Is South Korea's Energy Plan Enough for Net Zero?

In this episode of Energy Insights we speak with Joojin Kim. Joojin is the founder and CEO of Solutions for Our Climate based in Seoul, South Korea.

Prior to founding Solutions for Our Climate, Joojin's background was in law where he worked on several energy-related projects as a lawyer for South Korea's largest law firm Kim and Chang. Joojin has also been on the expert committee for the National Council on Climate and Air Quality that was convened by the President of South Korea and headed by former UN secretary-general Ban Ki-moon. Joojin holds a Bachelors in international relations and a masters degree in environmental studies from Seoul National University and a degree in environmental law from Georgetown University.

In today's conversation we focus mainly on South Korea's 10th basic energy plan and the implications that has on the countries energy mix in the future. Other topics include why Korea's renewable energy progress has been so slow, the risks of Korea's reliance on gas as a major energy source, and the corporate and international pressure to change the countries renewable energy landscape and other topics.

Website: https://forourclimate.org/en/
Twitter: @Solutions for Our Climate
Facebook: Solutions for Our Climate
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Transcript

Host (01:50): Before we get started on Korea’s 10th basic energy plan, could you give us a brief introduction of who you are, your background, and what your current areas of interest and focus are?

Joojin Kim (02:08): I'm the CEO and founder of Solutions for our Climate. We are a climate advocacy group based in Seoul, South Korea. We are one of the largest climate organizations in the country, and we cover a variety of topics. Today we're talking about the power sector, but we also do a lot of work around the financing of fossil fuel and climate policy in the financial sector. We also do a lot of work around industrial decarbonization, methane emissions and so on and so forth.

Host (02:41): Before we begin getting into the details of Korea's 10th basic energy plan, I just wanted to start with what Korea's current energy mix looks like and the context for Korea. I was just wondering if you could tell us a little more about where Korea currently gets its energy from. Is this a diverse mix of different fuels, or, like in other industrialized nations, do fossil fuels play a pretty large role? 

Joojin Kim (03:09): Fossil fuels certainly play a pretty large role. Around 35~36% comes from coal power among our power sector, gas power is about 30%, nuclear is about 25~26% depending on the year, and above all, renewables are very marginal. Solar and wind constitute only 5% of our overall power mix. So we're very low - one of the lowest countries among the OECD, one of the lowest countries in the world, actually, when it comes to variable renewable energy deployment.

Host (03:46): Why do you think that is? Has there been any sort of particular policy that's been placed over many years that has prevented renewables from growing in Korea? 

Joojin Kim (03:59): Well, I don't think this is something that happens just in Korea, but also it’s a global issue. We have basically two issues when it comes to renewables. Number one, renewables are not fairly treated in our regulatory system when it comes to marketing, I would say, electricity. So compared to how coal power plants and nuclear power plants are kind of treated in terms of grid access, price, and all kinds of flexibility-related requirements, renewables are not fairly treated. One of the main reasons this happens is because the people who decide what happens on the grid, the people who decide how renewables are priced, how coal power plants are priced, how gas power plants are priced, are actually the people who have a lot of coal power plants and nuclear power plants.

So the people who have a lot of coal power plants or nuclear power plants, the company that has a lot of coal power plants and nuclear power plants decides the fate of, practically, has a big call in the fate of renewables. And if they're not competitive in renewables, they don't wanna have a lot of renewables coming in.

That's what's happening in Korea, and I think that's a problem in many countries. Many of the problematic climate nations, let's say, South Africa, Indonesia, and Mexico, all have similar issues where you have a bundled power system where the treatment of renewables, in a big part, is determined by companies that have big exposure to fossil fuels. Unfortunately, many of these state-owned utilities have not been able, for many reasons, to have a strong role in renewables. It's just not right with their company. The companies are not well designed to have smaller scaled renewables. That's one problem. So that's the problem of the market, the regulatory sector around the power sector. 

The second problem that we experienced a lot, and this is more of a global problem, not just about countries that have state-owned utilities, but also all around the world is that renewables are not treated when it comes to permitting as they should be. They are subject to a lot more stringent review and it just takes a long time. It takes, in many cases, more than five, ten, or nine years to get an offshore wind plant permitted and operating, although the construction period is not that long. There has to be an awakening where if we continue to rely on what we've done with other assets and don't consider renewables as the saviour of our climate, then we won't be able to meet the climate timeline that we have.

