At the forefront of Taiwan's renewable energy revolution are the island's escalating energy needs and the imperative shift from fossil fuels to cleaner alternatives. Taiwan's ambitions to establish a thriving hydrogen energy industry remain an uphill battle, hampered by an inadequate renewable energy supply, lack of infrastructure, and policy gaps.
Clean hydrogen market size (US$ billion per year), 2030 to 2050
Source: Deloitte analysis based on the HyPE model
David Lin, a partner at Deloitte Legal and head of the Power, Utilities, and Renewables team, provided a reality check on the challenges facing Taiwan's push into hydrogen, despite the promise of the clean fuel to help the semiconductor-powerhouse decarbonize its energy-intensive economy and meet net-zero emissions goals.
"While hydrogen certainly has vast potential as a future energy carrier, Taiwan currently lacks the renewable energy capacity to produce meaningful amounts of green hydrogen from electrolysis," Lin said, referring to the process of using renewable electricity to split water molecules and extract hydrogen gas.
Taiwan aims to have 20% of its electricity generated from renewable sources by 2025, but Lin's presentation showed the island was falling well short of its solar and offshore wind installation targets as of 2023.
According to ITRI, Taiwan's hydrogen demand is expected to reach 3.67 million tons annually, driven by the industrial and transportation sectors.
However, fulfilling that demand will require cumulative investments of over US$9 trillion globally in the hydrogen value chain by 2050, covering production, storage, transportation, and end-use applications. It will also necessitate enhanced policy support, regulatory reforms, and international cooperation.
Cumulative investments in the hydrogen value chain (US$ trillion), 2050
Source: Deloitte analysis based on the HyPE model
While countries like the US, Germany, Japan, and South Korea have announced multi-billion dollar funding for hydrogen initiatives, Taiwan is still playing catch-up. Its current hydrogen-related policies remain narrowly focused on technical aspects with regulatory gaps around certification, infrastructure, and market-creation mechanisms.
Lin proposed several policy recommendations to bolster Taiwan's hydrogen industry. He advocated for the creation of a dedicated hydrogen energy policy that draws from successful models in Japan and South Korea. Such policies should encompass subsidies, pricing mechanisms, and competitive market regulations to attract foreign investments and foster local innovation.
"Taiwan needs to emulate its approach in developing the solar and wind industries by putting robust policies in place - be it through offtake guarantees, carbon contracts, investment incentives or public-private partnerships - to catalyze commercial hydrogen projects and attract foreign capital," Lin stated.
Global hydrogen trade among the key regions, 2050
Source: Deloitte analysis based on the HyPE model
He also stressed the importance of international collaboration, citing Taiwan's partnerships with global energy firms and private equity funds to develop offshore wind farms as a model for future hydrogen projects. These collaborations are not only crucial for technological advancements but also for setting industry standards and establishing robust legal protections.
Failure to do so risks Taiwan losing its competitive edge in key growth industries of the future like hydrogen fuel cells, storage solutions, and green steel production, where regional rivals are already staking claims.
Credit: Bloom Energy
He further discussed the legal intricacies of hydrogen projects. He elaborated on the comprehensive legal framework necessary to foster investment and development in the hydrogen sector. This includes ensuring regulatory compliance, securing environmental permits, and structuring financing arrangements that mitigate risks for investors and developers alike.
Moreover, Lin emphasized the need for a certification system for low-carbon hydrogen, ensuring transparency and sustainability in hydrogen production and consumption. He suggested that Taiwan should develop its own certification standards while aligning with international practices to facilitate global trade in hydrogen.
As the world increasingly shifts toward decarbonization, Taiwan can ill-afford to be left behind in the global race to construct hydrogen supply chains and capture the economic opportunities presented by the hydrogen economy.
