The Ministry of Economic Affairs Announced the Draft Amendment to the Regulations Governing the Management of Electricity Reserve Capacity (備用供電容量管理辦法)

11/06/2024

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The Ministry of Economic Affairs Announced the Draft Amendment to the Regulations Governing the Management of Electricity Reserve Capacity (備用供電容量管理辦法) 

 

Yi-Jiun Su, Helen Huang, Rachael Yen

After the amendment to the Electricity Act on January 26, 2017 and the liberalization of green power, the electricity enterprise is enabled to generate and sell renewable energy electricity through Taiwan Power Company's ("TPC") grid, presenting diverse power purchase channels to satisfy the demand for renewable energy consumption. Along with the amendment, the obligation of ensuring reserve capacity has been shifted to the electricity industry that supplies power to consumers. Nevertheless, under the current provisions, the complicated calculation formula and the mechanism for determination of the capacity for the electricity enterprise to reserve ("Capacity") from year to year make it difficult for the relevant electricity enterprise to estimate future costs. In an effort to encourage more electricity enterprise to enter into the green market, the Ministry of Economic Affairs has reviewed the calculation formula for the Capacity and has proposed the draft amendment to the Regulations Governing the Management of Electricity Reserve Capacity, which was announced on September 18, 2024 ("Amendment Proposal").

The Amendment Proposal primarily focuses on adjusting the calculation formula for the electricity reserve capacity, changing it from "a percentage of electricity sold on peak days" to a fixed percentage for different energy source, such as 3.3% for solar power, 6.7% for onshore wind, 10% for offshore wind, 10% for small hydropower, 15% for energy generated by direct use or treatment of domestic general waste and general industrial waste, 15% for biomass energy and 15% for geothermal energy, and so on. The calculation formulas are as follows: (1) for electricity generating enterprise, the Capacity is calculated by multiplying the average direct supply and wheeling capacity in the base year by the percentage of the electricity reserve capacity mentioned above; and (2) for the electricity retailing enterprise, the Capacity is determined by multiplying the average purchasing capacity in the base year by the percentage of the electricity reserve capacity mentioned above.

It also states that the source of the electricity reserve capacity shall be gas-fired unit that can be dispatched by electricity transmission and distribution enterprise, but it may be substituted with another controllable generating unit, equipment, or resources as determined by the electricity industry regulatory agency. Moreover, under the Amendment Proposal, the relevant electricity enterprise is permitted to purchase the electricity reserve capacity from TPC to fulfill their obligations.

Before the Amendment Proposal is promulgated, the relevant electricity enterprise shall continue to adhere to the original regulations for the announced 2024-2028 achieving year. The key points of the Amendment Proposal are summarized in the following table:

Amended Article	Contents and Descriptions
2	In order to revise the calculation formulas, the definition of "Proportion of Electricity Reserve Capacity"(備用供電容量比例) was added, and the definition of the terms such as "Total Supply of Electric Power" (總供電容量), "Base Year" (基準年), "Achieving Year"(達成年), "Net Peaking Capability" (淨尖峰能力) were amended.
3	The electricity industry regulatory agency shall calculate and individually notify the total supply of electric power and electricity reserve capacity to the relevant electricity enterprise each year. Meanwhile, the total supply of electric power in national power supply systems will be calculated and announced by the electricity industry regulatory authority. Also, TPC is in charge of the last preparation duty of the electricity reserve capacity.
4	The calculation formulas of the electricity reserve capacity are: (1) for electricity generating enterprise, the Capacity is calculated by multiplying the average direct supply and wheeling capacity in the base year by the proportion of the electricity reserve capacity; and (2) for the electricity retailing enterprise, the Capacity is determined by multiplying the average purchasing capacity in the base year by the percentage of the electricity reserve capacity mentioned above.
5	The percentage of electricity reserve capacity as stated in the preceding Article differs based on the energy source, with distinct percentages assigned to each source, for instance, 3.3% for solar power, 6.7% for onshore wind, 10% for offshore wind, 10% for small hydropower, 15% for energy generated by direct use or treatment of domestic general waste and general industrial waste, 15% for biomass energy and 15% for geothermal energy.
6	To achieve energy transition and net-zero emissions, and enhance the capability of dispatch of the source of electricity reserve capacity, the Amendment Proposal stipulates that the electricity reserve capacity of the electricity generating enterprise and electricity retailing enterprise shall be sourced from gas-fired units that can be dispatched by the electricity transmission and distribution enterprise.
11	In order to assist relevant electricity enterprise in fulfilling the obligations of electricity reserve capacity, the electricity generating enterprise and the electricity retailing enterprise are now allowed to purchase the electricity reserve capacity from TPC.
13	Considering that those required to uphold the electricity reserve capacity have already devoted substantial resources to prepare for it, for the announced 2024-2028 achieving year, the obligors shall still follow the original regulations.

If you have any questions on the Amendment Proposal, please do not hesitate to contact the members of our Energy Law Practice Group for more information.