come early March, customer purchasing was not active, and stable cell prices contributed to the overall stability of module prices. Towards the middle and end of the month, there was an uptick in overseas demand, but cost pressures persisted, keeping module prices stable. Throughout April, module prices continued to remain stable as costs remained unchanged. However, early May saw temporary falls in upstream polysilicon, wafer, and cell prices, which did not immediately affect module prices, allowing them to maintain stability. Nonetheless, by mid-May, the impact of the declining industry chain prices started affecting modules, leading to lower-than-expected customer demand and a significant decline in module prices. In June, although polysilicon and wafer prices gradually stopped falling, customer demand had not yet surged on a large scale, leading to a continued downward trend in module prices. In some instances, module prices even dropped below RMB 1.2/W.

Currently, module prices are experiencing irregular fluctuations, but overall, they have reached the lowest level in recent years. As upstream prices have started stabilizing, it is expected that module prices will soon follow suit, stabilizing at around RMB 1.3-1.4/W. This price point can act as a stimulus for a quick pickup in market demand. In the domestic market, positive signals of increasing demand are evident. Large-size base projects have already commenced construction, and the country has issued the second batch of project lists, with preparations underway. Additionally, plans for the third batch of projects are in progress, and the centralized market is expected to witness an explosion in demand. For the main overseas market, Europe’s inventory has reduced after a period of consumption, but the grid consumption issue has posed a challenge for demand revitalization. However, with the arrival of summer, Europe is expected to face peak electricity consumption, presenting a new opportunity for demand pickup in the region.

Regarding the U.S. market, being a high-value overseas market, it plays a crucial role for various leading module companies in their sales strategies. However, policy fluctuations in the U.S. market have always been a concern for both the supply and demand sides. The Middle East market has been notably active this year, with recent signings of large-scale sales frameworks and cooperation announcements on the manufacturing side. As a result, this market holds considerable potential for future growth and is worth close attention.
Monthly price trend of module Unit: RMB/W

In the first half of 2023, there was a continuous release of polysilicon production capacity, leading to intensified dynamics between the upstream and downstream industry chains, resulting in price fluctuations. Looking ahead to the second half of 2023, the situation of excess supply of polysilicon is anticipated to persist, making it challenging to bring about significant changes. Consequently, any potential price rebound is expected to be limited in both timing and extent. The wafer market remains oversupplied, presenting a downside risk to prices. On the other hand, the cell market is experiencing gradual release of N-type cell production capacity, with expectations of an explosive demand for N-type products. As for modules, both domestic and overseas demands for installed capacity are projected to improve, indicating a positive turn in the market outlook for the latter half of 2023.

After the Chinese holidays, solar-related materials continued to decline, with the exception of module prices which remained nearly flat. Prices for other materials such as cells, wafers, and polysilicon all decreased.

Polysilico

Polysilicon prices have continued to decline since the Labor Day holiday, with mono-Si compound feedings and mono-Si dense materials now priced at RMB 158/kg and RMB 155/kg, respectively. Downstream wafer businesses are trying to reduce their polysilicon inventory to avoid further losses from price drops. The increase in polysilicon output is weakening price protection for polysilicon companies, with some dumping their stocks, further accelerating the price drop. The ramp-up phase has resulted in lower quality polysilicon, creating an apparent price difference compared to high-quality polysilicon. The drop in prices is expected to continue.

Wafers

Wafer prices have dropped for nearly two weeks, guided by leading wafer businesses. M10 and G12 now cost a respective mainstream price of RMB 5.4/pc and RMB 7.4/pc. Zhonghuan recently announced a more than 8% reduction in its wafer prices following LONGi’s announcement of an approximate 3% drop in wafer prices. The cautious attitude towards procurement in response to falling prices has led to sluggish market transactions. The cell segment’s reluctance to purchase has led to shipment difficulties and an inventory build-up. Combined with the ongoing decline in polysilicon prices, wafer prices are expected to continue to fall in the short term.

