Taiwan’s Energy Security Under Threat

On May 20, Lai Ching-te was inaugurated as Taiwan’s new president. This presidential transition attracted significant attention amid China-U.S. trade competition and the power struggle in East Asia.
China perceives Lai as a “dangerous separatist” and has strongly opposed his inauguration. Following Lai’s assumption of office, China conducted the military exercise “Joint Sword-2024A” from May 23 as a “punishment to the independence forces and a warning to external forces.” Similar to the drills in August 2022, this exercise saw China’s People’s Liberation Army (PLA) encircle Taiwan, with over 100 military aircraft and dozens of warships mobilized.
China has made the reunification of Taiwan a national goal and has not ruled out the use of military options. President Xi Jinping’s legacy and the rapid enhancement of the PLA’s capabilities have fueled debates about a possible military invasion of Taiwan. While the prospect of an actual invasion remains uncertain, a maritime blockade is more likely, as demonstrated by China’s military exercises in 2022 and 2024 indicating its feasibility.
While China was a major election issue, Taiwan also faced a major crossroads in its energy policy. Lai advocated for the continuation of the current nuclear phase-out policy, whereas the other two candidates supported the continued use of nuclear power. Without significant policy shifts, the last nuclear power plant in Taiwan will be shut down by 2025.
Taiwan heavily relies on thermal power, with all its fuel imported. Facing the potential of a maritime blockade, can Taiwan reduce the vulnerabilities in its power system and establish energy security?
A maritime blockade that stops short of military conflict would most immediately impact Taiwan’s energy security, especially given the vulnerability of the power system. The previous Tsai administration aimed for carbon neutrality by 2050 without relying on nuclear power, planning to achieve this through a significant expansion of renewable energy and natural gas-fired power. Lai’s administration is expected to continue similar policies, but two challenges exist.
Taiwan’s substantial dependence on natural gas is the first challenge. In 2023, natural gas-fired power accounted for about 40 percent of Taiwan’s electricity generation, and this dependency will increase with the continued shutdown of nuclear and coal-fired power plants. Without a bold policy shift, reliance on natural gas is expected to reach 50 percent by 2025.
In terms of Taiwan’s energy security, this poses a problem due to the nature of LNG. Because LNG requires ultra-low temperatures for storage, it is difficult to stockpile on a large scale, as is possible with coal and oil. Taiwan currently has an 11-day LNG reserve, with plans to increase it to 14 days by 2027, still less than a month’s worth. If the PLA imposes a blockade, Taiwan could run out of LNG in less than two weeks, losing about half of its total electricity. In contrast, coal reserves amount to 42 days.
Moreover, the reliance on natural gas-fired power affects generation costs. While Taiwan has diversified its LNG procurement sources, a significant portion is still sourced from the spot market – over 50 percent in 2018, currently around 30 percent. This reliance makes Taiwan susceptible to price increases driven by global demand growth and geopolitical risks, which are then reflected in electricity prices.
For instance, international LNG prices began to rise in the winter of 2021, and surged to unprecedented levels following Russia’s invasion of Ukraine, which severely disrupted the supply-demand balance. Although Taiwan regulates electricity prices, preventing immediate reflection of LNG price surges in consumer electricity rates, Taipower, the state-owned utility company responsible for Taiwan’s electricity supply, has incurred substantial debt. In the long term, these costs are likely to be passed on to consumers.
One of the reasons Taiwan has become globally significant is its advanced semiconductor industry, represented by companies like TSMC. The semiconductor industry is a major consumer of electricity. If electricity prices soar due to excessive reliance on natural gas-fired power, it could weaken the semiconductor industry and indirectly undermine Taiwan’s national security.
The second challenge with the current energy policy, which calls for an increase in the share of renewables, is the uneven distribution of offshore wind power.
Taiwan focuses on offshore wind development as part of its renewable energy expansion policy to achieve carbon neutrality by 2050. Taiwan’s offshore wind development is the most advanced in the Asia-Pacific region, excluding China. The supply chain is being established, with installed capacity reaching approximately 1.8 GW by the end of 2023. Additionally, the ongoing offshore wind development “Phase 3” plans to install 3 GW every two years between 2026 and 2035. By 2050, renewables are expected to account for 60-70 percent of Taiwan’s energy mix, with offshore wind and solar power making up the majority.
However, solar power is variable in nature, and Taiwan’s energy system has a limited capacity to handle these fluctuations. On the other hand, offshore wind, despite seasonal fluctuations, will be a relatively stable renewable energy source. The problem is that development sites are concentrated on Taiwan’s west coast, i.e., the Taiwan Strait, due to wind conditions and water depth. Power generated by numerous wind turbines is transmitted to land via a few submarine power cables. These submarine cables and pipelines are highly vulnerable to external factors, as demonstrated by the sabotage of the Nord Stream pipeline connecting Russia and Germany in 2022. Thus, Taiwan’s offshore wind power will always have inherent vulnerabilities, and there are lingering doubts about the reliable supply of electricity in crises that fall short of military conflict.
Taiwan’s power system lacks reserve margin and idling capacity, and in the event of a prolonged blockade, reliance will shift to the decreasing coal-fired power and solar power, which cannot supply sufficient electricity to meet demand.
Fortunately, Taiwan’s energy supply of oil, natural gas, and coal was not affected by the recent military drills, but China has already demonstrated its capability to blockade Taiwan. This year, Russia has been targeting power plants in Ukraine, highlighting that power systems are crucial infrastructure, affecting public morale. China can potentially paralyze Taiwan’s power infrastructure without firing a single shot.
Enhancing generation capacity through the development of decentralized renewable energy, such as solar power, floating offshore wind, and geothermal energy, and the expansion of storage facilities would be one solution. It is already evident that storage facilities contribute to the resilience of the power system. For instance, during the earthquake that occurred on April 3 in Hualien, energy storage facilities supplied up to approximately 800 MW of power, which was a key factor in preventing a large-scale blackout.
Additionally, as opposition presidential candidate Hou Yu-ih suggested, continued use of nuclear power, while not a silver bullet, may alleviate some energy security issues. Until 2020, nuclear power supplied more than 10 percent of Taiwan’s total electricity generation.
While China’s military exercises have exposed the vulnerabilities in Taiwan’s energy security, Lai’s administration faces the challenge of implementing policies with a minority government. The opposition parties, the Kuomintang (KMT) and Taiwan People’s Party (TPP) have both agreed on strengthening the legislature’s authority, which means that the Lai administration will need to navigate opposition and potential restrictions from the legislature while deciding on policies for renewable energy expansion and future nuclear energy. At the same time, to maintain Taiwan’s economic and strategic stability, swift improvements in energy security are crucial. The new energy policies expected to be announced may very well determine Taiwan’s fate.

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