Taiwan’s energy crossroads: Powering an AI future while recalibrating its energy mix

Taiwan is seeking to balance energy security, economic competitiveness and a renewed nuclear debate as AI accelerates electricity demand on a grid almost wholly dependent on imported fuel.

An energy system built on imports

Taiwan’s energy landscape is shaped by a fundamental constraint: a scarcity of indigenous energy resources. Nearly 97% of the island’s energy supply is imported, making Taiwan one of the world’s most import-dependent advanced economies.

This reliance has long been viewed as a strategic vulnerability, particularly given the concentration of oil and liquefied natural gas (LNG) shipments that traverse critical maritime routes.

Recent assessments of official figures and expert analyses indicate Taiwan could sustain normal energy consumption for only a limited period should overseas supplies be severely disrupted. The safe storage capacity for natural gas is around 11 days.

The island’s primary energy mix remains dominated by fossil fuels. According to 2026 data disclosed by Taiwan Power Company (Taipower), the state-owned utility responsible for Taiwan's power generation, transmission, and distribution, thermal power accounted for 81.3% of total electricity generation, including 26.6% from coal, 1.4% from oil, and 53.3% from natural gas; while renewable energy accounted for 12.7%.

Economist Liang Chi-yuan (梁啟源), a professor at Taiwan's Graduate College of Sustainability and Green Energy of the National Central University, told TCN the government projects a reserve margin of around 8% this year.

Liang said there have been four months in the past two years where the nighttime reserve margin fell below 10%, and 40 days last year when it fell below 7%. He said the pressure of power rationing this year could be high.

Civil engineer and former Minister of the Interior Lee Hong-yuan (李鴻源) said natural gas is highly dependent on international shipping and immediate supply chains, with high storage costs. Unlike coal, it cannot be stored for long periods, and unlike nuclear energy, it does not have a stable load capacity.

Lee added that geopolitical tensions such as war, sanctions, or disruptions to shipping, would immediately impact the supply of natural gas.

Lee said he once warned the government that in countries that do not produce natural gas, the fuel can account for a maximum of 20% of the energy mix, but in Taiwan it exceeds 50%.

Electricity demand accelerates in the AI era

Taiwan’s emergence as the epicenter of advanced semiconductor manufacturing has intensified pressure on the power system. The rapid expansion of AI infrastructure, data centers, and high-performance computing facilities is expected to drive electricity consumption substantially higher over the coming decade.

On June 18, Director General Wu Chih-wei (吳志偉) of the Energy Administration under Taiwan's Ministry of Economic Affairs (MOEA) said at a press conference that Taiwan's electricity demand will grow by an average of 2.5% annually through 2035, more than double the 1.2% average annual increase recorded between 2016 and 2025.

Wu further stated that the forecast also exceeds both Taiwan's previous 2025 estimate of 1.7% and the projected growth rates of neighboring economies such as Japan and South Korea.

Wu attributed the upward revision primarily to the rapid expansion of AI data centers, continued capacity additions in the semiconductor industry, and sustained growth across advanced electronics manufacturing, all of which are moving from planning stages into concrete implementation.

The trend mirrors a global phenomenon. Gartner estimated that worldwide data-center electricity consumption would grow by more than a quarter in 2026 alone, driven primarily by AI workloads.

Beyond industrial demand, Wu noted that rising temperatures have become an increasingly significant driver of electricity consumption. As of 2026, Taiwan has already recorded 44 days with average daily temperatures exceeding 26 degrees Celsius, compared with 38 days during the same period last year, contributing to stronger demand for cooling and air-conditioning.

Wu further explained that while Taiwan's GDP grew by 8.76% in 2025, electricity consumption actually experienced negative growth, thus increasing the added value per kilowatt-hour compared to the past.

He also stated that installed capacity increased by 3 gigawatts (GW), representing a growth rate of 4.6%, with offshore wind power increasing by 0.6 GW and solar power increasing by 1.2 GW in the renewable energy sector.

Nuclear power returns to the policy debate

For years, Taiwan pursued a policy of phasing out nuclear energy. The island’s last operating reactor was shut down in May 2025, marking a milestone in that transition.

Yet growing concerns over energy security, industrial competitiveness, and future electricity demand have prompted a reassessment.

In March 2026, President Lai Ching-te (賴清德) stated that with AI and data center construction driving a surge in electricity demand, combined with the EU's implementation of the Carbon Border Adjustment Mechanism (CBAM) and geopolitical changes, Taiwan needs greater energy resilience and should recalibrate its approach to nuclear power.

Lai added that any review of restarting nuclear plants would proceed alongside continued support for renewable energy development, and that the government would remain open to advanced nuclear technologies, including nuclear fusion and small modular reactors (SMRs).

Renewables remain central to long-term strategy

Even as nuclear power re-enters the conversation, Taiwan has not abandoned its renewable-energy ambitions.

MOEA Minister Kung Ming-hsin (龔明鑫) said on June 17 that as power generation and green energy construction are increasing, it is estimated that renewable energy will account for 15% of Taiwan’s total energy mix by the end of 2026, per Yahoo.

Though they still represent a minority share of total electricity generation, renewables have expanded steadily over recent years.

TCN will continue to bring you reports and updates on Taiwan’s and Taiwanese companies' efforts in new energy, such as hydrogen energy, nuclear fusion, and geothermal energy.