In Focus
ENVIRONMENT, IPP | Staff Reporter, Korea
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Can Korea commit to renewable energy use?

Korea’s vow to go green is plagued with woes.

The world’s fourth largest importer of coal and heavy user of fossil fuels is eyeing a bigger chunk of renewables in its energy mix, but colossal amounts of investments and long adjustment time are badly needed.

When oil-dependent Korea revealed plans to inject a massive $27.4b (KRW30 trillion) in renewable energy, experts cocked their head and wondered how the country can achieve this given that it still has energy security concerns to address. The government plans to raise the ratio of energy that must be supplied by renewables in the Renewable Portfolio Standard, a globally accepted tool aimed at facilitating renewable energy, by between 0.5 and 1.0 percentage points and allow unlimited grid access to small-scale investments in renewables of less than 1 megawatt.

“Korea confronts some of the most severe energy security dilemmas in the world, and these dilemmas form an unusual triad combination, intensifying the challenge that they present to the country’s economic future,” says Kent E. Calder, director of Edwin O. Reischauer Center for East Asian Studies.

“Most fundamentally, Korea lacks domestic sources of energy to fuel its remarkable, rapidly growing, and energy-intensive economy. To make matters worse, it is unusually dependent on oil as a fuel source. In addition, most of Korea’s oil, together with much of its natural gas, comes from the volatile Middle East.” Despite the birth pains, these new renewables initiatives just might save Korea from its energy security woes, or at least keep them from getting out of hand. 

Renewables push

Vice minister for Energy and Trade Woo Tae-Hee says that the Ministry of Industry, Trade and Energy has been formulating policies to develop new energy businesses and putting them into practice with the aim of not only fighting climate change, but also nurturing the nation’s new growth engine. He adds that the ministry will soon unveil its “green energy towns” project. The project is aimed at turning unwelcome and unwanted facilities into environmentally friendly ones that generate green energy
using renewables. So far, the Korean government has created a total of 19 green energy towns nationwide. The World Energy Council (WEC) estimates that Korea, a relatively small country with one of the most energy-dependent economies in the world, is heavily reliant on imported oil, especially from the Middle East. This makes the country especially vulnerable to oil shock when prices fluctuate.

“The global recession which is closely followed by the ongoing drop in oil prices have caused difficulties in projecting the future energy price and situation and therefore perceived to be another key uncertainty,” says the WEC report. “In the past, low oil prices were beneficial for the Korean economy because people could increase consumption and businesses could save expenditure on production costs. However, the ongoing drop in oil price is now resulted in weak demand due to global economic slump, causing revenue loss in most industries that exports products by using crude oil as a raw material,” which includes the Korean petrochemical and shipbuilding companies.

The government has been attempting to build up its renewable energy sector in order to lower its dependence on imported oil, but this has been hampered by the natural geography of South Korea, which is mostly mountainous and lacking in natural resources required for costeffective renewable energy generation, says Korean Energy Economics Institute (KEEI).

In 2013, renewable energy supply amounted to 9.879 million TOE in Korea, or a mere 3.52% of the primary energy supply, with waste, bioenergy and hydropower accounting for 90% of renewable energy production, while photovoltaic (PV) and wind energy account for 6%. Korea’s gross electricity production from renewables amounted to 21.4TWh, making up 3.86% of the nation’s total electricity production. Waste and hydropower accounted for 74% in the renewable electricity production,
although globally, hydropower is the primary source of renewable electricity at 81.6%.

Economic growth driver

“The renewable energy sector has emerged as a growth driver of the Korean economy; opportunities are up for grabs for companies, especially for small and medium-sized companies, and the outlook is strong for job creation,” says KEEI. Renewable energy producers rose to 200 in 2012 from 134 in 2008 at a CAGR of 11%, and KEEI says the increasing supply in renewable energy has been helping support Korea’s economic growth by powering industries and creating new jobs. Job creation has accelerated to 11,836 in 2008 from 6,496 in 2012, at a CAGR of 16%, revenues have expanded to $6.5bn from $3.3bn at a CAGR of 19%, and exports have risen to $2.5bn from $1.7bn at a CAGR of 10%. 

Despite the growth of the renewables sector in recent years, KEEI explains that the share of renewable energy in the nation’s energy portfolio remains low due to its limited potential in renewable energy, at least compared to other countries, and the dominance of energyintensive sectors in the national economy. “With large steel, shipbuilding, and petrochemical sectors, the Republic of Korea has one of the most energy intensive industrial structures on Earth; and it is still growing rapidly, which of late has naturally intensified energy use, particularly electricity,” says Calder.

“Korea’s energy insecurities are deeply rooted despite the remarkable job that its policy process and private sector have done in recent years of coping with the
underlying domestic energy problems that the country faces,” he adds. Calder cites how the government and companies have worked together to develop new,
low-energy-consumption sectors such as computers and telecommunications. In fact, gross domestic product elasticity of demand for energy has steadily declined
since 2000 in part because of this trend. But WEC warns that Korean energy leaders will have to watch out for how well the Chinese economy fares as it is closely linked to Korea’s, and that a slowdown will dampen the latter’s economic growth as well. China is Korea’s biggest trade partner based on geographical proximity
with annual trade between the two countries rising to US$227 billion from US$118 billion over the last 10 years.

“Weak demand from China and the US has led to a slowdown in South Korean economic growth, which is expected to result in a more modest outlook for power demand growth, particularly in the industrial sector. End-use power demand is expected to average 1.4% per year through 2035, less than half the pace of the previous ten years,” says research firm Wood Mackenzie.

Energy efficiency

In 2016 alone, the Korean government plans to spend over one billion dollars to foster the growth of the new energy sector such as energy-efficient smart
plants, smart grid and ESS. For its part, the private sector also has a plan to invest about US$15.8 billion in the new energy sector over the next 5 years.
“Energy efficiency is a crucial player in Korea’s future to achieve climate target and creating new energy market. Particularly, the new energy sector
developed by cutting-edge technologies which include energy efficient systems, smart grid, ESS, and e-vehicles are highlighted as the future growth engine of Korea,” says WEC. Particularly noteworthy for WEC is Korea’s successful effort in developing innovative smart grid technologies, making it one of the cutting-edge
leaders in the field. The government and private companies plan to launch a newbusiness for expanding the smart grid infrastructure in 2016, which will then be
supported with the creation of 13 hubs for the smart grid system by 2018 and a nationwide rollout by 2025. “Korea is expecting its clear and constructed plan for developing smart grid to be one of a key instrument to clean energy future of the country,” says the WEC report.

Public and private opposition

The Korean government’s plan to boost renewable energy production and energy efficiency might be coming together nicely, but there remains significant public and private opposition. Regulatory measures, which continue to remain place in part due to significant public opposition to renewable energy production and its inconveniences, have thwarted the sector’s expansion.

“The renewable energy sector is struggling with the public’s resistance due to a lack of consensus on renewable electricity generation,” says KEEI. “Largescale
wind farm construction projects have faced growing resistance from the neighborhoods and increasing complaints about noise, vibration and high frequency.” Korea will also be struggling to muster corporate support for its climate change initiatives.  

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