Need for scenario-based outlook
Energy consumption in Korea is sensitive to shocks of every kind to the global economy, including the foreign exchange crisis in 1998, global financial crisis in 2009, and the surge in international energy prices since the mid-2000s.
- The Korean economy is heavily dependent on other countries. It is more exposed to outside factors, including business fluctuations in the US and China, the fiscal crisis in the euro zone, and sanctions imposed by the international community on Iran.
- As such, there is growing need to provide economic leaders a wider range of energy demand forecasts that take into consideration all of the uncertainties in future economic conditions.
This report presents high and low economic growth scenarios, in addition to the baseline growth scenario, and provides an energy demand outlook for each scenario in consideration of uncertainties in the energy market, including changes in the global economy and international oil prices.
Setting of economic (GDP) growth scenarios
For the baseline scenario, an outlook by the Bank of Korea (January 2013) was used as the economic growth rate (2.8%) of 2013. The premise values of the “2013 Long-Term Korea Energy Demand Outlook”2)were used for the growth rates between 2014 and 2017.
The growth rates of the high-growth and low-growth scenarios of 2013 were set within
±0.5p% of the growth rate of the baseline scenario, thus making them more practical in consideration of current economic conditions.
The economic growth scenarios for 2014 and onwards were set by applying ±1.0%p to the baseline scenario growth rate, considering that there is greater economic uncertainty.
Setting of economic growth scenarios
1
2) KEEI, 2013 Long-Term Korea Energy Demand Outlook, Planned for publication in December 2013
The economy is expected to grow at an annual average rate of 3.6% from 2012 through 2017 according to the baseline scenario. This figure is an annual average of 4.5% in the high-growth scenario and an annual average of 2.7% in the low-growth scenario.
Notes: Figures in parentheses are annual changes (%).
(Unit: KRW trillions)
Category Baseline High-growth scenario Low-growth scenario
2013 1,135 (2.8) 1,140 (3.3) 1,129 (2.3)
2014 1,181 (4.1) 1,198 (5.1) 1,164 (3.1)
2015 1,227 (3.9) 1,257 (4.9) 1,198 (2.9)
2016 1,273 (3.7) 1,316 (4.7) 1,230 (2.7)
2017 1,318 (3.6) 1,377 (4.6) 1,262 (2.6)
Annual average
growth rate (%) 3.6 4.5 2.7
(2012~2017)
<TableⅣ-1> Economic growth scenarios
[FigureⅣ-1] Outlook on GDP by scenario
Outlook on primary energy demand for each scenario
Primary energy demand is forecast to rise at an annual average rate of 2.7% during the forecast period (Year 2012~2017) and reach 317.8 million toe in 2017. Primary energy demand is expected to indicate an annual average rise of 3.2% in the case of the high- growth scenario and an annual average increase of 2.3% in the case of the low-growth scenario.
- In terms of primary energy demand in 2017, demand is 2.1% higher in the high-growth scenario compared to the baseline scenario. Demand is 2.0% lower in the low-growth scenario compared to the baseline scenario.
Notes: Figures in parentheses are annual changes (%).
(Unit: 1 million toe)
Category Baseline High-growth scenario Low-growth scenario
2013 283.3 (2.0) 283.6 (2.1) 282.8 (1.9)
2014 292.8 (3.4) 294.5 (3.8) 291.1 (2.9)
2015 300.9 (2.8) 304.0 (3.2) 297.8 (2.3)
2016 309.2 (2.8) 314.0 (3.3) 304.6 (2.3)
2017 317.8 (2.8) 324.3 (3.3) 311.5 (2.3)
Annual average
growth rate (%) 2.7 3.2 2.3
(2012~2017)
<TableⅣ-2> Outlook on primary energy demand by scenario
Energy demand by scenario
2
Outlook on energy intensity
In the case of the baseline scenario, energy intensity will likely indicate an annual average improvement rate of 0.8% during the forecast period, thus improving from 0.251 (KRW 1 million/toe) in 2012 to 0.241 (KRW 1 million/toe) in 2017.
Energy intensity is forecast to improve at an annual average of 1.3% in the case of the high-growth scenario and an annual average of 0.4% in the case of the low-growth scenario. Energy intensity is expected to further drop as the economy grows quickly.
Notes: p indicates that the figures are preliminary.
[FigureⅣ-2] Comparison of primary energy demand outlook among scenarios
(Unit: toe/KRW 1 million)
Category Baseline High-growth scenario Low-growth scenario
2013 0.250 0.249 0.250
2014 0.248 0.246 0.250
2015 0.245 0.242 0.249
2016 0.243 0.239 0.248
2017 0.241 0.236 0.247
Annual average
improvement rate (%) -0.8 -1.3 -0.4
(2012~2017)
<TableⅣ-3> Outlook on energy intensity by scenario
Energy intensity tends to improve relatively quickly in the high-growth scenario and relatively slowly in the low-growth scenario.
- Unless there are extreme economic conditions as in 1998, when the economy contracted, the rate of increase in demand for energy that is needed for basic national economic activity does not decline proportionally even when the economy grows slowly.
