Bulgaria(BOO-181120)

Korea-Bulgaria Energy Forum: Strengthening CooperationIn Energy Sector b/w Korea & Bulgaria, November 20, 2018Capital Fort Business Center, New York City Hall

SEOUL NATIONAL UNIVERSITY

SEOUL NATIONAL UNIVERSITY

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ECONOMIC GROWTH AND ENERGY DEMAND GDP EnergySEOUL NATIONAL UNIVERSITY 5

FINAL ENERGY CONSUMPTION BY SECTOR200 Share by Sector (1980 → 1990 → 2010, %)180 • Industry  : 44.9  48.1  59.3160 • Transport  : 9.6  18.9  18.8140 • Resid/Comm  : 40.7  29.3  19.6120 • Public etc.  : 4.8  3.7  2.3100806040 Industrial Sector Residentail & Commercial Sector20 Transport Secror Public- 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09SEOUL NATIONAL UNIVERSITY 6

MAJOR ENERGY INDICATORS Indicators AAGR(%) 1980 1990 2000 2010 1980- 1990- 2000- 1980-Primary Energy (106 TOE) 1990 2000 2010 2010 43.9 93.2 192.9 260.5 7.8 7.5 3.0 6.1 Energy/Capita (TOE) 1.15 2.17 4.10 5.33 6.6 6.6 2.7 5.2Oil Dependence 61.1 53.8 52.1 40.1 - - - - (%) 6.6 10.9 37.6 121.0 5.1 13.2 12.4 10.5 Energy Import (109USD/CIF)SEOUL NATIONAL UNIVERSITY 7

OVERVIEW OFKOREAN ENERGY POLICY EVOLUTION PERIOD ISSUE POLICY REGIME 1940s~1950s Energy Poverty Coal development 1960s Oil-oriented energy system Economic take-off fuelled by 1970s~1980s energy supply and use Energy security 1980s~1990s Energy-environment policy 1990s~2000s Vulnerable energy security2000s~present Market mechanism Degradation of Energy technology policy environmental quality Backward governance of energy industry management UnsustainabilitySEOUL NATIONAL UNIVERSITY 8

IMPLEMENTATION OF COAL DEVELOPMENT Background: Energy poverty  South-North Conflict  Most energy facilities located in the North Korea  Korean Civil War (1950-53)  Half of energy facilities destroyed  Deforestration  Firewood depletion crisis  Worsening fuel shortage Policy Direction: Coal-based Development Strategy  Anthracite coal development in the North Eastern mountainous areas  Construction of railways to connect coal mines and consumers  Construction of coal-fired power plants Policy Outcomes  Solution to fuel shortage via larger supply of anthracite  Share of coal (%): (1955) 19.2  (1965) 43.6  Planting seed for modern industrializationSEOUL NATIONAL UNIVERSITY 9

IMPLEMENTATION OFOIL-ORIENTED ENERGY POLICY Background: Limited Energy Supply Capacity to fuel Economic Take-Off  Launched ‘5-year Economic Development Plan’ (1962): Export-oriented  Limited domestic coal supply  Oil as an alternative energy source  Briquette supply disruption (1964), epidemic power brownout (1967)  Shift to oil-oriented policy Policy Direction: Oil-oriented Energy System Accelerated  Construction of refineries: Joint venture with oil majors (Gulf, Caltex, Unoco)  Promotion policy to expand oil use: subsidies and incentives  Construction of oil-fired power plants Policy Outcomes  Successful economic take-off, thanks to expansion of oil supply  Share by oil: (1965) 12.1%  (1973) 53.8%SEOUL NATIONAL UNIVERSITY 10

IMPLEMENTATION OFENERGY SECURITY POLICY Background: Increased vulnerability to energy supply disruption  Increased oil use  higher import dependence: (‘65) 12.7%  (‘73) 55.5%  100 % oil import dependence on Mid East and oil majors  1st ~ 2nd Oil Shocks  Widespread economic crises Policy Direction  Diversification: energy sources, suppliers, development-import  Energy conservation policy  Oil stockpiling : 7 days use  over 90 days use Policy Outcomes: Reinforced Energy Security  Strengthened resilience in response to energy crises  Diversification of energy sources  Proto-type of Korean energy industry  Upgraded structure of virtuous circle between energy and economySEOUL NATIONAL UNIVERSITY 11

