Complementary Direction of KGND

2.1. Visions for Korean Energy System

The direction of the energy sector included in EU Green Deal and EU strategy on energy system integration were not conceived and presented in a short time. From EU Energy Union launched in 2015 to the Clean Energy for all European package agreed in 2019, EU has been working on a clean and fair energy transition over a long period (EC, 2019b).

In addition, EU conducted an in-depth analysis of society and the

results, EU considered various technological options for GHG reduction, established several reduction scenarios, and analyzed the socio-economic impact of energy transition (EC, 2018). With these continuous efforts, EU strategy on energy system integration was able to establish visions for the energy system in the region and suggest measures to realize it.

Currently, KGND does not present visions for Korea's energy system.

Before announcing KGND, the government should have set visions for the future energy system and, foremost, come up with tasks, obstacles, and ways to overcome them. According to the results, KGND should have been composed of projects necessary to realize the future energy system and overcome obstacles. When the government launched KGND, some experts criticized it as merely expanding or reorganizing existing policies and businesses. These criticisms fundamentally point out the lack of a vision that should have been the basis for the KGND project.

KGND already includes many elements expected to be needed in future energy systems (RE dissemination, technology development, the R&D and dissemination of HVs, production facilities, and fueling stations). However, as can be seen from the comparison results between EU strategy on energy system integration and KGND, it lacks consideration for energy system integration. This problem is also due to the lack of visions and integration plans for the future energy system, characterized by the linkage between energy sources or energy consumption and supply sectors.

KEEI (2020e) presented the concept of an integrated green energy system as a vision for the future energy system. This integrated system converts the final energy consumption into electricity, covers the electricity demand centering on the RE, and promotes the linkage between energy sources or supply and consumption sectors based on RE

electricity (KEEI, 2020e; Figure 4-2). Currently, only the green energy integrated system concept is presented, and research on more specific visions and achievement strategy is in progress. In the future revision, KGND should refer to the concept of the integrated green energy system presented by KEEI (2020e) and follow-up research results to include the tasks for implementing the future energy system and ways to overcome obstacles.

Figure 4-2. Conceptual Diagram of Green Energy Integration System

Source: KEEI (2020e), p12

2.2. Linkage between Energy Sources or Sectors

One axis of EU integrated energy system is the linkage between energy sources or sectors. Synthetic fuels that combined hydrogen produced from RE electricity and captured CO2, heat pumps in the building sector, and EVs and charging stations in the transportation sector are related to linkages between energy sources or sectors based on energy transition.

opportunity for highly volatile RE generation to be put into the power grid on a large scale. In other words, it is possible to utilize means based on Power-to-Gas (P2G),¹⁷⁾ Power-to-Heat (P2H),¹⁸⁾ Vehicle-to-Grid (V2G),¹⁹⁾ etc., as a flexible resource to mitigate RE volatility.

However, the Korean New Deal 1.0 did not sufficiently consider the linkage between various energy sources such as P2G, P2H, and V2G, including green hydrogen production, or between sectors. In the case of the support projects of hydrogen production base construction, this version was targeted at the production facilities of hydrogen extracted from city gas. We speculate that this may be because green hydrogen production was not in the commercial phase. Therefore, the government should further strengthen support for green hydrogen technology development, demonstration, and scale-up. In the future version, green hydrogen and various energy sources such as P2G, P2H, and V2G, or between sectors, should be further strengthened. In addition, it is necessary to prepare for problems that may arise when RE generation, which is highly volatile, is put into the power grid on a large scale.

Energy system management will become more complex as the connections between energy sources and sectors deepen. Electricity and hydrogen will play a significant role in energy system integration as energy carriers. Therefore, near real-time monitoring of electricity and hydrogen production and consumption is essential. Thus, the government should vigorously promote the distribution of smart meters, establish an integrated control system for renewable energy, and build a monitoring

17) P2G produces gas fuels (methane, etc.) and hydrogen from water electrolysis using RE-generated surplus power (KEEI, 2020e).

18) P2H defines the conversion of electrical energy into heat. This system uses an electric boiler or heat pump to generate heat for heating and cooling. Then, it stores the heat in thermal or ice thermal storage to supply power when needed (KEEI, 2020e).

19) It refers to a technology that controls EVs that can charge and discharge in both directions (KEEI，

2020e).

system for electricity and hydrogen fueling stations.

