1
Overview of/Update on Overview of/Update on the Energy Sector and the Energy Sector and
LEAP Modeling Effort in LEAP Modeling Effort in the Republic of Koreathe Republic of Korea
Dr. David F. Von HippelDr. David F. Von HippelNautilus Institute Senior AssociateNautilus Institute Senior Associate
[Presented for the ROK Team, and based on [Presented for the ROK Team, and based on AES2006 Presentations by Dr. Chung Woo-jin AES2006 Presentations by Dr. Chung Woo-jin
and Dr. Jungmin Kang]and Dr. Jungmin Kang]Asian Energy Security Project MeetingAsian Energy Security Project Meeting
Tsinghua University, Beijing, PRC, November 1, 2007Tsinghua University, Beijing, PRC, November 1, 2007
AES 2007AES 2007 2Von Hippel/ROK Group 11/2007
OUTLINE OF PRESENTATION: The ROK Economy and Energy Sector—Brief
Update Overall Trends and KEEI Forecasts Structure of Energy Supply and Demand Key Policy Processes/Changes
The ROK LEAP Model—Current Status and Ongoing Work Model Structure Existing Paths Work ongoing and to be done Coordination/Integration with DPRK Model
AES 2007AES 2007 3Von Hippel/ROK Group 11/2007
ROK ECONOMY, ENERGY SECTOR
Rapid and Continuing Economic Growth Industry key sector, but Commercial,
Transport has been growing fast Population growth slowing
Structure of Energy Sector Vast majority of energy imported
(petroleum, LNG, Coal) Electricity generation nuclear, imported
coal, natural gas, small amount of hydro, declining amount of oil
AES 2007AES 2007 4Von Hippel/ROK Group 11/2007
ROK ECONOMY, ENERGY SECTOR
Indicator 1981 1990 1995 2003 2006
Avg. Annual Growth Rate (%)
‘81-‘90
‘90-‘06 ‘03-‘06
Primary Energy Consumption(million toe)
45.7 93.2 150.4 215.1 233.4 8.2 5.9 2.8
Per Capita Energy Consumption (toe)
1.18 2.17 3.34 4.50 4.83 7.0 5.1 2.4
Energy/GDP (toe/million won)
0.31 0.29 0.32 0.32 0.31 -0.7 0.42 -1.1
CO2 Emissions
(million t-CO2)135.9 239.0 366.9 474.4 ~495 6.5 4.7 1.4
CO2 Emissions
Per Capita (t-CO2)3.51 5.57 8.14 9.90 10.2 5.3 3.9 1.0
GDP (trillion won) 147.5 320.7 467.1 662.7 759.2 9.0 5.5 4.6
Population (million) 38.7 42.9 45.1 47.8 48.3 1.2 0.74 0.35
AES 2007AES 2007 5Von Hippel/ROK Group 11/2007
ROK Economic Growth/Energy Consumption
For 1987 - 1997• AAGR of Energy Consumption & GDP : 10.3% & 7.7%, respectively• Energy Elasticity of Energy Consumption to GDP : 1.34
For 1998 – 2005• AAGR of Energy Consumption & GDP : 4.7% & 5.6%, respectively• Energy Elasticity of Energy Consumption to GDP : 0.84• In 2006, GDP grew 5.2%, but Energy Consumption only 2.1%
For 1987 - 1997• AAGR of Energy Consumption & GDP : 10.3% & 7.7%, respectively• Energy Elasticity of Energy Consumption to GDP : 1.34
For 1998 – 2005• AAGR of Energy Consumption & GDP : 4.7% & 5.6%, respectively• Energy Elasticity of Energy Consumption to GDP : 0.84• In 2006, GDP grew 5.2%, but Energy Consumption only 2.1%
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
81 83 85 87 89 91 93 95 97 99 2001 2005
(%)
GDP
Primary Energy Consumption
AES 2007AES 2007 6Von Hippel/ROK Group 11/2007
ROK Primary Energy Consumption by Source
Trend in Consumption Shares (198119902006, %)
• Oil : 58.1 53.8 43.6• Coal : 33.3 26.2 24.3
• LNG : 0 3.2 13.7 • Nuclear : 1.6 14.2 15.9
Trend in Consumption Shares (198119902006, %)
• Oil : 58.1 53.8 43.6• Coal : 33.3 26.2 24.3
• LNG : 0 3.2 13.7 • Nuclear : 1.6 14.2 15.9
2006233.4 mil. toe
LNG13.7% Nuclear
15.9%
Hydro0.6%
Coal24.3%
Oil43.6%
Renewables& Others
1.9%
0
40
80