IMPLEMENTATION OFENERGY-ENVIRONMENT POLICY Policy Background: Degradation of the Environmental quality  Increasing use of dirty fossil fuel Environmental crisis  Widespread civil environmental movement, NIMBY  delayed or stopped construction of power plants and energy facilities Policy Direction  Expanding of clean fossil fuels: LNG, nuclear power  Strengthened quality control of energy use  Environmental assessment on power plants and energy supply facilities Policy Outcomes: Gradual improvement of environment quality  Share of clean energy: 4.1%(‘80)  23.0%(‘90)  34.1%(‘05)  Share of clean energy power generation: 14.6(‘80)  63.9(‘90)  57.7(‘05)  Air-quality improved within the level recommended by WHOSEOUL NATIONAL UNIVERSITY 12

POLICY TOWARDS MARKET MECHANISM Background: Obsolete governance of energy industry  Scale up, structural functional complication of energy industry  Continuation of government control on energy governance  delayed viability and evolution of energy industry Policy Direction: Deregulation, privatization  Rationalization of coal industry  Deregulation and liberalization of oil pricing, etc.  Restructuring of electric power industry and gas industry Policy Outcomes: Mixed view of success and policy failure  A big scale-down of coal industry: (‘88) 24 million ton  (‘95) 6 million ton  Government regulation: 50%  Increased viability of energy industry  Restructuring of power & gas industry stopped due to strong resistenceSEOUL NATIONAL UNIVERSITY 13

ENERGY TECHNOLOGY DEVELOPMENT POLICY Background: Lower Sustainability  Continuation of oil price hike  Increasing uncertainty of energy future  G9 major GHG emitters  New international regime on climate change  Technology breakthrough leads to low-carbon energy system Policy Direction: New & Renewable Energy, Energy Efficiency, Green Energy Technology  Institutional arrangements related to energy: KETEP, GGGI, GTC, etc.  Long-term technology roadmap: technology RD&D  RD&D support system: allocation of government budget, taxation, finance Policy Outcomes: Incremental Beneficiation  Upgraded tech capacity vs world top level: (2006) 60%  (2010) 69%  Export of NRE technologies: (2006) 1.9 billion USD (2010) 4.6 billionSEOUL NATIONAL UNIVERSITY 14

HIERARCHY OF NATIONAL BASIC PLANSSEOUL NATIONAL UNIVERSITY 15

POLICY ASSESSMENT ANDPOLICY IMPLICATIONS - 1 Historical evolution of the Korean energy policy  Change in energy policy direction depending on era-specific agenda  Coal  Oilization  Energy Security  Energy-Environment  Market Mechanism  Energy Technology  Rise up to G10 from the bottom of poverty based on building efficient energy system Fostering of energy industry  Basic framework for Korean energy business  Openness  Strong leadership by the government  Establishment of industrial foundation based on market-based policy  Low-Carbon Green Growth and Green Energy Industry Development Strategy future new grow engineSEOUL NATIONAL UNIVERSITY 16

POLICY ASSESSMENT ANDPOLICY IMPLICATIONS - 2 Energy conservation and energy efficiency  Emergence(1970s)Initial Infrastructure(1980s)Systematization(1990s)  Core role-players  Law of Rational Energy Use  Basic Plan for Rational Energy Use  Korea Energy Management Corporation (Now, Korea Energy Agency)  World top-notched policy infrastructure and R&D implementation system The environment and safety  Intensifying Int’l environmental regulations, worsening domestic environmental problem  Environment-friendly energy policy  Clean energy supply: Energy strategy in response to climate change  Energy-related accidents (frequency & scale)  main energy agenda  Nuclear and gas facilities: Safety management and siting for power plantsSEOUL NATIONAL UNIVERSITY 17

SEOUL NATIONAL UNIVERSITY

SEOUL NATIONAL UNIVERSITY

Shale Gas Revolution– Price declination of crude oil– Demand rebound for oil: transportation and petrochemical industryEarth Quakes in the South-East region– Most nuke power plants located there– Lowered public acceptance for Nuke since the Fukushima accidentMicro-dust syndrome– Major culprit: fossil fuels (coal-fired plants and diesel cars)– Public antagonism against coal-fired power generationNew Government– Declaration of Energy Transition Policy: De-nuclearization and De-coalization– Safety, Sustainability, and National Consensus동해안 에너지클러스터 조성 기본계획 20