2.3. Utilization of Hydrogen and Renewable Low-carbon Fuels

EU plans to implement low-carbonization by disseminating hydrogen or sustainable low-carbon fuels (biogas, biomethane, biofuels, synthetic fuels) to industrial processes or aviation and shipping sectors where electrification is not easy.

According to Kang (2020), hydrogen not only plays a vital role in energy system integration as an energy carrier but can also play a critical role in sectors where greenhouse gas reduction is not easy. In particular, Kang pointed out that hydrogen can replace fossil fuels in ammonia, steel, and cement industries. Hydrogen will also play an essential role in transport sectors that are not easy to electrify, such as large-scale road transport, aviation, and shipping.

The Korean New Deal 1.0 did not include support for developing eco-friendly processes in the industrial sector. The risk of failure and cost burden is high for the private sector to independently pursue developing and commercializing new industrial processes. Therefore, the government must jointly promote the development (using hydrogen, etc.) and commercialization of eco-friendly processes in the industrial sector through the KGND (Figure 4-3).

The 4th Basic Plan for Eco-Friendly Vehicles includes measures to support the conversion of buses and trucks to EVs or HVs (Joint Ministries, 2021c). Still, Korea's supply of EVs and HVs is mainly concentrated in passenger cars. As Kang (2020) argued, the government should first determine whether expanding the dissemination of HVs to large-scale transportation such as buses and trucks is effective in terms of conditions and technology in Korea. If such a direction is deemed appropriate, the government should consider expanding support through

On the other hand, for transportation methods where electrification is impossible, and hydrogen cannot be used, the government should consider using renewable, low-carbon fuels (advanced biofuels, biomethane, and synthetic fuels) as in the case of EU. However, KGND does not cover this issue.

Figure 4-3. Green Hydrogen Production and Utilization Plans

Source: AIST (2021), https://www.aist.go.jp/fukushima/en/unit/HyCaT_e.html (Accessed on December 30)

2.4. Reflection of GHG Reduction Costs

EU intends to steer the market, encouraging consumers to choose the most efficient and affordable decarbonization option by correctly pricing all costs associated with each energy carrier. Although the Korean government does not have to follow EU's energy tax and ETS operation, the purpose of these projects should be kept in mind. EU believes that all GHG costs associated with energy carriers should be adequately reflected in the price. Since Korea also operates its ETS, there is an

explicit carbon price. However, it is questionable whether the domestic carbon price accurately reflects the environmental cost of GHG emissions and whether the carbon price is properly passed on to final products. The government should gradually increase the paid allocation ratio and expand the emission efficiency benchmark (BM) allocation method to have companies bear the reduction costs corresponding to GHG emissions.

Reflecting the cost of GHG in electricity production in electricity prices is essential to induce a reduction in electricity consumption. The electricity rating system reform, implemented in December 2020, separated climate and environmental charges among retail electricity rates from electricity bills. The government needs to prepare a system to adjust climate and environmental rates annually by reflecting the cost of emission permits in the power generation sector.

2.5. Information Disclosure and Follow-up Management

KGND of Korean New Deal 1.0 plans to invest KRW 73.4 trillion from 2020 to 2025. Among them, the government fund is 42.7 trillion won.

The government expenditure for the Korean New Deal 2.0 increased to KRW 61 trillion (Joint Ministries, 2021a). Despite the enormous amount of the government fund being invested, the general public cannot confirm what specific projects the KGND is running, how much budget is invested in each project, and how it is progressing. Although the initial projects were disclosed on the website operated by the Korean New Deal working support group, tracking the progress or performance of each task is not available. Improving the effectiveness of KGND requires periodic inspection of project performance and identification and resolution of obstacles in project execution. To this end, the government needs to disclose each project's details, progress, and

Paris Agreement Rulebook adopted in 2018 requires member countries to submit projections of GHG emissions and removals that can show the impact of their mitigation policies and measures. In other words, the members must offer emissions and removals with measures, as well as projections and plans with or without additional measures (I. Son and D.

Kim, 2020, p.195). KGND is ultimately part of the GHG reduction policies and actions. Therefore, accurately measuring the GHG reduction effect of KGND is necessary to improve the project's effectiveness and accurately report it to the international community.