South Korea Energy Policy: New Strategy Announced

British Embassy Seoul

January 2014

Summary

South Korea’s new energy strategy is announced. While nuclear will continue to grow, ambitions to expand electricity supply mean much more coal. Potential for UK commercial opportunities on energy efficiency.

Detail

South Korea’s Cabinet in mid January approved the country’s Second Basic Energy Plan, an energy policy framework covering the period 2014-2035.  This marked the first comprehensive statement of new President Park Geun-hye’s energy ambitions.  Minister for Trade, Industry and Energy Yoon Sang-jick called it a decisive shift from “conventional supply control to demand-side control”.

 

The key measures set out in the plan were as follows:

 

  • The target for nuclear power generation would be reduced from 41 per cent by 2030 to 29 percent by 2035.

  • A target to reduce electricity consumption by 15% below Business as Usual (BAU) by 2035 through energy tax and electricity price reform.

  • The renewable energy target of 11% by would be delivered by 2035 rather than the previous plan of 2030.  A shift in focus towards solar and wind, less on bio energy and energy from waste.

  • A target of 15% of electricity from distributed power generation by 2035, up from the current 5%.  Where long distance power transmission was unavoidable, greater consideration would be given to underground lines. 

  • New coal power stations should apply ‘best available technology”.  The government would invest in clean coal including Coal to Liquid (CTL) and Carbon Capture and Storage (CCS) pilot plants.  [Comment: but no requirement for new coal plants to be CCS-ready.]

  • All new buildings should be “zero energy” by 2025.   

  • The introduction of a Renewable Heat Obligation for large buildings (10% of heat energy consumption to come from renewables).

  • Pursuit of an East Asia grid network, potentially linking electricity generation in Russia through North Korea to South Korea. 

 

Public attention has focused solely on the nuclear target.  South Korea has the highest density of nuclear reactors in the world and its 23 reactors make up 26% of the power mix.  Public support has waned, however, following Fukushima and a corruption scandal in its domestic nuclear industry.  But despite the reduced target, a 40% increase in the power demand forecast means that an estimated 18 new reactors will need to be built by 2035, increasing capacity from 21GW in 2012 to 43GW in 2035, and allowing all previously approved new build projects to go ahead as planned.  A fact not lost on the anti-nuclear campaigners who accuse President Park of ignoring public sentiment.

 

The energy plan did not alter Korea’s intention, announced last year, to build 25 new coal plants by 2027.  Specific targets for coal and gas in the generation mix will be decided later this year, offering a window of opportunity for supporters of the case for gas.  But a dramatic u-turn is unlikely given Korea’s desire to address power shortage concerns. 

 

Comment

 

 

The new energy plan illuminates a number of potential commercial and research opportunities which we will follow up, notably on green buildings, energy management systems, and underground transmission cables. The green buildings summit and trade mission in February will provide an excellent start.

 

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Countries: South Korea
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