Mid-Term Korea Energy Demand Outlook(2011~2016)

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The rapid increase in energy consumption by the industrial sector is a result of production activities in the economy. This is why it is unavoidable.

However, there is a need to improve the energy efficiency of the industrial sector in order to become a low-energy consuming society in the long term. This would entail promoting low-energy consuming, high added-value industries and continually developing energy efficiency technologies.

There is a need to strengthen electricity demand management and improve efficiency in electricity use.

According to the baseline of this outlook, electricity demand is projected to rise at an annual average rate of 4.3% to reach 560.8 TWh by 2016.

- The relatively rapid increase in electricity demand is an outcome of electrification of energy consumption resulting from convenience in use and the rise in income levels.

Major advanced countries also went through this process.

Unlike other final energy sources, electricity triggers energy conversion loss during the generation process. For this reason, a rise in electricity demand triggers an increase in primary energy demand that roughly amounts to the energy loss.⁴⁾

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5. Policy implications

Policy implications

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4) There is energy loss of 63.6% in the power generation sector(as of 2010), which is why there is a need for primary energy input of 2.74 TOE to produce 1 TOE of electricity.

중기수요전망13 영문 2012.7.3 11:31 AM 페이지19 매일3 MAC2PDF_IN 600DPI 125LPI T

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Notes: Energy loss = Primary energy consumption - Final energy consumption Source: OECD/IEA, Energy Balances of OECD Countries (2011 ed.)

- If the same energy requirement for final energy use were to be covered by electricity and not oil or town gas, there would be an additional increase in primary energy demand.

- The share of primary energy consumption accounted for by energy conversion loss is rising more rapidly in Korea than in major advanced countries. As of 2009, it surpassed the level recorded by Japan (OECD/IEA statistics).

This points to the critical need to engage in electricity demand management and to boost efficiency in the use of electricity to ensure stability in energy supply and demand from 2012 through 2016.

- It is important to secure a maximum electricity supply capacity in such ways as timely expansion of power generation facilities and use of emergency electric power generators in the private sector by 2014 and 2015, considering that there will be no

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KEEIKorea Energy Demand Outlook

[Figure 8] Share of primary energy accounted for by energy loss in the transformation sector

5) The annual average increase in base-load power generation facilities(nuclear power, bituminous coal) as of the end of the year in the period from 2011 through 2014 is forecast at 4.1%, which would be lower than the rise in electricity demand during the same period(annual average of 4.5%).

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additional spare electricity until that time.⁵⁾

- In terms of demand, there is a need to encourage greater efficiency in electricity consumption by setting electricity charges billed to end users at higher levels that reflect actual power generation costs.

- There is also a need to continually implement electricity demand management policies that are aimed at reducing peak demand in the winter and summer.

There is a need to establish measures on stable LNG supply in preparation for an additional rise in demand.

LNG for power generation, which is used to handle peak load, is expected to play an important role until 2015, according to the power generation facility construction plan of the 5th Electricity Supply and Demand Plan and this report's electricity demand outlook.⁶⁾

An additional rise in LNG demand is projected if electricity demand increases by more than the expected rate during the forecast period (2012-2016) or if difficulties occur in the construction of base-load power generation facilities stated in the 5th Electricity Supply and Demand Plan.⁷⁾

- A review of past electricity supply and demand plans indicates that there were frequent delays in the construction of base-load power generation facilities.

- A rise in LNG demand is considered unavoidable if there is a change in the government's nuclear power policy. Among the possible changes, the government may not continue to operate Gori Nuclear Power Plant Unit 1 and Wolseong Nuclear Power

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5. Policy implications

6) The 6th Electricity Supply and Demand Plan is to be released at the end of 2012 and will contain new electricity demand forecasts and power generation facility construction plans.

7) There is a need for more than 1 million tons of LNG annually in order to replace base-load power generation facilities of 1,000MW(based on a utilization rate of 90%).

8) Gori Nuclear Power Plant Unit 1 resumed operation after a decision was made in January 2008 to extend its life. However, it has since been stopped for a safety check. A decision will be made on whether to extend the life of Wolseong Nuclear Power Plant Unit 1 as its design life comes to an end in November 2012.

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KEEIKorea Energy Demand Outlook

Plant Unit 1⁸⁾because of disputes over the safety of nuclear power generation.

LNG demand for power generation handles peak load. There is a possibility that LNG demand variability will increase due to unexpected changes, such as electricity demand fluctuations, during the forecast period.

There is, therefore, a need to revisit measures on the stable supply of LNG in consideration of uncertainties in the supply and demand conditions and demand in the mid-term (2012~2016).