[Square] Energy Efficiency, Now the Primary Energy Source

Kim Young-hoon, Chairman of Daesung Group (Honorary Chairman of the World Energy Council)

[Asia Economy Reporter Kim Daeseop] As the United States and Iran make loud crackling noises at the beginning of the new year, a war atmosphere is spreading over the Gulf region. In the global energy market, where low oil prices have been maintained for the past few years, oil prices are fluctuating daily, and the global economy is also staggering. If the worst-case scenario occurs, where the Strait of Hormuz, the largest trading route for Middle Eastern oil, is blocked for a long period, there is even a possibility of a recurrence of an oil crisis.

The biggest concern is whether the current Middle East situation will lead to a surge in oil prices, dealing a fatal blow to the global economic system, which is already in a downward phase. Just like the global economic crisis that followed the oil price surge to $147 per barrel in 2008.

Whenever unexpected situations arise in the global energy market, South Korea, which depends on imports for about 95% of its energy, inevitably experiences growing anxiety about energy security. Although efforts have been made to strengthen energy security by diversifying import sources and expanding oil storage facilities, dependence on Middle Eastern oil still exceeds 70%.

To strengthen energy security further in the mid to long term, it is necessary to increase the proportion of non-fossil fuels such as nuclear power and renewable energy to raise the energy self-sufficiency rate. However, energy efficiency improvement, which is just as important, is often overlooked.

According to the International Energy Agency (IEA), over the past 20 years, the global economy has more than doubled in size, but energy consumption has increased by only 59%. Simply put, through a 41% improvement in energy efficiency, energy-importing countries have reduced foreign currency expenditures and lowered energy costs for economic agents such as households and businesses. This also reduced emissions of pollutants such as carbon and fine dust, easing the environmental burden.

Experts in energy and environmental fields view energy efficiency improvement and the expansion of renewable energy supply as the two most important and effective means of reducing carbon emissions. To achieve the goal of keeping the Earth's temperature no more than 2 degrees Celsius above pre-industrial levels, energy consumption must remain at current levels even if the global economy doubles in size.

On this basis, converting fossil fuels to clean energy can reduce carbon emissions. To do this, energy efficiency must improve by about 3% annually, but in reality, improvements have been in the 1% range, and the rate of improvement has decreased in recent years. The biggest cause is weakened motivation due to prolonged low oil prices.

According to government statistics, South Korea ranked 33rd out of 35 OECD member countries in energy efficiency based on energy source units in 2017. Paradoxically, low energy efficiency means there is still much room for improvement, which can be a source of hope.

Energy efficiency must be realized through the convergence and fusion of advanced technologies such as artificial intelligence (AI) and the Internet of Things (IoT) with energy technologies. In South Korea, solutions that optimize energy efficiency using AI and IoT technologies are already being used in homes, buildings, and industrial sites.

Improving energy efficiency is cheaper than any other energy source, the most environmentally friendly, and very effective in terms of energy security. From this perspective, energy efficiency was once called the "fifth energy," but now it is appropriate to call it the "first energy."

The energy efficiency sector will grow into a global industry with an increasing share in the future. If the government and private sector join forces, South Korea, which leads in advanced technologies such as AI, IoT, and big data, will be able to secure a very advantageous position. / Kim Younghoon, Chairman of Daesung Group (Honorary Chairman of the World Energy Council)