The Main Barriers to the Renewable Energy Transition in South Korea
04 October 2021 – by Viktor Tachev
Being among the most prosperous countries worldwide makes South Korea a benchmark that others look at and draw inspiration from. As such, it can have a massive influence on the future humanity is creating for itself. A significant chapter in this future is the renewable energy transition. With the latest declaration to achieve net-zero by 2050, the country acts as a role model. However, when we dive under the surface, we see plenty of barriers that risk deteriorating the renewable energy transition in South Korea.
Slow Renewable Energy Progress and Continued Reliance on Fossil Fuels
Data for February 2021 from the Korea Energy Economics Institute (KEEI) reveals that fossil fuels (82.5%) dominate the energy mix. In 2017, South Korea imported 94% of its energy supply from overseas. Today, the country is the world’s fourth-biggest importer of LNG after Japan, the EU and China.
Despite planning to retire all its coal plants (36.4 GW capacity) by 2029 to align with the Paris Agreement, South Korea is currently building a new 7.3 GW coal-fired power plant.
In 2020, wind and solar energy sources generated just 3.8% of the country’s electricity, up from 1% in 2015. Today, renewables account for just 6.4% of South Korea’s energy mix, the lowest among all OECD members. The government aims to increase the share of renewable electricity to 20% by 2030 and up to 42% by 2034.
The carbon emission reduction target of 24.4% compared to 2017 levels (37% compared to 2030 BAU levels) set in the current NDC lacks ambition compared to other countries. The U.S. and Japan, for example, aim at cutting emissions by 50% from its 2005 level by 2030.
While Korean officials promised that the country would submit an updated target by November 2021, according to experts, the minimum goal to remain on course with the net-zero by 2050 scenario should be 66% against BAU.
The Low Starting Position as a Roadblock to the Renewable Energy Transition in South Korea
South Korea’s current leadership, headed by President Moon Jae-in, shows ambition to reshape the country’s legacy power mix and develop green technologies. The Green New Deal, alongside the Ninth Basic Plan, the Emissions Trading Scheme (ETS), and the stimulus package for renewable energy, empower a positive shift in the current agenda. However, the uphill climb might prove too steep even for a country like South Korea. Due to its starting position and the green energy regress in the past couple of years, South Korea faces a more challenging task than many other nations.
As a result, Korea has significant and expensive legacy assets in need of transition. According to Carbon Tracker, the country has the highest stranded asset risk globally. Furthermore, new coal power operations are under construction.
Risk of Increased Reliance on LNG
Carbon Tracker acknowledges that Korea has to retire as much as 13.7 GW of coal capacity by 2034. However, instead of renewables, it might replace them with liquefied natural gas. Furthermore, throughout the Ninth Basic Plan’s legislative lifespan (2020- 2034), gas-fired capacity will increase to 55 GW in 2030, from 41 GW today. Such a scenario risks substituting one type of stranded asset risk with another. It will also hinder the country’s battle to lower its carbon emissions.
Carbon Tracker also concludes that new gas power is uncompetitive with new renewables today regarding Levelised Costs of Electricity (LCOE). Due to this, the think-tank suggests that LNG should serve as a substitute and not for baseload supply.
Last but not least, Korea imports all of its gas as LNG. Fossil fuel is known to have a volatile commodity price. Between October 2020 and January 2021, the Northeast Asian spot price increased from under USD 5/MMbtu to over USD 30/MMbtu.
Mixed Feelings From the Public Fail to Put Pressure on the Government
While South Korea may be the most polluted wealthy nation globally, Koreans are still divided regarding renewable energy. On the one hand, over 86% of the population acknowledge climate change as a major threat to their country. In March 2020, young activists sued the government for failing to prevent climate change from threatening their future.
However, not all support the green energy idea. In rural areas, many communities, do not want renewable energy projects close to villages or agricultural land. The growing conflicts between green energy companies and communities prompted policymakers to delay or even reject projects. Today, 123 of the 226 basic municipalities have regulations restricting land available for solar projects.
Disjointed public opinion means officials and corporations do not feel pressure to adopt a more ambitious strategy.
A Question of “When” and not “If”
There is no doubt that the renewable energy transition in South Korea will happen. The question is how much time it will take.
The target of reaching carbon neutrality by 2050 means there is much work left. To accelerate the transition to low-carbon energy, the country would have to substantially increase the share of renewables in the total energy supply. It will also have to phase out coal, rethink grid operations and energy markets, design more competitive pricing models for renewables, and foster the local hydrogen industry.
While the government seems determined to walk the talk, the clock is ticking. All eyes are now on South Korea to see whether one of the most advanced countries can move up the ranks of renewable energy adoption because the current position does not fit the country’s image and potential at all.
by Viktor Tachev
Viktor has years of experience in financial markets and energy finance, working as a marketing consultant and content creator for leading institutions, NGOs, and tech startups. He is a regular contributor to knowledge hubs and magazines, tackling the latest trends in sustainability and green energy.Read more