Global Energy Problems and Counter Policies and Measures of Korea MOON, Young Seok, Ph. D. Korea Energy Economics Institute 1

01 02 03 Two Challenges: Low Oil Price and GHG Emission Reductions Contents 01 Two Challenges: Low Oil Price and GHG Emission Reductions Five Counter Policies and Measures of Korea Concluding Remarks 02 03

01 Two Challenges: Low Oil Price and GHG Emission Reductions

Impact of Low Oil Price on Korean Economy For a 10% drop in oil price by supply side causes alone, economic impact on GDP growth rate and income would be 0.2%P and 0.3%P, respectively, for the past 14 years since 2001. - Less impact of oil price change than previous 14-year period < Impact of a 10% Drop of Oil Price on Korea Economy > (%P) Period GDP Cons. Invest CPI Current A/C (bill. $) GNI 2001.1/4~2014.2/4 0.16 0.06 0.10 -0.14 5.2 0.33 1988.1/4~2002.4/4 0.31 0.58 0.13 0.03 2.3 0.80

Impact of Low Oil Price on Korean Economy A 10% drop in oil price lowers production costs of industry as a whole by 0.67% (Japan 0.34%, China 0.36%) <Estimated Cost-Down Effects in Korean Industries of a 10% oil price drop > Manufacturing: Average: 1.04%, (Oil products: 7.92%, Petrochemical : 2.02%) -> Export of Manufacturing increases by 0.55% Service: 0.28% Need to business re-alignment and structural reform to cope with challenges against industrial competitiveness

KOREA’s Emissions Issues Rapid increase in GHG Emissions: 3.9% annually Increasing emission share of power generation due to high demand partly caused by low electricity price and coal-fired plants Significant reduction required to hit the emissions target ■ GHG Emissions Trend ■ Trend vs. Target ■ Share of Power Gen (unit: mil. tCO2eq)

Challenges and Opportunities Korea’s major industries facing low growth Need for developing new growth engine Production cost reduction due to low oil prices Achieving GHG reduction goal Transform to a low-carbon high-efficiency energy system More investment capability Take the current changing environment, e.g., low oil price, stricter response to climate change, as an opportunity to become an energy powerhouse

Five Counter Policies and Measures of Korea 02 8

Counter Policies and Measures of Korea Nurture Energy-Related New Industry Act on the 7th Basic Plan for Power Supply and Demand Induce More Investment in New/Renewable Energy Take Low Oil Price as Opportunity for Enhancing Energy Security Enact Trustworthy Safety-First Nuclear Policy

Energy-Related New Industry Basic Concept An industry that create new markets for energy efficiency improvements and reduce GHG emissions, creating a new growth engine By innovating the way energy is produced and consumed and by introducing new business models Through convergence between existing energy industries and ICT, manufacturing and financial sectors

Energy-Related New Industry Future Plans ■ To increase investment by initiating financial support to promote private sector investment, developing ‘locally’ customized energy-related business models To export energy-related new business models by utilizing Green Climate Fund To enact a special law on Energy-Related New Industry to lay an institutional foundation to nurture the Industry ■ ■ 11

7th Basic Plan for Power Supply /Demand Low carbon Gen Mix for Post 2020 Decreasing Share of coal-fired power Replacing aged plants by requiring environmental performance increase share of nuclear plants (23.4% by 2029) and RE (20.1% by 2029) Reserve margin: 22%↑ Peak demand 12%↓ Power Consumption 14.3%↓ Enhancing Distributed Gen. Minimizing new transmission lines and large-scale power plants Market incentives for distributed generation Expansion of self-generation facilities for metropolitan areas < Generation Mix Forecast by Capacity Share (%) > 2013 (actual outcome) 2029 Distributed Power Generation (GWh) Renew. 4,428 39,748 (5.3%) DHCS 16,871 29,426 (4.0%) Non-Utility 20,021 23,941 (3.2%) Total 41,320 93,115 Share of Distributed Gen. 7.6% 12.5% Nuclear Coal LNG RE DHCS Oil & Pump 2014 22.2 28.2 28.7 6.7 5 9.1 7th Plan (‘29) 23.4 26.8 20.6 20.1 5.5 3.6 12

Enhancing Renewables Investment Continue RE investment (780 Billion won by 2015) 7 on-shore wind power projects (208MW) Enforcement of RFS system in June, 2015 Expand solar PV licensee or small sized firms financial support for SMEs More gov RE+ESS 13

Opportunity for Enhancing Energy Security Continue overseas resource development investment Expansion of gov’t oil stockpile ■ Energy Imports (2013) ■ Oil Stock Status (By Apr, 2014) (Unit : MMb) Category Capacity Oil reserves Duration Days (IEA standard) (consump) Crude Product Total Gov 146.0 78 13 91 124 36 Priv 145.4 48 58 106 130 42 291.4 126 71 197 254 * Excluding International Joint Stockpile : 38MMb 14

Safety- First Nuclear Power Increasing investment to improve existing nuclear facilities (‘12-’17, 1.1 trill. won) Expanding low-and-intermediate-level radioactive waste disposal facilities (#1 in operation since Aug. 2015, #2 will be built by 2019) Enacting “Basic Plan for Spent Fuel Management” ■ Unplanned Outrage Rate (2012-14 Average) ■ NPP Operational Safety Performance Indicators (‘15. 1Q) 15

Concluding Remarks 03 16

Concluding Remarks Policy environment and policy measures may not be much different between countries in the face of the same global constraints. Korea’s policy measures are customized practical ones Safety-based nuclear power expansion, New industry and renewable energy investment, Energy security enhancement, etc. Opportunities for mutual benefit between Czech Republic and Korea and others from cooperation for developing policy and technology (esp. nuclear sector), sharing experiences and information, and promoting business in energy area. 17