120
160
200
240
70 73 76 79 82 85 88 91 94 97 2000 2005
(mil. toe)
Coal Oil LNG Hydro Nuclear Firewood & Others
AES 2007AES 2007 7Von Hippel/ROK Group 11/2007
ROK Energy Consumption by Sector
Trend in Consumption Shares (198119902006, %)
• Industrial : 44.948.156.0 • Rsd. & Cmrcl : 40.729.320.7
• Transport : 9.618.921.0 • Public & Other : 4.83.72.2
Trend in Consumption Shares (198119902006, %)
• Industrial : 44.948.156.0 • Rsd. & Cmrcl : 40.729.320.7
• Transport : 9.618.921.0 • Public & Other : 4.83.72.2
-
20
40
60
80
100
120
140
160
180
75 78 81 84 87 90 93 96 99 2005
(mil. toe)
Industrial Residentail & Commercial Transport Public & Others
2005170.9 mil. toe
Residential/Commercial
20.7%
Industrial
56.0%
Public &Others2.2%
Transport21.0%
AES 2007AES 2007 8Von Hippel/ROK Group 11/2007
213.8 215.4 214.8 214.9 226.6 227.9
37.833.8 32.2
38.0
49.6
66.7
0
100
200
300
400
500
600
700
800
00 01 02 03 04 05
0
10
20
30
40
50
60
70
80
Import(mtoe) Import expenditure(b il.US$)
ROK Energy Imports Dependencemtoe
Energy Import (2005/2006)
• Import Dependency: 96.7% • ME Dependency of Crude Oil: 81.8%
• Energy Imports: $ 66.7 billion • Energy Import/Total Import: 25.5%
Energy Import (2005/2006)
• Import Dependency: 96.7% • ME Dependency of Crude Oil: 81.8%
• Energy Imports: $ 66.7 billion • Energy Import/Total Import: 25.5%
Billion US$
AES 2007AES 2007 9Von Hippel/ROK Group 11/2007
ROK Electricity Sector
Recent Trends (2005-2007)
• Total Capacity as of 7/07: 66.7 GW • Load Factor 76-88%
• Reserve margin ~10 - 25% • Growth in GWh 2005-2006: 4.6%
Recent Trends (2005-2007)
• Total Capacity as of 7/07: 66.7 GW • Load Factor 76-88%
• Reserve margin ~10 - 25% • Growth in GWh 2005-2006: 4.6%
0
10000
20000
30000
40000
50000
60000
70000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Cap
acit
y (M
W)
Hydro NuclearCoal Mix Oil ThermalLNG Combined CycleInternal Combustion
AES 2007AES 2007 10Von Hippel/ROK Group 11/2007
05 10 15 20 30AAGR(%)
05-10
10-20
20-30
GDP ( trillion won)
640 806 981 1,194 1,684 4.7 4.0 3.5
Population (million)
48.3 49.2 49.8 50.0 49.3 0.4 0.1 -0.1
Economy and Population
• Annual average growth rate (AAGR) of economy from 2005 to 2030 : 3.9 %
• Population will decrease after 2020
Economy and Population
• Annual average growth rate (AAGR) of economy from 2005 to 2030 : 3.9 %
• Population will decrease after 2020
Source : Korea Development Institute
GDP and Population
ROK FORECASTS/PROJECTIONS
AES 2007AES 2007 11Von Hippel/ROK Group 11/2007
2005 2010 2015 2020 2025 2030Agriculture&
Fishery 3.9 3.1 2.6 2.2 2.0 1.8
Industry 32.2 32.9 33.1 33.1 32.7 31.8
SOC 11.0 10.7 10.4 10.2 9.8 9.5
Service 52.9 53.2 53.9 54.6 55.6 56.9
GDP in industry
100.0 100.0 100.0 100.0 100.0 100.0
Industry Structure
• The AAGR of value added from ’05 to ‘30 in industry: 3.9 %
• The ratio of service industry will be higher : AAGR 4.2%(’05-’30)
Industry Structure
• The AAGR of value added from ’05 to ‘30 in industry: 3.9 %
• The ratio of service industry will be higher : AAGR 4.2%(’05-’30)
Fractions of value added by economic activity (%)
Source : Korea Institute for Industrial economics and trade
ROK FORECASTS/PROJECTIONS
AES 2007AES 2007 12Von Hippel/ROK Group 11/2007
2005 2010 2015 2020 2025 2030
Food & Beverage 5.1 4.1 3.4 3.0 2.6 2.4
Textile product 3.8 2.6 1.9 1.6 1.3 1.2
Wood & Pulp, Paper 3.2 2.6 2.1 1.9 1.7 1.5
Petrochemical 16.9 15.1 13.7 13.0 12.4 12.0
Nonmetallic mineral 3.0 2.5 2.1 1.8 1.6 1.4
