KEEI
KEEI
Korea Energy Demand Outlook
ISSN 2093-7199
June 2013
Volume 15, No. 2 QUARTERLY ENERGY OUTLOOK
Korea Energy Economic Institute
132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114
ISSN 2093-7199
June 2013
Volume 15, No. 2
KEEI
Korea Energy Demand Outlook
·Director of research Kim, Tae-heon(thkim@keei.re.kr)
·Primary energy Kim, Tae-heon(thkim@keei.re.kr)
·International oil market Lee, Seung-moon(paragon@keei.re.kr)
·Oil Lee, Sang-youl(akan539@keei.re.kr)
·Electricity Choi, Do-young(dychoi@keei.re.kr)
·Town gas/Thermal energy Park, Myeong-deok(mdpark@keei.re.kr)
·Coal Kang, Yoon-yeong(yykang@keei.re.kr)
·Material/Research support Jo, Eun-jeong(12220@keei.re.kr)
·Material/Research support Jang, Seon-hwa(jsh9459@keei.re.kr)
·Statistical support Lee, Bo-hye(bhlee@keei.re.kr) Phone: +82-31-420-2264, +82-31-420-2234
Fax: +82-31-420-2164
KEEIKorea Energy Demand Outlook
This report quickly identifies recent changes in energy supply and demand and provides energy supply/demand forecast indexes and other information of great interest for formulation of government policy. It is intended to facilitate government efforts to set and adjust overall policy on energy supply and demand.
This report was written and edited by the Energy Demand and Supply Forecast Team under the Center for Energy Information and Statistics of KEEI.
1. Energy Consumption ……… 4
2. Outlook for Energy Demand……… 9
3. Major characteristics……… 18
4. Policy implications……… 23
<Table 1> Primary energy consumption and outlook ……… 16
<Table 2> Final energy consumption and outlook ……… 17
[Figure 1] Economic growth and primary energy consumption ……… 5
[Figure 2] Change in primary energy consumption……… 7
[Figure 3] Change in final energy consumption by sector ……… 8
[Figure 4] Economic growth rate and primary energy increase ……… 10
[Figure 5] Outlook for energy intensity and per-capita consumption ……… 10
[Figure 6] Percentage shares of energy sources ……… 13
[Figure 7] Percentage share of final energy demand of each sector ……… 15
[Figure 8] Oil dependence and forecasts ……… 20
[Figure 9] Consumption of town gas for industrial use……… 22
Contents Contents
Table of Contents for Titles
Table of Contents for Tables
Table of Contents for Figures
Primary energy consumption for the first quarter is tentatively tallied at 73.4 million toe, a year-on-year drop of 0.8%.
This is attributable to a slowdown in growth of the global and Korean economies and the persistently high international oil prices.
* Domestic economic growth rate (%): (’11) 3.7 ⇒(’12) 2.0 ⇒(First quarter of ’13) 1.5
* Primary energy usage increase rate (%): (’11) 4.5 ⇒(’12) 2.11)1)⇒(First quarter of
’13) -0.8
- The nation’s index of industrial production rose only 0.2% as a result of a slowdown in industrial activity.
Despite a rise in consumption in the industrial sector, there was a decrease in consumption in the transport sector and residential/commercial sector, resulting in an overall drop in primary energy consumption.
- A rise of 3.9% in consumption of naphtha for raw material use in the petrochemical industry led the increase in energy consumption in the industrial sector.
Excluding energy for raw material use (non-energy oil, coking coal), the level of increase in consumption fell 1.6% from the previous year.
- Energy for raw material use accounted for 25% of primary energy consumption in the first quarter.
1) Primary energy consumption indicates a rise of 2.1% if the same energy conversion factor as that used in 2011 is applied. It indicates a rise of 0.7% if the new energy conversion factor (introduced on December 30, 2011) is applied.
Energy Consumption
1
1. Energy Consumption
Energy consumption by source in the first quarter
Oil consumption dropped 2.1% year-on-year, attributable to a slower increase in naphtha consumption for raw material use and a continued drop in petroleum product demand for heating.
- Naphtha consumption rose 3.9% year-on-year as a result of an expansion of facilities in the petrochemical industry and an upswing in exports.
- Consumption of fuel oil, excluding non-energy oil, and LPG fell 4.9% year-on-year owing to continued fuel substitution in the industrial sector and the residential/commercial/public sector in response to the high oil prices.
