S Korea should meet power demand with renewables: IEEFA

South Korea should prioritise deploying renewables instead of fossil fuels to meet increasing power demand, said the Institute for Energy Economics and Financial Analysis (IEEFA) on 14 August.

The IEEFA suggests that the country meet its UN Cop 28 climate summit pledge of tripling its renewable power capacity by 2030, as this would generate an additional 113,434GWh from 2023 levels, outstripping the projected power demand increase of 53,186GWh over the same period, according to IEEFA calculations based on data from South Korea's trade, industry and energy ministry (Motie), state-owned utility Kepco and government-affiliated Korea Energy Economics Institute.

Doing this would also help the country fully meet increased demand from emerging semiconductor clusters and AI-driven data centers.

Renewable energy — which does not include nuclear power — comprises 9.64pc of South Korea's power generation mix in 2023, which is far below the world average of 30.25pc and the average of 26.73pc in Asia, according to IEEFA, citing OECD data. The country's share of clean energy rises to 40.32pc when including nuclear power, but this is still below the OECD average of 49.96pc.

Under the scenario where renewables are tripled, the share of renewables in the power mix would rise to 25.08pc by 2030, above the aim of 21.6pc in South Korea's latest 11th long-term electricity plan. Gas-fired power generation would rise by 3,008GWh to a 23.7pc share, in line with a target to cut the share to 25.1pc by 2030 and 11.1pc by 2038.

This contrasts with IEEFA's second scenario — where new LNG power plants requested by various industrial sectors, including semiconductor clusters, are built — which would result in an excess of 55,706GWh in gas-fired capacity by 2030. This means LNG would account for 30.53pc of the power mix in 2030, while renewables would make up just 19.79pc.

"Building more LNG plants contradicts the country's net-zero goal and increases the risk of stranded assets," said IEEFA. South Korea released its latest 11th long-term electricity draft in early June, which continues to prioritise gas-fired and nuclear generation, over that from renewable sources. The plan raises the share of gas-fired output to 25.1pc in 2030 and 11.1pc in 2038, up from 22.9pc and 9.3pc in the previous plan.

"South Korea's historical reliance on fossil fuels to provide energy security has hampered its renewable energy deployment," the report said. "The belief that fossil fuels guarantee stable and affordable energy has stunted the development of renewables, which are perceived as expensive and unreliable."

Economic competitiveness

South Korea's lagging renewable energy deployment could have "significant financial consequences", given international decarbonisation initiatives such as the RE100, carbon border adjustment mechanism, as well as Scope 1, 2, and 3 regulations, the report warns.

South Korea also risks missing out on potential cost reductions by delaying its transition, which may make its exports less competitive, especially with grid parity for renewables expected by 2027.

The IEEFA also asserts that embracing renewable energy is "critical to safeguard [the South Korean semiconductor industry's] economic competitiveness", as well as securing future suppliers and customers.

The EU, Japan, and China are already outpacing South Korea in renewable energy adoption, and stricter regulations could lead to environmentally conscious customers reducing the market share for South Korean chipmakers, IEEFA added. Companies across various sectors that participate in decarbonisation initiatives may also increasingly require their supply chain partners to adopt similar climate commitments.

By Tng Yong Li