FEATURE: South Korea's nuclear energy strategy set for revamp

Seoul (Platts)--26 Nov 2012 402 am EST/902 GMT

South Korea's decades-old nuclear-focused energy strategy could undergo a major revamp with the two top presidential candidates vowing to cut nuclear power generation and boost the use of gas and renewables.

Both candidates have also vowed to raise electricity tariffs as part of efforts to reduce the country's power consumption, which could lead to higher production costs for energy-intensive manufactures such as oil refiners, chemical companies, steelmakers and auto makers.

Park Geun-Hye, the nominee for the ruling conservative New Frontier Party who has maintained a solid lead in the race, has promised to review the country's long-term energy plan, which is focused on building more nuclear reactors, if she is elected in the December 19 presidential election.

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South Korea currently has 23 nuclear power reactors, which account for 30% of the country's total power generation. The country has plans to add 11 more by 2024 to expand the contribution of nuclear power to nearly 50%. Under the country's power blueprint, the proportion of gas-fired power generation is expected to fall to 16.6% in 2015 and 9.7% in 2024 from 22% currently, and oil-fired generation would slide to 1.3% in 2014 and 0.5% in 2025, from 3-4% currently.

But Park said she would review the plan, noting that building more nuclear reactors is "not desirable."

Her remark is a change from her predecessor President Lee Myung-Bak, who has pushed for nuclear as the country's main energy source despite concerns about safety in the wake of Japan's 2011 Fukushima nuclear disaster.

Moon Jae-Un, the candidate for the progressive opposition Democratic United Party, has also taken a tough stance against nuclear energy, vowing to scrap the plan to build more nuclear reactors and immediately close down ageing nuclear plants. A third contender, centrist independent candidate Ahn Cheol-Soo, had also pledged to review the nuclear plan and close down ageing reactors before withdrawing from the race last Friday and endorsing Moon.

Polls consistently showed Park ahead in the three-way race but indicated she would trail if Moon and Ahn settled on a single opposition candidate.


Both Park and Moon have also pledged to increase the use of renewable sources in power production, but have yet to disclose detailed plans over how to ensure stable energy supplies with fewer nuclear reactors.

South Korea, Asia's fourth-biggest economy, consumes more than 900 million barrels of crude oil and 36 million metric tons of LNG every year, all of which it imports.

All that the candidates have proposed is raising electricity tariffs to address the demand side to make up for short supply from nuclear reactors.

Ahn had said that if elected, he would boost the portion of LNG in power generation. "Natural gas would be combined with renewable sources to generate more electricity to make up for nuclear power shortfalls," he told a recent forum.

Yoon Hee-Do, an economist at Korea Investment and Securities, said the policy promises of the main candidates show that power production from gas-fired plants would be increased. This will help boost earnings of state-run Korea Gas Corp., that has a monopoly on domestic natural gas sales, and private gas-fired power producers, such as SK E&S and GS Power.

Since three reactors at the Yeonggwang plant on the southwest coast were closed due to safety problems earlier this month, operation of the gas-fired plants has been on the rise, according to Kepco.


But many analysts have raised questions about the candidates' pledge to sharply boost the portion of renewables in power production.

"Increased use of renewable sources would sharply raise electricity production costs, which would pose a bigger burden to consumers," said Park Jong-Bae, a professor at Konkuk University in Seoul.

Sohn Yang-Hoon, a professor at Incheon University, said the presidential candidates lacked a bigger strategy for national energy security.

"South Korea imports almost all of its energy requirements, but it has no grand strategy to ensure stable supplies," he said. "Despite potential energy crisis, the presidential hopefuls are just shouting about a shutdown of nuclear reactors and expansion of renewable energy that remains questionable," Sohn said.

The country's oil refiners are also likely to face tougher challenges as both candidates have vowed consumer-focused policies under their "economic democratization" platform, a big departure from Lee's business-friendly stance.

The market dominance of the four refiners -- SK Innovation, S-Oil, Hyundai Oilbank and GS Caltex -- which stood at 97.7% last year, has been cited as the main reason for high domestic oil prices.

President Lee, even though he was elected five years ago on a pro-business platform, has taken a series of steps to ease the market dominance and twisted refiners' arms to bring down retail fuel prices.

--Charles Lee,

--Edited by Mriganka Jaipuriyar,; Wendy Wells,

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