Basic metal product 6.7 5.8 5.2 4.7 4.3 3.9
Fabricated Metal 60.1 66.4 71.0 73.5 75.6 77.3
Others 1.2 0.8 0.6 0.5 0.4 0.4
Total 100.0 100.0 100.0 100.0 100.0 100.0
Fraction of value added by industrial sector (%)
Structural Changes in Industry (Manufacturing)
• AAGR of fabrication industries from ’05 to ‘30 : 5.0 % * Fabrication Industries: Information & communication, car-making, shipbuilding
• Shares of output by other sectors will fall as a result
Structural Changes in Industry (Manufacturing)
• AAGR of fabrication industries from ’05 to ‘30 : 5.0 % * Fabrication Industries: Information & communication, car-making, shipbuilding
• Shares of output by other sectors will fall as a result
Source : Korea Institute for Industrial economics and trade
ROK FORECASTS/PROJECTIONS
AES 2007AES 2007 13Von Hippel/ROK Group 11/2007
(Unit: %) 228.6 MTOE
2010 2020 2030
Oil
Coal
LNG
Nuclear
RE & Others
44.4
24.0
13.3
16.1
2005
2.3
40.9
25.5
15.9
14.1
3.6
260.1 MTOE
36.1
25.3
15.5
17.9
5.1
330.7 MTOE
34.3
23.1
18.0
18.4
6.1
400.2 MTOE
Shares of primary energy use by Type (20052030, %)
• Oil : 44.4 34.3 • Coal : 24.0 23.1 • Natural gas : 13.3 18.0 • Nuclear : 16.1 18.4
Shares of primary energy use by Type (20052030, %)
• Oil : 44.4 34.3 • Coal : 24.0 23.1 • Natural gas : 13.3 18.0 • Nuclear : 16.1 18.4
ROK FORECASTS/PROJECTIONS
AAGR 2.5% 2.4% 1.9%
2.2%(’05-’30)
AES 2007AES 2007 14Von Hippel/ROK Group 11/2007
4.5
5.5
6.5
7.5
8.5
05 10 15 20 25 30
year
per
capita
0.2
0.25
0.3
0.35
ener
gy/G
DP
per capita energy/GDP
Per capita energy & energy/GDP • Energy Consumption per capita will steadily increase while energy efficiency of the economy improves
Per capita energy & energy/GDP • Energy Consumption per capita will steadily increase while energy efficiency of the economy improves
ROK FORECASTS/PROJECTIONS
AES 2007AES 2007 15Von Hippel/ROK Group 11/2007
(Unit: %)
2010 2020 2030
Industry
Transport
Residential
Commercial& Public
2005
287.2 MTOE
55.2
20.6
14.2
10.0
172.1 MTOE
54.6
20.8
13.6
10.9
192.9 MTOE
54.7
20.8
12.6
12.0
238.9 MTOE
55.1
19.9
12.0
13.0
Shares of Final Demand by Demand sectors (20052030, %)
• Industry : 55.2 55.1 • Transport : 20.6 19.9
• Resident : 14.2 12.0 • Commercial& Public : 10.0 13.0
Shares of Final Demand by Demand sectors (20052030, %)
• Industry : 55.2 55.1 • Transport : 20.6 19.9
• Resident : 14.2 12.0 • Commercial& Public : 10.0 13.0
ROK FORECASTS/PROJECTIONS
AAGR 2.3% 2.2% 1.9%
2.1%(’05-’30)
AES 2007AES 2007 16Von Hippel/ROK Group 11/2007
Shares of consumption by final energy
• The shares of coal and petroleum will fall while those of other energy forms (electricity, city gas, heat, renewables) will be higher
Shares of consumption by final energy
• The shares of coal and petroleum will fall while those of other energy forms (electricity, city gas, heat, renewables) will be higher
0%
20%
40%
60%
80%
100%
05 10 15 20 25 30
year
consu
mpti
on renewables
heat energyelectricitycity gaspetroleumcoal
ROK FORECASTS/PROJECTIONS
AES 2007AES 2007 17Von Hippel/ROK Group 11/2007
Supply-oriented energy policy • Energy policy was mainly aimed at supplying energy in a stable
manner and at low prices to enhance industrial competitiveness and contain inflation
Intervention of the government • Depended on central planning rather than on markets functioning
Supply-oriented energy policy • Energy policy was mainly aimed at supplying energy in a stable
