Following is the ninth in a series of articles on President-elect Park Geun-hye’s key policies. ― Ed.
Ensuring a stable energy supply will surely be one of the key policy goals President-elect Park Geun-hye will push as Korea has the world’s 11th-highest energy consumption and is the fifth-largest oil importer.
To achieve security in the energy sector, the new government will put more focus on the demand side in its energy policy as power demand has increased faster than supply for the past few years.
The imbalance between power demand and supply has been worsening and Korea has to be concerned about electricity shortages during the summer and winter. At the end of November this year, the authorities launched a contingency plan for a possible power shortage this winter.
Industry watchers said if the trend continued, the nation’s sustained economic growth will be challenged.
Electricity market reform
After Park was elected last week, stock market analysts raised target stock prices of utility blue chips like Korea Electric Power Corp., the state-owned electricity distributer, saying the new government will seek rationalization of the electricity market, which mainly refers to a price hike of cheap electricity. If the electricity price is raised, KEPCO could improve its balance sheet. Debt of the utility giant has been snowballing due to a continued decline in sales.
In particular, Korea maintained a price of electricity for industrial use cheaper than that of OECD member countries in the course of driving the nation’s economic growth.
The new government will also face demand for easing its control over the electricity from the international community. In its in-depth review report on Korea, the Paris-based International Energy Agency urged Korea to remove barriers to new entrants and third-party access to network infrastructure and clear roles for publicly owned and private entities in the energy sector.
Despite mounting demand for electricity market reform, the government will rein in the speed of the reform as it could hamper the economic growth and cause resistance from citizens.
“In a longer term, the government has no choice but to rationalize the price of electricity to control energy demand overtaking energy supply,’’ Shinyoung Securities said in a report.
The new government will continue to diversify energy sources on the power demand side, maintaining nuclear power as the main energy source.
Diversifying energy sources
According to the fifth basic plan of long-term electricity demand and supply, published by the Ministry of Knowledge Economy in 2010, dependency of electricity generation capacity on nuclear power and renewable energy sources was supposed to rise by 2020, while the power generation by environmentally unfriendly energy sources like coal and gas would decrease gradually.
Under this long-term energy policy, President Lee Myung-bak had sought to build more nuclear power plants and to drive power generation by new and renewable energy sources to expand power generation capacity.
Industry watchers predicted the president-elect will follow suit from the current government with regard to energy sources, but ease the speed of nuclear power plant construction due to safety issues. Safety concerns over nuclear power plants, escalated by the meltdown of Fukushima Daiichi power plant in 2011, have put the brakes on nuclear power plant construction in the nation. To make things worse, use of thousands of untested parts in the two nuclear reactors were revealed in early November, which will raise doubt over the safety of nuclear power plants.
“Despite the safety concern, the next government will not lower dependency on nuclear power plants, considering environment and energy efficiency issues,’’ the report from Shinyoung Securities said.
It added the next government will not speed up to develop new and renewable energy sources, most of which are in the initial stage of the development.
The contribution of renewable energy sources to total primary energy supply in Korea is among the lowest in the OECD, according to the IEA. In 2011, new and renewable energy contributed to 1.6 percent of the total primary energy supply. This compares to IEA averages of 8 percent in the same period.
By Seo Jee-yeon (
jyseo@heraldcorp.com)
