An extension to planned nuclear plant maintenance in South Korea has given a small boost to the winter demand outlook for fossil fuels, but recent gas sales to the power sector suggest that coal-fired generation continued to lose ground in the mix last month.
The 1GW Hanbit 5 reactor has been off line for maintenance since April and has had its restart pushed back to 28 February 2021 from 17 November owing to a fault, according to schedules on state-run operator Korea Hydro and Nuclear Power's website.
The Hanbit 3 reactor — which had been off line since May 2018 — returned to service as expected over the weekend. The facility underwent a lengthy outage so that voids discovered in its concrete containment building could be repaired.
Hanbit 4 has also been off line since 2018 and is expected to return to service on 12 March, while Hanbit 1 is scheduled to undergo maintenance from 27 January.
The latest changes to the nuclear schedule mean that around 18.2GW is expected to be available for November, 19.8GW for December and 19.3GW throughout the first quarter. If fully dispatched, this would still be up from 14.2GW and 14.9GW in November and December 2019, respectively, and 17.9GW in the first quarter of 2020 (see chart).
The increase should allow the government to repeat similar or potentially even more stringent winter restrictions on the use of coal-fired plants in December-March, as part of efforts to control fine dust emissions.
Based on current scheduled nuclear availability for December-March, and assuming flat year-on-year generation from natural gas and flat overall power demand, Argus estimates that at least 20.1GW of coal-fired generation would be needed to meet demand.
Coal-fired generation averaged nearly 23GW in December-March last winter, and a 3GW decline would be equivalent to around 860,000 t/month less NAR 5,800 kcal/kg coal burn at 40pc efficiency.
The decline would be less severe in the event of a particularly cold winter or further additions to the nuclear outage schedule. But coal also faces much sterner competition from natural gas this winter, as first-quarter 2021 oil-linked LNG import costs will likely fall by 31pc on the year, based on current oil prices.
Gas-fired generation has already eaten into coal's share of the fuel mix this year, with switching particularly obvious in August and September. And state-run gas incumbent Kogas increased its power-sector sales by 8.5pc on the year in October, suggesting that gas-fired generation remained strong last month, probably at the expense of coal.
Based on the linear correlation between Kogas' sales to the power sector and South Korean gas-fired generation in 2020, Argus estimates that gas burn rose to an average of around 15.4GW last month, from 14.1GW last year.
With nuclear availability at around 16.8GW — compared with output of 14.3GW in October 2019 — Argus estimates that coal-fired generation was squeezed to around 22.6GW last month, from 26.6GW 12 months earlier.
Oil-linked LNG import costs have begun to recover as firmer oil prices since the end of April gradually filter through to supply contracts, although gas is still likely to be more competitive with coal than it was last winter. This may limit demand and the upside potential for coal prices in the months ahead.