- Oil consumption fell 9.7% year-on-year in the residential/commercial/public sector owing to substitution of oil by other energy sources such as town gas. This was also a result of the high oil prices.
- Oil consumption in the industrial sector rose 1.2% year-on-year because of the 3.9%
rise in naphtha consumption. Industrial consumption of oil for fuel plummeted 14.1%.
- In the transport sector, oil consumption dropped 1.2% year-on-year due to the economic slowdown despite the increase in the average size of passenger cars.
- The percentage of total oil consumption accounted for by naphtha rose to 47.5% in the first quarter.
Consumption of coal for industrial use dropped 0.5% year-on-year while coal [Figure 1] Economic growth and primary energy consumption
consumption for power generation rose 0.6%, resulting in a slight overall rise of 0.3%
year-on-year.
- Consumption for power generation rose 0.9% year-on-year. Consumption for steel making fell 1.7% and that for cement production fell 13.2% as a result of the economic slowdown, resulting in a 0.2% overall drop in bituminous coal consumption year-on- year.
- Anthracite consumption went up 6.4% year-on-year, attributable to a rise of 3.5% in consumption for residential/commercial use as well as a substantial increase of 10.7%
in consumption for industrial use, which accounts for a high percentage of overall consumption.
Consumption of natural gas (LNG) for power generation declined 0.9% year-on-year, while consumption of natural gas for town gas production went up slightly by 0.7%.
- Consumption for power generation fell slightly as there was little change in electricity demand.
- Consumption of town gas went up 4.9% year-on-year owing to a sharp rise of 15.8% in town gas consumption for industrial use. There was little change in town gas consumption for residential/commercial use.
Consumption of nuclear energy dropped slightly by 1.7% year-on-year owing to the shutdown of some power plants, despite the operation of new nuclear power plants (Singori Nuclear Power Plant Unit 2, Sinwolseong Nuclear Power Plant Unit 1).
Electricity consumption rose only 0.2% year-on-year, much more slowly than in the first quarter of 2012. Demand was dampened by the slowdown in industrial production and imposition of new electricity demand management policies.
- Electricity consumption rose 0.4% for residential use and fell 0.7% for commercial use, owing to the economic stagnation and warm weather.
- Electricity consumption for industrial use rose only 0.8% as a result of the slump in industrial production. This was a lower increase rate than the annualized economic growth rate of 1.5% recorded in the first quarter.
The percentage of primary energy consumption by source was the highest for oil at 35.7%, followed by coal at 28.1%, LNG at 22.6%, and nuclear power at 10.6%.
1. Energy Consumption
Energy consumption by sector in the first quarter Final energy consumption rose 0.6% year-on-year.
- There was a slight rise of 1.8% year-on-year in the industrial sector due to the economic slowdown. There was a drop in the transport sector of 0.8% and a drop of 1.2% in the residential/commercial/public sector.
- Excluding consumption for raw material use, final energy consumption changed little year-on-year.
Energy consumption in the industrial sector rose a mere 1.8% year-on-year, attributable to sluggish industrial activity resulting from the economic slowdown.
- Naphtha for raw material use and town gas led the rise in energy consumption.
- Excluding consumption for raw material use, energy consumption in the sector went up 1.5%.
- The rates of change by source were 0.8% for electricity, 15.8% for town gas, -0.5% for coal, and 1.2% for oil.
[Figure 2] Change in primary energy consumption
Energy consumption in the transport sector dropped 0.8% year-on-year as a result of the economic slowdown despite the increase in the average size of passenger cars.
- The rates of change by source were 0.9% for gasoline, 2.8% for diesel, -6.3% for LPG, and -3.0% for jet fuel.
Energy consumption in the residential/commercial/public sector rose a mere 1.9% from the previous year (2.1% based on the previous energy conversion factor) owing to the government’s stringent energy demand management policies, notwithstanding the extremely hot summer and cold weather in November and December.
- The rates of change by source were 2.2% for electricity, 6.5% for town gas, -5.0% for oil, and 2.9% for thermal energy.
[Figure 3] Change in final energy consumption by sector
2. Outlook for Energy Demand
Primary energy demand in 2013 is expected to rise 1.8% for the year to 282.7 million toe, indicating a 2.8% rise in the second half of the year.
The economy is forecast to somewhat improve in the second half of the year.
* Domestic economic growth rate (%): (’12) 2.0 ⇒(First half of ’13) 1.8 ⇒(Second half of ’13) 3.4
Nuclear power generation is expected to drop substantially from the forecast made in the first quarter (year-on-year rise of 10.3%) as a result of stoppage of operation of some nuclear power plants. Demand for LNG will likely go up considerably, by 6.6%, on a sharp rise in demand for power generation.
