Taiwan’s rapid renewables push has created a bustling battery market

TAIPEI, Taiwan — Taiwan faces two imperatives to decarbonize its grid: the looming threat of climate change, and the potentially more imminent risk of intervention by China’s military.

Taiwanese President Tsai Ing-wen recently enacted a binding target to reach net-zero carbon emissions by 2050. As it stands, Taiwan’s economy depends almost entirely on coal, oil and gas — all of which must be shipped in, since the 245-mile-long island lacks deposits of those fuels. But shipping depends on open sea lanes, and China’s increasingly belligerent attitude toward Taiwan has many observers worrying about military intervention in the years to come.

Against that backdrop, Taiwan’s state-run utility Taipower is attempting to nearly quadruple its share of renewable electricity by 2025. That’s also forcing a complementary buildout of battery storage to balance the surges of intermittent power on the isolated island grid.

Any location that builds a bunch of renewable power plants needs to figure out how to build energy storage at scale. Move too fast, and you can end up with faulty systems catching fire, as South Korea did after a lucrative incentive prompted a rowdy storage boom. Move too slowly, and the grid won’t have much-needed flexibility to handle the swings of wind and solar production. Outside of the U.S. and Australia, hardly any other places have cracked the code for sustained, large-scale grid battery construction.

Now Taiwan is looking to join that group of storage stalwarts as quickly as it can.

“In terms of rapid adoption, the percentage growth each year [for Taiwan’s energy storage market] is much higher than other countries,” said Danny Lu, senior vice president at Oregon-based grid battery integrator Powin Energy.

As one of the top energy storage integrators, Powin sells the most battery capacity to the U.S. and Australia; China and India have considerable demand for storage but also high barriers to entry. Taiwan’s appetite for new batteries is approaching the U.K. in size, Lu said — that’s notable given that the U.K. has nearly three times the population to serve.

Decarbonizing the grid is tricky anywhere. The stakes are higher than usual for Taiwan since it must transition its energy system — serving some 23 million people and a world-leading cluster of microchip factories — under threat of interference from a well-armed foreign power. It’s too early to tell how feasible net-zero goals can be under these circumstances, but incubating a bustling energy storage industry is a critical early step in the right direction.

Big clean energy goals — with tough limitations

Government-owned Taipower has a hefty task ahead of it: It wants to transform its energy mix by 2025.

The government’s plan is to reduce coal generation from 45 percent to 27 percent of the energy mix and to take nuclear from 11.2 percent to zero over that timeframe, according to Taipower materials. To compensate, imported fossil gas will rise from 35.7 percent to 50 percent of the energy mix, and renewables will increase from 5.5 percent to 20 percent.

In raw capacity terms, that means solar needs to go from 6.5 gigawatts in 2020 to 20 GW in 2025 (8 from distributed, 12 from utility-scale), and wind from 1.3 GW to 5.5 GW. That adoption curve would rival Taiwan’s verdant mountain ranges in steepness. The government also wants to see more than 500 megawatts of new storage, an eminently achievable sum.

The grid overhaul faces some structural challenges. For one thing, Taiwan has ​“pretty poor solar economics,” said Joseph Webster, a senior fellow at the Atlantic Council who covers energy issues in East Asia. The skies over Taiwan are often rainy or cloudy, and forested mountains cover much of the island. The flat lands south of the major population centers host rice paddies and pig farms, crucial resources for a population that still depends on imports for a majority of its food.

“They’re doing a lot on building out solar, but there’s going to be constraints there,” Webster said.

The ruling Democratic Progressive Party (DPP) wants to shutter Taiwan’s current fleet of fully functional nuclear plants. That policy runs counter to decarbonization and energy security goals, Webster noted. But the political leadership wants to avoid the risk of a Fukushima-style disaster in this densely populated, seismically active, geopolitically turbulent region.

There is offshore wind potential off the western coast, he added. Taiwan is starting to develop that, but offshore wind is a nascent industry here, much like it is everywhere outside of the North Sea. Taiwan’s military also has concerns about offshore wind farms’ impacts on radar, something that has also slowed development in Hawaii, for instance.

A few other challenges round out the bunch. Transmission constraints limit the ability to send power up the western coast to the population center in Taipei. And wherever large amounts of solar rush onto a geographically limited grid, a predictable set of problems arise. The wires need to handle surges of power at some times and not enough power at others.

Taiwan has already suffered some bad blackouts in recent years, making grid reliability a topic of public concern.

Luckily, there’s a proven technology that bolsters grid reliability, circumvents transmission constraints and improves the usefulness of renewable generation. It’s called battery storage.

