Too Optimistic about Supply and Price
The Ministry of Trade, Industry & Energy of Korea announced that it reported its eighth national electric power supply plan for 2017 to 2031 to the National Assembly on December 14.
According to the plan, the South Korean government is going to minimize an increase in the price of electricity while replacing nuclear and coal-fired power plants with LNG and renewable energy sources in stages. Specifically, the price is planned to be raised by 1.3% until 2022 and 10.9% until 2030. The target values do not reflect inflation rates and fuel costs though.
The government is planning to shut down nine nuclear power plants until 2030. Those include the first unit of the Wolseong Nuclear Power Plant, which has a capacity of 679 MW and is scheduled to be decommissioned in the first half of next year. Seven old coal-fired power plants are going to be shut down while four coal-fired power stations are converted into LNG power plants.
The total renewable power generation capacity is increased by 58.5 GW so that the ratio of renewable power generation is raised to at least 20% by 2030. The additional capacity includes 33.5 GW from photovoltaic power sources and 17.7 GW from wind power. Pumped-storage hydroelectric power stations are built, too.
Six projects for new nuclear power plant construction are halted, including those for the third and fourth units of Shinhanul and the first and second of Cheonji. The 10 nuclear power plants that reach the ends of their lives between 2018 and 2030 are retired without service life extension. Then, the number of South Korea’s nuclear power plants is reduced from 24 to 18 between this year and 2030.
The ratio of new and renewable energy facility capacity is increased instead. Specifically, it is slated to increase from 9.7% to 33.7% during the same period. The special consumption tax on bituminous coal is raised by six won per kilogram in June next year whereas the tax rate on LNG is lowered soon.
According to the government, the ratio of renewable energy-based electric power generation is expected to rise from 6.2% to 20% until 2030 while the ratio of LNG-based power generation rises from 16.9% to 18.8% and those of coal-based and nuclear power generation fall from 45.3% to 36.1% and from 30.3% to 23.9%, respectively. The ministry predicted that the unit cost of renewable energy-based power generation is estimated to fall 35.5% until 2030 in view of foreign organizations’ statistical data including photovoltaic module price estimates.
Some experts point out the government is painting a rosy picture. According to them, the real electricity price in South Korea increased 13.9% and the nominal electricity price reflecting inflation and fuel cost fluctuations jumped 68% in the past 13 years, when nuclear and coal-fired power plants were built one after another to supply electricity at a low price.
According to the plan, the cost of coal-based power generation increases over time, although it still remains as the largest power source for at least 13 years, whereas the ratio of nuclear power generation as the cheapest way of supplying electricity decreases with time. Nuclear power and coal account for no less than 60% of the country’s total power generation while LNG is the power source with the largest fuel price fluctuations. The price of electricity cannot but rise unless the price of new and renewable source-based electricity is lowered to a significant extent.
Another challenge lies in electric power demand control. The eighth plan is based on the assumption that the power demand until 2030 shows a substantial decrease from the previous plan. The government is planning to minimize power use by means of demand control, but experts advise that demand control will fail without an increase in electricity price.
“The most important part of demand control is price, and controlling the demand with the price kept intact is a lie or requires an extremely large amount of national financial resources,” said Incheon National University economics professor Sohn Yang-hoon. “What is worrisome is the period following 2030 in that coal-fired and nuclear power stations are retired one after another from that year on, and then the price of electricity cannot but be affected to a large extent,” Korea Polytechnic University professor Kang Seung-jin remarked.