40,000 The 7th Power Basic Plan (2029)35,00030,00025,000 28 units (28.9GW) by 202220,000 The 8th Power Basic Plan (2029) 18 units (20.4GW) by 203115,000 14 units (16.4GW) by 2039 24 units (22.5GW) by 20172016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 2031 2032 2033 2034 2035 2036 2017 2038 CATEGORY UNITS CAPACITY TARGET 8.8 GWNew Nuke Power Plant 6 12.5 GW Sinhanul 3∙4, Chungju 1∙2, new 1Old Nuke Power Plant 14 0.7 GW 1 By 2038, 14(Gori 2~4, Wolseong 2~4, Hanbit Wolseong 1 1~4, Hanwool 1~4 Wolseong 1 동해안 에너지클러스터 조성 기본계획 21

20% of power generation by 2030– More than 95% of new capacity with PV and Wind동해안 에너지클러스터 조성 기본계획 22

<Fuel Mix of Power Capacity> <Fuel Mix of Power Generation> (Unit: %) (Unit: %)<Nuke + Coal: 50.9> BaU<Nuke + Coal: 34.7>Nuke Coal LNG Renewable E Others 8th PBE Nuke Coal LNG Renewable E Others Bau Scenario: Current power mkt. Fuel costs: 2017 8th PBE Scenario: Powergen batch based on environ costs, fuel taxes Short-Term (2018~22): 12.4GW Mid/Long-Term (2023~30): 36.3GWResidence/buildings, etc. Passenger CarsCooperatives etc.Small BusinessesRural farms Solar PVsLarge Scale Projects 동해안 에너지클러스터 조성 기본계획 23

Increasing RPS mandatory rate– 28% by 2030Promoting large scale RE projects– Offshore wind, etc.Local community participation– Agricultural solar villages, etc.Investment for grid stability– T&D improvement, securing backup powerEfficient demand side management using smart grid infrastructureR&D investment $1.4 billion– Renewable energy: 1.0 billion (2016-2020)동해안 에너지클러스터 조성 기본계획 24

Total Investment for New Capacity: ￦92 trillion ($93 b) Gov. Budget: ￦18 trillion ($16.7 b)New Investment Source Public Institutes ￦92 trillion Public: ￦51 trillion Private Power ($47.4 b) Generators Private: ￦41 trillion Financial Institutes ($38.1 b) Cooperatives Farmers, local communitiesSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 2255

SEOUL NATIONAL UNIVERSITY

In the fuel mix, Korea phases out nuke power and coal, insteadgreatly increasing clean energies mainly shared by REIn relation to facility operation, the government proposed measuresto increase LNG generation while decreasing coal generationthrough a harmonious balance between economy and environmentAs gradually expanding generation capacity and facility capacity ofthe renewable and LNG, achieve stable power supply and improveenvironmentYEAR NUKE COAL LNG RE OTHERS DEMAND2017 30.3% 45.4% 16.9% 62% 1.3% 507 TWh2030 23.9% 36.1% 18.8% 20.0% 1.1% 580 TWhSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 2277

Reference demand by 2030: 113.4 GW  Target demand : 100.5 GW– Reduction by 12% against the BaU, AAGR: 1.27%– The 7th Basic Plan: AAGR 2.2% (113.2 GW)  11%(12.7 GW)SEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 2288

SEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 2299

SEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3300

Strengthening of demand management (peak load management)– Effective demand management measures, incentives for energy efficiency– Development of Demand Resources  Stable supply + reduced reserve ratioImprovement in support system and institution for renewable energy– Deregulation: Siting, planned siting– Expanded support: reasonable margin, grid-connection, eco-energy fund– Local autonomy’s leading role: profit sharing, local community participated proj.– The 4th Industrial Revolution  New business model  Export industryReforming of fuel tax and electricity pricing mechanism– Environmental costs, rational/reasonable/equitable– Energy tax reform for demand management– Environmental awareness: investment for the next generationEnergy market analysis and timely response to market irregularity– Continuous market monitoring– Periodical assessment of policy performance & feedback Enhanced policy readinessSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3311

