10 Takeaways From Simulated Attacks on Taiwan’s Energy Sector

China seeks not just to intimidate Taiwan, but to methodically erode its sovereignty — using coercive tools short of war to compel submission without firing a shot. FDD experts facilitated a two-day tabletop exercise in July with the Taipei-based Research Institute for Democracy, Society, and Emerging Technology to explore how the Chinese Communist Party (CCP) might use Cyber-Enabled Economic Warfare (CEEW) to disrupt and potentially block Taiwan’s liquified natural gas (LNG) and coal imports. The exercise tested the Taiwanese, American, and allied responses to China’s economic, cyber, and bureaucratic pressure and the CCP’s attempts to impose a quarantine against the island’s energy sector. Participants included national security experts from the United States, Taiwan, Japan, Australia, and the United Kingdom. Here are FDD’s top 10 takeaways from the exercise — for Taipei, Washington, and allies and partners across the globe:

1. CEEW is the CCP’s most likely attack vector.

The CCP is likely to employ a CEEW campaign against Taiwan using economic, diplomatic, and intelligence tools — enhanced by military pressure under the guise of naval and air defense drills and exclusion zones — to put pressure on Taipei’s energy, financial services, and communications sectors. China often opens its CEEW campaigns with administrative actions, weaponizing regulation and lawfare to incrementally disrupt the status quo while maintaining plausible deniability. This effort would be amplified by malicious cyber activity and influence operations. Most countries, including Taiwan and the United States, underestimate their cyber vulnerabilities and overestimate their cyber capabilities in this situation.

2. Taiwan must build societal resilience to outlast a CCP-led siege.

Beijing believes pressure plus patience equals political collapse, so what unnerves China isn’t Taiwan’s defiance, but its people’s ability to withstand Chinese coercion — a societal resilience that has been growing under President Lai Ching-te. Time is the test: if Taiwan can withstand the initial pressure, pre-emptively strengthen its energy partnerships, and avoid being baited into rash moves that Beijing could spin as “provocative,” then Beijing’s advantage erodes. But buying time means Taiwan must act now to invest in cyber, energy, and societal resilience — ahead of a crisis — even if it’s costly.

3. China sees opportunity in Taiwan’s dependence on energy imports.

Nearly half of Taiwan’s electricity is generated from LNG. All of Taiwan’s LNG and coal is imported, and the island has only limited energy storage. This reality does not just pose a risk to the reliability of the grid but creates a strategic liability. The CCP’s heavy use of CEEW, selective maritime quarantines, and diplomatic pressure on Taiwan’s energy providers would allow China to easily put Taiwan in extremis, undermining societal resilience and compromising continuity of the economy.

4. Taiwan’s energy problem is a significant vulnerability for Taiwan and the world.

The loss of Taiwan’s LNG supply would have near-immediate global economic and diplomatic implications as Taiwan confronts a dilemma — whether to prioritize electricity for households and hospitals or for its semiconductor industry, the backbone of both Taiwan’s economy and its leverage in global diplomacy.

The CCP can use cyber, diplomatic, and economic tools as well as its maritime forces to hold Taiwan’s electric grid at risk. As such, Taiwan must explore all angles to build energy resilience. Taiwan must diversify immediately: rethinking its dependence on Qatar for 30 percent of its LNG imports — a country susceptible to Chinese pressure; locking in U.S. energy contracts, even at a cost premium; building more capacity for LNG storage; developing more renewable capacity (including potentially restarting shuttered nuclear plants); and investing in better grid design and security.

5. The United States should increase LNG exports to Taiwan.

In the energy realm, the United States has the capacity to substantially increase its supply of LNG to Taiwan while facilitating a closer partnership. Signaling a willingness to do so will send a message to major energy supplying nations that if they comply with pressure from Beijing, the U.S. will happily backfill Taiwan’s economic loss. Should Taiwan choose to employ nuclear power — by restarting existing reactors and/or investing in small modular reactors — the United States can provide further assistance.

6. If allies invest today, Beijing’s decision calculus shifts tomorrow.

Throughout the exercise, China maintained control of the pace of escalation as well as the international narrative. But dominance is not destiny, and China’s edge does not guarantee its victory over Taiwan. While not every partner must take the same action, the United States, Japan, Australia, and Europe each need to signal that Beijing’s actions will engender a global response. These partners can also provide economic support to help Taiwan bolster the country’s energy, cyber, and societal resilience ahead of a crisis — the type of resilience that will change Beijing’s calculus. Success depends on a coordinated effort to support deterrence and generate friction for the CCP — not just from Washington, but from Tokyo, Canberra, and Brussels.

7. Taiwan must improve public and private critical infrastructure protection efforts.

A weak link in Taiwan — and in the United States — is critical infrastructure planning across the government and collaboration with the private sector to identify and protect the most important assets. Taiwan must bring together public and private critical infrastructure providers (ports, aviation, cranes, etc.) for dialogue on how to shore up the island’s cyber and physical defenses. China is already conducting operational preparation of the battlefield in cyberspace, embedding malware and access points throughout allied critical infrastructures.

8. Practice makes democracies more agile in the gray zone.

Winning in the gray zone requires the development of agile national security decision-making processes with an increased bias toward action, which only comes from repeated practice. Additionally, military exercises — such as maritime exercises conducted by the U.S. Navy that stress convoy and escort practice and operations — can begin as bilateral operations with Taiwan that eventually evolve into multilateral exercises with Japan, Australia, and the Five Eyes partners. At the strategic level, practice and experience can lead to the development of pre-crisis coordination playbooks, and at the tactical level, muscle memory.

9. Indo-Pacific partners must play a key role in supporting Taiwan.

After the United States, Japan is the pivotal player in helping Taiwan weather a CCP-led energy coercion campaign. Tokyo is as indispensable in this scenario as in a cross-Strait invasion, though its role ultimately depends on political will. Japan has LNG resources, especially shipping and storage capacity, that could help relieve Taiwan’s immediate pressure. And Japan’s maritime forces, numerous and proximate, have the potential to alter Beijing’s calculus if Tokyo chooses to employ them.

Australia also has a unique role in the global LNG system. Pointedly, Australia is Taiwan’s largest supplier (40 percent of imports) and can augment deliveries to support Taiwan in a crisis. Additionally, Australian maritime forces can contribute to the safe passage of LNG deliveries.

10. European allies must step up in the economic arena.

Europe will be a key player in any economic pressure brought against China to stop its CEEW campaign. It is also home to major ship owners and maritime insurers; thus, Europe should take action now to shape the shipping insurance response to future convoy operations. Pre-crisis signaling from across the Atlantic could easily bolster deterrence.

Rear Adm. (Ret.) Mark Montgomery is the senior director of the Center on Cyber and Technology Innovation (CCTI) at the Foundation for Defense of Democracies (FDD), where he is also a senior fellow. Johanna (Jo) Yang is a CCTI research and editorial associate. Craig Singleton is an FDD senior fellow and senior director of FDD’s China Program, where Jack Burnham is a research analyst. For more analysis from the authors and FDD, please subscribe HERE. Follow Mark, Craig, and Jack on X @MarkCMontgomery, @CraigMSingleton, and @JackBurnham802. Follow FDD on X @FDD and @FDD_CCTI. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.