- Nuclear power generation was expected to rise a strong 10.3% in a forecast made in the first quarter. This was in consideration of the commencement of commercial operation of Singori Nuclear Power Plant Unit 2 and Sinwolseong Nuclear Power Plant Unit 1 last year as well as the planned start of operation of Sinwolseong Nuclear Power Plant Unit 2 and Singori Nuclear Power Plant Unit 3 this year.
- However, nuclear power generation fell substantially as a result of stoppage of operation of Singori Nuclear Power Plant Unit 1-2 and Sinwolseong Nuclear Power Plant Unit 1 due to cable issues.
- LNG demand for power generation was expected to drop substantially due to the commencement of operation of new nuclear power plants. However, LNG demand rose relatively significantly owing to a sharp rise in demand for power generation.
Outlook for Energy Demand
2
Forecasts for key energy indicators
Energy intensity is expected to slightly improve from 0.251 toe/million won in 2012 to 0.250 toe/million won in 2013.
Per-capita energy consumption is forecast to rise from 5.55 toe in 2012 to 5.63 toe in 2013.
- In addition to a rise in energy demand by final consumers to power electrical equipment, electronic equipment, air conditioning, heating, automobiles, and the like as a result of higher income levels, there was also an increase in energy input in the industrial production process. This caused a steady rise in per-capita energy consumption.
[Figure 5] Outlook for energy intensity and per-capita consumption [Figure 4] Economic growth rate and primary energy increase
Forecasts for energy demand by source
Coal demand declined 2.1% last year, but is expected to rebound slightly by 1.1% this year.
- Coal demand for industrial use is forecast to rise somewhat as a result of an upswing in the economy, but coal demand for power generation will likely remain flat because no coal-fired power generation facilities will be expanded.
- Bituminous coal demand declined 1.7% last year, but is forecast to rise 0.8% as a result of a slight improvement in the economy this year.
- Anthracite demand is forecast to increase 4.4% as anthracite demand for industrial use, which accounts for a high percentage of total consumption, should rebound.
Oil demand is forecast to rise 0.6% for the year.
- Oil demand for transport is forecast to increase 0.8% this year owing to a steady rise in automobile sales and an increase in international air travel, despite the persistence of high oil prices.
- Oil demand in the industrial sector is forecast to rise 1.8%, an outcome of a continued increase in naphtha demand stemming from expansion of facilities in the petrochemical industry last year. Fuel demand is expected to drop 9.2% as a result of continued substitution of fuel by town gas.
- Oil demand in the residential/commercial/public sector is forecast to fall 5.2%, attributable to the continued substitution of fuel by town gas driven by the high oil prices.
Demand for natural gas has continued to rise sharply, and it will likely rise at a high rate this year.
- The rate of increase in natural gas demand was expected to drop substantially with the commencement of operation of new nuclear power plants (Sinwolseong Nuclear Power Plant Unit 2 - 1 million kW, Singori Nuclear Power Plant Unit 3 - 1.4 million kW). However, natural gas demand for power generation will likely rise sharply by 12.5% owing to cutbacks in nuclear power generation due to cable issues.
- The rate of increase in total town gas demand is expected to drop to 4.3% for the year.
- Town gas demand for industrial use has been rising quickly, but the rate of increase is expected to drop somewhat this year to 9.8%. Demand in the residential/
commercial/public sector is forecast to rise only 0.1% this year since there was some
2. Outlook for Energy Demand
unusually cold weather last year.
Electricity demand is forecast to rise 2.6% as a result of the economic recovery this year.
- Electricity demand for industrial use is expected to rise at a higher rate of 3.0% as compared to last year’s increase of 2.9% owing to a rise in industrial production.
- Electricity demand for residential use increased 3.2% last year owing to higher demand for air conditioning during the extremely hot summer. Demand is expected to rise only 1.4% this year since last summer’s temperatures were so extreme.
- Electricity demand for commercial use is forecast to rise somewhat sharply by 2.3% as a result of the upswing in the economy.