Cells

Cell prices have dropped slightly following the Labor Day holiday, with M10 and G12 cells now priced at RMB 1.04/W and RMB 1.1/W respectively. The reduction in upstream polysilicon and wafer prices, along with price suppression from downstream module makers, contributed to the decrease. However, the balanced supply and demand of cells prevented a significant drop, allowing cell businesses to maintain partial profitability. Further reductions in cell prices may occur due to ongoing cost reductions upstream and price pressure from module makers, but the equilibrium between upstream and downstream sectors could slow the decrease. M10 mono-Si TOPCon cell prices have increased due to a gradual rise in market transactions, now priced at RMB 1.18/W.

Modules

Module prices are holding steady in the short term, with 182 & 210 mono-Si single-sided PERC modules priced at RMB 1.67/W and RMB 1.68/W respectively, and 182 & 210 bifacial double-glass mono-Si PERC modules at RMB 1.69/W and RMB 1.7/W. Upstream price reductions have yet to affect the module segment due to the retention of profitability for the cell segment and the traditional peak season for the PV industry. Despite the price-suppressing approach from the end sector, first-tier module makers are stabilizing their prices, and overseas demand is strong. Overall, module prices are expected to remain sturdy in the short term. (Image credit: EnergyTrend)

Polysilicon

Polysilicon prices had enlarged in reduction this week, where mono-Si compound feedings and mono-Si dense materials were concluded at a respective mainstream price of RMB 178/kg and RMB 175/kg under an average drop of roughly 7.8%. The drop of polysilicon prices had somewhat widened this week alongside the continuous release and ramp-up of polysilicon capacity, as well as the depleted procurement from crystal pulling plants.

Low-quality polysilicon continues to diverge in prices from mainstream products, and has been seeing a low level of purchases, while most businesses that are procuring frequently at small batches amidst the continuous reduction of polysilicon prices had contributed to the finalization of several new orders this week. Some businesses have started negotiating for their May orders, and prices are expected to continue fall with the arrival of the new round of order signing. An observation on the production and operation of the polysilicon segment this week indicates that two businesses are currently under overhaul. Polysilicon supply should continue to climb as businesses, including Daqo New Energy, GCL, Dongli, Runergy, and East Hope, release capacity and initiate production between May and June.

Wafers

Wafer prices had slightly fluctuated this week, where M10 and G12 were concluded at a respective mainstream price of RMB 6.25/pc and RMB 8/pc. M10 mono-Si wafers had maintained a slow reduction due to insufficient demand, while G12 mono-Si wafers were largely stabilized in prices thanks to lingering support from demand.

The successive port arrival of imported quartz sand is able to fulfill full-load production among wafer businesses, though downstream cell businesses have not been aggressive in inventory pulls alongside the continuously rising level of wafer inventory, and are relatively resistant towards high-priced resources, which amplify the degree of wafer shipment on a continual basis, while second and third-tier businesses are also constantly lowering their prices in order to fight for orders.

Current mainstream concluded prices have fallen below that of prices previously announced by LONGi and Zhonghuan, and await the new round of prices that will soon be announced by leading businesses.

Cells

Cell prices were essentially stabilized this week, where M10 and G12 cells were concluded at a respective mainstream price of RMB 1.07/W and RMB 1.13/W. Supply and demand from upstream and downstream cell sectors have been relatively sturdy lately, with no significant changes to the level of overall inventory.

As demand for TOPCon cells increases, a segment of P-type production lines are currently being upgraded to N-type amidst continuous release and ramp-up of partial new capacity. The significantly risen supply of TOPCon cells could further widen the price difference between P-type and N-type cells. With upstream wafers dropping in prices and climbing in production, the cell segment has welcomed a recovery in profitability, though module makers are also amplifying in sentiment towards suppressing cell prices.

Modules

Module prices continued to maintain stability this week, where 182 and 210 mono-Si single-sided PERC modules were respectively concluded at RMB 1.67/W and RMB 1.68/W, while 182 and 210 bifacial double-glass mono-Si PERC modules sat on RMB 1.69/W and RMB 1.7/W respectively.

