Seoul - It started with a few bogus safety certificates for cables shutting a handful of South Korean nuclear reactors. Now, the scandal has snowballed, with 100 people indicted and Seoul under pressure to rethink its reliance on nuclear power.
A shift away from nuclear, which generates a third of South Korea’s electricity, could cost tens of billions of dollars a year by boosting imports of liquefied natural gas (LNG), oil or coal.
Although helping to calm safety concerns, it would also push the government into a politically sensitive debate over whether state utilities could pass on higher power bills to households and companies.
Gas, which makes up half of South Korea’s energy bill while accounting for only a fifth of its power, would likely be the main substitute for nuclear, as it is considered cleaner than coal and plants can be built more easily near cities.
“If the proportion of nuclear power is cut, other fuel-based power generation has to be raised. If we use LNG, the cost will definitely go up,” Hwang Woo-hyun, the vice-president of state-run utility Korea Electric Power Corporation (Kepco), said. Kepco owns Korea Hydro and Nuclear Power (KHNP), which operates the country’s nuclear reactors, and also has a quarter stake in Korea Gas Corporation (Kogas), the largest corporate buyer of LNG.
The extra cost to Asia’s fourth-largest economy of importing more LNG to replace nuclear could approach $20 billion (R196bn) a year by 2035, according to Reuters calculations based on government projections for power capacity growth and South Korea’s average LNG prices for last year.
South Korea could need as much as 25 million extra tons by 2035 if a proposal to reduce nuclear’s share of its energy mix is drafted into policy.
The cost projection could be conservative if rising demand from South Korea fuels further price rises in LNG. Top LNG importer Japan is also buying more gas than ever as it compensates for its own nuclear shutdown in the wake of the Fukushima disaster.
Three of South Korea’s 23 reactors are offline due to the fake safety certificates, while another will be shut on October 30 to examine welding quality related to the safety of a steam generator.
Two others are also out for regular maintenance and a sixth one is shut, awaiting an extension of its 30-year life span. Of six reactors under construction, three have been delayed from start-up, also because of safety issues.
Authorities have indicted 100 people, including a former top state utility official, for corruption after the discovery of the fake safety certificates.
Politicians at a legislative hearing yesterday estimated the recent nuclear scandals had cost operator KHNP almost 3 trillion won (R27.7bn) in cable replacement, loss of power sales and payment to Kepco to replace nuclear power with electricity from other fuels. KHNP president and chief executive Cho Seok, who attended the hearing, confirmed the cost figure.
The chaos in the industry comes as a government working group recommended on October 13 a cut in South Korea’s reliance on nuclear power, pointing to a drop in public confidence in safety that has been exacerbated by Japan’s Fukushima disaster.
The study recommended nuclear power capacity be kept between 22 percent and 29 percent of the total by 2035, well below existing plans to grow the sector to 41 percent in less than 20 years.
The government will hold public hearings to decide whether to back the recommendation before finalising its energy policy in December.
As of 2012, nuclear accounted for 26 percent of the total generating capacity, according to energy ministry data, though it typically accounts for about a third of power generation, while only making up about 3 percent to 4 percent of energy costs.
Coal made up about 31 percent and LNG 26 percent of the country’s total power generation capacity last year.
Fuel costs for power by the end of August, according to Kepco, were 48 won per kilowatt-hour (kWh) for nuclear, 64 won/kWh for coal, 166 won/kWh for LNG and 226 won/kWh for oil.
Gas demand by South Korea has already been rising to make up for its nuclear power shortfall.
South Korea’s LNG imports rose 12 percent from a year ago to 29.5 million tons in the first nine months of this year. Last year it imported 36.3 million tons of LNG.
Shares of Kogas hit their highest in more than five months at 66 700 won on October 16, reflecting expectations of higher gas demand if the recommendation for less nuclear power is taken up.
Plugging the nuclear shortfall with imports of fossil fuels could raise local electricity fares up to five-fold by 2030, according to local media.
The energy ministry has ruled out large electricity tariff hikes, however, saying low-cost nuclear generation will continue to contribute a large portion of total power supply even with a drop in its share of the capacity mix. – Reuters