“The green energy will be more and more,” said David Chen, a vice president at Taiwanese grid engineering and construction firm Leader and a 40-year veteran of Taipower. ​“We cannot connect another country’s electricity line to our country, so we will need the battery systems.”

Renewables growth spurs battery uptake

Five years ago, there wasn’t any inkling of a grid storage market in Taiwan, said Lu. But Powin started making inroads there nevertheless, in part due to a personal connection to the place: Lu was born in Taiwan, and his grandfather served as a head engineer at the state-owned utility.

Things changed quickly. Powin signed its first Taiwan deal in 2020 — three sets of battery enclosures totaling nearly 50 megawatt-hours, Lu said.

Rather than manage sales from the misty hills of Oregon, Powin chose Taiwanese engineering and construction firm Leader to act as the sales agent and distributor for the battery systems. In the first year of that partnership, Leader bought 300 megawatt-hours from Powin to be installed at around a dozen different sites, Lu said.

The big early driver for storage adoption was a market product called Dynamic Regulation Reserve (dReg). It’s a form of frequency regulation whereby batteries provide little bursts of energy to stabilize the grid. Taipower builds some of these facilities for itself, but it also lets independent developers erect their own batteries and bid into the market.

Batteries are appealing for this application because they respond faster and more nimbly than traditional power plants, and they do it without burning fuel. Battery developers can make an impact with small, short-duration batteries, which saves money compared to big battery plants that need to discharge for hours.

Frequency regulation is the gateway drug for grid storage adoption globally, but the next step is using longer-duration systems to deliver power for multiple hours at a time. That’s where Taiwan is going next.

Developers there are now gearing up for a newer grid storage service: Enhanced Dynamic Regulation (E-dReg), which calls for at least 2.5 hours of dispatch capability. The early dReg batteries had to stay under 10 megawatts to connect to local distribution grid feeders; E-dReg batteries can hook up to the transmission grid with capacity levels five, 10 or even 20 times bigger, Lu noted.

New solar power plants will also be required to add a certain level of accompanying storage, though the full details are still getting worked out, Lu noted.

Other countries spent years hashing out policy reforms to promote storage adoption. Legacy utility companies ignored the technology in favor of the familiar gas plants; when storage’s efficacy was proven, they ruled it out based on cost. Jumping in after a decade of battery cost declines, Taiwan has managed to bypass the foot-dragging and get batteries built by both the incumbent utility and a mix of competitive developers. It’s setting the scene for batteries to bulk-shift the island’s renewable production to times of day when it is more valuable, and to help ensure the grid doesn’t get wobbly as even more wind and solar connect to it.

“That energy mix is going to be changing aggressively over the next 10 years,” Lu said. ​“It’s a really good feeling to be able to support where our ancestors are from.”

Not that Powin is alone in that. Fellow integrator Fluence won a deal to supply Taipower with a 60-megawatt/96-megawatt-hour battery at a substation; other global leaders such as Tesla, Wärtsilä and Saft have a presence in the market too.

Batteries serve decarbonization and security

Taiwan’s grid planning can’t happen without consideration of its neighbor across the water. China has become increasingly assertive with its military exercises in and around Taiwan, violating the island’s territorial boundaries multiple times last year in a show of force.

“I don’t think invasion is imminent,” said Atlantic Council’s Webster — in contrast to the breathless prognosticating on display in some Washington, D.C. press coverage of the situation. But, he added, China ​“is going to attempt to apply more military, political and economic coercion to Taiwan over the next five years.”

A full-on invasion across the 100-mile-wide Taiwan Strait would entail a logistical undertaking of world-historical proportions, enough to make D-Day look easy. It would be considerably simpler for China to impose a blockade of the island or a quarantine — in which China would stop and inspect ships before letting them land in Taiwan. Either of those could bring modern life in Taiwan to a halt if it is still dependent on imported fossil fuels to keep the lights on.

“Renewables generation is indigenous, so you’re not as reliant on imports as you would be otherwise,” Webster said.

But renewables alone can’t ensure a reliable grid for Taipei and local juggernaut TSMC, the linchpin of the global semiconductor industry. Storage needs to grow significantly, and Taiwan will ultimately need different technologies beyond just lithium-ion batteries to deliver clean energy around the clock.

It’s not clear what a viable net-zero grid for Taiwan would look like, given the renewables constraints. Nor is it clear how quickly and how far Taiwan can cut dependence on imported fuels. But every bit of new solar, wind and storage helps.

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