Taiwan Needs US Help on Energy Security

Senior Fellow
Former Research Fellow
President Tsai Ing-wen with Speaker Nancy Pelosi at the Presidential Office Building in Taipei on August 3, 2022. (Taiwan Presidential Office)
President Tsai Ing-wen with Speaker Nancy Pelosi at the Presidential Office Building in Taipei on August 3, 2022. (Taiwan Presidential Office)

Since the visit of US House Speaker Nancy Pelosi to Taiwan, China has shown increasing belligerence toward the independent island state, including with implicit threats to blockade it. Unfortunately, Taiwan depends desperately on energy imports to fuel its advanced economy. In 2021, it imported almost 98% of its total energy supply, mostly in the form of sea-borne fossil fuels. Such reliance gives China leverage over Taiwan, as demonstrated most recently in Chinese navy patrols of sea-lanes, military overflights in Taiwanese airspace, live-fire missile flights over and near the island, and drone incursions over Taiwanese islands near the mainland.

In addition to its long-standing support for the island democracy, the US has a vital economic interest in an independent Taiwan, which is the world's leader in advanced semiconductor fabrication. The US and its allies ought to do more to deter the PRC from trying to control shipping lanes to Taiwan, and to ensure that energy shortages do not cripple or intimidate the island.

Fossil fuel imports dominate the energy supply system for Taiwan: in 2021, 43% of these were in oil and petroleum products, 31% in coal and 18% in liquified natural gas (LNG). Australia is the island’s biggest supplier of coal and LNG. Most of Taiwan’ oil is from the Middle East. China’s ally Russia supplied 15% of coal imports in 2021 and about 10% of LNG, although the supply contract for Russian LNG expired in March 2022. The US was the source of about 20% of Taiwan’s oil and petroleum product imports and about 10% of its LNG.

Taiwanese planners hope to produce 20% of its electricity from renewables by 2025, but that would represent a growth of 233% over 2021 levels. The country does have three operating nuclear electric plants, accounting for 10% of generation from this source. But similar to the Japan’s Liberal Democratic Party and other counterparts in Germany, the ruling Democratic Progressive Party—which has the support of most voters—plans to phase out the existing operating plants by 2025 and to continue the ban on starting up an already built fourth nuclear facility.

Taipei cannot realistically break its reliance on imported fossil fuels in the near or even medium term. It could reverse its plans to phase out nuclear energy, as Germany and Japan have done. Since China dominates solar and wind products, it is not in Taiwan’s interest to quickly replace fossil fuels with renewables.

The United States could be very helpful by maintaining Taiwan’s energy supplies and deterring Xi Jinping’s efforts to use economic intimidation to achieve Beijing’s goal of taking over the flourishing, market-oriented democracy 100 miles from its shores. First and foremost, the US and its close allies in the region need to redouble their efforts to keep the East Asian sea-lanes open and free from economic coercion from the People’s Republic of China.

Second, the US should cement its role as the energy arsenal of democracy for the 21st century by facilitating and encouraging domestic production of natural gas and oil to supply European and East Asian allies that are united to sanction Russian aggression in Ukraine. This effort would include regulatory relief for production and building required infrastructure, as Senator Joe Manchin envisioned as part of the deal allowing the recent passage of the “Inflation Reduction Act” bill, which privileges renewable energy production in the US It would also signal to the financial world that investment in fossil fuel production is needed at this time of war and recession to offset the loss of Russian oil and gas supplies. Australia may be at peak LNG production capacity, but the US can easily meet the Taiwanese loss of Russian LNG supplies if it completes the four new LNG export facilities now under construction along the Gulf Coast. These new liquefaction plants will increase total US capacity by 10.33 billion cubic feet per day, quadruple the total Taiwanese imports of LNG on a daily basis in 2021.

Third, in the context of the US-Taiwan Initiative on 21st Century Trade’s negotiating mandate that was unveiled in August, the US ought to prioritize energy cooperation, which was not mentioned in the original catalogue of objectives for the negotiation. A good step would be to complete a free trade agreement with Taiwan, which would ease existing regulatory requirements for US LNG exporters. It could also promote trade in other energy-related areas, including coal and nuclear, as part of a program to secure energy supplies for Taiwan.

The US, preferably working with its close allies in East Asia, can enhance Taiwan’s ability to maintain energy security and independence by blunting the ability of China (or its ally Russia) to pressure the island with blockades or otherwise weaken its access to energy supplies. Taiwan remains the world's center of advanced semiconductor production, and its fall to PRC control would be disastrous. Taiwan cannot easily move to a non-fossil fuel energy economy, and the US—especially in concert with energy-rich ally Australia—can enable Taipei to remain secure and well supplied with energy for the decades required for any transition to any semblance of renewables-based energy independence.

Read in RealClearEnergy.