1. Liberalization of Electricity Market in Taiwan Su, Jin-sheng Energy Commission Ministry of Economic Affairs August 8, 2001

2. 2 Contents 1. Current Electric Industry 2. IPP Programs 3. Measures Assisting IPPs 4. The Envisage of the Forth Round IPPs 5. Basic Structure of Liberalization 6. Energy Policy Requirements 7. Revise of Electricity Law

3. 3 IPPs 5 projects, 7,220 MW Transmission Power Generation 72 plants, 27,385 MW. Distribution Taiwan Power Company 25yrs PPA Avoided cost Customers Supply obligation self-use users Self-generation co-generation renewables For self-use Current Electric Industry 1. Current Electric Industry Industry Structure

4. 4 Thermal (17,818MW: coal 8100; oil 5404; gas 4314 MW) Extra High Voltage Substation

5. 5 2. IPP Programs Policy Objectives ‧ ‧ To meet power demand at reserve margin of 20% 1st & 2nd rounds (1995): 10,260 MW (1997-2002); 3rd round (1999): 2,840 MW (2003-2004) ‧ ‧ To balance regional supply and demand To prepare for power liberalization 1st & 2nd rounds: competitive bidding (base load, medium load) 3re round: fixed price, first come first serve (gas fired, medium load) To follow clean energy policy

6. 6 First Round IPP Projects First Round IPP Projects

7. 7 Second Round IPP Projects Second Round IPP Projects

8. 8 Third Round IPP Projects Third Round IPP Projects

9. 9 Status of IPP Projects Status of IPP Projects

10. 10 Revising relative regulations Use of public ground. Allowance of land use for power plants. Governmental fund financing. Foreign capital share up to 49%. Setting up an ad hoc committee Committee members from related government agencies: construction/ land authority/EPA/local governments Solving disputes on Power Purchase Agreement(PPA) Surplus capacity Foreign exchange reflection 3. Measures Assisting IPPs

11. 11 Rules on applications for a preparatory permit · ·Required capacity: 1. Year 2007: 100 MW, gas fired and in the North only 2. Year 2008-2009: 320 MW ( 150 MW reserved for TPC) · ·Requisitions (Construction planning plus the following 6 documents): 1.Environment Impact Assessment 2.General agreement from local government 3.Agreement of fuel supply 4.Agreement of power interconnection 5.Agreement of land use 6.Letter of intent on financing 4. The Envisage of the Forth Round IPPs 4. The Envisage of the Forth Round IPPs

12. 12 Rules on Power purchase Purchase prices: The Price will decided by bidding process held by Taipower. Dispatch rules: 1. Year 2007, medium load 2. Year 2008-2009, base load Transmission constraints: Taipower should announce its transmission constraints in one month since this program is implemented.

13. 13 Integrated Utility transmission Distribution Generators   1st, 2nd round IPPs   3rd round IPPs (Non-utility) Supply Obligation Generation   Existed Plants   Under-construction   Approved Projects   Future Projects Wholesale 5. Basic Structure of Liberalization After PPA terminated ISO Bilateral Contract Generators IPP's new units New IPPs (Non-utility) Self- generators Captive Customers (Unregulated tariff) (regulated tariff) Contestable Customers Direct Users (Unregulated tariff) Self-use Users Direct Supply

14. 14 Captive Customers Contestable Customers Direct Users Self-use Users 6. Energy Policy Requirements Integrated Utility Generators   1st, 2nd round IPPs   3rd round IPPs (Non-utility) Supply Obligation Generation Bilateral Contract § Generators are required to have gas-fired and renewable capacity through ： 1.installation, 2.purchase by PPA, or 3.pay fund § required to install hydro and nuclear power. § require to have gas- fired and renewable capacity through ： 1.installation, or 2.PPA. ISO Generators IPP's new units New IPPs (Non-utility) Self- generators § Exempted from the obligation when its capacity less than the assigned Direct Supply Wholesale

15. 15 –To allow Taipower to be vertically integrated and independent of the privatization process. –To allow new industries such as generation, transmission, and distribution to enter the market as soon as the law is passed. –To establish the Independent System Operator(ISO). –To allow electricity customers to choose their suppliers. –To require electricity industries to install certain percentage of clean energy capacity. –To require Integrated utility and distribution company have the obligation of guaranteed supply of electricity. –To allow generators to supply power directly to nearby users through private power lines. 7. Revise of Electricity Law

16. 16 THANK YOU