manner and at low prices to enhance industrial competitiveness and contain inflation
Intervention of the government • Depended on central planning rather than on markets functioning
Positive Achievement • Well-established Domestic Supply Network for Oil, Gas, Electricity,
and District Heating Several negative results • Energy-Intensive Economic Structure • Environmental Problem
Positive Achievement • Well-established Domestic Supply Network for Oil, Gas, Electricity,
and District Heating Several negative results • Energy-Intensive Economic Structure • Environmental Problem
ROK Energy Policy Directions
AES 2007AES 2007 18Von Hippel/ROK Group 11/2007
ROK Energy Policy Directions Market Development and Privatization
Break up of KEPCo into generation, transmission, distribution components
Development of Korea Power Exchange Break up of KEPCo generation into nuclear, non-nuclear
components, with sale and private operation of some (non-nuclear) assets
Partial sale to private sector of part of stock of Korean National Oil Company
Revise tax structures for some fuels (including biofuels) Energy Cooperation
Oil and gas resources development (foreign and domestic) Participating in NEA energy cooperation research
AES 2007AES 2007 19Von Hippel/ROK Group 11/2007
ROK Energy Policy Directions
Energy-EfficientSociety
High Oil Price
SustainableEnergy System
EnvironmentalRegulation
Oil MarketInstability
UNFCCC
Challenges Policy DirectionsChanging Conditions
Overseas EnergyDevelopment
Energy SecurityThreats
ResourceCompetition
Open PolicyFramework
Conflicts betweenStakeholders
Policy DecisionProcess
InternationalOil Market
EnvironmentalConcerns
Energy Supply
Security
Non-GovernmentalOrganizations
AES 2007AES 2007 20Von Hippel/ROK Group 11/2007
Overseas DevelopmentRenewables
Energy Intensity(%) Share(%) Rate(%)
Efficiency
0.32
0.25
0.20
0.30
0.40
2005 2011
2.3
5.0
0.0
2.0
4.0
6.0
2005 2011
Oil Gas
3.7
15.0
4.7
30.0
0.0
10.0
20.0
30.0
2005 2013 2005 2013
ROK Energy Policy Directions From 2nd Energy Plan—3rd Plan upcoming 2007
AES 2007AES 2007 21Von Hippel/ROK Group 11/2007
THE ROK LEAP MODELDEMAND STRUCTURE Residential—Driven by number of households
Cooking, Space Heating, Lighting, Appliances (electric)
Industrial—Driven by industrial GDP, share Mining, Agriculture/Fisheries, Manufacturing,
Construction (Manufacturing dominant) Commercial/public—Driven by building area Transport—Driven by number of vehicles
Private vehicles — 4 types Mass transit and freight vehicles — 8 types
AES 2007AES 2007 22Von Hippel/ROK Group 11/2007
THE ROK LEAP MODELTRANSFORMATION STRUCTURE Electricity T&D Electricity Generation — 11 Types of power plants Industrial Combined Heat and Power (CHP) District Heating Town Gas production LNG Gasification Oil Refining Pipeline Gas Imports from RFE (for Regional Path) LNG Imports from DPRK (for Regional Path) Electricity Imports from RFE (for Regional Path)
AES 2007AES 2007 23Von Hippel/ROK Group 11/2007
THE ROK LEAP MODELReference or BAU Path
Extrapolation of currently evolving economy/energy sector trends (Need to update to latest projections)
Item 2001 2010 2020 2030 Annual Increase (%)
’01-’10
’10-’20 ’20-’30
GDP (1995 T KRW) 493.4 768.4 1,165 1,629 5.0 4.3 3.4
Population(Million)
47.3 49.6 50.7 50.3 0.5 0.2 -0.1
Households(Million)
14.9 16.9 18.2 19.1 1.5 1.0 0.5
Person per Household
3.2 2.9 2.8 2.6 -1.0 -0.5 -0.5
AES 2007AES 2007 24Von Hippel/ROK Group 11/2007
THE ROK LEAP MODEL
