The application of the new energy conversion factor meant a downward adjustment in primary energy demand in 2012 of 1.4%p.
The energy conversion factor for major energy sources was amended at the end of 2011 and was applied to compilation of energy supply and demand balance statistics starting in 2012.
Primary energy demand in 2012 based on the new energy conversion factor is forecast at 274.6 million toe, indicating a year-on-year rise of a mere 1.2%.
- This forecast demand is approximately 3.8 million toe (1.4%p) lower than the demand (278.4 million toe) forecast according to the previous energy conversion factor.
- This is because of a decrease in the assigned calorific values, compared to the same quantity of major primary energy sources such as coal, oil, and nuclear power.
Assuming that unusual weather will occur in the summer and winter, primary energy demand in 2012 is expected to reach 275.9 million toe, a year-on-year increase of 1.7%.
It is assumed that the average temperature will be 1℃higher than the average year level in the third quarter and then be 1℃below the average year level in the fourth quarter.
- In 2010, the average temperature in the third quarter was 0.7℃higher than the average
Major characteristics
4
(Unit: Million toe)
Category Primary energy
Energy input in the transformation
sector
Final energy Previous energy
278.4 139.3 204.6
conversion factor New energy
274.6 138.5 201.4
conversion factor
Decrease rate (%) -1.4 -0.6 -1.6
<Table 7> Comparison of energy demand in 2012 between the previous and new energy conversion factor
temperature of the last 20 years and was 1.0℃lower in the fourth quarter. This data was applied when setting the temperature scenario.
According to the temperature scenario, primary energy demand should be approximately 1.3 million toe (0.5%) higher compared to the base case outlook (274.6 million toe).
- Final energy consumption is expected to rise 0.7 million toe. There will likely be a substantial rise in demand in the residential/commercial/public sector, where a high percentage of energy demand is for air conditioning and heating.
- By energy source, demand for electricity, town gas, oil and thermal energy is forecast to rise as a result of unusual weather.
- The rise in final energy demand will be met by increased supply of LNG and petroleum products. Demand for LNG, which is used for town gas production and peak-load power generation, is forecast to rise 2.2% compared to the base case, while oil demand is expected to rise 0.2%.
If abnormal weather occurs, as it did in 2010, stabilizing the supply and demand for natural gas in the summer and winter this year will likely become an important issue.
Forecasts on energy intensity improvements in 2012
Energy intensity (toe/million won) deteriorated in both 2009 and 2010, but improved in
(Unit: Million toe)
Category Base case (A)
Temperature scenario (B)
Difference (B-A)
Increase rate (B/A, %)
Primary energy 274.6 275.9 1.3 0.5
- Oil (Million barrels) 806.9 808.3 1.4 0.2
- LNG (Million ton) 37.7 38.5 0.8 2.2
Final energy 201.4 202.1 0.7 0.3
- Industry 122.7 122.8 0.1 0.1
- Transport 36.6 36.6 - -
- Residential/ 42.1 42.7 0.5 1.3
commercial/public
<Table 8> Energy demand scenarios for 2012
2011. It is expected to fall to 0.245 in 2012, an improvement of 2.2%.
- According to the previous energy conversion factor, the energy intensity in 2012 should be 0.249, an improvement of 0.9%.
The deterioration in energy intensity in 2009 and 2010 was temporary. It was a result of a rise in electricity demand and production in energy-intensive industries amid mid- to long-term energy efficiency improvements.
Notes: The figures in parentheses are calculated according to the previous energy conversion factor. p indicates that the figures are preliminary; e indicates that the figures are forecasts.
Continued strength in energy demand in the industrial sector and industrial restructuring for low energy consumption
Since 2007, final energy consumption has been rising the most quickly in the industrial sector.
- Energy consumption in the industrial sector rose 8.5% in 2010 and 5.5% in 2011, leading a rise in the nation's energy consumption in the process of overcoming the currency crisis.
The manufacturing sector, which accounts for at least 95% of energy consumption in the industrial sector, recorded sound growth of 5.3% year-on-year in terms of energy consumption in 2011. This is attributable to continued strength in the fabricated metal, basic metal, and petrochemical industries9).
Industrial restructuring partly offset the rise in energy consumption in the manufacturing sector in 2011.
