In 2005, Taiwan had nearly 38 gigawatts (GW) of installed generation capacity, from which it generated 210.3 billion kilowatthours (Bkwh) of electricity. The majority of electricity in Taiwan is generated from conventional thermal sources. In 2005, 165 Bkwh of electricity came from conventional thermal (roughly 78 percent of total electricity generated) while 8 Bkwh (3.7 percent) was from hydroelectric power, and 38 Bkwh (18.1 percent) was nuclear. In the mid-1980s, nuclear power comprised roughly half of the total electricity generated in Taiwan. However, the growth of fossil fuel-based power stations has decreased the share of nuclear power in Taiwan’s energy mix.

State-run Taiwan Power Company (Taipower) currently dominates Taiwan's electricity sector. Taipower's monopoly status technically ended after 1994, when the Taiwanese government encouraged the formation of independent power producers (IPPs). Today, IPPs own roughly one quarter of Taiwan’s generating capacity, although independent producers are required to sign power purchase agreements with Taipower, which maintains a monopoly in transmission and distribution activities. After joining the WTO in 2001-2002, foreign firms were permitted 100 percent ownership of firms in the sector. Plans to privatize Taipower are being discussed, although this process has been rather slow.

Taipower posted substantial net losses in 2007 as a result of the high cost of crude oil and coal, according to the company. Part of Taipower’s poor financial performance stems from a freeze on energy rates. In an effort to bring prices in Taiwan more in line with international levels, in July 2006 Taipower raised electricity rates by 5.8 percent, which was the first time prices had been raised in more than 20 years. However, Taipower requested additional price hikes and the government ultimately allowed a 12.6 percent average increase in prices in July 2008. Another increase is scheduled for October.

Conventional thermal sources comprise the bulk of Taiwan’s installed generating capacity. The fastest growth has been in natural gas-fired electricity generation, owing to government incentives that have encouraged new projects to use natural gas. Still, natural gas-fired plants only account for about 20 percent of electric capacity in Taiwan. Taipower is currently building a large 4,300-megawatt (MW) natural gas-fired power station at Tatan, to be fueled by LNG delivered from Qatar (see Natural Gas section). Taiwan heavily relies on coal for power generation and according to Taiwan’s Ministry of Economic Affairs, 77 percent of the coal Taiwan consumes is for power generation purposes. Oil is declining as a share of power generation.

Taipower operates three nuclear power plants with a total capacity of 4,900 MW. The construction of Taiwan’s fourth nuclear plant has been controversial, as has been nuclear power on the island in general. After coming into office in 2000, former President Chen cancelled the construction of the 2,700-MW Kungliao nuclear reactor at Lungmen with a vision of a “nuclear-free homeland”. However, in February 2001, this decision was overturned by the legislature and development was continued. Recently the new KMT government has urged a speedier completion of the plant citing carbon dioxide emission concerns in power generation. Opponents to nuclear power express concerns over the storage of nuclear waste and the safety of nuclear power plants. Currently, the Kungliao project is scheduled to start commercial operations at its first unit in 2009, with the entire plant to be completed by 2012.

Hydroelectric power accounts for 12.1 percent of installed generating capacity, although in 2005 only 3.7 percent of Taiwan’s total electricity generation came from hydroelectric sources. In addition, the government of Taiwan encourages the use of renewable energy sources in power generation, including wind power, solar energy, and biomass, however these sources accounted for less than one percent of electric capacity in Taiwan in 2005 and minimal power is generated from these sources.