Nuclear power generation was expected to rise substantially with the commencement of commercial operation of Singori Nuclear Power Plant Unit 2 and Sinwolseong Nuclear Power Plant Unit 1 last year as well as the start of operation of Sinwolseong Nuclear Power Plant Unit 2 (1 million kW) and Singori Nuclear Power Plant Unit 3 (1.4 million kW) this year. However, nuclear power generation will likely go up only 1.5% as a result of stoppage of operation of Singori Nuclear Power Plant Unit 1-2 and Sinwolseong Nuclear Power Plant Unit 1 due to cable issues.
- Nuclear power generation capacity is expected to rise 10.1% for the year.
The share of energy consumption accounted for by oil and coal is expected to decline;
the share taken up by natural gas should rise.
- Oil’s share of primary energy consumption dropped to below 50% in 2002 and has continued to go down. It is estimated at 38.2% in 2012 and forecast at 37.7% for 2013.
- The share taken up by coal consumption increased from 23.1% in 2001 to 30.3% in 2011 as a result of a steady rise in coking coal consumption for industrial use and coal consumption for power generation. The share accounted for by coal will likely decrease to 28.8% since there will be no expansion of coal-fired power generation facilities and demand for industrial use will likely increase more slowly in 2013, just like it did in 2012.
- The share accounted for by natural gas was 18.1% in 2012, attributable to a sharp rise in natural gas demand for power generation and town gas production. The share is forecast to go up somewhat to 18.9% in 2013, attributable to a sharp increase in
2. Outlook for Energy Demand
demand for power generation.
- The share accounted for by nuclear power peaked at 16.0% in 2005 and then declined through 2012 as no facilities were expanded. There will likely be no change in the share in 2013 as a result of a drop in the usage rate despite a rise in facility capacity.
Outlook for energy demand by sector
Final energy demand is forecast to indicate steady growth of 1.7% as a result of economic recovery in 2013.
Energy demand in the industrial sector is expected to go up 2.4% as it is forecast that there will be an increase in energy demand for fuel, including energy oil and town gas, and demand for naphtha and coking coal as a result of the economic recovery.
- Demand for naphtha is expected to increase at a slower rate compared to last year, but coking coal demand for steel making is forecast to rebound.
* Forecast for naphtha demand (%): (’12) 8.3 ⇒(’13) 3.7
* Forecast for coking coal demand (%): (’12) -0.9 ⇒(’13) 3.0
- Energy demand excluding that for raw material use is forecast to rise 0.9% for the year.
- Demand for oil for fuel is expected to drop 9.2%, while demand for town gas will likely go up 9.8%.
[Figure 6] Percentage shares of energy sources
- Forecasts for increases in energy demand are 3.0% for electricity, 9.8% for town gas, 2.8% for coal, and 1.8% for oil.
Energy demand in the transport sector is forecast to increase 1.1%, mainly for gasoline and jet fuel, an outcome of the increase in the size of passenger cars and the rise in international travel, despite high oil prices.
- Forecasts for increases in demand for energy are 2.7% for gasoline, 1.1% for diesel, and 2.8% for jet fuel. Demand for LPG is forecast to decline 1.6%.
Energy demand in the residential/commercial/public sector is expected to rise 0.1% for town gas and 2.1% for electricity. It is forecast to drop 1.9% for thermal energy, 0.2% for anthracite, and 5.2% for petroleum products. The overall increase should be 0.4%.
Final energy consumption by sector
- The share of energy consumption accounted for by the industrial sector remained between 55% and 56% until 2005. It is continuing to rise and will likely reach around 61.8% in 2013. The increase in the share accounted for by the industrial sector is a result of steady growth of energy-intensive industries including the steel and petrochemical industries and very strong growth of the fabricated metal industry, which consumes a great amount of electricity.
- The transport sector accounted for 21.0% of consumption in 2006, but its share steadily declined afterwards. It fell to 17.9% in 2011. The share is expected to drop slightly to 17.8% in 2013. The drop in the share of consumption of the transport sector is a result of a substantial drop in the rate of increase in petroleum product consumption for transport, compared to the rate of increase in energy consumption in other sectors. This was another result of the persistently high oil prices since 2003.
- The percentage of consumption accounted for by the residential/commercial/public sector indicated a steady downward trend in tandem with strong energy consumption by the industrial sector since 2005. It dropped to 20.7% in 2012 and is expected to decrease slightly to 20.4% in 2013. The share of consumption accounted for by the residential/commercial/public sector, where most energy is consumed for heating and air conditioning, tends to vary with temperature in the summer and winter.
