Balancing the Environment and Economic Objectives of Energy Policy: South Korea’s Perspective PECC XIV: Managing Globalization in the 21st Century 28-30.

Balancing the Environment and Balancing the Environment and Economic Objectives of Energy Policy: Economic Objectives of Energy Policy:

South Korea’s PerspectiveSouth Korea’s Perspective

PECC XIV: Managing Globalization in the 21st Century

28-30 November 2001, Hong Kong

Hoesung Lee, Ph. D.Hoesung Lee, Ph. D.Council on Energy and Environment KoreaCouncil on Energy and Environment Korea

Former Co-Chair of IPCC Working Group IIIFormer Co-Chair of IPCC Working Group III

Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Primary Energy Shares)(Primary Energy Shares)

22.2 20.6 20.4 19.8 19.6

52 51.5 50 48.1 46.8

9.8 11.6 12.4 14.1 14.9

14.1 14.6 15.6 16.4 16.9

0%

20%

40%

60%

80%

100%

2000 2005 2010 2015 2020

Others

Hydro

Nuclear

Natural Gas

Oil

Coal

External Shocks --> Energy ModernizationExternal Shocks --> Energy Modernization

First Oil Crisis (1973)

- Nuclear power generation system

- Steam coal power generationSecond Oil Crisis (1979)

- Natural gas imports Next Energy Crisis (?)

- Energy efficiency technology

- New & Renewable energy tech

Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Primary Energy Demand)(Primary Energy Demand)

2000 2005 2010 2015 2020Growth Rate (%)

00-10 10-20 00-20

Coal 42.9 48.7 56.0 60.7 65.6 2.7 1.6 2.1

Oil 100.3 121.3 137.6 147.6 156.5 3.2 1.3 2.2

Natural Gas

18.9 27.3 34.2 43.4 49.8 6.1 3.8 5.0

Hydro 1.4 1.2 1.1 1.2 1.3 -2.4 1.4 -0.4

Nuclear 27.2 34.4 42.9 50.4 56.4 4.7 2.8 3.7

Others 2.1 2.8 3.2 3.8 4.5 4.3 3.5 3.9

Total 192.9 235.8 275.1 307.1 334.2 3.6 2.0 2.8

(million toe)

Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Long-term Projection)(Long-term Projection)

2000 2005 2010 2015 2020Growth Rate (%)

00-10 10-20 00-20

GDP (trill ’95 Won)

476.3 622.3 794.2 985.0 1,198.4 5.2 4.2 4.7

Population (mill persons)

47.3 49.1 50.6 51.7 52.4 0.7 0.3 0.5

Total Energy (mill toe)

192.9 235.8 275.1 307.1 334.2 3.6 2.0 2.8

Energy per Capita (toe/person)

4.08 4.80 5.43 5.92 6.38 2.9 1.6 2.3

Energy/GDP (toe/mill ’95 Won)

0.40 0.38 0.35 0.31 0.28 -1.6 -2.1 -1.8

GDP Elasticity of Energy

- 0.70 0.63 0.51 0.43 (0.69) (0.47) (0.60)

Final Energy (mill toe)

150.1 182.8 209.1 231.7 250.0 3.4 1.8 2.6

VulnerabilitiesVulnerabilities

Supply securityEnvironmental integritySystem inflexibility from technology

lock-in

System InflexibilitySystem Inflexibility

Nuclear investment is exogenous to the system

State dominance in electricity and gasCompetitive disadvantage for new

technology: energy efficiency improvement, new and renewable energy sources

OECD Sustainable Energy Scenario 2020 OECD Sustainable Energy Scenario 2020 vs Koreavs Korea

Korea NA WE Coal 20 % > 12 % 11 % Oil 47 > 27 28 Natural Gas 15 < 26 24 Nuclear 17 9 17 Hydro - 7 9 New, others 1 < 19 11 Total 100 100 100

CO2 Emissions per CapitaCO2 Emissions per Capita

1

3

5

7

9

11

13

15

17

19

USA

Ru

ssi

a

CanadaAustralia

BangladeshBangladesh PakistanPakistanChadChad NigeriaNigeria

Debt

Credit

Norway

Denmark

VietnamVietnam

ChinaChina

CO

2 E

mis

sio

ns,

to

ns

per

cap

ita

CO

2 E

mis

sio

ns,

to

ns

per

cap

ita

Ger

man

y

UK

Netherlands

Belgium

Japan

Fra

nce

Switzerland

Ital

y

Sweden

Spain

Finland

Ko

rea

Ukr

ain

e

Ireland

Sustainable RateSustainable RateSustainable Rate

Components for CO2 EmissionsComponents for CO2 Emissions

1997--2010 2010--2020

OECD LDC OECD LDC

Carbon Intensity %

0.0 -0.1 0.1 0.0

Energy Intensity % -1.0 -0.8 -1.2 -1.3

GDP per capita % 1.8 3.2 1.7 3.3

Population % 0.5 1.4 0.4 1.2

CO2 emission % 1.2 3.6 1.0 3.2

Cost-Effectiveness Tests Cost-Effectiveness Tests

Industrial Sector : Industrial Sector : Payback period : Average = 1.23 years; maximum of 7 years (less than one-tenth of 1% of cases involve 7-year paybacks)

