Seoul needs to reconsider nuclear phase-out policy
The Korea Electric Power Corp. (KEPCO) sustained operating losses of 814.7 billion won ($720.9 million) in the first half of the year. The six-month deficit, which was 62.9 percent larger than the estimate by brokerages, might as well be called an "earnings shock."
Government officials attribute the red-ink to the "rise in energy prices and the temporary shutdown of nuclear reactors for safety checks." Few can deny, however, the primary reason was the Moon Jae-in administration's policy to "denuclearize" the nation's energy mix.
In other words, the big hole in the balance sheet of the state utility was due to its cutting down the operation of atomic power plants (with a unit cost of 66 won per kWh), and increasing those of coal-fired plants (unit cost of 90 won) and LNG stations (125 won).
The problem will even likely aggravate in years to come, given the sharp rise in coal and gas prices. According to the Korea Resources Corp., the price of bituminous coal stood at $120.7 per ton as of July 31, up about 30 percent from a year ago. The price of liquefied natural gas redoubled over the period. Energy experts predict the resumption of U.S. economic sanctions on Iran will likely push up international oil prices above $100 per barrel.
If the Seoul government pushes ahead with its non-nuclear energy policy, KEPCO's bottom line is sure to turn from bad to worse. In announcing the plan to wean Korea off nuclear energy, the government said there would be no power rate hikes over the next five years. If the losses accumulate at KEPCO, however, it will have only two options: Make up for the deficit with taxpayer money, or increase electricity prices.
President Moon recently said, "The use of air-conditioners should be part of the basic welfare directly linked to people's life and health." Moon's remark cannot become a reality without low-cost, high-efficiency power generation. Korea, which depends on imports for 98 percent of its energy need, has few such energy sources other than nuclear power.
The government should rethink its nuclear phase-out policy from the ground up.
