[The Korea Herald] How can Korea ensure energy security?

By John Power

An unusually hot summer is raising fears of a repeat of last year’s country-wide blackouts. The Korea Power Exchange last week issued a number of power shortage warnings as scorching weather pushed people to crank up their air conditioners, causing reserve levels to drop below 3 million kilowatts. While Korea’s longest heat wave since 1994 has certainly stretched energy reserves, the country’s energy security challenges go much deeper than unseasonable weather. The world’s ninth-largest energy consumer, Korea imports about 97 percent of its energy sources due to a lack of fossil fuels and uranium needed to run its nuclear power plants. With the grid already stretched thin and high economic expectations for the future, Korea has to be able to rely on a stable and affordable energy supply.

Much of that responsibility falls on Korea Electric Power Company, the country’s main electricity provider. KEPCO assured The Korea Herald that it has measures in place to deal with potential shortages.

Officials at the Korea Power Exchange keep an eye on power levels after a shortage alert earlier this month. (Yonhap News)

“KEPCO has strengthened information sharing with the concerned organizations and established a framework for prompt response to address power supply emergency situations,” the company said in a statement. “To be prepared for low reserve margins, we have increased demand-side management resources and their implementation. Also, we have reviewed our manuals for addressing power supply emergencies and performed various drills.”

Roots of the problem

KEPCO also plans to increase its reserve rate from the current 6-8 percent to 13-20 percent by 2014, which it says will remove the need for emergency conservation measures seen this and the previous summer.

Korea’s energy crunch has been a long time in the making. Past predictions of future energy demand have proved far from accurate. At the same time, above-expectations consumption over the last decade has not been accompanied by any significant expansion of the grid’s capacity.

“In 1999, we expected 2011 consumption to be 351 terawatt-hours but the actual consumption was 455 TWh,” said Roh Dong-seok, a senior research fellow at the Korea Economic Energy Institute. “On the other hand, in 1999 we expected the capacity of our facilities (in 2011) to be 76 gigawatts and the actual was 77 GW, only a marginal difference. The reason why the expectation was quite precise is because it is impossible to build facilities in a short amount of time. Especially something like a nuclear power plant takes about 10 years at least to build.”

With increasing capacity a long term project, encouraging a reduction in consumption remains one of the government’s few immediate options for avoiding shortages. Recently, the government duly asked businesses and households to voluntarily rein in consumption. Low electricity prices, at almost half the OECD average, are seen by many as driving over-consumption. Last year, electricity was sold at less than 88 percent of the optimal price as determined by KEPCO.

“The grand campaign the government has launched this year of saving energy can hardly achieve anything without being accompanied by an actualization (increase) in electricity prices,” said Roh.

“The only (other) way to secure the supply at the moment is to enforce strong consumption monitoring.”

In the long term, Korea simply needs a greater energy supply. One essential step toward this, according to University of Seoul international relations professor Ahn Se-hyun, is to secure resources overseas.

“From Korea’s standpoint, Russian natural gas and shale gas access on the North American continent are the most important tasks to deal with, along with African and Australian resources,” said Ahn.

The Ministry of Foreign Affairs and Trade last year allocated about $9 billion for the purpose of securing natural resources in developing countries. Such a strategy brings with it the potential for controversy. U.S. Secretary of State Hilary Clinton last summer warned against a “new colonialism” in Africa, by which rich countries strip poor countries of their resources with little regard for the wellbeing of the local inhabitants.

Regional rivals

While this is potentially a concern when it comes to Africa, Ahn says, Seoul has done a good job of avoiding a vulture-like image overseas.

“Specifically, the Republic of Korea put more emphasis on helping out local communities by using more of a local labor force and eventually creating the Seoul consensus, which is distinct from Beijing or Washington Consensus. As an example, providing medical social care services could be most tempting for the ROK considering the high quality of human resources within the ROK.

“Not only in Africa, but also in Central Asia, the ROK is using a strong network grid and historical ties and ethnic Koreans to avoid the neocolonial approach, which China (has) failed to do.”

The sentiment fostered in poorer nations is just one consideration in exploiting resources abroad. Another is how the behemoths of the region will affect Seoul’s energy strategy. Negotiating regional rivalries and security issues will be a crucial task, Ahn said.

“Russia is a very important energy partner for both Korea and Russia, especially regarding massive natural gas in the Siberian region and a transfer mechanism, possibly a pipeline scheme.

“Therefore, in the next few decades, an energy alliance among three countries, possibly four countries including North Korea, is realistic and essential. However, on the African continent, ROK and China will turn out to be strong competitors in the next few decades. Also, as far as energy aid to the North (goes), I would expect severe energy competition or conflict between ROK and China in the next several years.”

But fossil fuels are no less finite overseas, and KEPCO has committed itself to investment and research in renewable energy. Among its focuses are wind energy, photovoltaics, thermal energy and integrated gasification combined cycle, a technology used to turn carbon fuels into gas. KEPCO formed KEPCO-Uhde Inc. with German engineering company Uhde to foster this latter technology in July last year.

Questions about renewables

“Currently a feasibility study is being performed on building a photovoltaic energy station using idle land at Shin-Namwon Substation,” KEPCO said. “Most notably, KEPCO’s new head office in Naju, where it is to be relocated, will be Korea’s number one energy-conserving building as it uses various renewable energy sources such as building integrated photovoltaics and thermal energy.”

Yet, many remain skeptical of the economic viability of such renewable energy sources. Roh said that renewable energy can cost up to six times as much as nuclear energy, which currently produces more than 31 percent of the country’s energy needs. The government aims to raise that share to almost 50 percent by 2024.

“Many who support the use of renewable energy ― including civic organizations ― think if we take into account the trend of decreasing prices of renewable energy, by 2020, we can reach grid parity (the point at which renewable energy is as cheap as fossil fuels),” he said. “By and large, I agree that the cost of renewable energy will decrease but I doubt a dramatic decrease will be possible like they argue.”

KEPCO, whose subsidiary Korea Hydro & Nuclear Power Corporation handles nuclear energy operations in the country, is betting otherwise.

“Renewable energy is presently increasing mostly among advanced countries, but after 2020, when renewable energy sources are expected to reach grid parity, the renewable energy market is forecast to exponentially grow,” the company said. “KEPCO is also looking into the future in this area and is seeking to develop a specialized business model and establish a business fleet with Korean companies to enter the global market.”

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