Payback period : Average = 1.23 years; maximum of 7 years (less than one-tenth of 1% of cases involve 7-year paybacks)

Residential and Commercial Sector:Residential and Commercial Sector:Cost of Conserved Energy (CCE) < 5.0 cents/kWh

(60 Won/kWh)Cost of Conserved Energy (CCE) < 5.0 cents/kWh

(60 Won/kWh)

Transportation Sector :Transportation Sector :Payback Period < 5 yearsPayback Period < 5 years

En

erg

y C

on

sum

pti

on

(M

illio

n T

OE

)E

ner

gy

Co

nsu

mp

tio

n (

Mill

ion

TO

E)

5050

100100

150150

200200

250250

300300

350350

0019981998 20102010 20202020

IndustrialIndustrial

TransportationTransportation

ResidentialResidential

CommercialCommercial

ElectricityElectricity

South Korea’s Energy Consumption in 2020: MOCIE/KEEI BAU Forecast

South Korea’s CO2 Emissions in 2020:

MOCIE/KEEI BAU Forecast

South Korea’s CO2 Emissions in 2020:

MOCIE/KEEI BAU Forecast

00

5050

100100

150150

200200

250250

CO

2 E

mis

sio

ns

by

Se

cto

r(M

illio

n T

C)

CO

2 E

mis

sio

ns

by

Se

cto

r(M

illio

n T

C)

19981998 20102010 20202020






Korea Industrial Sector ScenarioMeasures Selection

Korea Industrial Sector ScenarioMeasures Selection

SIC Codes of Korean industries Energy Intensive Industries: Primary Metal, Cement, and

PetrochemicalNon-Energy Intensive Industries (e.g., textiles, machinery, etc.)

SIC Codes of Korean industries Energy Intensive Industries: Primary Metal, Cement, and

PetrochemicalNon-Energy Intensive Industries (e.g., textiles, machinery, etc.)

Facility Assessments screened by:Facility Assessments screened by:

Technologies screened by:Technologies screened by:Energy efficiency measures onlyTechnology packages that contributes at least 10% energy

savings at a typical facility

Energy efficiency measures onlyTechnology packages that contributes at least 10% energy

savings at a typical facility

Cost-Effectiveness Test: Cost-Effectiveness Test: Payback period : Average = 1.23 years; Maximum = 7 yearsPayback period : Average = 1.23 years; Maximum = 7 years

50

60

70

90

1998 2000 2010 2020

MOCIE BAU

MOCIE BAU

FullImplementation

FullImplementation

Korea Industrial Sector ScenarioKorea Industrial Sector ScenarioC

arb

on

Em

issi

on

s(m

illi

on

to

ns)

Car

bo

n E

mis

sio

ns

(mil

lio

n t

on

s)

80

100

25.2%25.2%

Korea Transportation Sector Scenario

Measures Selection


Measures Selection

Fuel Economy Improvement

Technologies

Alternative Fuel Vehicles

Fuel Economy Improvement

Technologies

Alternative Fuel Vehicles

Target TechnologiesTarget Technologies

Cost-Effectiveness Test:Cost-Effectiveness Test:Payback Period < 5 yearsPayback Period < 5 years



FullImplementation

FullImplementation

MOCIE BAU

MOCIE BAU

10

20

30

40

50

60

1998 2000 2010 2020

Car

bo

n E

mis

sio

ns

(mil

lio

n t

on

s)C

arb

on

Em

issi

on

s(m

illi

on

to

ns)

28.0%28.0%

Korea Residential Sector Scenario

Measures Selection


Measures Selection

Space Heating and Cooling UpgradesHigh Efficiency LightingRefrigeration

Shell Insulation

Space Heating and Cooling UpgradesHigh Efficiency LightingRefrigeration

Shell Insulation


Cost-Effectiveness Test:Cost-Effectiveness Test:Cost of Conserved Energy (CCE) < 5.0 cents/kWh

(60 Won/kWh)Cost of Conserved Energy (CCE) < 5.0 cents/kWh

(60 Won/kWh)


Three Implementation Options


Three Implementation Options

MOCIE BAU

MOCIE BAU

FullImplementation

FullImplementation

15

20

30

35

1998 2000 2010 2020

Car

bo

n E

mis

sio

ns

(mil

lio

n t

on

s)C

arb

on

Em

issi

on

s(m

illi

on

to

ns)

25

40

34.5%34.5%

Korea Commercial Sector Scenario

Measures Selection


Measures Selection

High-Efficiency Lighting

Space Heating and Cooling Upgrades

Motors (for air circulation, elevators, etc.)

