Powering Taiwan’s AI Future: Navigating Grid Challenges with Smarter Energy Solutions

Author: Daniel James, ABB Head of Sales, Power Protection, Taiwan (https://new.abb.com/tw)

Taiwan is entering a new phase of technological growth, driven by the rapid rise of artificial intelligence (AI) data centers. These high-performance facilities are essential for powering cloud services, generative AI models, and big data processing—but they come with major energy demands. Over the next three years, this surge in electricity use will test the limits of Taiwan’s power grid and challenge its path to a more sustainable energy future.

AI Boom Brings Massive Energy Demands

According to the Ministry of Economic Affairs, electricity use from AI-related activities in Taiwan is projected to grow from 240 megawatts (MW) in 2023 to over 2,200 MW by 2028—nearly a tenfold increase. Much of this demand will come from global tech giants like Amazon Web Services (AWS), Nvidia, and Foxconn. For example, Foxconn and Nvidia are planning a new AI data center in Kaohsiung, starting with 20 MW of power and scaling up to 100 MW. AWS is also investing $5 billion in a new cloud region in Taipei.

Grid Under Pressure: A National Challenge

Taiwan’s power grid, already operating near capacity in some regions, must quickly adapt. Government projections show the country will need to boost electricity availability by 12–13% during peak hours between 2024 and 2029 just to keep up. Northern Taiwan, home to many tech hubs, is already facing a shortfall. As a result, large data centers above 5 MW are no longer being approved in the north, prompting a shift to central and southern Taiwan, where renewable resources are more available.

To address these challenges, the government has launched a 10-year, NT$564.5 billion (US$18 billion) power grid resilience plan led by state utility Taipower. The initiative includes upgrading substations, reinforcing transmission corridors, and adopting smart grid technologies. These improvements are critical to support industrial growth and maintain pow-er quality as demand intensifies.

Nuclear Exit Adds Further Pressure

Taiwan’s situation is made more complex by its plan to decommission all nuclear power plants by 2025. Nuclear has long provided a stable, carbon-free base load. Phasing it out will remove a key pillar of reliability just as demand from AI and semiconductor facilities surges. Without nuclear, Taiwan must rely more heavily on natural gas, renewables, and energy storage—while ensuring the grid can handle this transition.

However, Taiwan’s geography—limited land and dense urban centers—makes it challenging to build new renewable plants or expand transmission infrastructure. Solving these issues will require strong public-private collaboration, streamlined permitting, and major investment in next-generation energy technologies.

Pushing for Clean and Stable Power

In response, Taiwan is actively integrating renewables like solar and geothermal into its energy mix. Google has already invested in a 100 MW solar plant in Changhua County and signed a deal for 10 MW of geothermal energy to support its local data operations by 2029. But solar and wind are intermittent by nature, meaning that storage and grid up-grades are essential to avoid instability.

The government is supporting modernization of substations and large-scale battery energy storage systems (ESS) to make the grid more flexible and reliable. These systems can store energy during low-demand hours and release it during peaks, helping balance renewable variability and reduce blackouts.

Building More Efficient Data Centers

Another critical step is improving energy efficiency. New data centers in Taiwan are expected to meet Power Usage Effectiveness (PUE) targets below 1.2—indicating very low energy waste beyond computing needs. Achieving this requires efficient cooling systems, smart energy management tools, and optimized power distribution.  These improvements not only cut operating costs but also help ease strain on the grid at a time when every megawatt counts. As AI models and applications become more energy-intensive, building smarter infrastructure will be essential.

On-Site Generation and Temporary Backup

To further improve energy reliability, many data center operators are turning to on-site power generation. This includes solar arrays, geothermal systems, and fuel cells that provide clean electricity directly at the facility. Local generation helps reduce transmission losses, improves power quality, and ensures more control over energy supply—especially in areas where the grid is under stress.

In the short term, gas-powered generators (gensets) are also being used to provide emergency or backup power during peak loads or outages. While not ideal from a sustainability perspective, these gensets offer a reliable stopgap until grid improvements and cleaner alternatives are fully in place. Over time, their use is expected to decline as more efficient, renewable solutions become widely available.

A Smarter, Greener Future for AI Infrastructure

By combining on-site renewables, energy storage systems, and reliable backup technologies, Taiwan’s data centers can maintain high reliability, use energy more efficiently, and significantly lower their carbon footprint. This holistic approach also supports Taiwan’s broader goals—transitioning to a low-carbon economy, building a more resilient grid, and keeping its leadership edge in AI and semiconductor innovation.

Achieving this vision will require tight coordination across government agencies, energy providers, and technology partners. Policy incentives, fast-track permitting, and continued investment in smart grid infrastructure will be key. Meanwhile, companies like ABB will play a vital role in delivering the high-efficiency UPS, PCS, and ESS systems that make it all possible.

As global AI demand grows, Taiwan’s ability to scale responsibly while staying sustainable could become a model for other tech-forward economies. Investing in smarter energy today ensures the country’s AI ecosystem remains strong, reliable, and future-ready.