The incumbent government’s push for an energy paradigm shift away from nuclear and coal took the form of an official policy in the 8th Basic Plan for Electricity Supply announced in December 2017. The plan called for slashing down the number of nuclear plants, which have safety concerns, and coal-fired thermal power plants, which are the biggest cause of fine dust, and drastically expanding renewable energy and liquefied natural gas (LNG) power generation.
LNG power generation received little attention at that time as the focus was on renewable energy. However, the government is planning to increase the LNG power generation capacity from 37.4 GW in 2017 to 47.5 GW in 2030. The plan will be included in the 9th Basic Plan for Electricity Supply to be unveiled at the end of this year.
The problem is that building a large number of LNG power plants will not help the domestic industry at all because South Korea needs to import all the gas turbines, a key component of the plants, from other countries. LNG power plants also have a downside that they depend entirely on imported LNG fuel. The fact is being ignored that LNG power plants are less effective in reducing the amount of fine dust than nuclear power plants, though they are more effective than coal-fired power plants.
The total purchase amount of 149 gas turbine units for LNG power plants in operation in South Korea came to 8.12 trillion won (US$7.17 billion) as of January last year, according to the data from the Korea Institute of Machinery & Materials (KIMM). Moreover, the maintenance costs, which have been paid to foreign companies over the last 25 years, stood at 4.21 trillion won (US$3.72 billion). The total amount of money drained to other countries for the introduction of LNG power generation reached a whopping 19 trillion won (US$16.78 billion) when including incidental expenses.
A considerable amount of money will go abroad additionally in the future if the country increases the number of LNG power plants as the government has planned. Sohn Jeong-rak, a senior researcher at the KIMM, said, “Gas turbine power generation currently costs US$250 (283,000 won) per kW. Considering this, the cost to introduce a 300 MW gas turbine power generation unit is estimated at 85 billion won (US$75.06 million) and 2.80 trillion won (US$2.47 billion) for a 10 GW gas turbine power generation unit.”
The eight LNG power plants scheduled to be completed in 2020 and 2021 are all planning to use foreign gas turbines. Korea Midland Power Co.’s LNG combined-cycle power plants in Seoul will be constructed by Doosan Heavy Industries & Construction Co. However, the industry and the academic community considers it as a foreign one because Doosan E&C will just assemble it after receiving a license from foreign companies.
Currently, the global gas turbine market is an oligopoly market led by four companies, including General Electric Co. of the United States, Siemens AG of Germany, Mitsubishi Hitachi Power Systems Ltd. (MHPS) of Japan and Ansaldo Energia Group of Italy. The small number of market players show the tall technological barriers in this field.
Doosan E&C is carrying out a demonstration project for the first time in the domestic industry this year, raising the possibility of localization. However, it takes two to three years for commercialization and, even when the company succeeds in commercialization, it will still be in the entry level when it is chosen by domestic power plants, according to market experts.
Lee Deok-hwan, a professor of physical chemistry at Sogang University, said, “LNG power plants which are completely dependent on imports for not only key components but also fuel will not help boost the domestic industry and can be exposed to risks caused by price volatility. LNG power plants are better than coal considering emissions alone but they can have a greater effect as they are located around big cities.”