Gradual growth in primary energy demand
The annual average increase rate of primary energy demand is projected to be 3.3%
during the forecast period (2010~2015). This is lower than the assumption made for the annual average economic growth rate (4.3%).
This is because the Korean economy is entering a phase of stable growth, breaking away from the high growth trend of the past, and because of a slowdown in the rate of increase in energy consumption by industries that consume great amounts of
Key characteristics
1
(Unit: Trillion won, constant price of 2005) Annual average growth rate
(%) Category 2000 2005 2006 2007 2008 2009
Added value of three
key high-consuming 62.6 80.0 81.9 85.5 82.3 79.2 2.6 industries
GDP 694.6 865.2 910.0 956.5 978.5 980.4 3.9
<TableⅣ-1> Trends in GDP and the added value of three key high-consuming industries
[DiagramⅣ-1] Share of GDP taken up by the three energy-intensive industries (%)
Source: Statistics Korea, national statistics portal (KOSIS)
energy and that led a rise in energy demand.
- The share of added value of the three key high-consuming industries, from among GDP, has been going down since the mid-2000s (8.1% as of 2009).
Notes: 1) Considering that the K-factor changed in 2007, data before 2007 was converted to the changed K-factor for consistency in energy consumption by business type
2) In terms of anthracite and new & renewable energy/other energy, only overall statistics for the manufacturing industry are tallied. There are no statistics per business type. For this reason, they have been exempted from analysis of consumption.
A rise in domestic energy prices as a result of high oil prices that continued since the mid-2000s and improvements in energy efficiency are forecast to contribute to the stabilization of energy demand.
- Dubai oil, which continued to soar since the mid-2000s, recorded a year-on-year drop of 34% in 2009 but has been sharply going up again afterwards.
- Energy intensity, which indicates the energy efficiency level of the entire economy, has been steadily improving since the late 1990s.
(Unit: 1 million TOE)
Business type
Annual average increase rate 2000 2005 2006 2007 2008 2009 2010 (%)
Petro and
35.9 42.9 44.7 49.0 49.2 51.0 52.7 3.9
chemical
Non-metallic 5.4 5.2 5.4 5.5 5.6 4.9 4.8 -1.2
mineral Basic
17.4 18.7 18.8 19.9 21.4 19.2 23.4 3.0
metal
Total 58.8 66.8 68.9 74.4 76.2 75.1 80.9 2.8
<TableⅣ-2> Trends in energy consumption by the three energy-intensive industries
Notes: The price for 2011 is an estimate made by the Korea Energy Economics Institute Source: Oil information network of the Korea National Oil Corporation (www.petronet.co.kr)
Korea Energy Economics Institute, 2011 International Crude Oil Market Condition and Oil Price Outlook, January 2011
[DiagramⅣ-2] Trends in Dubai crude oil prices
(Unit: $/bbl)
[DiagramⅣ-3] Energy intensity and GDP elasticity
(Elasticity) (TOE/1 million won)
Continued improvements in energy intensity
Energy intensity (TOE/1 million won) temporarily worsened in 2009 and 2010, but is forecast to turn around and indicate improvements starting from 2011.
- Year 2009: Primary energy consumption went up 1.1% as a result of completed construction of facilities that consume great amounts of energy, while economic growth remained stagnant (0.2%) because of the financial crisis.
- Year 2010: There was a soar in demand for cooling and heating as a result of abnormal weather and a sharp rise in consumption for industrial use (8.8%) triggered by favorable conditions in the economy and base effects.
The annual GDP elasticity of primary energy demand posted 1.21 in 2010. It is forecast to continually go down during the forecast period and stand at around 0.73 in 2015.
Notes: 1) Values in parentheses refer to the rate of increase from the previous year (%); p refers to tentative figures 2) Primary energy consumption in 2010 includes the estimated directly-adopted and consumed volume of POSCO
and K-POWER
3) Annual average primary energy consumption increase rate÷Annual average economic growth rate
Continued decrease in level of oil dependence
Oil dependence on primary energy reached its peak at 63% in 1994, and then continued to drop. It was below 50% in 2002, and is projected to decrease even
Annual average increase rate
(%)
Category 2010p 2011 2012 2013 2014 2015
GDP (Trillion won) 1,040 1,086 1,134 1,183 1,232 1,284 4.3 Primary energy demand
(Million TOE) 261.2 270.8 280.1 289.0 298.0 307.1 3.3
Energy intensity
(TOE/Million won) 0.251 0.249 0.247 0.244 0.242 0.239 -1.0 GDP elasticity of
energy consumption 1.21 0.82 0.78 0.74 0.74 0.73 0.763)
<TableⅣ-3> Outlook on key indicators related to energy efficiency
more to between 35 and 36% in 2015.
- The share of primary energy occupied by naphtha, a raw material in the petrochemical industry, rose from 15.2% in 2005 to 17.0% in 2009. However, it is forecast to gradually decrease during the forecast period to record the low 15%
range in 2015.
- When excluding naphtha, oil dependence is projected to remain at 20.2% in 2015.
The decrease in the share of consumption accounted for by oil is assessed to be the result of the government’s continuous oil dependence reduction policies aimed at achieving energy security.
- Such policies include strengthening of environmental regulations and a project to build metropolitan area town gas pipelines to bring down oil dependence.
- International oil prices have been soaring since the mid-2000s. This has resulted in a decrease in oil consumption and further acceleration in replacement of oil for fuel by other energy sources.
In the final demand sector, including the industrial sector and residential/commercial [DiagramⅣ-4] Oil dependence trends and outlook
(Unit: %)
and public/other sectors, replacement of oil for energy by town gas and electricity continued. This trend will likely continue in the future.
