 Electric Power |
Power Generation
The electricity sector in Korea has grown rapidly to ensure that electricity is supplied reliably to facilitate the industrial development of the Korean economy. Electricity generation capacity has increased more than five times since 1980, from 9 gigawatts (GW) in 1980 to 51 GW in 2001. Gross power generation also increased significantly from 37 terawatt-hour (TWh) in 1980 to 285 TWh in 2001, in line with increases in demand for electricity.
The fuel mix in electricity generation changed markedly between 1980 and 2001. Oil was the major fuel for power generation in Korea prior to 1980, but declined in importance from 79 % of total electricity generation in 1980 to 10 % in 2001. LNG and bituminous coal were first used in electricity generation in the early to mid-1980s, with the first LNG-fired power plant completed in 1986 and the first bituminous coal-fired power plant completed in 1983. The shares of LNG and coal in total electricity generation reached 11 % and 39 % in 2001, respectively. Domestic anthracite coal is used for a small portion of coal-fired generation. Of all the fuel types available, nuclear power increased most sharply between 1980 and 2001, and it is now the major energy source for electricity generation in Korea. Hydropower is also used for meeting peak demand, but its share in total power generation is only 1.5 % in 2001.
Restructuring the Electricity Industry
The electricity industry in Korea has been entirely run by the Korea Electric Power Corporation (KEPCO), a major state-owned utility power company that owned 94 % of generating capacity and 100 % of transmission and distribution. However, the Korean electricity sector is now in the early stages of a process of restructuring, privatizing and liberalizing.
In January 1999, the government adopted the Basic Plan for Restructuring the Electricity Supply Industry, which proposed to introduce competition gradually in electricity generation and the retail supply of electricity. The objectives of the reform are to promote efficiency, security and reliability of supply and customer choice by introducing competition into the electricity sector. The plan called for a four-phase reform process. Phase 1 (Current System) runs through the end of 1999, and Phase 2 (Power Generation Competition) through 2002. Phase 3 (Wholesale Competition Phase) will run through 2004, with Phase 4 (Retail Competition) post 2009.
|
Several major components of the plan are now being implemented. Two combined heat and power plants providing district heating in Anyang and Bucheon were privatized in June 2000. Necessary legislation was passed in December 2000 so that KEPCO could be restructured and privatized. The Korea Electric Power Exchange (KPX) was established in April 2001 as a non-profit corporation responsible for operating both the electricity system and the electricity market.
KEPCO's generation part is comprised of one nuclear-hydro company and five companies using fossil-fuel or pumped storage generation. The five non-nuclear generation companies, which are to be privatized beginning in 2002, are: Korea South-West Power Co. Ltd. (KOSEPCO), Korea Midland Power Co. Ltd. (KOMIPO), Korea Western Power Co. Ltd. (KOWEPCO), Korea Southern Power Co. Ltd. (KOSPO), and Korea East-West Power Ltd. (KEWESPO). The number of companies was determined partly by the need to balance a minimum scale of efficiency as there could be the risk of collusion if too few companies were created. The companies were to be divided relatively equally so that each would have a similar mix of generating capacity by fuel type and location. Both foreign and domestic firms can invest in the power generation companies.
|
The nuclear power generation company known as Korea Hydro and Nuclear Power Co. Ltd. (KHNP) remains public as a separate government-owned company. It owns and operates the nuclear power plants in Korea and 536 MW of hydropower generation capacity.
|
| |
| Coal Industry |
Domestic Coal Mining
Anthracite coal is Korea's only indigenous fossil fuel. In the early stage of industrialization, particularly in the 1960s and 1970s, the government took a series of measures to promote coal production, in order to meet the sharp increase in energy needs. The government has subsidized the domestic coal mining industry since 1967 to increase domestic energy supply. As a result, the coal mining industry has made great progress and by 1987, there were 363 mines producing 24 million tons of anthracite coal.
The coal mining industry, however, began to show a decline from the latter half of the 1980s because demands for anthracite coal was decreasing rapidly, and stocks of domestic anthracite coal had accumulated to 10 million tons. Also, most of the coal mines are located in mountainous areas, and require labor-intensive underground mining. Production costs are higher than import prices.