2. Outlook for Energy Demand
[Figure 7] Percentage share of final energy demand of each sector
Notes: 1) The figures for 2012 were calculated using the new energy conversion factor (introduced on December 30, 2011). When the previous energy conversion factor is applied, the rate of increase in primary energy demand is 2.1% (1.2% not including raw material use).
2) The figures in parentheses are year-on-year percentage changes, e indicates that the figures are forecasts.
Category 2012 2013e
2011 1/4 2/4 3/4 4/4 Annual First half Second half Annual
130.9 32.6 29.3 32.9 33.2 128.0 32.7 62.4 67.1 129.5
(8.1) (3.1) (-2.5) (-4.3) (-4.5) (-2.1) (0.3) (0.7) (1.5) (1.1)
99.1 24,8 21,5 25.0 25.2 96.6 25.0 46.7 50.3 97.0
(5.6) (2.6) (-3.3) (-3.3) (-5.8) (-2.8) (0.9) (0.8) (0.2) (0.5)
801.6 209.1 201.2 204.2 213.0 827.4 204.8 412.7 423.2 836.0
(0.9) (1.1) (9.8) (1.5) (1.2) (3.2) (-2.1) (0.4) (1.5) (0.6)
413.5 108,4 98,4 99,7 105.3 411.9 100.4 198.9 203.3 402.2
(-4.5) (-2.1) (7.9) (-2.4) (-3.7) (-0.4) (-7.4) (-3.8) (-0.8) (-2.3)
35.6 12.7 7.9 6.7 11.1 38.5 12.7 21.1 20.0 41.0
(7.6) (2.8) (6.5) (7.9) (16.3) (8.1) (-0.4) (1.9) (12.0) (6.6)
8.0 1.2 1.8 2.4 1.5 7.1 1.1 2.9 3.7 6.6
(23.3) (-20.3) (-2.2) (-27.1) (30.1) (-11.5) (-14.5) (-6.2) (-7.7) (-7.0)
150.2 37.7 36.4 40.3 36.0 150.3 37.0 76.1 76.5 152.6
(1.1) (0.6) (-5.6) (5.4) (0.1) (0.1) (-1.7) (2.7) (0.3) (1.5)
6.6 1.8 1.8 1.7 1.9 7.2 1.9 3.9 3.9 7.7
(9.1) (7.0) (9.3) (8.8) (8.5) (8.4) (9.3) (9.6) (6.2) (7.9)
275.7 74.0 64.6 66.4 72.6 277.6 73.4 139.7 143.0 282.7
(4.5) (0.5) (2.1) (-0.8) (1.0) (0.7) (-0.8) (0.8) (2.8) (1.8)
203.1 56.0 46.4 47.9 53.6 203.9 55.1 102.7 103.8 206.5
(2.6) (0.0) (1.1) (-0.5) (0.9) (0.4) (-1.6) (0.3) (2.3) (1.3)
Coal (Million ton) -Excluding coking coal
Oil (Million bbl) -Excluding non-energy
LNG (Million ton)
Hydro (TWh) Nuclear power
(TWh) Other (Million TOE) Primary energy (Million TOE) Primary energy -Excluding for raw materials
<Table 1> Primary energy consumption and outlook
1/4
Notes: 1) The figures for 2012 were calculated according to the new energy conversion factor introduced on December 30, 2011. When the previous energy conversion factor is applied, the rate of increase in final energy demand is 2.3%.
2) The figures in parentheses are year-on-year percentage changes, e indicates that the figures are forecasts.
