Taiwan is facing a number of challenges regarding energy policy. The current focus is on how to respond to the 50%+ drop in oil prices over the past six months and future nuclear energy policy.

The large increase in supply from the US shale gas industry and the failure of OPEC member states to reduce their output led to a global   supply surplus of about 600,000 barrels per day in 2014, and this is expected to rise to 1.7 million barrels per day in 2015.
According to Liang, US$50 per barrel is close to the cost of shale oil and that prices should rebound in the second half of 2015.According to Liang's analysis, imported fuel prices account for 80% of wholesale and 50% of retail energy prices before tax. This implies that a 10% shift in oil prices results in an 8% shift in wholesale prices and a 5% shift for retail consumers.
In Taiwan, fuel prices account for 65% of electricity prices while transmission and distribution accounts for 28.3% and personnel expenses account for 6.7%. This implies that a 10% drop in fuel prices will result in a 6.5% shift in electricity costs.
High carbon sources still make up the bulk of Taiwan's electricity supply (coal 38.4%, liquid natural gas 31.1% and oil 2.3%) while nuclear accounts for 18.8% and renewables (including hydro, solar and wind) account for 4.5% of supply.According to Liang's DGEMET model, a 10% drop in the oil price will translate into a 0.27% rise in GDP and a 0.43% decrease in inflation while a 10% drop in electricity prices will translate into a 0.16% rise in GDP and a 0.34% decrease in inflation.
The implication therefore is that the recent drop in oil prices will benefit Taiwan's economy. However lower oil prices will have a negative impact on Taiwan's energy security, energy efficiency and CO2 emissions.Taiwan has one of the world's highest imported energy ratio of 97.16%. In terms of CO2, Taiwan emitted 256.61 million tonnes of CO2 in 2012, not high in volume compared to the world's largest emitters, but on a per capita basis, Taiwan's 10.95 tonnes per person, ranked third globally after the United States (at 16.15 tonnes/person) and South Korea (11.86 tonnes/person). Taiwan's high CO2 per capita can be partly attributed to the fact that Taiwan is an export-oriented economy, Taiwan's high energy intensity or energy consumption/GDP and high CO2 emissions per kilowatt hour (kWh) of electricity generated. Taiwan's energy intensity over the past decade has improved as indicated by the CO2/GDP which decreased by 26.17% between 2003 and 2013 while energy/GDP decreased by 19.37% over the same period. Nevertheless, Taiwan's CO2 emissions per kwh of electricity generated is still high by global standards, third only to the US and South Korea.While Taiwan's CO2 emissions per capita have levelled off in recent years, lower energy prices are likely to result in higher consumption. Based on Liang's DGEMET model, if electricity prices decrease by 10% in Taiwan, the short-term electricity demand and subsequent emissions will increase by 2-3%. However, if oil prices fall 10% in Taiwan, the short-term oil demand will increase by 3.5-4.8%. Consequently, a 27.5% decrease in the oil price, will increase demand by 9.625-13.2%. Hence, the fall in energy prices will have a negative impact on Taiwan's energy efficiency and CO2 emissions.The Ma administration announced its energy policy programme in June 2008, focused on three main areas: increasing energy efficiency, developing clean energy and increasing energy security. This included cutting emissions to 2000 levels by 2025 and by 50% of 2000 levels by 2050 and increasing the share of low-carbon energy from 40% to above 55% in 2025.

According to Liang, authorities have been successful in reducing energy intensity and electricity intensity since 2007. This has been thanks to electricity price hikes (in 2008, 2011 and 2012), regulations on energy efficiency (such as minimum efficiency standards and labelling) and industrial restructuring. Plans were also set out for an energy tax and a cap and trade system (although progress has been stalled in the legislature).

Turning to the contentious issue of nuclear power, in the wake of the Fukushima disaster, the government pledged to only begin operating the 4th nuclear power plant if safety is guaranteed while the existing nuclear power plants would be retired according to a phased schedule (the first to close by 2019 and third plant to close by 2025). The three existing nuclear plants account for 12% of total installed capacity and 18.8% of electricity generation. If the 4th nuclear plant goes into operation, it would add another 9% in electricity generation. This would bring Taiwan's total to very close to the 28.6% of electricity generation in Japan before the Fukushima incident. Making up for the shortfall should nuclear power be wholly phased out will be very challenging and it would have major implications. This would include an investment loss of NT$283 billion, higher electricity prices from the cost of replacing the 4th power plant with LNG and renewables, higher running costs and potential power shortages. Assuming a GDP growth rate of 3.37% from 2013 to 2025, the demand for electricity should rise annually by 2.2%, according to Liang. At this rate back-up power capacity in 2018 would fall to just 5.8%. This would substantially increase the probability of power outages and power rationing. In addition, it will be difficult to achieve Taiwan's carbon reduction goals.

The government had pledged to increase the use of renewables 3.4-fold from 2010 levels to account for 16% of total installment and 8% of electricity generation, increase natural gas from 12 million tonnes in 2010 to 20 million tonnes by 2030 and allow the entrance of new independent power producers (IPPs). According to statistics cited by Liang, renewable energy capacity (wind and solar) has increased substantially (albeit from a low base of 35.73 megawatts in 2010 to 413.73 megawatts in 2013).
In addition, the government announced its renewable energy development plan in January 2014, which raised its targets for various types of renewables. However, Taiwan's targets are still low by international, especially European, targets.

During the Q&A session, Liang said that improving energy efficiency should be an important part of the government overall energy policy and that incentives are needed to drive efficiency. He also said that electricity prices should reflect internal as well as external costs (such as pollution) and future energy security. He noted that Taiwan authorities are already addressing these factors to some extent (through stock-piling and energy security funds) but that more could be done. For example, he said that, given relatively low oil prices and Taiwan's relatively good economic conditions, now might be a good time to implement a carbon tax. He also said that there was a lot of potential to improve efficiency in, for example buildings and industry, and that this could be done through regulation. He also supported the idea of more private participation in renewable energy projects.