Shell Insulation

Cost of Conserved Energy (CCE) < 5.0

cents/kWh

High-Efficiency Lighting

Space Heating and Cooling Upgrades

Motors (for air circulation, elevators, etc.)

Shell Insulation

Cost of Conserved Energy (CCE) < 5.0

cents/kWh


Cost-Effectiveness Test:Cost-Effectiveness Test:

MOCIE BAU

MOCIE BAU

Full Implementatio

n

Full Implementatio

n

5

15

20

30

1998 2000 2010 2020



Car

bo

n E

mis

sio

ns

(mil

lio

n t

on

s)C

arb

on

Em

issi

on

s(m

illi

on

to

ns)

10

2535.3%35.3%

Efficiency Improvement


19981998 20102010 20202020

South Korea’s Energy Consumption in 2020South Korea’s Energy Consumption in 2020

Savings = 95.4 MTOESavings = 95.4 MTOE






BAUBAU

En

erg

y C

on

sum

pti

on

(M

illio

n T

OE

)E

ner

gy

Co

nsu

mp

tio

n (

Mill

ion

TO

E)

5050

100100

150150

200200

250250

300300

350350

0019981998 20102010 20202020






28.7%28.7%

00

5050

100100

150150

200200

250250

CO

2 E

mis

sio

ns

by

Se

cto

r(M

illio

n T

C)

CO

2 E

mis

sio

ns

by

Se

cto

r(M

illio

n T

C)

Reductions = 58.9 MTCReductions = 58.9 MTC

19981998 20102010 1998199820202020 20102010 20202020


Efficiency Improvement BAUBAU

South Korea’s CO2 Emissions in 2020South Korea’s CO2 Emissions in 2020







IndustrialIndustrialIndustrialIndustrial

ElectricityElectricity ElectricityElectricity

28.8%28.8%

Electricity saved total (34 mtoe) > Nuclear capacity planned (30 mtoe) for 2000-2020

Benefits of energy saved ($30 B) > Costs of efficiency improvement ($4 B) for 2000- 2020

Create level playing field for efficiency upgrades technology and new & renewable energy resources

Avoid further lock-in of old technologies Utilize the window of opportunities: Intensify

energy R&D, technology diffusion

Conclusion: Cost Effective Sustainable Conclusion: Cost Effective Sustainable Energy Development is PossibleEnergy Development is Possible

Developments in LNG MarketDevelopments in LNG Market Upstream costs down

– Funding method

– Competition in EPC

– Increased scale and design efficiency of liquefaction

– Shorter development period

– Early project commitment with flexible terms

LNG Shipping – 27 to 44 uncommitted ships by 2005

– Bigger ship size: 165,000m3, lower unit building costs

– Weaker destination restriction

– Amenable to short-term LNG trading and internal competition

Developments in LNG MarketDevelopments in LNG Market Changing LNG Acquisition Practice

– Participation by India and China: less market share for Japanese buyers

– Pricing on a more transparent and competitive basis

– Flexible LNG acquisition lower storage costs in internal markets

Ship saving swaps to face uncertainties from seasonal demands and competition

Market for Third-Party LNG Traders LNG more competitive Allow more freedom of choice

for fuels and suppliers

Grid InterconnectionGrid Interconnection Efficient energy system with stable supplies and linked to

the Asian continent Northeast Asian Gas and Power interconnection proposed No. 1 characteristic of interconnection: externalities

system security, supply reliability– Well-coordinated transmission protocol/ pooling arrangement

required

– Harmonized institutions and industrial structures required

– E.g., Lack of PSA rules delay of gas development in Far East Russia

Grid InterconnectionGrid Interconnection

Policy risk, country-specific risk, cross-border risk to be minimized to invite private capital

Cost-benefit assessment necessary for interconnection via North Korea considering– Not only transmission of energy

– But also integration of power and gas systems, and

– Inter-Korean relation

Balancing the Environment and Economic Objectives of Energy Policy: South Korea’s Perspective PECC XIV: Managing Globalization in the 21st Century 28-30.

Documents

energy crisis

total energy

energy modernization

final energy

toe energy consumption

toe slide

renewable energy sources

energy efficiency improvement