Host (07:12): Given the context that you just gave us, particularly in Korea’s sense, if we talk about how energy-intensive South Korea is and how important it is for it to shift into more clean energy, does Korea have a high or low carbon footprint? And how important will it be for Korea to bring that down if it is pretty high? I'm guessing it is.

Joojin Kim (07:40): Yes. Our carbon footprint, carbon intensity is pretty high. As I mentioned, the reliance of our power sector on fossil fuels and two-thirds of our power sector mix comes from fossil fuels. On top of that, we also have a pretty big petrochem, heavy industry steel, shipbuilding, all kinds of heavy industry inside the nation. Very export-oriented, which brings up the carbon intensity of the nation. That's made us the second-highest per capita coal emission country, I must say. 

How can I bring it down? I guess the answer is what I just mentioned before, renewables. There's gonna be other technologies that have to come in, but I guess the most important role will come from renewables. Renewables may not be the full answer for a lot of things. For example, industrial decarbonization will have to take place. There may be a role of hydrogen there, especially green hydrogen, and all kinds of other technologies as well. But I guess the main chunk of decarbonization will have to come from renewables. 

Host (08:53): What are Korea's carbon emission goals right now? What has the country said it would do, or when has the country said it would reach net zero or at least come towards a net zero economy? Do you think this is feasible, given the current circumstances? 

Joojin Kim (09:12): South Korea has a 2050 carbon neutrality target. Our so-called NDC 2030 greenhouse gas emission reduction target is to reduce emissions by 40% compared to 2018 levels. So there is a target. 

Is it feasible or not? Well, it should be feasible if the policy levers are all there. It could be feasible, but unfortunately, a lot of people believe because of the status quo because of the incumbents, it's not gonna be feasible. But I guess making it feasible is one of the things that we're trying to do right now.

Host (09:46): This is a good leeway into the 10th basic energy plan. First, I'd like to get you to tell us what the basic energy plan actually is. We're in the 10th iteration now. Do these regularly change? How often do they change, and are they adaptable to, say like a geopolitical circumstance?

Joojin Kim (10:08): Yes, they are very fluid. Frankly speaking, I won't be too confused, too overwhelmed by the figures coming out. They do indicate the thinking of that period, but they do not indicate the technology. They do not indicate where our power sector is going. Unfortunately, the political context right now is that renewables will have to give away a little bit more room for other bigger power sources like nuclear. That's the way our current administration has been thinking. I'm not saying that's not gonna change. I believe there is room for change for that and I do see signals of change. But it's just a reflection of what the people think right now. It doesn't mean that renewables will be capped that much or fossil fuels will expand to that much.

Practically speaking, it's also a very old-fashioned way of deciding power policy. It's something that exists only in, not that many countries, especially those in Asia. Eventually, what happens with this is, it's not the promotion of renewables to a certain level that happens with this. It's actually the squatting of certain fossil or nuclear assets that happens with this. Usually, in a power plant, you would have nuclear power plants or fossil power plants kind of identified, and being inside the plant means the next step would be getting a permit for that power plant. With that comes some kind of belief that this power plant will exist and a lot of market players put in a lot of market value on that. That kind of thinking, that kind of practical pre-permitting of fossil fuel power plants is the problem of these power plans. That's not always what the market wants.

I believe it's more of, I would say, a planned economy legacy of Korea, which a lot of people, experts, think are not sure whether this is needed right now. 

Host (12:26): What does the plan in its current state actually say? What does the energy mix, or at least the current administration's envisioning, what will power Korea in the next decade or so? 

Joojin Kim (12:41): Well, compared to previous power plans, the coal and gas mix is pretty similar. There are marginal, small, minimal differences. But the biggest change is that in the past, the ratio of nuclear was lower. That has gone up by, let's say, something like 10%, and renewables have gone down. So there was a switch of around 10% of the ratio between renewables and nuclear. That's the biggest kind of trend of thinking reflected in this new power plan. I would say that's a result of a long time, more than five years, of discussion on whether the country wants to be pro-nuclear and anti-nuclear, and renewables were the easy scapegoat in that planning process. 

Host (13:34): Rather than bringing down renewables and replacing it with, say, 10% more nuclear, why didn't the conversation, or at least in your view, why didn't it go from “hey, let's bring down fossil fuels and up the renewables”? Was there a particular moment in recent history that shaped the conversation in that way? 

