Raising electricity costs are owed to surging global liquefied natural gas prices, which is an unfavorable factor in the government’s policy of weaning the nation off nuclear power.

The current situation is not transient, but a long-term problem. The government, reducing the nation’s dependence on nuclear power with no greenhouse gas emissions, has increased LNG power generation, which emits less greenhouse gases than coal and petroleum, but much more than nuclear power.

As power generation by renewal energies, such as photovoltaic power and wind power, fall short of base-load expectations, the government has turned to LNG as a fuel for power generation as part of the strategy to reduce carbon emissions as much as possible.

But as global LNG prices have surged, the government has no option but to raise electricity prices.

Given global trends of rising demand for LNG, an additional raise in electricity charges will be inevitable until the power generation portion of nuclear power units is raised.

An evaluation of fuel unit prices for the period between October and December, announced by the government and KEPCO on Sept. 23, showed that prices of bituminous coal, LNG and bunker C-oil surged to 355.42 won per kg between June and August, a 19 percent jump over the previous three months.

LNG prices jumped 72 percent during the same period. Futures of LNG imported by Korea jumped over three times in September compared to those in February. Global LNG prices have showed signs of keeping on rising.

The problem is that the nation is cutting the power generation portion of cheaper nuclear power, while raising the power generation percentage of more expensive LNG and renewable energies.

The power generation portion of nuclear power stood at 29.8 percent, versus 20 percent for LNG, in July 2016, when the current government was launched. But things have changed.

The percentage of nuclear power declined to 22.7 percent while the port of LNG surged to 28.9 percent.

As long as the government sticks to its policy of weaning the nation off nuclear power and expanding renewable energies, KEPCO is expected to see power generation costs surge. Due to unpredictable power generation amounts, caused by precarious weather conditions, the nation has to depend on the LNG power generation.

Prof. Joo Han-gyu of Seoul National University was quoted as saying that KEPCO should have dramatically saved power generation costs if the Wolsong Nuclear Power Unit 1, scheduled to become operational in November 2022, was ordered not to be decommissioned and Shin Hanul Nuclear Power Unit 1 was given a go-ahead on its operation, and it was put into operation from July.

A whole view of Shin Hanul Nuclear Power Units 1 &2. (Photo: Gyeongsangbuk-do provincial govt.)

He said the construction of Shin Hanul Nuclear Power Units 3 & 4 should have resumed to avert a raise in electricity charges down the road.

Chances are high that the nation needs to keep on raising electricity charges for the time being. KEPCO raised electricity charges for the fourth quarter of this year 13.8 won per kWh, reflecting fuel cost differences.

If global fuel costs continue to rise like the current trend, raising electricity charges at least additional 10 won is mostly likely to be inevitable.

Figures released by the Ministry of Economy and Finance (MOEF) showed that KEPCO logged 3,267.7 billion won in losses this year when a fuel cost indexing system was introduced.

Prof. Park Joo-hyeon of Dongduk Women’s University was quoted as saying that narrowing electricity charge fluctuations also causes price distortions.

Consumers now benefit from too narrow electricity charge fluctuations, but KEPCO’s cumulative losses will become a burden to future generations, Prof. Park said.