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South Korea needs economic overhaul to meet 2050 net-zero emissions target: IHS Markit analyst
01 March 2021Bernadette Lee
South Korea's existing policies and long-term plans are unlikely
to be sufficient to see the country meet its 2050 net-zero
emissions target, and a major restructuring of its economy would be
required to achieve the goal, according to an IHS Markit
analyst.
In a speech to the National Assembly on 28 October 2020,
President Moon Jae-In outlined the country's aim for carbon
neutrality by 2050, making South Korea the third Northeast Asian
country to make the pledge, following similar commitments by Japan
(net zero by 2050) and China (net zero by 2060).
In 2019, South Korea emitted an estimated 679 million metric
tons (MMt) carbon dioxide (CO2) equivalent of greenhouse gases
(GHGs), making it the world's 10th-largest GHG source, according to
IHS Markit estimates.
"The new target represents a significant ramp up from the pledge
in South Korea's first National Determined Contribution (NDC) to
the Paris Agreement to reduce greenhouse gas (GHG) emissions by 37%
from a business-as-usual (BAU) path by 2030, equivalent to a 24%
reduction compared with the 2017 levels," said Vince Heo, associate
director at IHS Markit in Seoul.
"The power sector accounts for 41% of South Korea's emissions,
and has been the main focus of strategic planning to date, but
further plans are needed to decarbonize other sectors as well,
particularly transportation," Heo said.
Complicating matters, Heo pointed out that the country is
heavily dependent on imported fossil fuels.
Tougher emission controls needed
Tougher emission controls are needed to achieve the country's
2030 emission targets, and these were set out in the 9th Basic Plan
for Electricity Demand and Supply (9th BPE), released on 28
December 2020.
In the 9th BPE, the government set a target to limit power
sector emissions to a level below 193 MMt CO2-equivalent by 2030,
down 23.6% from its 2017 levels. The government aims to achieve
this through two measures — a phaseout of 24 aging coal-fired
power plants and restraints on coal generation.
"This means that no new coal and nuclear plants will be built
beyond what is already under construction, which will see a peak in
their capacity in 2024; instead efforts will be channeled into
boosting renewables and converting coal to gas to achieve the GHG
emissions target. The government is targeting gas-fired power
generation capacity and renewables to reach 59.1 GW and 77.8 GW,
respectively, by 2034," Heo said.
However, IHS Markit expects GHG emissions in the power sector to
reach 243 MMt CO2e in 2030, far behind the target, Heo said.
"In the IHS Markit base case, we expect electricity demand to be
stronger, leading to an increase in LNG demand in the power sector
by 2034, in contrast to the 9th BPE forecasts," he said.
The country's emissions trading scheme, which covers about 70%
of total emissions, is expected to play a pivotal role in the short
to medium term in decarbonizing its economy, but the government
needs to devise a more concrete roadmap in terms of the technology
it plans to use to help meet the net-zero pledge, Heo added.
The 5th Basic Plan on Renewable Energy
As part of the move to accelerate South Korea's transition to a
low-carbon economy based on renewable energy, the Ministry of
Trade, Industry and Energy (MOTIE) on 30 December 2020 released the
5th Basic Plan on Renewable Energy. MOTIE updates the plan every
five years to provide a 20-year outlook for renewables capacity and
generation, technology development plans, and measures to foster
industry ecosystems and promote exports.
According to IHS Markit data, as of 2020, renewables provide
about 7% of the country's energy, with solar and wind accounting
for 3% and 1%, respectively. The 5th Basic Plan sees the share of
renewables reaching 22.2% by 2034 or 25.8% if it includes such "new
energy" such as integrated gasification combined-cycle (IGCC)
turbines and fuel cells.
"Solar and wind would see the biggest increases, with the former
likely to make up 10.1% of power generation and the latter
accounting for 9.1% — a big jump given their relatively small
share today," Heo said.
The 5th Basic Plan also lays out the government's determination
to review the renewable portfolio standards (RPS) scheme which
underpins the 2034 renewables target.
This will entail a number of actions:
expanding the auction scheme through competitive bidding for
solar photovoltaic (PV) projects initially and subsequently for
wind;
expanding the number of generation companies under the RPS to
include those with more than 300 MW in generation capacity, in
addition to those with 500 MW of capacity at present. This
introduces seven more generation companies to the scheme, for a
total of 30 generators with RPS obligations, according to Heo.
a potential rule amendment that would raise the permissible
renewable portion of an RPS-compliant generator's portfolio to 40%
by 2034 from 10% currently;
revising the RPS multipliers, an important adjustment mechanism
to reflect various generation costs across renewable technologies,
in an effort to account for new economics,
environmental-friendliness, safety, social acceptance, and impact
on the grid infrastructure. This will be carried out in 2021.
The government also passed a bill in January this year that
offers consumers different renewable procurement options that
include a green premium, power purchase agreements, renewable
energy credit purchases, equity investment, and
self-generation.
"An increasing number of South Korean companies such as Samsung
Electronics and LG Chem [are under] pressure from their global
customers who [have] committed to 100% renewable power across their
supply chain by 2050 [by becoming] a member of the RE100
initiative. These new procurement options are expected to generate
more demand for renewables from Korean companies," Heo said.