Consequently, the Coal Industry Promotion Board (CIPB) was established in 1987 to help uneconomic coal mining operations to close. By 2001, there were only 12 coal mines in the industry, and the production of anthracite coal decreased to 4 million tons in 2001 from 24 million tons in 1987. Anthracite coal has been used mainly for space heating in the residential sector, but the use of anthracite coal for space heating has been largely replaced by oil, gas and district heating system. |
|
Imported Coal
Korea imports all of its requirement for bituminous coal. Korea commenced importing coking coal on a large scale from 1973 when Pohang Iron and Steel Company (POSCO) began operation. Import demand for coal, particularly steaming coal, increased rapidly from the early 1980s. Steaming coal was imported for power generation from 1983, and the cement industry fully converted from heavy fuel oil to coal in the early 1980s.
Demand for coking coal has increased sharply as a result of rapid growth in the steel industry from 4.4 million tons in 1980 to 17.6 million tons in 2001. Imports of steaming coal increased from 0.6 million tons in 1980 to 44.0 million tons in 2001, reflecting both the increased use of steaming coal as a substitute for oil in electricity generation and rapid growth in cement production. Coal consumption for power generation increased more than six times between 1990 and 2001 as new coal fired plants rapidly came on line.
Imports and trade of bituminous coal is the least regulated of all domestic energy market. Consumers are permitted to negotiate their own contracts directly with producers, and there are no import licenses required.
|
|
| Oil Refining |
Industrial Structure
The oil refining industry in Korea was launched in 1964 with an initial capacity of 35,000 barrels per stream day (BPSD). Along with the increase in petroleum demand, the Korean refining sector expanded its crude distillation capacity. The combined crude refinery capacity of Korea's oil refineries stood at 2,438 thousand BPSD as of the end of 2001, about 70 times that of 1964, and the world's fifth largest refinery capacity as of 2001.
|
Private companies dominate the Korean oil market. The major oil companies are SK Corp. (formerly Yukong), LG-Caltex (formerly Honam), S-Oil (formerly Ssangyong Oil) and Hyundai Oil. SK Corp. is 100 % Korean-owned. Caltex owns a 50 % stake of LG-Caltex. In 1999, Hyundai sold 50 % of its interest in its refining operation to International Petroleum Investment Corporation of the United Arab Emirates. S-Oil is 35 % owned by Saudi Aramco. The relatively young Korean refining industry operates efficiently and is very competitive internationally.
The Korea National Oil Corporation (KNOC), a state enterprise, engages in exploration, development and production of oil and natural gas, and builds and maintains Korea's strategic oil stocks. The Daehan Oil Pipeline Corporation (DOPCO), which delivers oil products via pipeline to the Seoul metropolitan area, was privatized in 2000.
|
Domestic oil refiners are also equipped with secondary facilities, which include heavy oil cracking facilities (247 thousand BPSD), heavy oil de-sulphurizing facilities (145 thousand BPSD), naphtha reforming facilities (187.4 thousand BPSD) and kerosene-diesel de-sulphurizing facilities (658.5 thousand BPSD). As environmental regulations become more stringent, the maximum sulphur content permitted in heavy fuel oil decreased from 0.5 % to 0.3 % in July 2001. As demand for high-sulphur heavy oil is forecast to be stable or to decrease slowly, oil refineries in Korea are expected to expand their heavy oil cracking and de-sulphurizing facilities to fit the changing pattern of demand for oil products .
Oil Products Supply and Demand
Total production of petroleum products increased from 4.8 million barrels in 1964 to 892.8 million barrels in 2001. Increase in the domestic supply of petroleum products brought about a drastic change in the pattern of energy consumption. Since 1990, petroleum consumption had posted an average annual growth rate of 7 % due mainly to the expansion of petrochemical industry and increase in transport oil demand.
Total consumption of petroleum products in 2001 reached 743.7 million barrels, or four times greater than in 1980. By major products, gasoline, kerosene, diesel, and naphtha have all played a leading role in increasing consumption in Korea.
|
|
| Natural Gas Industry |
|
Since Korea introduced natural gas in 1986 in the form of liquefied natural gas (LNG), demand for LNG increased steadily and significantly from 1.6 million tons in 1987 to 16.0 million tons in 2001. Korea's entire demand for natural gas is currently met through imports.
Korea has very limited indigenous gas reserves, and a small offshore project in the Southeast is underway. The gas field's recoverable reserves are estimated to range from 170 to 200 billion cubic feet. This is a relatively minor development, however, and would cover only 2 % of Korea's gas demand, when commercial production of this field is launched in 2003.
The Korea Gas Corporation (KOGAS), the state-owned monopoly LNG importer, was created in 1983, being responsible for managing import, storage, transmission and wholesale distribution of LNG in Korea. Recently, the Korean government announced a plan to reform the gas industry. The government proposed to introduce gas-to-gas competition by unbundling imports and sales activities from the operation of terminals and transmission facilities and instituting an open access regime for receiving terminals and the transmission network. For the retail market of gas, there are 20 private city-gas companies supplying city gas to 7.2 million consumers nationwide.
LNG is mainly used in electricity generation and city gas service. City gas is made from LNG, and used as a fuel for cooking and heating for residential and commercial sectors. Demand for LNG in the production of city gas has increased from 0.6 million tons in 1990 to 10.3 million tons in 2001. Demand for LNG in power generation increased from 1.7 million tons in 1990 to 5.3 million tons in 2001.
Demand for compressed natural gas (CNG) used in vehicles is expected to contribute to the future growth of natural gas consumption. The government has embarked on a program to have a total of 5000 intra-municipal CNG buses in operation by the end of 2002 in major Korean cities.
|
|
| Alternative Energy Technology |
|
Alternative energy use was 2,457 thousands TOE in 2001 and held a marginal share in Korea's total primary energy supply, at 1.2 % in 2001. However, the use of alternative energy is growing quickly, since their supply was 1,162 thousand TOE in 1995 accounting for 0.6 % in total energy supply in Korea.
Promoting alternative energy use both as a source of energy security and as cleaner energy is an important energy-policy objective in Korea. The initial effort dates to 1987 when the Ministry of Commerce, Industry and Energy (MOCIE) introduced the New and Renewable Energy Development and Promotion Act in an attempt to further reduce Korea's dependence on imported fossil fuels, especially petroleum. The Act encouraged installing waste-incineration facilities that generate heat and power and residential solar heaters for home water heating. It also promoted small hydropower plants and facilities to use methane gas. The Act constituted the initial framework for the development of new and renewable energy technologies in Korea.
Solar thermal hot-water units and industrial waste incineration system have been commercialized and are being disseminated actively. More than 94 % of alternative energy is now produced from municipal and industrial waste. At the end of 2001, 442 industrial and municipal waste incinerators were producing locally-consumed steam in Korea. The incinerators provided clear benefits for energy production, but the air pollution they cause has gradually become a matter of concern. The southern coastal area has the greatest economic potential for solar thermal, which can be used in greenhouses, fish farms, swimming pools and industrial-heat processes. The government aims to expand the residential use of solar water-heating systems in rural areas in small- and medium-sized cities. So far, 185,909 units of residential solar thermal water heaters have been installed, producing 37.2 thousand TOE of energy in 2001.
Basic research on photovoltaic (PV) systems has been completed, and they are coming into use. The 88 inhabited Korean islands are the main potential sites for PV off-grid generation. PV power systems are being used for unattended lighthouses, emergency highway lighting and demonstration PV electrification on isolated small islands, Hahwado (60 KW), Marado (30 KW) and Hodo (100 KW). Total installed capacity of PV systems amounted to 4.9 MW in 2001. At US$0.65 to US$1.00 per KWh, the cost of PV generation is still considered too high to compete with conventional power generation.
As for wind power generation, the coastal, island, and mountain areas of Korea have an average wind speed of 4.0 to 5.6 meters per second. By the end of 2001, 40 wind plants had been installed with a total capacity of 6.6MW, generating electricity at a cost of US$0.10 per KWh. Technological development has improved reliability, increased the size of turbines and thereby contributed to lower costs.
The government is now reviewing the possibility of producing methane from landfills. Fourteen large-scale landfill sites with an overall estimated gas generation potential of 647 thousand cubic meters present attractive opportunities for project development.
In February 2001, the government announced an Alternative Energy RD&D Basic Plan, as a renewed framework for further development of renewable energy. Wind, Fuel Cell and PV power are targeted as top-priority technology areas on which the government will focus its R&D support. Other areas targeted are solar thermal, waste and biomass.
The MOCIE has set a target of a 2 % share of new and renewable energy in the total primary energy supply by 2003, and a target of 3 % by 2006. From 2001 to 2006, the government plans to invest around US$ 800 million to help broaden the dissemination of renewable energy technology. It envisages the following measures: 1) Providing financial support and preferential tax treatments as incentives for the research, development, demonstration and dissemination of alternative energy technologies; 2) Introducing mandatory use of renewable energy for newly constructed public buildings; and 3) Establishing a mechanism by which surplus electricity sold to public grid from renewable energy facilities will be purchased at rates that provide sufficient incentives to make renewable energy projects viable.
|
|