2. Outlook for Energy Demand
Category 2012 2013e
2011 1/4 2/4 3/4 4/4 Annual First half Second half Annual
126.9 31.6 31.2 31.6 32.8 127.2 32.2 64.0 66.2 130.2
(8.5) (1.1) (2.6) (-1.9) (-0.6) (0.3) (1.8) (1.9) (2.9) (2.4)
54.3 13.6 13.0 13.0 13.8 54.5 13.8 27.0 27.1 54.1
(6.3) (0.0) (-0.5) (-2.6) (-3.4) (-1.6) (1.5) (1.4) (0.9) (1.2)
36.9 8.9 9.3 9.6 9.4 36.9 8.8 18.3 19.3 37.6
(-0.2) (1.1) (5.7) (-1.8) (-1.2) (0.8) (-0.8) (0.6) (1.5) (1.1)
42.1 15.1 8.3 7.5 12.0 42.9 15.0 23.7 19.4 43.1
(0.8) (-2.4) (-0.2) (1.2) (10.0) (1.9) (-1.2) (1.0) (-0.2) (0.4)
205.8 55.6 48.8 48.6 54.2 207.3 55.9 105.9 104.9 210.9
(5.3) (0.1) (2.7) (-1.5) (1.4) (0.7) (0.6) (1.5) (2.0) (1.7)
133.3 37.7 30.5 30.1 35.2 133.5 37.6 68.9 65.8 134.7
(2.7) (-0.7) (1.4) (-1.4) (1.4) (0.1) (-0.1) (1.1) (0.8) (0.9)
21.7 8.7 4.5 3.6 7.0 23.8 9.1 14.1 10.7 24.8
(8.5) (2.2) (3.0) (12.3) (24.8) (9.7) (4.9) (1.6) (-4.1) (4.3)
778.9 199.1 192.9 198.1 206.5 796.5 197.9 393.5 411.0 804.5
(1.5) (1.4) (7.3) (0.4) (0.5) (2.3) (-0.6) (0.4) (1.6) (1.0)
390.8 98.4 90.1 93.7 98.8 381.0 93.5 183.8 191.0 374.8
(-3.8) (-1.9) (2.8) (-4.8) (-5.4) (-2.5) (-4.9) (-2.5) (-0.8) (-1.6)
455.1 124.7 111.5 115.9 114.4 466.6 125.0 239.9 238.6 478.6
(4.8) (2.7) (2.3) (3.0) (2.0) (2.5) (0.2) (1.6) (3.6) (2.6)
49.9 12.0 11.7 11.9 12.7 48.3 11.9 24.0 25.6 49.6
(14.7) (0.8) (-1.9) (-7.8) (-3.5) (-3.2) (-0.3) (1.3) (4.0) (2.7)
18.2 4.2 4.0 4.0 4.8 16.8 4.3 8.4 8.8 17.2
(11.4) (-5.8) (-5.3) (-8.9) (-8.9) (-7.3) (2.4) (3.2) (1.0) (2.1)
7,535 2,390 1,763 1,642 2,278 8,074 2,515 4,451 4,082 8,534
(6.7) (5.5) (6.2) (6.0) (10.5) (7.2) (5.2) (7.2) (4.1) (5.7)
<Table 2> Final energy consumption and outlook
1/4 Industry
(Million TOE) -Excluding for raw materials Transport (Million TOE) Residential/
commercial/
Public (Million TOE)
Total (Million TOE)
Total -Excluding for raw materials Town gas (Billion m3)
Oil (Million bbl) -Non-energy
oil excluded Electricity (TWh)
Coal (Million ton) -Excluding coking coal Thermal and
other (Thousand TOE)
The nuclear power generation usage rate fell substantially due to issues in the operation of nuclear power plants.
Nuclear power generation will likely fall substantially due to stoppage of operation of Singori Nuclear Power Plant Unit 1-2 and Sinwolseong Nuclear Power Plant Unit 1 due to cable issues.
- Nuclear power generation capacity is expected to rise 10.1% for the year.
- Nuclear power generation was previously expected to rise substantially because of the commencement of commercial operation of Singori Nuclear Power Plant Unit 2 and Sinwolseong Nuclear Power Plant Unit 1 last year as well as the start of operation of Sinwolseong Nuclear Power Plant Unit 2 (1 million kW) and Singori Nuclear Power Plant Unit 3 (1.4 million kW) this year.
The industrial sector is expected to account for 84% of the rise in energy demand in 2013.
Energy consumption in the industrial sector rose 10.2% in 2010 and 8.5% in 2011, leading the rise in overall energy consumption. It rose only an estimated 0.3% in 2012 (2.4% when the previous energy conversion factor is applied) and is forecast to rise only 2.4% in 2013 owing to the economic slowdown.
- The rate of increase in demand for town gas and naphtha, which have recently led the rise in energy demand, will likely fall to some extent, but will likely continue to lead the increase in demand for industrial use.
The contributions to the rise in total energy demand are forecast at 84% for the industrial sector, 11% for the transport sector, and 15% for the residential/commercial/public sector. The industrial sector is expected to lead the increase in energy demand in 2013.
- Energy sources that will lead the rise in energy demand in the industrial sector are town gas, naphtha, electricity, and bituminous coal for steel making. The rates of increases are forecast at 9.8%, 3.7%, 3.0%, and 3.0%, respectively.
Major characteristics
3
Electricity demand is forecast to rise 2.6%, virtually the same rate as the economic growth rate.
