1.

Electricity Target Demand and Generation Capacity Targets

The Draft Plan projects a generation capacity target of 157.8GW in light of the electricity target demand which takes into account factors such as (i) increased investments in the semiconductor industry, (ii) growth in data centers, and (iii) industrial demand for electricity. Additional generation capacity of 10.6GW will be required to meet the said target, and the Draft Plan outlines a plan to procure the necessary increase in generation capacity in the following manner:
 

2.

Power Generation Outlook

In order to achieve the 2030 Nationally Determined Contribution (“NDC”) target, the volume and proportion of power generated from carbon-free energy sources such as nuclear power, renewable energy, and hydrogen/ammonia are likely to increase compared to the 10^th Basic Plan. On the other hand, the volume and proportion of power generated from fossil fuels, such as coal and LNG, are expected to decrease significantly. Further, due to the rise in the proportion of power generation from renewable energy, it is envisaged that 21.5GW of long-term ESS facilities will be needed to ensure stable operation of the grid system. The table below shows the forecasted power generation volume and proportion by energy source:
 

3.

Key Policy Goals

The supply of renewable energy, mainly solar and wind power, is likely to increase steadily due to the revitalization of industrial-scale solar power projects, early expansion of ESS facilities, and relaxation of the rules and regulations for separation distances. Both the volume and proportion of nuclear power in the generation mix are expected to increase with the completion of Saeul Units Three and Four, and Shin Hanul Units Three and Four, together with the proposed construction of new nuclear power plants. As for thermal power generation (LNG and coal), the conversion of old coal-fired plants into LNG power plants will be halted, and the 12 coal-fired units which will reach their 30-year design life between 2037 and 2038 will be converted into carbon-free energy sources, such as pumped-storage and hydrogen. Nonetheless, when there is a compelling public interest (e.g., heat supply), the conversion of coal-fired units to LNG generation will be permitted on the condition that they transition to co-firing with hydrogen. This is to ensure that the total capacity of thermal power generation does not effectively increase.
 

4.

Implications

As the government officially announced its plan to allocate LNG generation capacity through a bidding process – as was the case for hydrogen power generation – it is expected that future allocations of generation capacity are likely to be conducted on the basis of particular energy sources and by way of a bidding process which secures transparency and cost-efficiency. As such, businesses undertaking energy-related projects should, in addition to pricing factors, also take into account in their business planning and strategy that there may be some uncertainties surrounding the planned expansion of nuclear power renewable energy under the 11^th Basic Plan as it will be dependent on the timely expansion of the grid system, including the construction of transmission lines. Whereas previously, the government sought to outline a general direction for the Korean energy sector through the Basic Plan, the Draft Plan is now closer to an outlook for the realizable future.

The Draft Plan is viewed as setting out reasonable, yet challenging goals that contemplate a balanced expansion of renewable energy and nuclear power, having regard to practical issues, such as grid constraints. However, for the successful realization of the Draft Plan, efforts will need to be made to push forward with the legislative agenda on high-level radioactive waste management, expansion of the national power grid, and the promotion of wind power generation (all of which are expected to be progressed in the second half of 2024), as well as implementing robust measures to alleviate grid saturation, such as the timely completion of major transmission lines.

The government plans to finalize the 11^th Basic Plan throughout 2024. As this process will involve public hearings and reporting to the standing committees of the National Assembly, it is advisable that businesses closely monitor the discussions held in the National Assembly and the feedback raised by various stakeholders and interested parties in the process of finalizing the 11^th Basic Plan. Businesses may also consider taking active steps to present their views and opinions at public hearings and other relevant forums, as necessary.