Category 2005 2006 2007 2008 2009 2010 2011p 2012e
Economic growth rate (%) 4.0 5.2 5.1 2.3 0.3 6.3 3.6 3.5
Primary energy consumption
3.8 2.1 1.3 1.8 1.1 7.9 3.4 1.2
increase rate (%) (2.6)
Energy intensity
0.264 0.256 0.247 0.246 0.248 0.252 0.251 0.245
(toe/Million won) (0.249)
<Table 9> Outlook on energy intensity
- The contribution of production to the rise in energy consumption in the manufacturing sector is estimated at 7.0%p. This means that energy consumption in the manufacturing sector would have risen 7.0% year-on-year if there had been no change in other factors.
- In contrast, the contribution from industrial restructuring was -1.6%p. Industrial restructuring helped reduce energy consumption in the manufacturing sector by 1.6 million toe.
- The manufacturing sector's energy intensity improvement effect was only 0.1%p.
Town gas consumption for industrial use sharply rose as a result of raw material replacement in the petroleum refining and chemical industries
Town gas has been put to much wider industrial use over the years. Consumption increased at an annual average rate of 30.3% between 1990 and 2000, but the rate has slowed substantially since 2000.
9) Energy consumption of the manufacturing sector excludes anthracite and new & renewable energy. Statistics on anthracite and new & renewable energy for industrial use are compiled only for the entire industry and are not broken down by manufacturing business type.
[Figure 4] Contribution of each factor to change in manufacturing sector energy consumption in 2011
Consumption increased at an annual rate of around 5% through 2006, and a two-digit increase rate has been maintained since 2008 (excluding 2009, during the financial crisis).
- A sharp rise in town gas consumption for raw material use in the petroleum refining and chemical industries is believed to be the main cause of the recent rapid increase in town gas consumption for industrial use.
- 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 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 from among all manufacturing industries rose sharply from 8.3% in 2006 to 19.5% in 2008 and 22.5% in 2010.
- Industries are increasingly showing preference for clean fuel. Industries are believed to be replacing oil, etc. with town gas for use as fuel.
The supplied reserve level indicates a downward trend
Since 2000, peak electricity demand has been increasing quickly, outpacing the rate of [Figure 5] Consumption of town gas for industrial use
construction of power generation facilities. Spare electric power generation capacity is steadily declining as a result.
- From 2000 through 2011, peak electricity demand in the summer increased at an annual average rate of 5.3%. Total capacity and supply capacity increased at rates of 4.7% and 4.9%, respectively, with the result that the supplied reserve margin10) dropped substantially.
- Peak electricity demand in the winter (December - February) rose at an annual average rate of 5.7% during the past 11 years, substantially outstripping total capacity at the point of winter peak demand, which increased at an annual average rate of 4.6%.
Peak electricity demand in the summer of 2011 and in the winter of 2011 to 2012 showed year-on-year rises of only 3.3% and 1.0%, respectively, as a result of the climate factor (low temperatures in the summer and mild weather in the winter).
- The supplied reserve level at the point of peak demand stood at 5.44 million kW in the summer of 2011 and at 5.67 million kW in the winter of 2011 to 2012.
There is a possibility of a shortfall in electricity supply if there is unusual weather in the summer or winter or unexpected difficulties in supply.
Oil dependence regarding primary energy consumption is forecast to drop steadily The share of primary energy accounted for by oil fell to less than 40% in 2010, and will likely fall to 37.6% in 2012.
When excluding non-energy oil for industrial raw material use (naphtha, asphalt, etc.), the share of primary energy accounted for by oil used as an energy source is expected to fall from 20.1% in 2011 to 19.3% in 2012.
The Korean economy’s declining dependence on energy oil is a result of the persistently high oil prices and relative prices among energy sources in Korea.
- 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 being steadily
10) Supplied reserve margin = 100*(Supplied reserve level/Peak electricity demand) Supplied reserve level = Power supply capacity - Peak electricity demand
replaced by other energy sources such as electricity.
There is a need to determine whether the rate at which dependence on energy oil is decreasing is appropriate when Korea establishes energy supply and demand policies as well as price policies.
- Considering Korea’s industrial structure, which is characterized by a high contribution to the economy by the petrochemical industry, oil for fuel should be targeted when setting the nation’s oil dependence target.
[Figure 6] Oil dependence and forecasts