Electricity demand for industrial use is forecast to increase 3.0% in the second half of the year. This is attributable to the rise in industrial production driven by the modest recovery in the economy. The rate of increase for the entire year should be similar to that recorded last year.
Electricity consumption has risen quickly for several reasons: low charges, continued strength in production in energy-intensive industries, use of more electric-powered equipment, and convenience in use.
- Electricity consumption rose at an average annual rate of 9.8% in the 1990s and an annual average rate of 6.1% in the 2000s. Consumption of electricity rose more quickly than that of any other major final energy source.
- Electricity consumption rose 10.1% in 2010 and 4.8% in 2011. It rose only 2.5% in 2012 owing to the economic slowdown.
The share of primary energy accounted for by oil is forecast to fall to 37.7%.
The share accounted for by oil in primary energy fell to less than 40% in 2010, and is expected to decline to 38.2% in 2012 and 37.7% in 2013.
- When excluding non-energy oil for industrial use (naphtha, asphalt, etc.), the share of primary energy accounted for by oil used as an energy source is expected to fall from 19.9% in 2011 to 19.6% in 2012 and 18.8% in 2013.
- The share of primary energy accounted for by LNG rose to 18.1% in 2012 owing to a continued increase in natural gas demand. It is expected to reach 18.9% in 2013 as a result of a rise in LNG demand for power generation, triggered by a drop in the nuclear power generation usage rate.
- The share of primary energy accounted for by petroleum products (excluding non- energy oil) and LNG is forecast to remain at a similar level.
- The share of primary energy taken up by non-energy oil will likely go up from 18.3%
in 2011 and 18.6% in 2012 to 18.9% in 2013.
3. Major characteristics
The Korean economy’s declining dependence on oil is a result of the persistently high oil prices and the resulting change in the relative prices of energy sources.
- The rise in oil prices has led to less rapid increases in fuel consumption for transport and an ongoing decline in oil consumption for power generation. Oil is steadily being replaced by other energy sources such as town gas.
- Prices of oil soared and the real electric charges have changed relatively little, resulting in widespread conversion to electricity.
- Oil dependence is naturally expected to continue to drop.
Energy intensity (toe/million won) is expected to slightly improve to 0.250 in 2013.
Energy intensity (toe/million won) is an index that indicates national energy efficiency. It deteriorated for three consecutive years, from 2009 through 2011. It is expected to somewhat improve from 0.251 recorded in 2012 to stand at approximately 0.250.
The deterioration in energy intensity from 2009 through 2011 was temporary. It was a result of a rise in electricity demand and production in energy-intensive industries amid
[Figure 8] Oil dependence and forecasts
mid- to long-term energy efficiency improvements.
- The deterioration in energy intensity in 2009 was due to the surpassing of the economic growth rate of 0.3% by an increase of 1.1% in primary energy consumption, triggered by increased energy conversion loss, a result of the commencement of operation of new steel facilities and a sharp rise in electricity consumption.
- In 2010, there was a surge in energy consumption for cooling and heating owing to unusual weather and a sharp rise in bituminous coal consumption for pig iron production. This was an outcome of the commencement of operations of Hyundai Steel’s Blast Furnace No. 1 with an annual crude steel production capacity of 4 million tons in January and Blast Furnace No. 2 at the end of November.
- In 2011, the commencement of operations of Blast Furnace No. 2 of Hyundai Steel and a surge in consumption for raw material use in the petrochemical industry as a result of facility expansions were factors.
Demand for town gas for industrial use will continue to rise sharply.
Town gas demand for industrial use will go up 9.8% in 2013. It will continue to rise sharply but should be at a slightly slower rate.
- Consumption of town gas for industrial use increased at an annual average rate of 30.3% between 1990 and 2000. The rate slowed considerably after 2000.
- Consumption increased at an annual rate of around 5% through 2006, and it has increased at an annual rate of more than 10% since 2010, an outcome of international crude oil prices remaining above USD 100/bbl. It rose 15.0% in 2012.
The sharp rise in town gas consumption for industrial use was mainly driven by fuel substitution in response to the high oil prices.
- It is assumed that fuel, including oil, is being widely replaced by town gas in response to the high international oil prices and rising preference for clean fuel by industry.
- Another cause is a sharp rise in consumption for raw material use in the petroleum refining and chemical industries.
- Major oil companies replaced naphtha with town gas in response to the sharp rise in prices of naphtha, which is a raw material used for producing hydrogen in the cracking
3. Major characteristics
process. The high naphtha prices are a result of the high oil prices since 2008.
