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Balancing the Environment and Balancing the Environment and Economic Objectives of Energy Policy: Economic Objectives of Energy Policy:
South Korea’s PerspectiveSouth Korea’s Perspective
PECC XIV: Managing Globalization in the 21st Century
28-30 November 2001, Hong Kong
Hoesung Lee, Ph. D.Hoesung Lee, Ph. D.Council on Energy and Environment KoreaCouncil on Energy and Environment Korea
Former Co-Chair of IPCC Working Group IIIFormer Co-Chair of IPCC Working Group III
Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Primary Energy Shares)(Primary Energy Shares)
22.2 20.6 20.4 19.8 19.6
52 51.5 50 48.1 46.8
9.8 11.6 12.4 14.1 14.9
14.1 14.6 15.6 16.4 16.9
0%
20%
40%
60%
80%
100%
2000 2005 2010 2015 2020
Others
Hydro
Nuclear
Natural Gas
Oil
Coal
External Shocks --> Energy ModernizationExternal Shocks --> Energy Modernization
First Oil Crisis (1973)
- Nuclear power generation system
- Steam coal power generationSecond Oil Crisis (1979)
- Natural gas imports Next Energy Crisis (?)
- Energy efficiency technology
- New & Renewable energy tech
Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Primary Energy Demand)(Primary Energy Demand)
2000 2005 2010 2015 2020Growth Rate (%)
00-10 10-20 00-20
Coal 42.9 48.7 56.0 60.7 65.6 2.7 1.6 2.1
Oil 100.3 121.3 137.6 147.6 156.5 3.2 1.3 2.2
Natural Gas
18.9 27.3 34.2 43.4 49.8 6.1 3.8 5.0
Hydro 1.4 1.2 1.1 1.2 1.3 -2.4 1.4 -0.4
Nuclear 27.2 34.4 42.9 50.4 56.4 4.7 2.8 3.7
Others 2.1 2.8 3.2 3.8 4.5 4.3 3.5 3.9
Total 192.9 235.8 275.1 307.1 334.2 3.6 2.0 2.8
(million toe)
Changes in Korea’s Energy Scene Changes in Korea’s Energy Scene (Long-term Projection)(Long-term Projection)
2000 2005 2010 2015 2020Growth Rate (%)
00-10 10-20 00-20
GDP (trill ’95 Won)
476.3 622.3 794.2 985.0 1,198.4 5.2 4.2 4.7
Population (mill persons)
47.3 49.1 50.6 51.7 52.4 0.7 0.3 0.5
Total Energy (mill toe)
192.9 235.8 275.1 307.1 334.2 3.6 2.0 2.8
Energy per Capita (toe/person)
4.08 4.80 5.43 5.92 6.38 2.9 1.6 2.3
Energy/GDP (toe/mill ’95 Won)
0.40 0.38 0.35 0.31 0.28 -1.6 -2.1 -1.8
GDP Elasticity of Energy
- 0.70 0.63 0.51 0.43 (0.69) (0.47) (0.60)
Final Energy (mill toe)
150.1 182.8 209.1 231.7 250.0 3.4 1.8 2.6
VulnerabilitiesVulnerabilities
Supply securityEnvironmental integritySystem inflexibility from technology
lock-in
System InflexibilitySystem Inflexibility
Nuclear investment is exogenous to the system
State dominance in electricity and gasCompetitive disadvantage for new
technology: energy efficiency improvement, new and renewable energy sources
OECD Sustainable Energy Scenario 2020 OECD Sustainable Energy Scenario 2020 vs Koreavs Korea
Korea NA WE Coal 20 % > 12 % 11 % Oil 47 > 27 28 Natural Gas 15 < 26 24 Nuclear 17 9 17 Hydro - 7 9 New, others 1 < 19 11 Total 100 100 100
CO2 Emissions per CapitaCO2 Emissions per Capita
1
3
5
7
9
11
13
15
17
19
USA
Ru
ssi
a
CanadaAustralia
BangladeshBangladesh PakistanPakistanChadChad NigeriaNigeria
Debt
Credit
Norway
Denmark
VietnamVietnam
ChinaChina
CO
2 E
mis
sio
ns,
to
ns
per
cap
ita
CO
2 E
mis
sio
ns,
to
ns
per
cap
ita
Ger
man
y
UK
Netherlands
Belgium
Japan
Fra
nce
Switzerland
Ital
y
Sweden
Spain
Finland
Ko
rea
Ukr
ain
e
Ireland
Sustainable RateSustainable RateSustainable Rate
Components for CO2 EmissionsComponents for CO2 Emissions
1997--2010 2010--2020
OECD LDC OECD LDC
Carbon Intensity %
0.0 -0.1 0.1 0.0
Energy Intensity % -1.0 -0.8 -1.2 -1.3
GDP per capita % 1.8 3.2 1.7 3.3
Population % 0.5 1.4 0.4 1.2
CO2 emission % 1.2 3.6 1.0 3.2
Cost-Effectiveness Tests Cost-Effectiveness Tests
Industrial Sector : Industrial Sector : Payback period : Average = 1.23 years; maximum of 7 years (less than one-tenth of 1% of cases involve 7-year paybacks)
Payback period : Average = 1.23 years; maximum of 7 years (less than one-tenth of 1% of cases involve 7-year paybacks)
