Industry officials voiced both hope and concern after reviewing the 12th Basic Plan for Long-Term Electricity Supply and Demand, which the government released on the 26th. Expectations ran high that expanding renewable energy in an era of electrification would help Korea secure leadership in related industries, but officials also warned that raising the share of renewables too quickly could push up electricity bills and erode the country's industrial competitiveness.
That is what happened little more than a decade ago in Germany, once one of the world's strongest manufacturing powers. In 2010, the government of Chancellor Angela Merkel launched a decarbonization drive aimed at expanding clean energy. The following year, the Fukushima nuclear accident prompted Berlin to add a nuclear phase-out to the agenda. Germany's renewable generation capacity grew 3.7-fold in 15 years, from 53.9 gigawatts in 2010 to 200.1 gigawatts at the end of last year. From 2016, renewable capacity exceeded non-renewable capacity.
The problem is that over the same period, German manufacturing competitiveness — long among the world's best — eroded rapidly as liquefied natural gas prices surged in the wake of the war between Russia and Ukraine. Germany's potential growth rate, which had exceeded 1% a year since the 2000s, has fallen to about 0.4%.
The government's renewable expansion plan is more aggressive than Germany's past policy.
The Ministry of Climate, Energy and Environment said it would build renewable power plants faster over the period to 2040 than Germany, the sector's front-runner, did over the past 15 years. Under the ministry's outlook, Korea's cumulative renewable capacity will rise from 37 gigawatts at the end of last year to 100 gigawatts in 2030, 163 gigawatts in 2035 and 220 gigawatts in 2040. Germany's climb from 53.9 gigawatts to 200 gigawatts already drew criticism as too fast, meaning Korea is starting from a lower base and aiming higher.
Industry officials immediately raised concerns that the burden on manufacturers will grow as the government presses to meet its targets. Offshore wind farms, which are set to expand sharply from the 2030s, currently generate power at a cost higher than the price at which it is sold. The larger solar's share of total generation becomes, the more backup capacity is needed to offset its intermittency, adding inefficiency to the generation mix. That means expensive LNG plants must run around sunrise and sunset, when solar output is absent, while baseload sources such as nuclear reactors have to be curtailed during the day, when solar output is abundant. All of these factors push electricity rates higher.
Faster renewable deployment also increases the infrastructure burden of keeping the grid stable. The 11th Basic Plan, which called for expanding renewable capacity to 121.9 gigawatts by 2038, put the cost of building the national transmission network alone at 72.8 trillion won ($52.5 billion). With the deployment target 1.8 times larger just two years later, the cost of transmission and distribution lines and battery energy storage systems is expected to climb in step. Germany likewise expanded its BESS capacity to 16.3 gigawatts by the end of last year, from virtually none as recently as 2015, to cope with growing solar output.
Others question whether the generation capacity can be built as planned. In presenting its 2040 renewable outlook, the ministry said satellite analysis put Korea's solar potential in 2040 at 271 gigawatts, but that estimate assumes solar panels will be installed on a large number of factory rooftops and reservoirs.
Analysts also argued that the 12th plan will inevitably include new LNG plants or nuclear reactors even with the government's sweeping push into renewables. Applying a 22% reserve margin to the ministry's projected 2040 peak demand of 165 gigawatts, the government must prepare a total of 201.3 gigawatts of generation capacity on an effective-capacity basis by 2040. That is 43.3 gigawatts more than the 158 gigawatts by 2038 set out in the 11th plan.
While the 2040 renewable target is 98.1 gigawatts higher than the 121.9 gigawatts in the 11th plan, that adds only 37 gigawatts of effective capacity, based on assumed power efficiency of 20% for solar and 30% for wind. That leaves more than 6.3 gigawatts of demand to be met by other means — the equivalent of 4.5 large reactors of 1.4 gigawatts each. Because the government plans to phase out coal-fired plants by 2040, that gap will have to be filled by large nuclear reactors, small modular reactors or LNG plants.