The continuous price drop from the upstream polysilicon and wafer segments has yet to be effectively transmitted to the module segment, and the end sector remains relatively anticipative towards dropping module prices, where some businesses of integrated production are generating orders by offering lower prices in order to bring up their shares in the domestic market. Integrated module makers are likely to carry on with their increase of demand during May, while the transmittance of price reduction from midstream and upstream sectors are also expected to further pull up end demand.

In terms of auxiliary materials, glass prices were seen with robustness this week, where 3.2mm and 2.0mm were respectively priced at RMB 26/㎡ and roughly RMB 18.5/㎡. As the new round of centralized order signing arrives soon, some module makers have been comparatively cautious on procurement by adequately digesting their previously accumulated inventory, and had thus led to a marginal drop of glass shipment this week compared to that of last week.

TrendForce, the independent new energy research agency, forecasts that capacity for 210mm products will reach 57% in 2023. The penetration of 600W+ high-power modules is clearly accelerating, setting a distinct direction for both the industry chain and market.

As technology iteration is an essential force in driving industry development, an increasing number of module makers are now producing 210mm modules, marching into the 600W+ era.

More than 80% of module makers deploy 210mm technology as 600W+ high-power modules become a global standard

The 600W+ is now dominating major PV exhibitions around the world. 75% of the 600W+ products showcased by mainstream module makers at RE+2022 were fitted with 210mm wafers, demonstrating the advantage of the 210mm technology, and 30 companies had more than 40 600W products on display at Intersolar South America at the end of August. A similar pattern was seen at Intersolar Europe and SNEC.

According to TrendForce, more than 52 module makers (>80%) worldwide can now produce 210mm products. As indicated by TrendForce, capacity of large-sized modules has continued to expand this year, and new capacity is compatible with sizes of up to 210mm. Because of the extensive compatibility of 210mm cell and module technology, cutting-edge technologies such as TOPCon and HJT could be adopted, and module power output is likely to reach 700W+ soon.

Trina Solar, as the first mover of 210mm modules, recently put 210mm n-type capacity into mass production, reinforcing the company’s competitiveness with next-generation n-type cell technology. The refinement in 210mm products and n-type technology will further improve efficiency and cut costs.

Accumulated shipment of 210mm modules reached 50GW in first nine months of 2022

The production of 210mm modules is growing rapidly as the downstream high-power module market flourishes. In the first nine months of the year 50GW of 210mm cell modules were shipped. More than 76GW of such modules has been shipped as of third quarter 2022, and shipments were expected to accelerate in the last three months of 2022.

210mm module capacity to reach 57% by 2023

As indicated by TrendForce, large-sized modules (182mm and 210mm) are estimated to account for 512GW of capacity during 2022 at a ratio of 83%, of which 210mm capacity accounts for 287GW at 46%, representing year-on-year growth of 16%. Large-sized modules (182mm and 210mm), with their successive completion in capacity deployment next year, will occupy 89% of ratio then, and 210mm modules are likely to dominate, with estimated capacity of 466GW at 57%.

TrendForce forecasts that capacity of 210mm modules will continue to surge in 2023 and reach 66.04% by 2025, when 182mm module capacity will fall to 30%. In terms of wafers and cells, shipments of large-sized variations will continue to climb and dominate the market. New highs in global shipments of 210mm can be expected in the near future.

600W+ modules supreme in all-scenario for both utility and non-utility plants

High-power modules are widely used because of their superior LCOE and BOS costs. According to TrendForce, 600W+ high-power modules are becoming the trend in power stations, with 210mm technology seen as the first choice in making their 600W+ modules, which can reduce LCOE by up to 4.1%.

600W+ modules are yielding compatible solutions by adapting to different installation environments and projects that include ground-mounted power stations and distributed settings.

600W+ high-power modules lead the way as they deliver low LCOE

Low LCOE has been an ultimate target for the industry chain, and 600W+ modules that are equipped with high power, high efficiency, high energy yield, and high reliability can effectively reduce LCOE. Comparing 600W+ modules and 500W+ modules, the former have increased power output by 125-130W and increased module efficiency by 0.3-0.5%. 600W+ modules are also superior in energy yield, evidenced in test by their increase of 1.51~2.1% in single watt power generation. In addition, in five rigorous tests, 600W+ modules were proven to retain their highly reliable performance even in extreme climates.