Residential and Commercial Sector:Residential and Commercial Sector:Cost of Conserved Energy (CCE) < 5.0 cents/kWh
(60 Won/kWh)Cost of Conserved Energy (CCE) < 5.0 cents/kWh
(60 Won/kWh)
Transportation Sector :Transportation Sector :Payback Period < 5 yearsPayback Period < 5 years
En
erg
y C
on
sum
pti
on
(M
illio
n T
OE
)E
ner
gy
Co
nsu
mp
tio
n (
Mill
ion
TO
E)
5050
100100
150150
200200
250250
300300
350350
0019981998 20102010 20202020
IndustrialIndustrial
TransportationTransportation
ResidentialResidential
CommercialCommercial
ElectricityElectricity
South Korea’s Energy Consumption in 2020: MOCIE/KEEI BAU Forecast
South Korea’s CO2 Emissions in 2020:
MOCIE/KEEI BAU Forecast
South Korea’s CO2 Emissions in 2020:
MOCIE/KEEI BAU Forecast
00
5050
100100
150150
200200
250250
CO
2 E
mis
sio
ns
by
Se
cto
r(M
illio
n T
C)
CO
2 E
mis
sio
ns
by
Se
cto
r(M
illio
n T
C)
19981998 20102010 20202020
IndustrialIndustrial
CommercialCommercial
TransportationTransportation
ResidentialResidential
ElectricityElectricity
Korea Industrial Sector ScenarioMeasures Selection
Korea Industrial Sector ScenarioMeasures Selection
SIC Codes of Korean industries Energy Intensive Industries: Primary Metal, Cement, and
PetrochemicalNon-Energy Intensive Industries (e.g., textiles, machinery, etc.)
SIC Codes of Korean industries Energy Intensive Industries: Primary Metal, Cement, and
PetrochemicalNon-Energy Intensive Industries (e.g., textiles, machinery, etc.)
Facility Assessments screened by:Facility Assessments screened by:
Technologies screened by:Technologies screened by:Energy efficiency measures onlyTechnology packages that contributes at least 10% energy
savings at a typical facility
Energy efficiency measures onlyTechnology packages that contributes at least 10% energy
savings at a typical facility
Cost-Effectiveness Test: Cost-Effectiveness Test: Payback period : Average = 1.23 years; Maximum = 7 yearsPayback period : Average = 1.23 years; Maximum = 7 years
50
60
70
90
1998 2000 2010 2020
MOCIE BAU
MOCIE BAU
FullImplementation
FullImplementation
Korea Industrial Sector ScenarioKorea Industrial Sector ScenarioC
arb
on
Em
issi
on
s(m
illi
on
to
ns)
Car
bo
n E
mis
sio
ns
(mil
lio
n t
on
s)
80
100
25.2%25.2%
Korea Transportation Sector Scenario
Measures Selection
Korea Transportation Sector Scenario
Measures Selection
Fuel Economy Improvement
Technologies
Alternative Fuel Vehicles
Fuel Economy Improvement
Technologies
Alternative Fuel Vehicles
Target TechnologiesTarget Technologies
Cost-Effectiveness Test:Cost-Effectiveness Test:Payback Period < 5 yearsPayback Period < 5 years
Korea Transportation Sector Scenario
Korea Transportation Sector Scenario
FullImplementation
FullImplementation
MOCIE BAU
MOCIE BAU
10
20
30
40
50
60
1998 2000 2010 2020
Car
bo
n E
mis
sio
ns
(mil
lio
n t
on
s)C
arb
on
Em
issi
on
s(m
illi
on
to
ns)
28.0%28.0%
Korea Residential Sector Scenario
Measures Selection
Korea Residential Sector Scenario
Measures Selection
Space Heating and Cooling UpgradesHigh Efficiency LightingRefrigeration
Shell Insulation
Space Heating and Cooling UpgradesHigh Efficiency LightingRefrigeration
Shell Insulation
Target TechnologiesTarget Technologies
Cost-Effectiveness Test:Cost-Effectiveness Test:Cost of Conserved Energy (CCE) < 5.0 cents/kWh
(60 Won/kWh)Cost of Conserved Energy (CCE) < 5.0 cents/kWh
(60 Won/kWh)
Korea Residential Sector Scenario
Three Implementation Options
Korea Residential Sector Scenario
Three Implementation Options
MOCIE BAU
MOCIE BAU
FullImplementation
FullImplementation
15
20
30
35
1998 2000 2010 2020
Car
bo
n E
mis
sio
ns
(mil
lio
n t
on
s)C
arb
on
Em
issi
on
s(m
illi
on
to
ns)
25
40
34.5%34.5%
Korea Commercial Sector Scenario
Measures Selection
Korea Commercial Sector Scenario
Measures Selection
High-Efficiency Lighting
Space Heating and Cooling Upgrades
Motors (for air circulation, elevators, etc.)
