File photo courtesy of Taiwan Power Co.

Taipei, July 3 (CNA) Taiwan needs an efficient energy market if it is to reach net zero emissions by 2050, Taiwan Power Co. (Taipower) Chairman Tseng Wen-sheng (曾文生) said at a climate change summit on Wednesday.

The Taipower chairman said the development of renewable energy requires new technologies and investment, “decisions about which are multifaceted.” However, the government has many factors to consider, which can make decision-making slow and inefficient.

If renewable energy-related industries can develop according to market logic, decisions can be made more efficiently, “but it all comes down to [renewable energy] being able to be traded on an [efficient] energy market,” Tseng added.

Taiwan’s Electricity Act was amended in 2017, as a first step to liberalize the green energy market by allowing power generated by renewable energy facilities to be sold directly to consumers.

Major Taiwanese enterprises in need of a large amount of green electricity, such as members of RE100 — a global initiative calling for businesses to commit to 100 percent renewable electricity — have mostly opted to enter into corporate power purchase agreements (CPPA) that last up to 20 years with renewable generators such as offshore wind developers.

Renewable generators nevertheless have concerns about weaker buyers’ ability to stick to long-term contractual obligations and thus are less willing to sign CPPAs with them, a concern that has spurred a plan by the Ministry of Economic Affairs to introduce a government-backed renewable power credit guarantee scheme.

The scheme is intended to help mitigate the risk of default by corporate consumers that would discourage renewable energy developers from signing agreements with them.

Tseng proposed an alternative.

He said 20-year “one company-one generator” agreements can be “painful for any purchasing managers” as it is possible that green power will get cheaper in the future but there is no way to trade that purchased green power in the intervening 20 years.

The Taipower chairman said an “intermediary mechanism” should be established to “equalize the risk of uncertainties” the company could experience in the years covered by the agreement.

The intermediate mechanism requires collaboration between two sides, Tseng said. “One is on the supply side, or the financial institutions, who can help remix different batches of energy products into a product that has a relatively stable price.”

“The other is the demand side,” he noted. “As buyers might need different amounts of green electricity in different years, efficiency can only be achieved if they can transfer their purchased power to others freely.”

Only with such an energy market can a balance between supply and demand be achieved, Tseng said.

He added that he expects Taipower, as a renewable generator, to first work with major state-owned enterprises as big consumers in an effort to stimulate the further development of the green energy market.