South Korea needs economic overhaul to meet 2050 net-zero emissions target: IHS Markit analyst
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.
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