Trina Solar, a pioneer in 210mm cell technology, has demonstrated to the market its solid strength and capability in the 600W+ field. As of third quarter 2022, Trina Solar has shipped 40GW 210mm modules, ranking first in the industry, with a total of 120GW of global modules shipments since its foundation.

(AmCham Taiwan｜Contributing Writer: David Stinson & Angelica Oung)  Taiwan has some of the world’s lowest electricity prices. The question is why? With no domestic energy reserves, every lump of coal and drop of liquefied natural gas (LNG) – the mainstays of Taiwanese power generation – must be imported. Yet even as the prices of those commodities have soared on the global market, the price for residential power in Taiwan has stayed at NT$2.6253 per kilowatt-hour – a number that has remained unchanged since 2018.

Although the state-run Taiwan Power Co. (Taipower) is traded on the Taiwan stock market, key decisions – including the price of power – are out of the company’s control. Instead, Taiwan’s electricity prices are set by a 17-member Power Tariff Review Committee, made up of experts and academics. The committee, which convenes twice a year, has a price formula that allows the rate to be increased by 3% every six months, or 6% annually. But for the past four years, it has consistently declined to raise prices, even as global oil prices have increased significantly since 2021.

International development bodies generally now advise against price subsidies for electricity. Experts argue that suppressing prices is an inefficient way to help people in the lower-income bracket – since the rich tend to consume more power, energy subsidies are poorly targeted. Moreover, making energy artificially cheap encourages the overuse of a scarce resource. Worst of all, taxpayers eventually end up paying the final price when electricity revenue cannot cover the cost of fuel and power generation infrastructure maintenance.

The reason for Taiwan’s continued suppression of electricity prices in the face of rising costs is political, says Chen Jong-Shun, research assistant at the Center for Green Economy at the Chung-Hua Institution for Economic Research (CIER). Low electricity prices have long been seen as an implicit part of the social contract in Taiwan – a way for the state to care for the people.

“In fact, the amounts involved are not large,” says Chen, referring to the public expenditures required to keep prices from rising, as well as the public benefits from these subsidies. “The problem is that the costs are so widespread. Any breakfast stall, for instance, can see when prices increase, so it becomes a political issue.”

Price-sensitive voters are not the only constituency lobbying for discounted electricity prices. Taiwan’s export-driven economy also benefits from the low prices, with industrial rates ranking sixth lowest in the world. This impact is particularly significant for Taiwan’s highly successful semiconductor industry, which is exceptionally power-intensive. Power subsidies are therefore historically an important part of Taiwan’s economic development, says Chen.

Passing the buck

As electricity usage rises, economic planners face urgent questions about both the environmental and financial sustainability of Taiwan’s price support policy. State-owned oil refiner CPC Taiwan Corp. posted losses of NT$43.4 billion last year due to an ongoing government-mandated freeze on the price of natural gas, despite the commodity’s rising global cost. CPC is the natural gas supplier for Taipower, Taiwan’s primary electricity producer, and sold gas to Taipower for an average purchase price of NT$8.2929 per cubic meter in 2021. According to an April 12 statement by newly appointed CPC Chairman Lee Shun-chin, by the end of April, CPC’s cumulative losses could total NT$65 billion – equivalent to about half of its paid-in capital – if prices remain unchanged.

Although CPC recently raised its sales price of natural gas for electricity generation to NT$12.0873 per cubic meter, the number is still much lower than the company’s current purchase price of about NT$20. There are few signs that international prices will decrease anytime soon, and Taipower will be unable to absorb even the current pricing on an ongoing basis.

After earning NT$48 billion from operations last year, Taipower reported operational losses for the first two months of 2022, when the price it paid for natural gas was NT$11.4033 per cubic meter. Meanwhile, lack of profits has caused the upkeep and improvement of the nation’s power grid to be neglected.

