NS4960 Spring Term 2017 Korea: Energy Policy Oxford Analytica South Korea: EnergyPolicy Will Put Industry First, August 15, 2016

Overview Developments in South Korea's energy sector South Korea has one of the highest energy import dependencies in the world Despite policy statements and actions in support of the country's emission targets, South Korea's coal generating plants will see a major expansion This will be supported by nuclear power plant construction. Little room left for either renewables or natural gas in the electricity sector

Recent Developments I Crude oil consumption has risen 8.6% over the period 2006-2015 During this period coal consumption has increased 54.2% Natural gas demand has also risen strongly, but consumption declined in 2014 and 2015 Despite their clear potential to reduce energy import dependency, renewables barely register in South Korea's energy mix -- 1.36% of the total Although country has invested in some innovative projects such as tidal power, it has been slow to embrace new energy generation technologies Wind and solar exist, but at very low levels of generating capacity

Recent Developments II Despite its large manufacturing and export sectors, South Korea has only one company among the top ten solar module manufacturers. No South Korean companies feature among the major wind turbine manufacturers South Korean industrial strategy remains centered on nuclear power and fossil fuels. Coal is the cheapest and the least exposed to supply disruption At the same time environmental organizations have judged South Korea's greenhouse gas emissions targets under the Paris Agreement inadequate for a country at its level of economic development

Recent Developments III New Building Program There are twelve new coal-fired power plants under construction Will add just over 10 GW of new capacity and A further eight coal plants planned which add 7.4 GW If all built South Korea's coal fleet would grow from 35 GW in 2016 to 45 GW in 2011 and 49 GW by 2016 Country produces little coal itself, so estimates are for coal import demand to rise from 94 million tons in 2015 to 130 million tons by 2021

Recent Developments IV Nuclear reliance South Korea currently has 24 reactors There are four reactors under construction This new build program should add 1.4 GW new nuclear capacity each year for period 2016-19 Two further 1.4 GW reactors have been approved and scheduled for completion in 2021 and 2022 An additional four 1.4GW reactors planned (but not yet approved for completion between 2022 and 2027.

Korea Nuclear Capacity

Korea: Industrial Strategy Korea Hydro and Nuclear Power (KNHP) has two reactors currently under construction which will be the first to have 100% core components and equipment manufactured domestically Underpins country's ability to export nuclear technology Just sold and will staff four units to the UAE -- competition 2017- 2020 Country also wants to export coal-fired power plants Contracts in Vietnam and Indonesia Country appears to have adopted an industrial strategy Based on heavy industry rather than expanding its manufacturing know-how to new forms of energy generation. Means prioritizing heavy industry both at home and export.

Assessment Likely developments Thermal coal imports are set to increase by 40% by 2021 LNG imports likely to remain flat (and possibly contract) out to 2030 Emissions targets are unlikely to be met and local air pollution is likely to worsen Korean government will come under pressure regarding its international climate change obligations and rising concern with air pollution Economy's concentration on heavy industry opens its wider economic strategy to some risk Country may be caught With industries with limited growth prospects and Without sufficient diversification into higher-growth energy technologies such as renewables