SEOUL NATIONAL UNIVERSITY

Legal Basis Established Planning Period 10 years The 1st National Law of Rational Energy Use 1997Energy Basic Plan every 5 years 10 years The 2nd National Law of Rational Energy Use 2002Energy Basic Plan every 5 years Limited scope and content, Consistency with other 20 years, basic plans  Legislation of Energy Basic Law every 5 years The 1 National Energy Basic Law 2008 20 yearsEnergy Basic Plan every 5 years Legislation of Low-Carbon Green Growth Law 20 years Energy Basic Law  Revision of Energy Law every 5 years The 2nd Basic Law of Low-Carbon 2014Energy Basic Plan Green Growth The 3rd Basic Law of Low-Carbon 2018Energy Basic Plan Green Growth 동해안 에너지클러스터 조성 기본계획 33

Planning processes are underway– Working groups started working– Co-work with GHG Reduction Roadmap(NDC) revision team5 Working groups (about 70 experts are involved)– General WG: set working direction, opinion hearing– Conflict management WG: public participation, governance– Demand WG: demand forecasting and management, price & taxes– Supply WG: distributed generation, energy cooperation– Industry & Job WG: new energy industry, renewable energySchedule– June: energy demand forecasts– September: Draft of master plan to be unveiled Public hearing, legal process– December: Mater Plan to be finalizedSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3344

Basic Direction2040 National Vision & Targets A Sustainable Energy Transition Paradigm– Clean and Safe Energy Mix, Setting the target for Energy Transition 2040– Citizen/business-led implementation of participatory-communication- decentralized system– The 4th Industrial Revolution-initiated demand management, distributed generation, job-creating energy new businesses Improvement of the 2nd Energy Basic Plan: WGs allocated from the perspective of policy needs– People-oriented energy transition with growth engine and job creationThe 2nd EBP Nuke The 3nd EBP Communic OutreachGeneral WG + Power RE General WG + Demand Business Jobs Demand SupplySEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3355

Energy Vision 2040 for Sustainable Prosperity Realizing A Safe and Clean Energy System with National ParticipationSecurity and Stable Energy Supply via Energy Transition ReliabilitySafety Natural disasters/accidents response sys Safe living environmentEnvironment Eco-friendly energy supply/demand  Micro-dust/GHG reductionCoexistence Empowering citizen & local autonomy: authority/responsibility/profit sharing  Participation/communication/decentralized energy ecologyGrowth Energy industry + 4th Industrial Revolution  Create Innovative Growth EngineSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3366

Reduced final energy consumption and improved energy intensity Energy saving target setting based on the 4th Industrial Revolution-led demand management services, etc.Share of renewable energy in the power generation mix Scenario developed based on policy trend, costs, technology (flexibility) developmentGHG emissions in the energy sector Revised version of GHG Reduction Roadmap 2030 (2018.07)Micro-dust emissions in the power and transport sectors Deployment of environment-based batching, eco-friendly cars (EVs, FCEVs)Numbers of power generators and renewable energy participationhousehold– Expansion of DG participation and national participation in energy productionSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3377

Demand Materialization of high energy efficient society through innovative energy demand managementSupply Building a smart energy system centering around renewable energyIndustry Promotion of the future energy industry and business to create new markets and jobsGovernance People participatory-decentralized energy governanceCooperation Int’l energy-resource cooperation to enhance energy securityInfrastruct. Infrastructure building in response to and in preparation for the 4th Industrial Revolution and energy transitionSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3388

In the context of global trend, energy transition is not a choice but anecessity, becoming a global standardThe Korean energy transition with a vision & commitment will transformenergy system towards safer, heathier and more sustainable oneThe current energy transition should be executed on a stable basiswith a long-term perspectiveEnergy transition, to be successful, should be mainstreamed viadebates, public hearing, outreaching to reach a national consensusProvision of effective financial supports (FITs) with a nationalrenewable energy fundIntegrated institutional arrangement will facilitate energy transition– Designation of an agency dedicated to energy transitionSEOUL NATIONAL UNIVERSITY 동해안 에너지클러스터 조성 기본계획 3399

Kyung-Jin BOOProfessor, PhD/Urban Affairs & Public PolicyTechnology Management, Economics, Policy ProgramSeoul National University☎ +82-2-880-2593 [email protected]