Taiwan makes most of the world's advanced AI chips. It has struggled to host the data centres that run them. The Strait of Hormuz disruption has sharpened that tension. On 23 August 2026, the chairman of Taiwan Power Co (Taipower), Tseng Wen-sheng, said the state utility plans to supply artificial intelligence data centres through dedicated lines running directly from power plants, with operators allowed to manage those lines themselves and with their length, costs and timing set by market mechanisms.
"The most stable way to supply electricity is to locate as close to the power source as possible," Tseng said, according to the Taipei Times. He described electricity as a "sovereign industry" and said Taiwan needs to reinforce the resilience of its supply amid geopolitical risks.
The comments came six months into a crisis that has exposed how much of Taiwan's power depends on gas shipped from the Gulf.
An island on an 11-day gas buffer
Taiwan imports around 96 per cent of its energy, with liquefied natural gas (LNG) accounting for roughly half its power generation, according to a Bloomberg report published by the Taipei Times in May. Gas is hard to store, and Taiwan keeps about an 11-day reserve.
Not a single shipment from Qatar had docked at the Yongan terminal in Kaohsiung since early March, when the Strait of Hormuz closed, the report said. Taiwan avoided a shortfall by buying on the spot market, "paying more than double the price of long-term contracts," and the government said in May that it had secured enough LNG until July.
The International Energy Agency (IEA) says almost 90 per cent of the LNG exported through the Strait in 2025 went to Asia, accounting for more than a quarter of the region's total LNG imports. Spot LNG prices in Asia averaged USD 17.5 per million British thermal units in the second quarter of 2026, up 45 per cent year on year, the IEA's Gas Market Report for the third quarter found.
Chips first, then data centres
Taiwan's electricity demand was already climbing before the war. The semiconductor industry consumed more than 42 billion kilowatt hours in 2025, around 18 per cent of the island's total, the Bloomberg report said. Taipower forecasts that average annual demand growth over the next decade will be more than double the rate of the previous ten years.
The grid is also geographically awkward. Most power is generated in the south and sent north to Taipei and the Hsinchu technology cluster, a system prone to cascading failures. A blackout in 2022, caused by a problem at a single power plant, left millions of households without power.
That is why Taipower, in September 2023, suspended new applications for data centres with demand above 5 MW north of Taoyuan, fearing a severe transmission bottleneck. Tseng illustrated the scale in July: a 5 MW data centre draws as much power as the Shin Kong Life Tower near Taipei Railway Station, while Taipower's own headquarters uses about 4 MW.
The plan: put load next to generation
In July 2026, Taipower said it would support plans by local governments to set up AI data centre zones near power plants in northern Taiwan, subject to checks on local grids and substations. The comments followed reports that the Taoyuan City Government was planning a northern AI computing centre near the Datan Power Plant in Guanyin District, which would require lifting the 5 MW restriction. The Minister of Economic Affairs, Kung Ming-hsin, said the central government was willing to relax the ban but that new data centres should, where possible, sit near power plants.
Tseng said the outlook for northern supply had improved since 2023, because additional gas-fired units at Datan had come online and the redevelopment of the Concord Power Plant in Keelung had cleared its environmental review.
The August plan extends that logic. Rather than sending power through the main north-south grid, Taipower is building dedicated links, such as lines from Datan to the Taoyuan Aerotropolis and from the Tunghsiao Power Plant in Miaoli County to the Hsinchu Science Park. Tseng said Taipower had shifted from planning overall supply to matching large users with specific generation and grid capacity, tracking demand at individual factories and parks.
The Hormuz problem the plan does not solve
Siting data centres next to Datan, Taiwan's largest gas-fired plant, solves a transmission problem. It does not solve a fuel problem. A data centre wired directly to a gas plant is, in effect, wired to the LNG terminals that feed it, and the Hormuz crisis has shown how quickly that supply can be squeezed.
Taiwan's alternatives are slow. Renewable generation has risen to around 15 per cent of the power mix from 5 per cent a decade ago, but wind and solar projects face local land disputes, according to the May report. Plans to restart mothballed nuclear plants would not bear fruit until around 2028. An official at the Energy Administration said Taiwan was aiming for energy self-sufficiency by 2034. In the meantime, an analyst quoted in the report observed that Asian power systems facing LNG pressure have "a backup plan in Asia to go back to coal."
For data centre investors, the result is caution. An investment director at Actis, which has invested in a Taipei data centre project, told Bloomberg that power constraints had been a key concern and that "in this environment, we have to be much more diligent and disciplined" about investments.
Backup power has limits
The crisis has also focused attention on what happens if supply fails. Delta Electronics, which supplies power and cooling hardware for data centres, told Bloomberg that backup power typically lasts only a few hours, "eight if you really push it," and that its main failsafe is diesel generators. "If energy supply relies heavily on imports, there's little companies can do to help," an executive said.
That is a frank assessment for an industry that sells resilience. A data centre can ride through a grid fault. It cannot ride through a weeks-long fuel shortage.
What it means
Taiwan's response is a version of what grid operators from Texas to Ireland are doing: asking large loads to locate where power already is, and to pay for the connection. The difference is that Taiwan's generation fleet depends on imported fuel to a degree few other advanced economies share.
The direct-line plan should make it easier for AI data centres to connect in the north, and it could ease the transmission strain that has defined Taiwan's grid for years. But the Hormuz disruption has made clear that the binding constraint is not wires. It is fuel security, and on that front Taiwan's options are measured in years.