How the Hormuz crisis threatens Taiwan’s power grid

Taiwan’s liquefied natural gas crisis has shifted from a debate about energy diversification into a real test of the island’s energy security. Taiwan relies on imports for 99% of its natural gas needs, and during 2025 around one-third of its 23.6 million tons of LNG imports came from the Gulf region — mainly Qatar, which supplied roughly 8 million tons, in addition to 200,000 tons from the UAE.

But with Qatari gas production halted and the Strait of Hormuz effectively closed, LNG tankers already loaded with cargo became trapped inside the Gulf, leaving Taiwan without any gas shipments from Qatar or the UAE during April and May. For an economy where gas-fired power plants generate nearly half of total electricity output, this represents a direct blow to the fuel that was supposed to make the power grid cleaner, more flexible, and more secure.

Despite the severity of the situation, the crisis has not yet fully appeared in the import figures. Taiwan imported 1.9 million tons of LNG in April, close to last year’s levels, although lower than the 2.03 million tons imported in March. Much of this apparent stability came from a record surge in US supplies, as American LNG shipments jumped from around 200,000 tons in March to 700,000 tons in April — the largest monthly volume of US gas imports in Taiwan’s history.

The United States has effectively become Taiwan’s emergency supply line, but spot cargoes do not offer the same stability as long-term Qatari contracts. They are also more expensive and far more exposed to global competition and price volatility.

Australia remains the second pillar of Taiwan’s gas supply network. Taiwan imported around 8 million tons of Australian LNG in 2025, and these volumes have remained stable over the past three years thanks to long-term contracts. However, Australia cannot fully replace the missing Gulf supply, especially with mounting domestic pressure on gas availability and Canberra’s decision to reserve 20% of gas exports for the domestic market starting in 2027.

Taiwan’s state-owned CPC Corporation, which handles LNG imports, confirmed it is trying to reduce dependence on the Middle East after signing a new US contract that will provide an additional 1.2 million tons annually. However, this remains a medium-term solution and cannot quickly replace lost Gulf shipments.

Although Russian gas could theoretically provide a practical alternative, Taiwanese authorities are avoiding that option for political reasons. Taiwan imported four cargoes from Russia’s Yamal project in 2025 totaling 350,000 tons, but it currently has no plans to increase Russian imports, despite having imported between 1.8 and 2 million tons annually from Russia before the Ukraine war.

The impact of the crisis is becoming increasingly visible in Taiwan’s electricity market. Monthly power generation averaged around 24.1 terawatt-hours during 2025, with gas-fired plants accounting for roughly 50% of that output. Of Taiwan’s total LNG consumption of 23.8 million tons, around 20 million tons go directly toward electricity generation, representing about 85.5% of total LNG usage.

If the loss of Qatari and Emirati shipments continues without stable replacements starting in June, Taiwan could lose more than 2 terawatt-hours of electricity generation per month — nearly 10% of total monthly demand. That could force difficult decisions regarding electricity allocation priorities, particularly during peak summer consumption.

The situation is further complicated by Taiwan’s broader energy transition strategy. The island had planned to phase out coal gradually, targeting an energy mix of 20% renewables, 30% coal, and 50% gas by 2025, while halting the construction of new coal-fired plants. But the fuel intended to replace coal — natural gas — is now itself in short supply.

As a result, coal has re-emerged as the most realistic emergency solution, similar to what is happening across several Asian economies. Coal plants currently account for about 35% of Taiwan’s electricity generation, while four units at the Hsinta power station, with combined capacity of roughly 2 gigawatts, were placed into emergency standby mode between 2023 and 2025. Those units can now generate around 1 terawatt-hour per month to offset part of the gas shortage.

Yet coal is far from a perfect solution. Taiwan’s coal imports fell to 4.5 million tons in April, the lowest level in five years, while Australian coal prices rose 25% year-over-year to $130 per ton. Taiwan is also competing with China and Japan for alternative coal supplies amid the broader global gas crisis.

Nuclear power, which was supposed to provide a strategic long-term solution, will not be ready in time. Taiwan’s state utility has proposed restarting the Kuosheng and Maanshan nuclear plants, which were shut down after their operating licenses expired in 2023 and 2025. If fully restarted, the four reactors could add around 30 terawatt-hours annually, but a full restart before 2028 appears unrealistic.

As a result, Taiwan now finds itself in a fragile position, relying on a patchwork of emergency US LNG shipments, limited Australian contracts, reserve coal stations, and a delayed nuclear option.

Authorities insist supplies are secured through September via spot purchases and Australian contracts, but media reports indicated official gas reserves were equivalent to only 11 days of consumption in early May, highlighting how narrow the safety margin has become.

The danger extends far beyond rising energy prices. Taiwan’s economy depends heavily on semiconductor manufacturing and solar panel production — two industries critical to the global economy and the clean energy transition. If the crisis worsens, industrial users are likely to face power rationing first, as governments typically prioritize households and residential consumers, potentially triggering another global semiconductor supply shock.

Taiwan’s energy transition over recent years was built around natural gas as a cleaner and more sustainable alternative to coal. But the Hormuz crisis is now exposing the scale of the risks embedded in that strategy.