Shell Insulation
Cost of Conserved Energy (CCE) < 5.0
cents/kWh
High-Efficiency Lighting
Space Heating and Cooling Upgrades
Motors (for air circulation, elevators, etc.)
Shell Insulation
Cost of Conserved Energy (CCE) < 5.0
cents/kWh
Target TechnologiesTarget Technologies
Cost-Effectiveness Test:Cost-Effectiveness Test:
MOCIE BAU
MOCIE BAU
Full Implementatio
n
Full Implementatio
n
5
15
20
30
1998 2000 2010 2020
Korea Commercial Sector Scenario
Korea Commercial Sector Scenario
Car
bo
n E
mis
sio
ns
(mil
lio
n t
on
s)C
arb
on
Em
issi
on
s(m
illi
on
to
ns)
10
2535.3%35.3%
Efficiency Improvement
Efficiency Improvement
19981998 20102010 20202020
South Korea’s Energy Consumption in 2020South Korea’s Energy Consumption in 2020
Savings = 95.4 MTOESavings = 95.4 MTOE
ElectricityElectricity
IndustrialIndustrial
TransportationTransportation
ResidentialResidential
CommercialCommercial
BAUBAU
En
erg
y C
on
sum
pti
on
(M
illio
n T
OE
)E
ner
gy
Co
nsu
mp
tio
n (
Mill
ion
TO
E)
5050
100100
150150
200200
250250
300300
350350
0019981998 20102010 20202020
IndustrialIndustrial
TransportationTransportation
ResidentialResidential
CommercialCommercial
ElectricityElectricity
28.7%28.7%
00
5050
100100
150150
200200
250250
CO
2 E
mis
sio
ns
by
Se
cto
r(M
illio
n T
C)
CO
2 E
mis
sio
ns
by
Se
cto
r(M
illio
n T
C)
Reductions = 58.9 MTCReductions = 58.9 MTC
19981998 20102010 1998199820202020 20102010 20202020
Efficiency Improvement
Efficiency Improvement BAUBAU
South Korea’s CO2 Emissions in 2020South Korea’s CO2 Emissions in 2020
CommercialCommercial
TransportationTransportation
ResidentialResidential
CommercialCommercial
TransportationTransportation
ResidentialResidential
IndustrialIndustrialIndustrialIndustrial
ElectricityElectricity ElectricityElectricity
28.8%28.8%
Electricity saved total (34 mtoe) > Nuclear capacity planned (30 mtoe) for 2000-2020
Benefits of energy saved ($30 B) > Costs of efficiency improvement ($4 B) for 2000- 2020
Create level playing field for efficiency upgrades technology and new & renewable energy resources
Avoid further lock-in of old technologies Utilize the window of opportunities: Intensify
energy R&D, technology diffusion
Conclusion: Cost Effective Sustainable Conclusion: Cost Effective Sustainable Energy Development is PossibleEnergy Development is Possible
Developments in LNG MarketDevelopments in LNG Market Upstream costs down
– Funding method
– Competition in EPC
– Increased scale and design efficiency of liquefaction
– Shorter development period
– Early project commitment with flexible terms
LNG Shipping – 27 to 44 uncommitted ships by 2005
– Bigger ship size: 165,000m3, lower unit building costs
– Weaker destination restriction
– Amenable to short-term LNG trading and internal competition
Developments in LNG MarketDevelopments in LNG Market Changing LNG Acquisition Practice
– Participation by India and China: less market share for Japanese buyers
– Pricing on a more transparent and competitive basis
– Flexible LNG acquisition lower storage costs in internal markets
Ship saving swaps to face uncertainties from seasonal demands and competition
Market for Third-Party LNG Traders LNG more competitive Allow more freedom of choice
for fuels and suppliers
Grid InterconnectionGrid Interconnection Efficient energy system with stable supplies and linked to
the Asian continent Northeast Asian Gas and Power interconnection proposed No. 1 characteristic of interconnection: externalities
system security, supply reliability– Well-coordinated transmission protocol/ pooling arrangement
required
– Harmonized institutions and industrial structures required
– E.g., Lack of PSA rules delay of gas development in Far East Russia
Grid InterconnectionGrid Interconnection
Policy risk, country-specific risk, cross-border risk to be minimized to invite private capital
Cost-benefit assessment necessary for interconnection via North Korea considering– Not only transmission of energy
– But also integration of power and gas systems, and
– Inter-Korean relation