POWER November 2013 - 41

Power Policy
7. The demand and supply plan. The 6th Basic Plan of Long-Term Electricity Supply
and Demand (2013-2027) compared to the 5th plan (2010-2024) calls on generators to maintain
a constant reserve margin of 22% until 2027 in order to stabilize power demand and supply. Also
urged is massive capacity expansion for nuclear, coal, and renewable generation. Source: MOTIE
Nuclear
Coal
50
45
40
35
30
25
20
15
10
5
2010
(5th)
2012
(6th)
2015
(5th)
2015
(6th)
between 2009 and 2013 tested five sectors to
improve the power system efficiency and to
develop output stabilization technology for
renewable energy. The project included testing
of commercialized electric car charging
stations and real-time payment systems.
On the renewables front, too, KEPCO
is equipping itself with the technology and
competency needed for all aspects of offshore
wind power generation, including
engineering, construction, and operation,
and it has ambitions to become one of the
world's top three offshore wind energy
players by 2020.
Research is under way at an offshore wind
farm in the Yellow Sea, and South Korea is
also developing biogas turbine generators
and establishing infrastructure for solar energy
testing facilities. An interesting project
from the Korea Institute of Energy Research
(KIER), meanwhile, seeks to use ammonia
produced using water, air, and electricity from
renewables in existing energy storage and
transportation infrastructure. KIER has to date
developed a vehicle whose fuel has an ammonia
substitution rate of 70%.
Establishing a Safety Net
South Korea's future energy goals are outlined
in biannual power development plans
based on which generation companies apply
for government approvals for power plant
construction. The latest installment of the socalled
" Basic Plan of Long-Term Electricity
Supply and Demand (BPE) " is the 6th BPE,
issued this year, which covers a planning period
from 2013 to 2027.
Compared to the 5th BPE (2010-2024),
the 6th plan calls for a marked rise in the
proportion of baseload power plants: It increases
the share of coal-fired generation to
34.6% on a 2027 basis compared to 27.9%
on a 2024 basis (Figure 7). Those plants will
November 2013 | POWER
2020
(5th)
2020
(6th)
2024
(5th)
2025
(6th)
2027
(6th)
be needed to meet a power consumption
growth rate increase of 3.4% in the 6th plan,
a figure that was revised from 3.1% in the
5th plan, and significantly, to retain a target
electricity reserve margin rate of 22%, the
government reasons. However, deferring a
decision to build any new nuclear plants, the
plan notably stops short of planning for new
nuclear capacity beyond what is already approved
in the 5th plan (35.9 GW), given ongoing
safety concerns.
Analysts applauded the plan's stance to
complete six planned but uninstalled nuclear
reactors from the 5th Basic Plan, which have
been controversial following the procurementrelated
scandal at Korea Hydro and Nuclear
Power. But according to credit ratings agency
Fitch Ratings, if no nuclear generation is built
after 2024, the share of higher-cost generation
(including coal and LNG-fired power plants)
will surge-and Fitch projects the government
may rethink its position on nuclear energy
given high production costs anticipated.
At the same time, it says, the government's
call for 61 new generating units (excluding
renewables) by 2027 underscores the need for
urgent reforms of its power sector.
Higher generation capacity and a more expensive
overall generation mix through 2027
will continue to burden KEPCO-which will
build about 35 of those new plants-if the
government does not allow for cost-reflective
tariffs. Fitch also projects that KEPCO and
its five generation subsidiaries could spend
more than 10 trillion won ($9.3 billion) per
year solely on the construction of the new
coal and nuclear plants-even if the government
invites more private sector participation
in the generation market.
Seeking Fuel Stability
The 6th plan, meanwhile, also contains an
interesting admission by the government that
www.powermag.com
LNG
Renewable
Others
power generation costs will need to be curbed
in the face of expected fuel cost rises in the
mid- to long term. Though South Korea accounts
for 2.1% of the world's total energy
consumption, it is poor in natural resources
and has been forced to import a staggering
96% of its fuel needs for more than a decade.
In 2012, the country spent an astounding
$184.8 billion (compared to $172.49 billion
in 2011) to import 96.4% of its energy-a
figure that represented a third of the country's
total imports.
Comprising 99% of energy imports
were almost a billion barrels of oil from
the Middle East (and a tiny fraction from
Asia and Africa); 116 million tons of
coal from Australia, China, and Indonesia;
36.7 million tons of LNG from Qatar,
Oman, and Indonesia; and 907.4 tons
of uranium from Russia and Canada. Effectively,
South Korea was in 2011 the
world's third-largest coal importer. And
in 2012, because it is dependent on costly
oil-indexed price imports for nearly all
its LNG, except for a small fraction obtained
from its own Donghae gas fields, it
became the world's second-largest LNGimporting
nation, after Japan.
Future plans to diversify imports focus on
shale gas, and to that effect, the government
in September 2012 announced a " Shale Gas
Development and Use Strategy. " The Korea
Gas Corp., an entity responsible for importing
natural gas, has a stake in developing
shale gas fields in Canada and is attempting
to secure supplies offshore Mozambique.
It has also more recently signed a purchase
contract with Cheniere Energy's Sabine Pass
LNG facility for 3.5 million metric tons of
LNG annually (making it the first U.S. LNG
export project). Then the government plans
to increase storage rates and add capacity
from three other import terminals already
in operation at Incheon, Pyeongtaek, and
Tongyeong.
A Comprehensive Vision
South Korea's attempts to balance energy
security and the environment are notable in
their scope and span, but the country continues
to be at the mercy of several volatile
factors. Later this year, the government is
expected to release its second energy master
plan. It remains to be seen if, as some
government sources report, that plan will
lay out a more flexible vision that could allow
the country to achieve the tremendous
economic growth it is capable of while engaging
a smart strategy to address climate
change. ■
-Sonal Patel is a POWER associate
editor. Follow her on Twitter @sonalcpatel
and @POWERmagazine.
41
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POWER November 2013

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