32 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 coercion or as retaliation to hostilities. Such actions would damage Taiwan’s broader economy, but especially its industrial sector. If costly electricity reduces TSMC’s global competitiveness, Taiwan will struggle to mitigate China’s ECFA influence through diversifying electronic exports. Implications as an export-oriented economy Taiwan’s economic strength rests on the export of goods and services, generating a $51.4B trade surplus. That surplus even increased by 7.4% in 2021, despite trade disruptions due to the COVID-19 pandemic (Ministry of Foreign Affairs…, 2024). One of the major recipients of Taiwan’s exports is China. However, the trade volume between the two countries has decreased in recent years, a casualty of geopolitical tensions (Crotty, 2024). Economic factors also played a role in the decline, including rising Chinese labor salaries, decreased foreign direct investment from Taiwan, and competition from Chinese firms. Machinery and electronics account for $284.7B, or 64.2%, of Taiwan’s total global exports, of which electronic integrated circuits represent almost 40% (Crotty, 2024). There are several impediments to funding energy infrastructure in Taiwan. First, the US Department of State notes that market domination by stateowned enterprises in the utilities and energy sector, specifically Taipower’s status as a state-owned monopoly, creates structural barriers to foreign direct investment flowing into, for example, offshore wind development (Bureau of Economic and Business Affairs, 2023). With Taipower’s monopoly, there is less space for private or foreign companies; politicized pricing causes financial losses for the company. The second obstacle is installation cost. Currently, offshore wind farms as renewable energy sources must address installation and regulations that discourage investment. Installing 1 MW of offshore wind power in Taiwan costs approximately 2.5-fold more than in Europe and is more than in other East Asian countries, including Vietnam and South Korea. Uncertain financing attributable to construction delays also adds to the hesitation (Lu & Lui, 2023). The third challenge for investment in the energy sector is regulatory hurdles. A major one is the statute that all offshore wind proposals off the Changhua coast must have approval from the Changhua Fisheries Association. Projects in this region represent 70% of all wind farms being built in Taiwan. The approval process adds significantly to costs. Preliminary calculations indicate that a wind farm covering 50 square kilometers requires a compensation of NT$60M upfront, with NT$0.018 per kWh generated for 20 years as an assistance payment. These “co-prosperity funds” are supposed to enable fisheries to coexist with offshore wind (Lu & Liu, 2023). The funds are designed to promote oyster farming, net cage aquaculture, and fishery training centers, all to compensate for the burden of fishing in a space shared with wind farms, to enable fisheries to transition to a model that enables coexistence of their communities with wind farms and ecological restoration and maintenance. The Fisheries Act means that some Taiwanese enjoy their fishing rights as their property in offshore areas (Tseng & Kao, 2022)—damage to fisheries is equivalent to damage to property. Wind farms contribute to lessening fishery output; thus, fisheries expect compensation for lost productivity. In addition, the government caps bidding rates, imposes a mandated share of locally sourced content, and places ceilings on size. Regulatory impediments were a factor cited by multinational energy company Ørsted for withdrawing in 2022 from bidding in stage 3 for an offshore wind project, claiming the regulations made the proposal uninvestable (Lu & Liu, 2023). Further, as Taiwan works to decrease dependence on Chinese supply chains, it has cut back on imports of low-cost Chinese solar products and wind turbines. Taiwan now seeks to import these from the European Union but at higher costs (Yin, 2024). The combination of Taipower’s monopoly, high cost, and regulatory obstacles discourages international interest in Taiwan’s offshore wind sector. Taiwan’s reliance on fossil fuels similarly threatens its economic competitiveness. Firms may relocate if Taiwan does not prioritize the transition to renewable energy. Suppliers to companies like Amazon, Meta, and Google increasingly must meet net-zero carbon requirements. These firms are major customers for Taiwanese chip manufacturers. A transition to renewables also would help it avoid the EU’s Carbon Border Adjustment Mechanism (Hilton, 2024). If Taiwan does not transition to a higher share of renewables in electricity production, businesses will either pay these carbon taxes, thereby impeding their global competitiveness, or move to somewhere that enables them to satisfy net-zero limits. Mitigation by supply diversification Energy security for Taiwan requires both diversification of imports and development of domestic renewables. Oil from alternative sources, for example, Norway, Canada, and the US, could supplement imports from the Middle East and OPEC. However, this solution does not mitigate the risk of a Chinese
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