High Electricity User Clause Announced Boost Corporates to Use Renewable Energy

In order to promote the implementation of corporate social responsibilities of high electricity users and to activate the green power trading market, the relevant regulations on the obligations of electricity intensive users have been added to the revision of the "Renewable Energy Development Act ".

In accordance with Article 12, Item 3 of the "Renewable Energy Development Act", for the electricity contract signed by the user, if the contract capacity is above a certain capacity, the user should choose to (1) install certain capacity of renewable energy power generation equipment, or (2) install certain capacity of energy storage equipment, or (3) purchase a certain amount of renewable energy electricity and certificates (T-RECs); those who fail to comply with one of the previous regulations shall pay a fine to the competent authority for the purpose of renewable energy development.

Accordingly, the Ministry of Economic Affairs (MOEA) has announced on December 31, 2020, the "Administrative Regulations for High Electricity Users above a Certain Contract Capacity to Install Renewable Energy Power Generation Equipment" (High Electricity User Clause).

Five key points can be summarized for the High Electricity Users Clause (see Figure 1). (1) Obligatory users of renewable energy refer to those who have signed an electricity contract with the utility (i.e., Taiwan Power Company) with a contract capacity of 5,000 kW or more. Two years after the regulation take effect (starting from 2023), the scope of application will be reviewed regularly every two years; (2) The obligation capacity is 10% of the contract capacity; (3) If the company has multiple electricity numbers belonging to one entity, their obligation capacity can be combined, which obligation capacity can be fulfilled by total planning and calculation; (4) There is a 5-year buffer period; (5) For those who already installed or rent renewable energy equipment, the amount of obligation capacity can be deducted by up to 20%. If the obligation capacity is fulfilled more than 80% within 3 years, the obligation capacity can be offset 20%; If the obligation capacity is fulfilled more than 90% within 4 years, the obligation capacity can be offset 10%; By early performance of the obligation, the enterprise can enjoy up to 40% reduction of obligation capacity.

Source: KPMG

Figure 1 High Electricity Users Clause Key Points

There are four methods to choose from for the users to fulfill the obligation, installing self-use renewable energy power generation equipment, installing energy storage equipment, purchasing renewable energy electricity and T-RECs, or paying monetary substitution.

Considering the cost-effectiveness of 4 different methods, users may take the priority of (1) installing renewable energy power generation equipment, (2) purchasing renewable energy electricity and T-RECs, (3) installing energy storage equipment, or (4) paying monetary substitution.

In addition, the user should report the obligation execution plan before the end of March of the second year of the obligatory contract capacity notification date. The users should report the equipment operation data in the previous year for the renewable energy power generation equipment and energy storage equipment before the end of March every year, started from the fourth year of the contract capacity notification date (applicable to the early bird program). For those who purchase renewable energy electricity and T-RECs should provide T-RECs and power direct supply and wheeling document and submitted to the central competent authority for reference (see Figure 2).

Source: KPMG, TIER renewed

Figure 2 High Electricity Users Obligation Performance Timeline

The use of renewable energy is one of the important production factors for international competitiveness of enterprises. The Taiwanese government promotes the obligation of high electricity users to install renewable energy power generation equipment to encourage power users to increase the green power usage, to enhance the environmental value of corporate products, and elevate the international market competitiveness, to become part of the international green supply chain, and realize the vision of sustainable development.