LONDON, March 14 – Carbon Tracker models and tracks key economic and financial metrics of coal power at the asset-level throughout the world through its Global Coal Economics Portal, the findings of which have been summarised for South Korea in a new report, Brown is the New Green, published today.
Matthew Gray, senior utilities & power analyst and author of the report said: “South Korea has the highest level of stranded asset risk in the world due to regulatory loopholes which favour coal power.”
Our below 2°C scenario finds South Korea has $106 billion of potential stranded asset risk – the highest of the 34 countries modelled globally. The figure represents the difference between the cash flow utilities — i.e. Korea Electric Power Corporation (KEPCO), generation companies and private generators may receive under the current business-as-usual (BAU) scenario; and what they would receive in a below 2°C scenario, which sees coal capacity phased-out in South Korea by 2040, to meet the temperature goal in the Paris Agreement.
The extent of South Korea’s stranded asset risk is due to regulatory structures which effectively guarantee coal generators high returns. Around 90% of the electricity KEPCO purchases from generation companies are procured on a spot basis and the merit order is determined only by fuel cost. Other costs, such as capital and pollution are not reflected in the merit order and are separately compensated by KEPCO. This situation puts coal at an unfair economic advantage.
Gray warns that: “If South Korea continues to subsidise coal it will lose the low carbon technology race to those nations who are opening up their power markets to competitive forces which accelerate the deflationary trends of renewable energy.”
South Korea has seven new coal plants (5.4 GW) under construction and another two plants (2.1 GW) planned, as well as several retrofits in various stages of planning. The nation’s low carbon strategy, which aims to stimulate the economy and secure energy independence, risks being derailed by a continued focus on coal power.
Gray added: “South Korea has a formidable track record in technological innovation. The low carbon economy offers South Korea an opportunity to reassert its technological pre-eminence, but realising this opportunity will require political conviction and courage.”
Independent of additional climate or air pollution regulations, Carbon Tracker analysis shows it will be cheaper for South Korea to build new solar PV than to operate existing coal plants by 2027, calling into question not only planned coal investments but also the economic viability of the operating coal fleet.
The designed brief can be downloaded here:
https://carbontransfer.wpengine.com/reports/south-korea-coal-power
To arrange interviews with the author, please contact:
Joseph Zacune joseph.zacune@Europeanclimate.org +4793077925
