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Interview: S Korean leading presidential candidate pledges less coal, nuke, while pursuing Russian natural gas

Seoul (Platts)--20 Jan 2017 745 am EST/1245 GMT


South Korea's leading presidential candidate Moon Jae-In has pledged to reduce coal-fired power plants and phase out nuclear reactors in the country, while seeking to buy Russian natural gas to meet power demand and combat climate change.

"We should reduce consumption of fossil fuels, coal in particular," he said Wednesday night at a group interview that included S&P Global Platts. "Coal-fired power plants are accused of air pollution and fine-dust emissions," said Moon, former leader of the progressive opposition Democratic Party.

Shutdown of aged coal-fired plants would not greatly affect the country's power supply if the country makes more investments in renewable power projects, Moon said, stressing that South Korea's fuel-mix for power generation should be more environment-friendly and low-carbon oriented.

Moon is the front-runner in South Korea's next presidential elections, outpacing ex-U.N. Secretary-General Ban Ki-Moon by more than six percentage points in terms of popularity, according to recent public surveys.

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The current president, Park Geun-Hye, was suspended from duty in December 2016, after the national assembly voted to impeach her. The constitutional court is currently deciding whether to uphold the motion.

The presidential elections will happen in 60 days if the constitutional court approves Park's impeachment that would come between March and June, which means, the next president could be elected by May.

Moon is the top candidate from the Democratic Party, the biggest party, with 121 seats in the 300-seat National Assembly.

The Democratic Party is more focused on environment and fair wealth-distribution than the conservative, currently ruling Saenuri (New Frontier) Party. The Saenuri Party has long placed the top priority on economic growth led by big business conglomerates, called chaebol, such as SK Group that runs oil refineries and chemical plants.

In line with his party's objectives, Moo said he would seek to raise electricity tariffs for businesses as part of efforts to overhaul energy-intensive manufacturers, which can sap profits of oil refiners and chemical makers mostly run by big conglomerates such as SK Innovation, GS Caltex, Hyundai Oilbank, Hanwha Total and Lotte Chemical.

Moon's comment on coal-power plants came at a time when South Korea has been increasingly hit by higher concentrations of fine-dust in the air, caused largely by coal-fired power plants, sparking public health concerns.

Fine-dust refers to particles that are smaller than 10 micrometers and have been known to cause various respiratory problems while also affecting the body's immune system.

South Korea runs more than 50 coal-fired power plants that supply about 40% of the country's total electricity, followed by nuclear about (30%), LNG (about 25%), oil (3%), and renewable sources, such as hydropower, solar, wind and fuel cells (2%).

The coal-fired power plants mostly owned by the state have been usually operated at full capacity, because they, as base-load generators, provide electricity, along with nuclear reactors, as a means to minimize power production costs.

With increasing demand for power, power plants using more expensive fuel like natural gas increase their electricity production, under South Korea's power trading formula.

Operating rates at natural gas-fired power plants have decreased to less than 40% since the second half of 2014, from 60% over 2012-2013, due to increased capacity of coal-fired and nuclear power plants and economic slowdown.

Moon has also pledged to pave the way for achieving 'nuclear zero' by around 2060, to address growing public fears about safety, particularly in the wake of the country's biggest earthquake in September last year, which forced four nuclear reactors to close for three months.

"I will make South Korea build no more nuclear reactors and close down aged nuclear reactors when their lifespan expire," Moon said. "Through this, South Korea can arrive at nuclear zero in 2060, and until then, we can develop alternative sources," he said.

The best alternative to coal and nuclear, Moon said, is renewable sources, but it would take a long time for them to meet electricity demand. "So, South Korea needs to consider purchasing natural gas from neighboring Russia by building a pipeline," he said. South Korea's state-run Korea Gas Corp. signed a preliminary agreement with Russia's Gazprom in 2008 to buy 10 Bcm/year of Russian gas for a 30-year period, beginning 2015.

Under the $90-billion deal, Kogas and Gazprom also agreed to push for a pipeline that runs across North Korea as the preferred delivery option. For their part, Russia and North Korea signed a memorandum of understanding on the proposed cross-border gas pipeline.

But talks on the project have been suspended due to military tensions across the inter-Korean border following the death of North Korean leader Kim Jong-Il in 2011, which was followed by nuclear and missile tests, as well as Seoul's concerns that North Korea may disrupt gas flows to South Korea to use it as a leverage to win more concessions.

"South Korea's energy problems can be fully resolved once it can get cheaper and cleaner source of Russian natural gas via the inter-Korean pipeline," Moon said. "For this, I will place a top priority on improving ties with North Korea," he said.

Moon also noted the so-called 'Asia Super Grid' linking the enhanced electric power systems of Mongolia, China, Japan, Russia and the Korean peninsula.

The Asia Super Grid project was the idea of Softbank CEO Son Masayoshi, who drove Japan's post-Fukushima shift to a renewable energy pathway. The grid project features building a cross-border power grid in Northeast Asia, which allows electricity, including power sourced from renewables, to be sent across the region.

"If realized, the initiative will resolve electricity supplies not only for South Korea but for other Northeast Asian nations as well, which would also help promote cooperation and peace in the region," Moon said.

South Korea, the world's fifth-largest crude oil buyer and second-largest LNG buyer, imports almost all of its crude oil and gas requirements, mostly from the Middle East.

--Charles Lee, newsdesk@spglobal.com
--Edited by Arnab Banerjee, arnab.banerjee@spglobal.com

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