28 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 Implications of Taiwan’s dependence on imported energy Sean M. Davis Taiwan occupies a unique geopolitical position, often in conflict with China. Its energy sector represents a key vulnerability as it attempts to mitigate Chinese aggressions and influences. This article examines how Taiwan’s dependence affects its geopolitical position and economy, exploring strategies for strengthening its position through a transition to renewable and clean energies and through strategic supply chain management to counter Chinese pressure. Introduction Taiwan’s energy sector mirrors its precarious geopolitical position. The island imports 98% of its energy, 90% from nonrenewable sources—coal, oil, and natural gas (Togu, 2020). This heavy import reliance leaves the island vulnerable to external political influence, supply disruptions, potential blockades, and, in extreme scenarios, military aggression. A stable energy market is especially important to maintaining the competitiveness of Taiwan’s manufacturing- focused export economy and managing geopolitical vulnerabilities. Taiwan must strategically address its energy portfolio. The island’s sovereignty and economic prosperity rely on reducing its energy dependencies, which create significant leverage for China. Expanded renewable capacity, revitalized nuclear production, and diversified import partnerships can curtail that leverage while insulating Taiwan’s competitive export-oriented economy. Taiwan’s energy landscape Taipower, which produces 64% of Taiwan’s electricity (Energy Administration, 2024), operates as a vertically integrated monopoly controlling the generation, transmission, and distribution of electricity and energy (Taiwan Power Company, 2024). Its aging grid is notably unreliable (Bui et al., 2024), and, despite modernization (Taiwan Power Company, 2023), integrating intermittent renewable energy sources into the grid remains difficult. This reliability problem is evident in the island’s recent history. Grid reliability problems led to blackouts in 2017, 2021, and 2022. The 2017 blackout affected 151 companies in industrial parks and export zones as well as almost 50% of households, causing NT$87.5M (US$2.7M) in losses (McGillis, 2023). Excessive power demand, which Taipower could not satisfy, triggered a rolling blackout in May 2021 (Energy Administration, 2024). To understand these challenges, Taiwan’s current energy mix and its implications for energy security are examined. Taiwan’s energy landscape is heavily dominated by fossil fuels. As Figure 1 illustrates, collectively oil, coal, and natural gas comprise more than 93% of the energy mix, with the remaining portion coming from nuclear power and renewable sources. This heavy reliance on imported fossil fuels leads to significant energy security concerns that shape Taiwan’s energy policy decisions. Oil products constitute almost 44% of the energy mix (Energy Administration, 2024). The main suppliers are Saudi Arabia (31%), the United States (27%), and Kuwait (18%). Unlike other fossil fuels, oil remains prominent in total energy contributions because of its role beyond electricity generation (Boone, 2023). Taiwan uses petroleum products for transportation, direct industrial energy, and as a critical resource for nonenergy applications, such as lubricants and raw materials for plastics or solvents (U.S. Energy Administration, 2023). The second most significant fossil fuel in Taiwan’s mix is coal, which contributes nearly 29% of its overall energy, including generating more than 42% of electricity (Energy Administration, 2024). In 2023, Taiwan’s coal came primarily from Australia (51%), Indonesia (26%), and Russia. While coal may be a poor choice for the environment, it has significant strategic advantages: Taiwan’s main supplier, Australia, lies largely outside China’s sphere of influence (Webster, 2023), and coal is easy to stockpile for use in blockades or other disruptions (Fryer & Szladow, 1973). However, coal’s role is set to diminish under Taiwan’s climate commitments. In 2022, Taiwan’s National Development Council released a 2050 net-zero roadmap, pledging to halt construcdoi:10.18275/pbe-v043-005
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