Industry Trend Analysis - Quick View: Energy Strategy Aligns With Shifting Power Mix - FEB 2018

The Latest: South Korea's Energy Ministry has finalised its 15-year energy strategy, which outlines targets for the country's power mix by 2030. The strategy aims to reduce the share of coal and nuclear in total power consumption and envisages gas and renewables playing a larger role in the mix. The share of coal should fall to around 36% in 2030, while the share of nuclear will decrease to just under 24%. Renewables capacity is targeted to increase to 58.5GW by 2030, contributing around 20% to South Korea's total electricity consumption.

South Korea Power Mix Set For A Shake Up
South Korea - Electricity Generation By Type (% Of Total)
e/f = BMI estimate/forecast. Source: EIA, BMI

Implications: The finalised strategy is mostly unchanged from the draft policy that was released earlier in the year and closely aligns with President Moon Jae-in's energy agenda. The President is taking steps to shift South Korea's power mix away from coal and nuclear by temporarily closing down coal projects and halting the construction of nuclear facilities, and boosting LNG and renewable energy in the mix. We maintain our view that the share of nuclear power in the electricity generation mix will fall over the coming decade, from nearly 30% in 2016 to around 20% in 2027, as projects under construction and planned are stalled. The share of coal will very gradually decrease, but not to the extent outlined by the government, as the project pipeline for new projects remains strong. That said, the role of gas and renewables in the power mix will increase, significantly in the case of gas, to around 32% in 2027 from 22% in 2016.

What's Next: The finalisation of the energy strategy cements President Moon's agenda and we expect to see continued assertive action from the government to meet the targets outlined in the strategy. The regulatory environment for renewable energy is improving in line with the ambitious targets, and we expect competitive renewables auctions to feature over the coming years as a mechanism to mobilise investment into the sector. As such, there is potential for us to upwardly revise our forecasts for renewables capacity over the coming quarters if investor interest in the auctions is strong.

Related Research:

  • Favourable Policy To Drive Steady LNG Growth, November 17 2017

  • Shifting Energy Policy Spells Trouble For Nuclear, August 22 2017

  • Quick View: Assertive Action Against Coal Hints At Future Power Shift, May 1 2017