Seoul plans to suspend voluntary coal plant restrictions during July-August this year in a bid to reduce LNG use during the peak demand period, a source familiar with the matter told Argus.
This suggests that Kepco's coal-fired fleet could operate closer to available capacity, which is set to average 27.8GW in July-August, based on the latest maintenance schedule. Assuming that Kepco's coal-fired units are loaded at 93pc ― an average load in July-August 2018, before any coal-fired plant restriction measure was introduced ― the state-owned company's coal-fired output could increase to 25.9GW in July-August this year, up from 24.5GW average output a year earlier.
Coal-fired generation from private utilities could increase to 4.8GW average during the two-month period from 3.7GW, based on flat year-on-year load factor.
Stronger-than-expected coal-fired generation in South Korea could help utilities to reduce LNG use during the peak cooling season, with nuclear output also scheduled to average 20.9GW during the two-month period, up from 16.9GW. Based on Argus analysis, South Korea's combined nuclear and coal-fired output could increase by around 6.5GW in July-August, which is equivalent to around 1.26mn t of LNG or 17-18 standard-sized LNG cargoes.
But robust power demand amid hotter weather across the northern hemisphere indicates that LNG demand will not be reduced by as much. South Korea's power demand remained above the last year's level by 5pc/month during January-April, while daily peak power demand data shows that power demand has remained above the seasonal range so far this year (see chart).
Kepco's coal-fired units were asked by the government last year to voluntarily reduce generation during April-November, when the units are not affected by the seasonal coal-fired plant restriction measures typically implemented in December-March. This request was aided by the low gas prices then, supporting South Korea's gas-fired output reaching 19.8GW in July-August 2021, from 15.9GW a year earlier.
That said, persistent rallies in global LNG prices this year had already prompted Kepco to announce in April that it would limit the voluntary restrictions to weekends this year to reduce gas-fired power generation. Kepco's coal-fired output remained flat on the year at 15.2GW in April, while firmer output from private utilities supported overall coal-fired output rising to 18.6GW from 17.9GW.