Joojin Kim (13:57): I should go back to my previous point. If your regulators rely on information from the state-owned utility and use a state-owned utility basically as the most important tool to develop the power sector, you get used to what the state-owned utilities are used to. State-owned utilities are often very used to big assets. They're not used to one-megawatt or two-megawatt, small-scale microfinance renewables. That's why, always, very often among our power sector regulators, renewables were a very marginal factor. It was more of a trend rather than a technological change. So that's why there's been a tendency to bring down renewables. Also, because of this policy, I would say this lack of appreciation of renewables, the land permitting or land planning policies needed for renewables, the power market policies needed for renewables are not in place. Which also, I would say, deteriorates the situation making renewables always less appreciated by our policymakers. 

Host (15:14): You mentioned earlier that gas is still playing a pretty big role, even compared to the last iteration of the energy plan in Korea. Gas has been a pretty hot topic in the past year or so - you've got record-high prices, you've got supply issues all over the world. Now, with all this in mind, do you think that this is a sensible thing for Korea to do, to keep gas at a pretty high level in its 10th basic energy plan? I mean, recently, and this is in part due to high gas prices, Korea raised the electricity tariff by something like 10%, and I think that's been the highest rate rise annually in the past 40 years, for example. And not to mention Korea's gas company, KEPCO, is just bleeding billions of dollars in losses because of these high prices. Now, I know there's a lot in there in what I just said, but do you think this big role for imported gas is the right move for Korea? And what kind of risks can you foresee with Korea expanding or not expanding but also keeping the status quo as it is right now?

Joojin Kim (16:30): Above all, the risk is we're paying a lot of money because of gas. You mentioned KEPCO bleeding. Yes, KEPCO is financially bleeding, and it paid more than twice the money it paid compared to the previous year to purchase natural gas, I mean, fossil gas for gas power plants. That's been causing billions of dollars of losses to the company. On top of that, coal is a lot more expensive than the year before the Ukraine war. So those two combined have made KEPCO issue a lot of bonds, more than 20 billion dollars of bonds and incur a lot of financial losses.

It will eventually be a price tag that is imposed on the Korean public, either through the form of taxes. Some kind of collection, some kind of companies collapsing because of money not being available in their capital market because of this big corporate bond vacuum made by our national companies or just by the increase of electricity prices.

So it's a price that our country will have to pay. The word that renewables are expensive, saying that renewables are expensive, is now more and more treated as something in the past, especially with what happened after the invasion of Ukraine. We will eventually turn more into a renewable-friendly country, but people are people. It takes a little bit of time for people to realize what's been wrong and that's what's happening. 

Host (18:21): How are energy prices in terms of, you mentioned the people will pay for it, how are energy prices in Korea affecting inflationary pressures? Is it much like the rest of the world, where people's daily cost of living is skyrocketing? Is it a similar situation in Korea right now? 

Joojin Kim (18:42): Well, not as immediate and not as direct as what you would see in Europe. Our consumer gas, consumer electricity prices are regulated, which means that increasing prices exposes political factions to pressure. So the administration has been careful about increasing prices, and that's why that debt, that expensive price of power, is not coming out in the form of price hikes. It is coming out, but not as extensive as what you would see in Europe. But instead, it's coming out in the form of KEPCO’s exploding debt. 

Host (19:26): Do you think that is at all sustainable in the long term? 

Joojin Kim (19:29): Of course not. Money is money. The economy is the economy. If you have, even if it's a state-owned company, having a financial hole of several tens of billions of dollars does leave a dent in the company's balance sheet, and the country will have to address it. So no, they may have a bigger buffer because they're relying on a government balance sheet, but that will eventually come out.

Host (19:58): You mentioned that politics plays a role here in terms of raising the gas prices and keeping them regulated, keeping them low. So I assume that is not to upset the political constituencies that support the current administration. Has there been any talk of deregulating those prices? Or lessening the subsidies, for example, and moving them into renewables or any other kind of technology that moves away from gas?

Joojin Kim (20:30): Oh, yes. Um, there have been discussions about that. There are people who say that we should be deregulating our power prices. That higher consumer power prices will lead to a lot more energy conservation, will incentivize companies to go into renewables. There are certainly people who say that, and there is a discussion around that. But the reality is that for politicians deregulating power prices means they're not gonna win, they're reducing by themselves the chance of winning in the next election. So that's another reality and we do have the general legislative elections coming up next year. So that's also been a very big barrier of going into these fundamental reforms. 