- Accordingly, the percentage of town gas consumption accounted for by the petroleum refining and chemical industries among all manufacturing industries rose sharply, from 8.3% in 2006 to 19.5% in 2008 and to 26.3% in 2011.
[Figure 9] Consumption of town gas for industrial use
There is a need to develop supply capacity and continue efforts to restrain rising demand for electricity in the interests of stabilization of electricity supply and demand.
The cost principle should be incorporated into electricity charges as soon as possible to prevent the higher electricity demand that arises from the low charges.
- There is a need to present a direction for electricity charge policy to promote rational choices among electricity consumers.
PR should be stepped up to ensure that the general public receives information on how to use electricity efficiently and gains better understanding of the importance of reducing energy consumption, thereby minimizing wasteful energy use.
There is a need to continually implement measures to stabilize winter and summer electricity supply and demand.
There will be no spare electric power supply in 2013 owing to a considerable decline in nuclear power generation, an outcome of the stoppage of operations of some nuclear power plants, despite the 5.7% expansion of nuclear power generation capacity in 2013.
- At summer peak time in 2012 (August 6), the supplied reserve margin was extremely low at 3.8% (power reserve level: 2.79 million kW).
- Operation of Singori Nuclear Power Plant Unit 2 and Sinwolseong Nuclear Power Plant Unit 1 commenced last year. Commercial operation of Sinwolseong Nuclear Power Plant Unit 2 (1 million kW) and Singori Nuclear Power Plant Unit 3 (1.4 million kW) is planned to commence in 2013.
- However, total nuclear power generation will likely drop substantially as a result of stoppage of operations of Singori Nuclear Power Plant Unit 1-2 and Sinwolseong Nuclear Power Plant Unit 1 due to cable issues.
- Electricity demand is forecast to go up 2.6% in 2013, which means that electricity supply and demand will likely be even tighter than in 2012.
There is a possibility of an emergency situation in electricity supply in the event of a
4. Policy implications
Policy implications
4
delay in the commencement of operation of new nuclear power plants, the occurrence of unusual weather, or unexpected stoppage of power generation facilities.
This points to the need to continually implement electricity demand management policies for stabilization of electricity supply and demand, including reduction of peak electricity use and imposition of restrictions on heating temperature.
Measures should be devised to secure maximum electricity supply capacity in such ways as using emergency electric generators in the private sector this year considering that there will be no spare electricity supply.
There is a need to examine LNG supply and demand conditions.
LNG demand for power generation is forecast to soar 12.5% owing to a substantial drop in nuclear power generation as a result of stoppage of operations of some nuclear power plants.
- LNG demand for power generation, which is used to handle peak load, soars when there are problems in the operation of base-load power generation facilities, including nuclear power generation and coal power generation facilities, amid a rise in electricity demand.
- LNG demand for power generation surged as a result of stoppage of operations of some nuclear power plants in 2012.
- LNG demand may rise sharply if there is unusual weather or a delay in the commencement of operation of new nuclear power plants.
There will be a sharp rise in demand for LNG for both power generation and town gas if there is a deep freeze in the winter, which points to the need to establish measures to stabilize LNG supply and demand in the winter.
There is a need for policy consideration of factors that trigger increased energy demand for industrial use.
Naphtha demand rises in response to increases in exports of petrochemical products to China and other countries. Higher demand for coking coal is an outcome of facility expansion by Hyundai Steel. These increases have made industry even more energy-intensive.
The sharp rise in electricity demand for industrial use is also making industry more energy-intensive. Waste of energy should be reduced by normalizing electricity prices, thereby establishing an efficient energy supply/demand structure and industrial structure.
The increasing energy-intensiveness of industry runs counter to the low carbon, green growth movement and renders reduction of greenhouse gas emissions even more difficult. It clearly needs to be managed according to national policies.
4. Policy implications
KKEEEEII Korea Energy Demand Outlook (Volume 15 No. 2)
Printed on August 2013 Issued on August 2013
CEO of publisher: Sonn Yang-hoon
Registration: No. 7 on December 7, 1992
Printed by: Beomshinsa (02)503-8737
ⓒKorea Energy Economic Institute 2013 132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114, Fax: (031)422-4958
Publisher: Korea Energy Economics Institute
KEEI
Korea Energy Demand Outlook
June 2013
Korea Energy Economic Institute
132 Naesonsunhwan-ro, Uiwang-si, Gyeonggi-do Phone: (031)420-2114
