Report nonetheless sees scope for more progress in long-term vision for Korea’s electricity and natural gas markets
23 November 2012
In an in-depth review of Korea’s energy policies released today, the International Energy Agency applauds the country’s long-term commitment to green growth and achieving a low-carbon future but also sounded notes of caution regarding some elements of existing energy strategy.
“Korea has taken great steps to enhance energy security and to foster the development of new and renewable energy alongside the expansion of its energy-related R&D programme, which is one of the largest in the IEA,” IEA Executive Director Maria van der Hoeven said at the launch of the report, Energy Policy of IEA Countries: Korea 2012.
Korea, the world’s thirteenth-largest economy and the seventh-largest exporter, is an energy-intensive nation. In 2008, it adopted a long-term “green growth” strategy to foster economic development by means of low-carbon technologies and clean energy; since then, the government has implemented many policies to support these goals.
A key element of Korea’s long-term strategy is a government commitment to reduce its greenhouse gas (GHG) emissions by 30% compared to its business as usual (BAU) case by 2020. In 2012, in order to achieve this target, Korea announced details of an emissions-trading scheme -- the first of its kind in Asia -- which will be implemented in 2015.
The IEA report recommends that Korea elaborate on the details of the new emissions trading scheme and provide greater clarity on how it will work in practice. Korea must also take steps to ensure that the design of the scheme complements other policies such as its renewable energy target, nuclear energy expansion and the move towards a more competitive market-based approach in the electricity and gas sectors.
Furthermore, the success of Korea’s export-orientated industrial sector suggests that energy efficiency in manufacturing is high compared to other countries; nonetheless, there is scope for further improvement. The IEA strongly recommends that Korea consolidate its progress to date and develop an integrated energy efficiency strategy, one that complements the emissions trading scheme, to improve the effectiveness of energy efficiency policies, with measurable sector targets, in particular for transport, industry and the utilities sectors.
At a time when some IEA member countries are scaling back their nuclear energy programmes, nuclear power remains a pillar of Korea’s energy policy, providing 30% of its electricity needs. Five reactors are under construction and six more have been announced. Given the growing demand for energy and Korea’s lack of indigenous energy resources, this is a logical policy, the Executive Director said. Nonetheless, recent incidents at Korean nuclear facilities should serve as a timely reminder to the government that the nuclear regulatory authority must maintain an enhanced profile, be well-resourced and able to take independent decisions. Korea must continue to enhance its participation in international discussions and sharing of experiences post Fukushima, given the expected improvements of safety and regulation being considered in many countries, Ms. Van der Hoeven added.
Progress in some sectors has been slower; the lack of a clear, long-term vision for electricity and natural gas markets is one of the greatest energy-policy challenges facing the Korean government. Energy markets are dominated by incumbents and have been slow to open up to competition while consumers face the threat of electricity supply shortfalls. The greatest tools the government can have at its disposal to secure electricity supply are liberalised and competitive energy markets. The IEA strongly urges the Korean government to establish a framework that allows the development of effective competition in the electricity and natural gas markets.
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