Host (21:16): Has there been any talk in those elections that you mentioned? Is energy a big issue now or is it still kind of regulated to the sidelines in Korea?

Joojin Kim (21:28): Well, until now, unfortunately, climate energy hasn't been the most important issue in the elections. There were other political discussions that took place. However, during our most recent presidential elections, corporate renewable energy demand was an important topic inside of the discussions. It's an important topic in our political context because we are a very export-oriented country and the supply chain, decarbonization requests from clients abroad mean something to our economy. I expect in our upcoming elections, and that hasn't been the trend until now, that the youth climate voice will become bigger, just like what you saw in Australia, Europe, or the U.S. That is a trend that I expect to see, although not the most important issue until now.

Host (22:25): I just wanted to drill into the corporate, the private sector and their demands, or at least their ambitions for more clean energy. Samsung last year committed to RE100, committed to 100% renewables. Was it Hyundai that had plans to build an LNG facility and then they pulled back on that? How much can you see corporate action influencing government policy? Is that quite a large influence in Korea along with civil society, as you mentioned, like youth movements and things like that?

Joojin Kim (23:20): It's potentially a very big, I would say, stakeholder (i.e. industry). Most of Asia has a sentiment that we’re behind in the economy and everything, all the policy has to be designed for the industry. Well, if the industry says renewables are the future, that comes in with a lot of weight. At the same time, many nations in Asia are state-led. The economy was developed under an authoritarian government with a state-led economy, and therefore there is a strong hesitance in saying something directly to the government. Even though companies are big conglomerates, are not satisfied with our power sector to a very high level, consider our power sector a risk, a commercial risk to their future business, they are very careful in complaining about these to the government. Although, I do see that this content exists inside our industry.

Host (24:16): How much do you or how much do you think that kind of international pressure will also have an effect on not just the private sector but also the South Korean government in itself? Do you see that happening more and more in the coming years? 

Joojin Kim (24:30): Certainly. A lot of talks on renewable targets do have an impact on our country's policy. I mean, why did Samsung commit to renewable energy 100% by a certain year? Well, that was sort of international pressure. That was basically from multinational companies requesting Samsung to do something. So, yes, that does play a very important role in making our companies move.

Host (24:59): I just wanted to finish up by getting your final thoughts on, as you probably mentioned a little bit about the main barriers, but also what you think the country can potentially do to overcome those challenges to kind of see it move away from an import-dependent model on fossil fuels into a more domestically sourced renewable model where, as you said, that would be potentially an economy-wide shifting transition moment.

Joojin Kim (25:34): First of all, our country has been very good at making steel mills, petrochemical plants, fast permitting, and very fast business decisions that were the backbone of our economy. Even coal power plants, nuclear power plants, (have) very fast deployment of them. I think the same thing has to happen with renewable power plants, offshore wind, solar, and onshore wind plants. The country doesn't consider this as part of industry, as part of our future, the future of our economy. I think the highest level of people in our government will have to change their minds on that. Number one, so faster, permitting, planning, renewable energy, just like we planned factories. That's something that has to happen.

Another thing that has to happen is that the country has to understand that the way our power sector is designed is just not right with the new technology with renewables. It's a small-scale, more distributed source of energy, centralized, unilateral source way of making energy policy decisions just doesn't work.

The power sector has to be more distributed. There has to be independence of the system operator so that the system operator can be more creative (with) new energy sources. And inside the system, treatment of renewables versus fossil fuels or renewable-friendly sources like batteries, demand response has to be fair and transparent. These are the changes that are needed, especially in climate-laggard Asia. 

Host (27:08): Do you see a role for imported clean energy playing a part in this as well? 

Joojin Kim (27:13): Well, yes, but when there's a lot of cheap room to change the power sector of each country, why all the way go out to renewable sourced energy to be imported? Yes, there is a room there, there will be marginal room for that. But I guess there's a lot more low-lying fruits. 

Host (27:32): Joojin, thank you so much for again, coming on Energy Insights. Before you go, could you please tell listeners where they could find your work or follow your organization's work on social media or website would be great.

Joojin Kim (27:46): We can be found on Twitter and Instagram. Our handle is @forourclimate. We also have a good LinkedIn page if you find that from Solutions for our Climate. YouTube as well. We also have a site you can find with our name.