Outlook on demand by scenario of major energy sources
Compared to coal and nuclear energy, LNG and oil indicate significant differences in demand forecasts among scenarios.
[FigureⅣ-3] Comparison of energy intensity outlook among scenarios
(Unit: %)
Category Coal Oil LNG Nuclear power
High growth Low growth High growth Low growth High growth Low growth High growth Low growth
2013 0.2 -0.2 0.3 -0.3 0.0 -0.3 0.0 0.0
2014 0.6 -0.6 0.9 -0.9 1.3 -1.3 0.0 0.0
2015 1.0 -1.0 1.6 -1.6 2.4 -2.4 0.0 0.0
2016 1.4 -1.3 2.4 -2.3 3.8 -3.7 0.0 0.0
2017 1.7 -1.6 3.2 -3.1 5.7 -5.4 0.0 0.0
<TableⅣ-4> Change in demand for major energy sources by scenario compared to the baseline scenario
The percentage of total oil demand taken up by oil consumption for raw material use (naphtha, etc.), which is fixed, irreplaceable demand, is expected to steadily go up.
Notwithstanding, oil is relatively elastic to economic growth, international oil prices, etc.
compared to other energy sources.
- The annual average increase rate is forecast at 1.0% in the baseline scenario, 1.6% in the high-growth scenario, and 0.3% in the low-growth scenario.
LNG demand for power generation, which is used to handle peak load, accounts for approximately half of overall demand. This is why LNG demand is so elastic to changes in economic growth.
- In other words, there are extremely large fluctuations in the LNG power generation according to electricity demand, which depends on the rate of economic growth.
- LNG demand is forecast to go up 1.7% in the baseline scenario, 2.8% in the high- growth scenario, and 0.6% in the low-growth scenario.
[FigureⅣ-4] Outlook on oil demand by scenario
Coal demand for bituminous coal-fired power generation, which is used to handle base load, accounts for a high percentage of overall coal demand. For this reason, the demand variation among the scenarios is not great.
- During the forecast period, coal demand is forecast to go up an annual average 4.7% in the baseline scenario, 5.1% in the high-growth scenario, and 4.4% in the low-growth scenario.
[FigureⅣ-5] Outlook on LNG demand by scenario
[FigureⅣ-6] Outlook on coal demand by scenario
Nuclear energy, which is used to handle base load, is not significantly influenced by changes in primary energy demand. There may be a small change in power generation as an outcome of an adjustment in the power generation facility output stemming from electricity supply and demand conditions and adjustments in regular maintenance schedules.
Outlook on demand by scenario in the final consumption sector
The transport sector indicates the greatest variance among the demand forecasts for the scenarios. The residential/commercial/public sector shows the least variance.
- Most of the energy used in the transport sector is from petroleum products. Oil consumption is very elastic with respect to changes in economic growth and international oil prices. This is why the transport sector indicates the greatest variation among the demand forecasts.
- An essential energy requirement exists in the residential/commercial/public sector, including basic energy demand in the residential sector and the provision of public services such as national defense and administration. This is why demand in this sector is comparatively inelastic with respect to changes in economic growth.
- There is also a fixed base level of energy demand in the industrial sector unless economic conditions become extreme. However, industrial activity is naturally sensitive to business fluctuations, with the result that energy demand by industry reacts relatively elastically to changes in economic growth.
(Unit: %)
Category Industry Transport Residential/Commercial/Public
High growth Low growth High growth Low growth High growth Low growth
2013 0.3 -0.2 0.2 -0.2 0.0 0.0
2014 0.8 -0.8 0.7 -0.7 0.1 -0.1
2015 1.4 -1.3 1.2 -1.2 0.3 -0.3
2016 2.0 -1.9 1.7 -1.7 0.4 -0.4
2017 2.6 -2.5 2.3 -2.2 0.7 -0.7
<TableⅣ-5> Changes in demand in the final consumption sector by scenario compared to the baseline scenario
In demand forecasts in the baseline scenario, energy demand in the industrial sector is expected to go up at an annual average rate of 2.8%, resulting in consumption of 145.8 million toe in 2017. It is expected to increase at an annual average rate of 3.3% in the high-growth scenario and at an annual average rate of 2.3% in the low-growth scenario.
Demand in the transport sector is forecast to grow at an annual average rate of 1.5%
during the forecast period in the case of the baseline scenario, resulting in energy consumption of 40.1 million toe in 2017. It is expected to indicate annual average growth of 2.0% in the high-growth scenario and 1.1% in the low-growth scenario.
[FigureⅣ-7] Outlook on energy demand in the industrial sector by scenario
[FigureⅣ-8] Outlook on energy demand in the transport sector by scenario
Final energy demand in the residential/commercial/public sector is expected to rise at an annual average rate of 1.9% during the forecast period in the baseline scenario, reaching 47.0 million toe in 2017.
- Demand is forecast to go up an annual average of 2.0% in the high-growth scenario and 1.7% in the low-growth scenario.
[FigureⅣ-9] Outlook on energy demand in the residential/commercial/public sector by scenario