National Alternative Path—Current Structure Assumptions currently similar to BAU Path,
except electricity generation projections. Emphasizing renewable energy: Share of electricity
generation by renewables 7.0% of total electricity generation in 2011, comparing with 2.6% in BAU
No new deployment of nuclear power plants after 2017
Demand side planned, but not yet developed
AES 2007AES 2007 25Von Hippel/ROK Group 11/2007
THE ROK LEAP MODELRegional Alternative Path ROK participates in many of the regional
infrastructure and other cooperative activities proposed for the Regional Alternative path
Natural gas pipeline: recipient of gas from pipeline bringing gas from North Sakhalin in the RFE to the ROK, with some gas used in the DPRK, and beginning operations in 2016
LNG Terminal: ROK/DPRK collaboration on a new LNG terminal, in the southern DPRK
Electricity Import: Transmission interconnection between RFE and ROK, passing through DPRK; 3 GWe in both directions
AES 2007AES 2007 26Von Hippel/ROK Group 11/2007
ROK LEAP MODEL: Initial ResultsResidentialIndustrialCommercial PublicTransportation
Demand Results: Energy demand final unitsScenario: BAU, Fuel: All Fuels
20012004 2008 2012 2016 2020 2024 2028
Millio
n To
nne
of O
il Eq
uiva
lent
s
340
320
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
AES 2007AES 2007 27Von Hippel/ROK Group 11/2007
ROK LEAP MODEL: Initial ResultsTown GasNatural GasNaphthaLPGKeroseneJet KeroseneIndustrial HeatHeatGasolineFuel OilElectricityDieselCoal {bituminous}Coal {anthracite}
Demand Results: Energy demand final unitsScenario: BAU
2001 2004 2007 2010 2013 2016 2019 2022 2025 2028
Millio
n To
nne
of O
il Eq
uiva
lent
s
340320300280260240220200180160140120100806040200
AES 2007AES 2007 28Von Hippel/ROK Group 11/2007
ROK LEAP MODEL: Initial ResultsSolid FuelsRenewablesNuclearNatural GasHydropowerCrude Oil
Resource Results: Primary requirementsScenario: BAU
2001 2004 2007 2010 2013 2016 2019 2022 2025 2028
Millio
n To
nne
of O
il Eq
uiva
lent
s
400
350
300
250
200
150
100
50
0
AES 2007AES 2007 29Von Hippel/ROK Group 11/2007
ROK LEAP MODEL: Initial ResultsOil ProductsNatural GasHeatElectricity
Resource Results: Primary requirementsScenario: BAU
2001 2004 2007 2010 2013 2016 2019 2022 2025 2028
Thou
sand
Ton
ne o
f O
il Eq
uiva
lent
s30,00028,00026,00024,00022,00020,00018,00016,00014,00012,00010,0008,0006,0004,0002,000
0-2,000-4,000
AES 2007AES 2007 30Von Hippel/ROK Group 11/2007
ROK LEAP MODEL: Initial ResultsAnt. CoalBit CoalOil SteamLNG SteamCombined CycleInternal CombustionNuclearHydroWind PowerSolar PVTidal Power
Transformation Results: CapacityScenario: BAU, Capacity: All Capacities
2001 2005 2009 2013 2017 2021 2025 2029
Thou
sand
Meg
awat
ts
110
100
90
80
70
60
50
40
30
20
10
0
AES 2007AES 2007 31Von Hippel/ROK Group 11/2007
THE ROK LEAP MODELNEXT KEY STEPS BY ROK TEAM Team leader, Prof. Shin Eui-soon of Yonsei Univ., Dr.
Chung Woo-jin of KEEI advising Update to 2006 Base Year, add latest projections Add detail as available/needed (Manufacturing
subsectors?), review assumptions Add/revise Demand-side measures for National
Alternative Plan; add demand-side costs Add supply-side costs for a number of modules Add resource costs Develop, evaluate Nuclear “Max” and “Min” Paths Link with updated DPRK paths (LNG, imports from
RFE) Develop alternative nuclear fuel cycle paths
AES 2007AES 2007 32Von Hippel/ROK Group 11/2007
THANK YOU!THANK YOU!