Deputy Minister Tseng Wen-Sheng of the Ministry of Economic Affairs (MOEA) said in March that at least NT$100 billion would be needed this year to increase grid stability. Premier Su Tseng-Chang noted that this sum would be paid by the government, in contrast to previous years when it showed up on Taipower’s balance sheets. However, the final allocation of costs between Tai-power and the government has yet to be determined.

The National Development Council (NDC) has proposed that the state sector invest a collective NT$440 billion in energy-related upgrades by 2030, which will be an ongoing financial burden. Taipower has accumulated reserves worth NT$40 billion, an amount that can only temporarily support the upgrades. The utility has also yet to write off the estimated NT$285 billion loss from Taiwan’s fourth nuclear power plant, following a referendum vote last December to scuttle the project. Overall, it appears that the government’s attempts to stabilize prices have only created additional instability.

The MOEA has recognized that the current situation is a problem. When the Power Tariff Review Committee voted to freeze the price again, MOEA Minister Wang Mei-hua described electricity prices as “too cheap.” The committee is convened under the auspices of the MOEA and the government appoints nine of its 17 members, though it is supposed to act independently.

Taiwan has made sudden corrections to electricity prices before, although politics has always been in the background. Shortly after winning a presidential election, the Ma Ying-Jeou administration raised power prices twice in 2012 and 2013, amounting to a total increase of 16.7%. The 2018 price freeze also appeared to be politically timed, occurring shortly after a minor price increase following the election of President Tsai Ing-Wen. It seems no administration dares raise rates in the runup to an election. And the present moment is particularly tricky, as campaigning for the 2024 presidential election will begin almost immediately after the “nine-in-one” local elections this November. No clear political window for rebalancing thus exists until later in 2024.

Meanwhile, the EU is considering future border carbon tariffs to harmonize international energy transformation efforts. In response, Taiwan’s Environmental Protection Agency has proposed a fee of US$10 per ton of carbon. This amount is easily eclipsed by the current price subsidies, as well as any conceivable price subsidies in the near future. Indeed, Taiwan’s practice of subsidizing electricity prices contradicts the government’s ambitious stated intentions to reach net zero by 2050. Partially as a result of the subsidies, Taiwan currently has the fifth-highest carbon emissions per capita among the world’s top 21 economies.

But system reform is in the works. By 2025, Taipower will be split into two entities: one for generation and another for distribution. This mechanism should allow for more market-based pricing, although many details remain undetermined, including practical responsibility for grid stability. This step will nevertheless mark a milestone in Taiwan’s reform of its power market.

No relief in sight

Taiwan’s energy transition will take place in an environment of persistently high fossil fuel prices. Global oil and gas prices are set to rise in the medium term as a result of pandemic recovery and, more recently, the war in Ukraine. These increases follow a long period of reduced investment in capacity after several years of pain for producers and are thus unlikely to be quickly counteracted.

Liang Chi-Yuan, an economics professor at National Central University and a former Minister Without Portfolio, anticipates that supply will decrease faster than demand as the world moves toward decarbonization, resulting in a seller’s market that could last a decade or more.

“In order to achieve net-zero greenhouse emissions by 2050, the International Energy Agency (IEA) suggests that starting from 2021, all new development of coal and oil fields should stop, which will decrease the supply of oil,” he says. “However, it also suggests that sales restrictions on news cars fueled by oil come much later, in 2035. These two factors might lead to supply shortages until 2035.”

Some opportunities for short-term adjustments by consumers exist, given functioning price signals. CIER’s Chen points to old air conditioners as low-hanging fruit, as they can become significantly less efficient after just a decade. Air conditioners were partially blamed for one of the major outages in May last year.

In the longer term, the energy transition will not only require changes in consumption patterns but also greater changes in industry structure. In some cases – such as last year’s referendum, which rejected nuclear power – prices will only be a background factor for individual decisions with complex upstream and downstream consequences. In the view of many experts, it is time for Taiwanese power consumers to start seeing its true price. Nevertheless, further steps to rationalize the market will take place in the context of financial pressure as the bills for many years of deferred reform come due.

Source: https://topics.amcham.com.tw/2022/05/the-high-cost-of-taiwans-low-electricity-prices/