Can Korea help solve Asia's energy challenge?

By John Burton

The Asian Development Bank recently warned that Asia is heading for a dangerous energy gap. The bottom line is that Asia’s enormous energy appetite to fuel its breakneck economic growth carries with it, a lot of unpleasant consequences.

Asia faces what the World Energy Council has described as an “energy trilemma’’: the need to balance the conflicting priorities of increasing energy security, providing universal energy access, and mitigating environmental damage.

But as the ADB noted, Asia’s current energy strategy threatens its energy security by increasing its dependence on imported fossil fuels, while worsening environmental damage and widening the gap between rich and poor when it comes to energy access.

The bank estimated that Asia’s energy consumption could grow from a third of the world total to more than half by 2035. Based on its present energy mix, the consumption of oil in the region will double and natural gas triple, while the use of coal will rise by 80 percent.

The bank said a dramatic change in the region’s energy is needed. For example, the issue of imported oil is particularly important to Asia because it accounts for only 9 percent of proven global oil reserves. But oil imports are predicted to triple over the next 20 years based on current trends, making the region more vulnerable to external supply shocks.

Air pollution will also get worse due to increased fossil fuel use, particularly in China and India, and the region will contribute nearly half of the world’s carbon dioxide emissions by 2035, according to the ADB.

Meanwhile, energy subsidies, meant to provide affordable energy to the poor, have the perverse effect of actually benefitting the biggest energy users, such as industries.

The challenge for Asia is to find ways of adopting sustainable energy resources and policies that are compatible with its continued economic expansion as well as its desire to provide universal access to affordable energy.

The ADB suggested that this could be achieved in three ways. The first is the adoption of cleaner energy options to fossil fuels. The second is to reduce energy subsidies to curb rising power demand. The third is to promote pan-Asian energy market integration similar to that undertaken in Europe to improve more energy efficiency.

So how does Korea measure up in achieving these goals and contributing to a more sustainable energy future for Asia?

When it comes to adopting cleaner energy options, Korea has become a regional leader. Its heavy reliance on nuclear power and LNG is preferable to economies run on oil and coal, which are the biggest sources of climate change.

Korea is also pursuing smarter urban planning. Seoul’s mass transit system is one of the best in Asia in terms of promoting better energy use and encouraging lower gas consumption. The use of public buses powered by compressed natural gas is one reason that Seoul is not plagued by the heavy pollution that covers other Asian cities from New Delhi and Beijing to Ulaanbaatar.

Korea has set a target of reducing carbon emissions by 4 percent between 2005 and 2020. It is exploring how large waste collection and disposal systems can generate electricity from waste, such as a project in Incheon.

In addition, Korea last year opened a facility to research carbon capture and storage technology, which is considered vital for reducing greenhouse gases. The smart grid project on Jeju Island is one of the world’s largest and could serve as a prototype in improving energy efficiency in the future.

But while Korea has made strides in pursuing a mix of renewable energy and low-emission power sources, it must do more when it comes to weaning itself off energy subsidies.

Electricity prices in Korea are only a third of those in Japan, but this is due to energy subsidies that keep the cost of power low for industry. While the government believes that cheap energy improves export competitiveness, it also encourages the wasteful use of energy.

The distorted price structures resulting from the government-set electricity tariffs fail to properly reflect the true cost of energy resources. It has also imposed a heavy financial burden on the state-owned Korea Electric Power Corporation (KEPCO), which must shoulder massive debts as a result.

KEPCO has lobbied for years to increase electricity rates that are market-based. But the Ministry of Trade, Industry and Energy, which supervises KEPCO, also represents the interests of industry, creating a conflict of interest when it comes to energy pricing. Moreover, the government fears a public backlash to higher electricity prices.

Reducing subsidies would help create an energy-efficient economy, particularly when Korea can do little about participating in pan-Asian electricity and gas grid integration for the time being because of its geographical position, hemmed in on three sides by the sea and its land access to the rest of Asia blocked by the heavily-armed border with North Korea.

John Burton, a former Korea correspondent for the Financial Times, is now a Seoul-based independent journalist and media consultant. He can be reached at johnburtonft@yahoo.com.