South Korea's new president has a chance to clean up

Japan Times

a day ago

The election of left-leaning former labor activist Lee Jae-myung as South Korean president Tuesday is just the latest example of how much of the world is moving in the opposite direction to the US.
In common with recent elections in Canada and Australia, it's a rebuke of leaders on the right who've fought a rearguard action against the transition to renewables. Lee has promised to phase out coal, limit use of natural gas and accelerate the building of wind and solar. His position on nuclear power, a major success story that was strongly supported by his impeached predecessor Yoon Suk Yeol, remains ambiguous.
However, resolving energy policy in South Korea won't be easy. Years of inertia and obstruction of the transition have left the country with a system that's plagued with high costs and has the lowest renewable penetration among developed economies.
State-owned utility Korea Electric Power Corp., or Kepco, is wallowing in debt after it was forced to suppress bill prices when Russia's invasion of Ukraine pushed up the cost of liquefied natural gas. In the best of times, it usually depends on government subsidies to sell electricity for less than it spends on fueling, building and servicing its plants.
The biggest challenge will come from fixing the crippling costs of renewables. South Korea pays more for its wind and solar than any other major economy. It's the only significant market where you can still build a new coal power plant more cheaply than a new solar or wind generator.
If Lee's plans for an energy transition aren't going to become mired in red tape while adding yet more costs to Kepco's teetering balance sheet, it will be slow, unrewarding work. British Prime Minister Keir Starmer came to power last year promising to build 1.5 million homes in five years by breaking through a similar morass of regulatory roadblocks. Homebuilding this year, however, is expected to hit its lowest level in 14 years.
The barriers to renewables are legion. Some are natural: South Korea is as densely populated as the Netherlands, but its land is far more mountainous. That means a dearth of the flat sites best suited to solar and wind. The few that exist have to contend with a farming sector that aims to be largely self-sufficient in growing rice for the country's 52 million people. Hillsides where solar can be built are vulnerable to landslides, particularly as a warming climate causes more intense downpours. There are no grid connections to other countries, because South Korea doesn't much trust its neighbors.
The more serious barriers are the effect of regulatory capture, though. One little-noticed update from Kepco and the powerful Ministry of Trade, Industry and Energy last year largely outlawed new renewable development for seven years in a swath of the south and east, saying fresh generation licenses wouldn't be issued in the region until 103 electricity substations complete their upgrades in 2032.
Similarly, onerous rules requiring solar developers to verify the carbon footprint of their panels throughout the supply chain were introduced in 2021 following concerns that Chinese modules were undercutting local manufacturers. That's helped prop up the local industry, but left the country with some of the highest module costs in the world. The carbon footprint of a grid that gets 60% of its power from fossil fuels seems to have been less of a concern.
Lee's more vocal backing for offshore wind is a sign of how intractable these problems may be. It's the least price competitive form of clean energy in South Korea, but in a country where the rural lobby is opposed to onshore solar and wind and the green lobby wants a halt to further nuclear development, it's the one that's least likely to upset any interest groups.
For all that, Lee has some advantages. The center-left has had control of Seoul's executive and legislative branches for just two years since 2008, from 2020 to 2022 when policy was dominated by COVID-19. He's now got that power, giving him a stronger hand in allowing more renewables onto the grid. Kepco's weakened financial state should mute its objections, too.
He will need to move fast, though. Three under-construction nuclear generators near Ulsan and on the east coast must be expedited, while the red tape that's held back solar and wind will need to be slashed. If Kepco needs more bailouts, they should be conditional on it upgrading transmission networks to open up the windy, sun-baked east of the country as a renewables hub.
Even costly offshore wind has potential, if prices can be brought down by shortening current decadelong development times. Costs for the technology in the U.K. fell by two-thirds between 2014 and 2019 as the sector grew. There's no reason South Korea can't repeat the trick.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy.