With the turmoil in the Middle East affecting global oil and LNG shipments and pricing, how much strain can Taiwan absorb as demand continues to climb?
In mid-March, as global energy markets nervously reacted to escalating conflict involving Iran, Beijing made a pointed intervention.
In remarks to reporters, China’s Taiwan Affairs Office spokesman suggested that Beijing provide Taiwan with “energy security” as part of a broader pitch for “peaceful reunification.” He suggested that alignment with “a strong motherland” could shield the island from external supply shocks.
Taipei’s response was sharp and immediate. Deputy Economic Affairs Minister Ho Chin-tsang called the proposal “impossible,” dismissing it as part of China’s longstanding cognitive warfare strategy. He said that Taiwan, which like many Asian countries relies heavily on the supply of fuel from the Persian Gulf area, has its own “response plans” to deal with the current energy challenges posed by geopolitical developments.
Roughly one-third of Taiwan’s crucial liquefied natural gas (LNG) supply ordinarily comes from Qatar and must pass through the narrow Strait of Hormuz that the war with Iran has put at risk. With LNG storage capacity typically covering only about 11 days of consumption in Taiwan, questions quickly amounted as to whether scheduled deliveries for the coming weeks and months could be maintained.
Seeking to reassure the public, Premier Cho Jung-tai and energy officials stated that LNG supplies for March and April had already been secured, with most May shipments also arranged despite disruptions linked to QatarEnergy’s force majeure declaration.
Authorities emphasized that inventory levels remain above legally required minimums and that the Ministry of Economic Affairs (MOEA) is actively monitoring cargo schedules while securing additional supply, including increased imports from the United States beginning later this year. Contingency measures — including the potential reactivation or increased utilization of coal-fired generation — remain available if needed.
That reassurance addressed the near term. It did not resolve the underlying concern.
Taiwan’s dependence on imported energy is among the highest in the world. According to MOEA data, more than 97% of the country’s energy requirement is imported, leaving the system exposed to disruptions in global supply chains. While crude oil is easier to store, LNG — which has become central to Taiwan’s power mix — is particularly sensitive because of limited storage capacity and the need for continuous delivery.
“Energy is actually a national security issue,” says Randy Tsai, co-chair of AmCham Taiwan’s Energy Committee. “Most of the oil and LNG we import is used right away.” She adds that Taiwan’s system operates with minimal buffer. “We don’t have the luxury of large reserves — our system depends on continuous inflow. If shipments are delayed, the impact is immediate.”
Taiwan’s 11 days of LNG reserves compares with between 14 and 20 days for Japan and South Korea, analysts say. Though the government plans to increase stockpiles to 14 days, Taiwan’s three LNG receiving terminals are operating close to capacity, and expansion projects have been slow to come online.
The third terminal at the Datan Power Plant in northwestern Taiwan illustrates the challenge. Originally planned as a key pillar of Taiwan’s gas strategy, the project is a roughly NT$75 billion LNG receiving terminal spanning about 9 km2 off the coast of Taoyuan, according to government and industry data.
Construction began after environmental approval in 2018, with completion initially targeted for 2025, though the timeline has been repeatedly affected by redesigns and environmental review. While construction has progressed, delays tied to efforts to minimize impact on nearby algal reefs — including relocating the terminal roughly 1.2 km offshore — have limited the pace at which Taiwan can expand gas import and storage capacity.
This bottleneck has direct implications, given the system’s dependence on precise scheduling and uninterrupted shipping. “Even if you can secure more LNG cargoes, without sufficient receiving terminals and storage, you can’t meaningfully increase your reserves,” says Tsai, adding that expanding capacity is a long-term effort. “Building LNG infrastructure can take six to eight years.”
The issue is magnified by geography. LNG tankers that pass through the potential chokepoint of the Strait of Hormuz then transit the Indian Ocean and Southeast Asian sea lanes on their way to Taiwan. Analysts have long warned that any disruption along these routes — whether from conflict in the Middle East or heightened tensions in the South China Sea — could have immediate effects on Taiwan’s energy security.