- As a result of recent changes in the economic feasibility of energy sources as a result of high oil prices, oil is being quickly substituted by electricity in the heating energy market.
A rise in share accounted for by LNG and nuclear energy
LNG is comparatively clean and convenient as a network energy. The share of primary energy occupied by LNG rose from 13.3% in 2005 to 15.9% in 2010. It is forecast to go up further to reach approximately 17.8% in 2015.
- The increased share occupied by LNG is a result of a rapid increase in demand for power generation rather than demand for town gas. The annual average increase rate of demand for power generation and for town gas is projected to be 6.7% and 4.7%, respectively, from 2010 through 2015.
- Considering the power generation facility expansion plan of the 「5th Electricity Supply and Demand Plan」, dependence on LNG power generation, which handles [DiagramⅣ-5] Trends and outlook on the share taken up by LNG and nuclear energy
(Uni: %)
peak load, is projected to rise up until 2014 and drop in 2015 owing to the operation of a new coal power plant.
The share of primary energy accounted for by nuclear energy, a key base power generation source, went down from 16.1% in 2005 to 12.1% in 2010 due to sluggish expansion of facilities. However, it is projected to gradually go up during the forecast period to reach around 14% in 2015.
- Nuclear power is forecast to post annual average growth in the low 6% range during the forecast period as new facility expansion is concentrated in the years 2011 through 2014 according to the electricity supply/demand plan.
- Nuclear power plants that will be built during the forecast period will total 6,800MW.
It is projected that there will be a rise from 17,716MW in 2010 to 24,516MW in 2015.
Increased share of final energy accounted for by electricity
The share of final energy taken up by electricity is forecast to rise from 16.7% in 2005 to between 21 and 22% in 2015.
- Electricity consumption recorded annual average growth of 9.8% in the 1990s. It continued sound growth of an annual average 6.1% in the 2000s as well.
Consumption of electricity, a high-class energy source, is continuing comparatively high growth even in the 2000s. This is due to several factors.
- The main reason is because the fabricated metal industry (machinery and equipment, electricity and electronics, semiconductor, automobile, etc.), an industry that consumes great amounts of electricity, recorded the highest degree of growth among manufacturing industries.
Average added value increase rate from 2000 through 2010: (Manufacturing industry) 2.8%, (Assembled metal) 5.6%
- Recently, the steel making industry (Hyundai Steel, POSCO, Dongkuk Steel) launched the operation of facilities that consume great amounts of electricity, contributing to a rise in electricity consumption.
- Another important factor is the rapid replacement of previous key energy sources -
oil and town gas - by electricity in the energy market for heating, attributable to the maintenance of an electricity charge that does not reflect production costs and continued high oil prices.
Electricity is projected to continue to perform leading roles in energy use due to several factors: convenience in use, and changes in lifestyles resulting from a rise in income levels and technological development.
- Electricity demand is forecast to continue high growth, recording an annual average in the high 4% range, even after 2010. Growth will be mainly led by demand in the industrial sector (annual average increase of 5.4%).
An increase in final energy consumption led by the industrial sector
Energy demand in the industrial sector is forecast to indicate sound growth of an annual average 3.3% if the economic growth rate (assumption of an annual average 4.3%) reaches the potential growth rate level from 2010 through 2015.
- It is projected that energy demand in the industrial sector will show the highest increase rate during the forecast period. This is because energy demand in the industrial sector sensitively responds to favorable conditions in the economy.
[DiagramⅣ-6] Trends and outlook on share taken up by each key final energy source
(Unit: %)
The share occupied by the industrial sector maintained the 55 to 56% range up until the mid-2000s, but gradually went up afterwards and reached 59.2% in 2010. It is projected to go up further to 60.5% in 2015.
A rise in energy consumption in the industrial sector is the result of production activities in the economy. This is why it is unavoidable. As such, there is a need to promote high added-value industries that do not consume much energy in the long term to ensure efficiency in the nation’s energy consumption.
Primary energy demand in consideration of uncertainties in economic growth (scenario-based outlook)
Considering uncertainties on the economic environment from 2010 through 2015, the annual average increase rate of primary energy demand is projected to be in the 2.5 to 4.1% range (annual average economic growth rate of 3.4 to 5.2%).
The energy intensity improvement rate is an annual average 1.1% in case of the high growth scenario and -0.9% in case of the low growth scenario. It is projected that energy intensity will further decrease as economic growth progresses quickly.
- In general, energy intensity relatively quickly improves when the economic growth rate is high. Improvement in energy intensity tends to slow down when the growth [DiagramⅣ-7] Trend and outlook on share of consumption taken up by the industrial sector
(Unit: %)
rate is low.
The primary energy share taken up by LNG and new & renewable energy goes up in case of the high growth scenario, while it decreases in the low growth scenario.
- Base power generation facilities such as those for bituminous coal and nuclear power require a long construction period. It is therefore assumed that there will be no change during the five-year mid-term forecast period, irrespective of the economic growth scenario.
- LNG, which handles peak load, indicates an increase in the facility usage rate to satisfy rising electricity demand in the high growth scenario since there will be no change in the base power generation capacity. On the other hand, it indicates a decrease in the facility usage ratio in the low growth scenario.
- The share taken up by new & renewable energy is projected to slightly go up in the high growth scenario since relevant investments will more actively take place as economic growth quickly progresses. In contrast, the share accounted for by new
& renewable energy will likely drop due to poor investments in case of a decrease in the economic growth rate.
On the contrary, the share occupied by oil, coal, and nuclear energy is projected to go down in case of the high growth scenario, and go up in case of the low growth scenario.
