Japan built the institutions Taiwan lacks for managing long-cycle energy risk, yet still failed to unlock its geothermal wealth — a reminder that institutional capacity matters, but does not guarantee delivery
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By Romain Blachier / Contributing reporter
Taiwan’s renewable shortfall is a problem of execution, not resources. Japan’s long-cycle, joined-up energy planning is the model worth studying — but what Taiwan can borrow is the institutional machinery, not the politics.
When Nvidia CEO Jensen Huang (黃仁勳) used his visit to Taipei last month to warn that the country needs far more electricity, he was naming a constraint its own planners already know well: Taiwan Power Co (Taipower, 台電) expects demand from the semiconductor and artificial intelligence (AI) sector alone to exceed 5 gigawatts (GW) by 2030. The harder question is not whether to build more capacity but which kind, and whether the institutions exist to deliver it — a question Japan’s energy system has grappled with for decades.
Part 1 of this feature (“Why Taiwan’s energy transition keeps falling short,” May 27) argued that Taiwan’s shortfall is a failure of institutional follow-through rather than of geology, geography or capital. Geothermal makes the point. The government’s own surveys put the island’s deep geothermal potential at up to 40GW, of which about 10GW is realistically developable. What feeds the grid is trivial: the Tuchang plant in Yilan, which began generating in January, became the first in Taiwan to exceed 5 megawatts (MW). Every operating plant taps shallow hot water, not the deep, engineered reservoirs that next-generation geothermal needs. As Taiwan winds down its nuclear fleet, the gap falls largely to imported coal and gas — the opposite of where the country says it wants to go. The heat beneath Taiwan is not the constraint. Bringing it to the surface and onto the grid is.
Photo: Lin Ching-hua, Taipei Times
EXPLORATION RISK
Ask the few companies drilling in Taiwan what is missing, and the answer is consistent. For Alexander Helling, chief executive of Baseload Capital, which is developing projects at Tatun in the north and Hualien in the east, the binding constraint is exploration risk.
A developer must sink wells costing hundreds of millions of dollars before knowing whether the resource below is worth exploiting; many disappoint, and no private company can shoulder that gamble alone. No Taiwanese mechanism shares it either: a power-purchase contract guarantees a price but does nothing about the risk that the drilling itself fails. Helling’s remedy is a single, empowered cross-agency body with firm deadlines, real power and a direct link to financing and risk-sharing.
Photo: Chiang Chih-hsiung, Taipei Times
Sharing this kind of upfront risk is something Japan has spent decades building into its institutions. Its state-owned energy and minerals agency, Japan Oil, Gas and Metals National Corp (JOGMEC), takes equity stakes in mining projects abroad, holds strategic stockpiles and guarantees to buy output years ahead, so private investors are not left exposed — the logic behind the joint critical-minerals group it agreed to the US in October last year, under the Ministry of Economy, Trade and Industry (METI). For Taiwan, the lesson is the method, not the mineral: a state prepared to absorb the risk that private capital will not.
CAUTIONARY TALE
Yet Japan is also a cautionary tale on the very resource at issue. JOGMEC’s mandate has included geothermal since 2012, and Japan sits on the world’s third-largest geothermal reserves, estimated at about 23GW. Even so, geothermal still only provides about 0.3 percent of the country’s electricity. The machinery is not the obstacle; entrenched local interests are. Roughly 80 percent of the resource lies inside national parks, and the powerful hot-spring industry has resisted it for decades.
Seen from inside Taiwan’s own system, the picture looks less like gridlock. The Industrial Technology Research Institute (ITRI) describes the offshore-wind build-out as agencies genuinely cooperating: the transport, defense and agriculture ministries jointly redrew parts of the Taiwan Strait shipping lanes to free sea space for wind farms, a decision that crossed three bureaucracies and touched a national-security nerve. As of March, installed offshore wind capacity had reached 4.5GW, according to the Ministry of Economic Affairs (MOEA), among the leading in the Asia-Pacific. Finance tells the same story. Offshore wind will need close to NT$2 trillion in financing by 2035, the government estimates, and in October 2024 the Executive Yuan raised the national credit-guarantee ratio from 60 to 80 percent to coax cautious lenders in. Taiwan can do it, when political will is concentrated on a single sector.
On geothermal, the bottleneck is at last drawing a response. The MOEA has proposed amendments to the Renewable Energy Development Act (再生能源發展條例) that would define geothermal as a national natural resource and create a clearer legal basis for directional drilling. The 2026 feed-in tariff now carries a dedicated rate for next-generation geothermal for the first time. Meanwhile, Taiwan’s geothermal policy framework now points toward a national target of 6GW by 2050.
Whether such cooperation can be sustained is the harder question, and the record is mixed. The clearest test is the one Part 1 examined: the long friction with the EU over local-content rules in the third round of offshore-wind auctions. What that exposed was not an inability to coordinate one decision, but a failure to hold a steady signal across auction rounds and changes of government — enough to push several European developers out of the market.
Holding a course steady over years is what Japan’s system is built to do, and where the comparison grows delicate. METI’s energy blueprint, revised on a fixed cycle and negotiated among ministries before publication, is meant to survive changes of government. But part of that continuity is political, not institutional: the near-monopoly of the Liberal Democratic Party has spared Tokyo the test of handing an energy strategy to a successor determined to undo it. Taiwan has no such cushion, and should not want one — its lively alternation between the Democratic Progressive Party (DPP) and the Chinese Nationalist Party (KMT) is the mark of a healthy democracy, and precisely what makes holding a single line across a decade so hard. And because almost all the nation’s electricity is bought by one utility, Taipower, risk gathers in a single place rather than spreading across many buyers.
The window Jensen Huang pointed to is real. Taiwan’s challenge is to build an institution with a horizon longer than the next election, with the authority and balance sheet to carry the risks no single developer will. Even that guarantees nothing: Japan has had such institutions for years and still leaves its geothermal reserves in the ground. The shortfall was never a lack of resources, capital or policy, but the failure to turn all three into electricity on the grid — and by that measure, the only one that counts, neither the model nor its student can yet claim success.
Romain Blachier is an associate fellow at the Fondation Jean-Jaures. He works in the renewable energy sector and teaches political science.