An incomplete transition
The March episode highlighted the tension at the heart of Taiwan’s energy policy. The government has already phased out nuclear power and is pursuing decarbonization and reduced use of coal. At the same time, electricity demand is rising rapidly with the advent of AI, continued growth in the semiconductor sector, and increased investment in data centers.
Natural gas has been seen as the bridge in this transition. According to the state-run Taiwan Power Co. (Taipower), fossil-fuel generation accounted for more than 80% of electricity output in 2025, while renewables contributed just over 12%. Nuclear power, once a stable baseload source, is no longer available following the shutdown of the island’s last reactor in May 2025.
That decision continues to shape the debate. Advocates of nuclear energy argue that its removal has increased Taiwan’s reliance on imported fuels at a time of heightened geopolitical risk. Business groups have also raised concerns about long-term price stability and supply security in the absence of nuclear baseload capacity. Some policymakers have called for reconsidering nuclear’s role, including reactivating closed power plants or deploying small modular reactors, a relatively new technology that is considered to bring the benefits of greater safety, lower cost, and faster construction time.
In March, President Lai Ching-te moved beyond conditional openness to actively supporting the potential restart of existing reactors, with authorities initiating procedures to bring the Kuo-sheng and Maanshan plants back online pending regulatory approval and safety inspections. Lai has emphasized that any restart would still hinge on strict safety standards, viable waste management solutions, and public consensus, while framing nuclear energy as a pragmatic option to address rising electricity demand, particularly from AI-driven industries, and to bolster energy security.
For now, though, it has been left to LNG to fill the gap.
“Even a very short interruption or voltage dip could result in significant economic losses,” says AmCham Co-Chair Tsai, pointing to the high energy needs of Taiwan’s crucial semiconductor industry. She notes that grid constraints are becoming increasingly evident, with some renewable projects facing curtailment because “the grid cannot absorb all the electricity generated.”
Demand is rising at a pace that compounds these challenges. Reuters and Bloomberg have reported that Taiwan’s semiconductor expansion and growing data center footprint are driving significant increases in electricity consumption. The International Energy Agency has similarly warned that AI-related workloads will sharply increase power demand globally.
“Taiwan can’t get power fast enough,” says PJ Huang, Taiwan country head of Bloom Energy, a U.S.-based developer of solid oxide fuel cells used for onsite power generation in data centers, manufacturing, hospitals, and other commercial and industrial settings. “There’s going to be a constraint.”
Huang adds that the issue is already shaping investment decisions. “Companies are looking at whether they can get reliable power before they commit to expanding here.”
The development of renewable energy was intended to reduce Taiwan’s reliance on imported fuels. Offshore wind, in particular, has been central to that strategy. In 2025, Taiwan had reached approximately 4 gigawatts (GW) of offshore wind capacity, with a target of 10.9 GW by 2030. Yet the pace of development has slowed as projects move into deeper waters, increasing costs and technical complexity.
At the same time, regulatory uncertainty has weighed on investor confidence. Taiwan Business TOPICS reported in April last year that changes to local content requirements and evolving auction frameworks have complicated long-term planning. Developers have expressed concern about policy consistency, particularly for projects requiring large upfront capital investment.
Some companies have already reduced their exposure. Japan’s JERA completed the sale of its stake in the Formosa 3 offshore wind project in 2023, reflecting concerns over rising costs and project economics, the Taipei Times reported.
Local resistance has been another factor. Developers must negotiate access to maritime space, compensation mechanisms, and project design with local fishing groups, while also securing approvals from multiple levels of government. These processes can extend timelines and introduce additional uncertainty for projects that already face high upfront costs.
The result is a slower rollout of renewable capacity than originally planned. Taiwan’s 20% renewable energy target, initially set for 2025, has been delayed to 2026. Even so, skeptics question whether the target will be reached this year.
Cost and corporate demand
Even when physical supply is secured, price volatility remains a significant concern. Global LNG markets are highly sensitive to geopolitical disruptions, particularly in key transit chokepoints such as the Strait of Hormuz. In early March, Asian spot LNG prices surged to their highest levels in nearly three years as the Middle East conflict raised concerns over potential supply interruptions from Qatar, one of the region’s largest exporters.
