US-China geopolitical chess: Taiwan's energy sector emerges

Annie Huang, Taipei; Vyra Wu, DIGITIMES Asia 0

Credit: AFP

The US Department of Energy remains steadfast in its drive to overhaul local energy infrastructure. In addition to the surge in demand for transformers vital to the electrical grid, which is propelling growth for Taiwanese heavy electrical equipment manufacturers, numerous Taiwanese enterprises are keenly eyeing the lucrative prospects in the US energy storage sector. Nonetheless, amidst apprehensions stemming from Sino-US tensions, industry stakeholders are adopting a cautious stance in the near term, albeit foreseeing a steadfast growth trajectory in the medium to long run.

The Transmission Facilitation Program (TFP), slated to kick off construction in the initial quarter of 2025, is anticipated to catalyze a 6%-7% compound annual growth rate in transformer requisites over the ensuing decade. With international conglomerates grappling with production constraints, Taiwanese entities are reaping orders from the US market. Notably, Fortune Electric has secured a fully subscribed order book for 2024-2025, prompting a concerted expansion drive in 2024 to cater to the heightened demand.

Underpinned by burgeoning initiatives in new grid installations and decommissioning endeavors in the US, opportunities in the local energy storage sphere are witnessing an upsurge. Industry mavens underscore that the energy storage landscape in the US predominantly centers on California, Texas, and Puerto Rico, with California registering an unparalleled pace of advancement, buoyed by a conducive policy framework and a meteoric surge in aggregate storage capacity.

Observing the ingress of Taiwanese enterprises into the US market reveals a preference for debut appearances at industry expos. For instance, Truewin Technology, a recipient of investment from Formosa Smart Energy Tech, showcased its lithium battery systems for uninterruptible power supplies (UPS) at Disasters Expo 2023 in California.

Industry insiders emphasize the colossal opportunities inherent in the US market, albeit underscore the intrinsic nexus between the energy domain and regulatory paradigms. For novices, the imperative of discerning local policy trajectories across diverse state jurisdictions cannot be overstated. Moreover, against the backdrop of the 2024 US presidential election that introduces additional variables, the immediate operational focus may temporarily revert to the Taiwanese market.

Nevertheless, a cohort of industry protagonists is broadening their ambit to encompass overseas operations. Taiwan Cement, for instance, garnered attention by showcasing integrated charging and storage solutions at CES 2024 in the US, eliciting fervent inquiries from local attendees. With decentralized grid frameworks gaining ascendancy, numerous US charging stations mandate incorporating energy storage systems to bolster grid resilience. Consequently, the imperative for energy storage apparatus has assumed a non-negotiable stature for entities engaged in transformative power projects.

Industry pundits underscore the indispensability of acclimatizing to local regulatory frameworks in the US while also espousing a vigilance vis-à-vis the international geopolitical tapestry governing energy equipment provisioning. Recent actions by US utility behemoth Duke Energy to phase out energy storage solutions supplied by Chinese entity CATL under congressional duress attest to the heightened sensitivities around procuring critical energy infrastructure.

Analysts predict that against the backdrop of intense global endeavors toward carbon neutrality, political brinkmanship between major geopolitical actors could engender sustained ramifications across industry supply chains. Nonetheless, with Taiwan's burgeoning presence across the charging infrastructure, energy storage, and solar energy sectors, juxtaposed against US endeavors to recalibrate reliance away from China, Taiwanese entities stand poised to capitalize on fresh business opportunities. However, a cautious eye must remain attuned to the trajectory of US-China relations after the 2024 US presidential election.