33 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE blockade. It only addresses the day-to-day uncertainties of overreliance on potentially compromised sources. Long-term security includes increasing domestically produced renewable energy to buffer the impact of a Chinese blockade. Expanding use of natural gas also offers security benefits by broadening suppliers and transport routes. Major natural gas reserves exist in Australia, Malaysia, and Indonesia (Lévêque et al., 2010). Japan and South Korea, both major importers of natural gas, have each widened import portfolios, which, however, leads to higher energy costs. Unfortunately, Taiwan cannot rely on stable funding flows into the natural gas sector. Global shifts toward low-carbon sources and sustainable energy lead to unpredictable demand and investment patterns (Lévêque et al., 2010). Therefore, the best course of action combines increased domestic renewable or nuclear energy electricity production with greater import diversity during the transition period. Although supply diversification will increase electricity prices, TSMC can likely pass these increases to consumers (Subramanian, 2024). Since TSMC is responsible for such a large share of advanced chips and is so proficient at chip manufacturing, the company has significant pricing power. TSMC is the exclusive supplier of Nvidia’s advanced artificial intelligence chips, with Nvidia accounting for 10% of the company’s revenue in 2024. Thus, while diversification will increase costs, TSMC’s market position allows it to manage these increases by raising prices without losing significant market share. Challenges and opportunities in an energy supply shift Taiwan must encourage investment in renewable and nuclear energy through both financial and regulatory reforms. Offshore wind represents the most viable renewable energy option to lower reliance on fossil fuel imports. Taiwan has a small, fixed land area, of which 79% is mountainous and unsuitable for solar plants, and the island’s weather is frequently cloudy (Webster, 2023). In addition, rooftop solar is expensive and often unavailable, a consequence of competing uses of rooftop space, such as for recreational areas or gardening. Distributed solar electricity experiences low utilization rates and high installation costs, while utility-scale solar may be more efficient and cheaper to install but more vulnerable to cyberattacks (Webster, 2023). In contrast, the Taiwan Strait has the highest potential for wind power in the world close to high population centers (Hilton, 2024). Taiwan should also address public distrust of nuclear generation. Reforming regulations—including constraints on size, locally sourced content mandates, and favoring local interest groups—would be a complementary set of actions along the same lines. Taiwan’s Bureau of Energy places bidding caps to prevent any one company or player from becoming dominant in the production of offshore wind, but these capacity limits inhibit achieving economies of scale. This restriction dampens the appeal, but companies that do choose to invest often find ways to circumnavigate the caps. For economies of scale advantages, firms jointly develop larger wind farms (Foxwell, 2022). Another reason developers consider joint projects is a 60% localization requirement. This large, mandated share of locally sourced content increases costs, and investments are not viable unless the projects are larger. For example, a standard type of foundation for offshore wind turbines, a jacket foundation, is approximately twice as much when produced domestically compared to one produced in South Korea (Foxwell, 2022). Taiwan should lower the required percentage of domestic production to decrease costs. Lifting the caps on bids would enable companies to capture economies of scale and reduce operating expenses that ultimately are passed on to electricity consumers. So too, Taiwan should diminish the role of the Changhua Fisheries Association, reigning in what companies must pay upfront. These regulatory reforms carry risks regarding the Chinese. If Chinese firms gain significant stakes in energy projects, Taiwan exposes its energy sector to Chinese leverage. If tensions rise, China may use this advantage for retaliation or to threaten Taiwan’s energy stability. However, Taiwan already has a security review mechanism, in which Chinese firms undergo more rigorous scrutiny than other firms when investing in Taiwan and its infrastructure (Hsieh & Chen, 2024). Current regulatory barriers increase the price of offshore wind projects, hindering renewable energy proposals. Offshore wind projects do not have to be as expensive as they are; Taiwan must decide whether to prioritize domestic interests, such as the fisheries association and domestic content manufacturers, or energy security and industrial competitiveness internationally. A major concern regarding relying on wind and solar is scalability. By contrast, nuclear energy can provide large-scale clean, carbon-free electricity to meet the needs of companies like TSMC aiming to decrease their carbon footprint. Nuclear can provide low-cost, reliable energy while promoting overall security by reducing import dependence (Nuclear Energy Institute, 2024). Bill Gates in the US
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