While the price spike reflected market fears rather than immediate shortages, traders moved quickly to secure alternative cargoes, tightening supply and driving up premiums across Northeast Asia. The episode revealed Taiwan’s exposure not only to physical supply risks but also to sudden cost increases in the spot market, where utilities may need to procure replacement cargoes at significantly higher prices.
For Taiwan, where electricity prices are subject to regulation, rising fuel costs are placing increasing financial pressure on the system. Taipower has reported heavy losses in recent years, raising concerns that sustained price increases could eventually translate into higher rates for users or increased government subsidies.
These pressures are also being felt at the corporate level. Multinational companies operating in Taiwan face growing expectations to meet renewable energy targets, particularly those enterprises aligned with RE100 (100% renewable energy) commitments. Yet securing sufficient green power remains difficult, due to limited availability and high costs for corporate power-purchase agreements.
Toward a more resilient system
Part of the challenge lies in market structure. Taiwan’s power sector remains only partially liberalized, with Taipower retaining a dominant role in generation, transmission, and retail. While reforms have opened some space for independent power producers and renewable developers, industry participants say the current framework continues to restrict flexibility.
For large corporate consumers, these limitations are most evident in renewable procurement. Companies seeking to meet sustainability commitments often face a lack of standardized contract structures and limited access to supply. In response, some firms have turned to self-generation or overseas offsets, reflecting gaps in Taiwan’s domestic energy market.
“Energy supply has to be diversified in order to mitigate the risks,” says Edwin Liu, president of the Taiwan Power and Energy Engineering Association. “Relying too heavily on any single energy source makes the system more vulnerable to disruption.”
Liu, a former president of the semigovernmental Industrial Technology Research Institute, emphasizes the importance of integrated resource planning and maintaining “an open-minded attitude” toward both supply-side and demand-side solutions.
Bloom Energy’s Huang emphasizes the need for a broader mix of solutions. “Your toolbox can’t just have a hammer,” he says. Newer onsite generation technologies like solid oxide fuel cells, wind, solar, and battery storage are all needed.
Market design plays a critical role in enabling that mix. Industry groups have called for clearer pricing signals, expanded access to the grid for private generators, and mechanisms to better integrate energy storage and demand response. These changes, they argue, would allow the system to operate more efficiently while reducing reliance on centralized infrastructure.
For her part, Tsai points to a lack of clear accountability within government. “The Energy Committee has long called for a central coordinating authority — an energy ‘czar’ — because it’s not always clear which agency is ultimately responsible,” she says.
Progress has been incremental. The government has introduced reforms aimed at increasing competition and encouraging private investment, but implementation has been uneven. But for many stakeholders, the priority is not only the direction of policy but its consistency. Long-term capital investment in energy infrastructure depends on predictable rules, particularly in a market where project timelines often span decades.
Distributed energy systems are gaining traction as part of the solution. Huang argues that onsite power generation can enhance resilience by reducing reliance on centralized infrastructure. “When everything is self-sufficient, you’re just a lot more resilient,” he says. He adds that “if power is generated closer to where it’s used, you’re less exposed to single points of failure.”
He also highlights efficiency gains during periods of supply constraint. “What is the most efficient way to use the gas you have to make it last longer in the event of a crisis?” he says. Bloom Energy’s solid oxide fuel cells generate electricity onsite using natural gas, allowing power to be produced closer to demand centers such as data centers and manufacturing facilities. Huang adds that the company has held discussions with think tanks and other organizations around energy resilience and distributed power solutions, particularly in the context of Taiwan’s broader energy security challenges.
AmCham Taiwan’s White Paper has reflected a similar perspective. Its recommendations have focused on strengthening grid infrastructure, improving regulatory transparency, enabling energy storage and distributed resources, and supporting investment in emerging technologies such as hydrogen and carbon capture.
The government has taken steps in this direction. Taiwan has expanded LNG procurement from a broader set of suppliers, including the United States and Australia, while continuing to invest in grid upgrades and renewable deployment. Policy discussions are also underway on how to better integrate storage, improve permitting timelines, and create more flexible market mechanisms.
Ultimately, Tsai says, the focus must shift to long-term planning. “This isn’t about one shipment or one month. It’s about building a system that can absorb shocks without disrupting the economy.”
