[The Editors' Verdict] Power Industry Must Change for Carbon Neutrality

Carbon neutrality is a challenging task. Although more than 100 countries have declared carbon neutrality, only a few have legally mandated it. Most countries, including the world's top two carbon emitters, China and the United States, remain at a declarative level. South Korea also announced carbon neutrality last October but is still in the planning stage.

To achieve carbon neutrality, measures such as energy conservation, efficiency improvement, carbon capture, use of hydrogen and renewable energy, and electrification of energy use are proposed. The greatest impact comes from electrification of energy use and electricity generation using zero-carbon energy. For example, replacing internal combustion engine vehicles with electric vehicles and converting city gas used for cooking and heating to electricity. According to the International Energy Agency, to achieve carbon neutrality, electricity?which currently accounts for 20% of energy consumption?must exceed 50% by 2050, and electricity must be generated from zero-carbon energy sources.

The share of electricity in South Korea's energy consumption is also about 20%. Last year, electricity consumption was around 520 TWh (terawatt-hours, 1000 GWh), and Korea Electric Power Corporation's electricity sales amounted to 58 trillion won. Assuming that the increase in energy consumption is offset by energy conservation and efficiency, if 50% of energy consumption at last year's level is consumed as electricity by 2050, electricity consumption will reach 1300 TWh, exceeding last year's consumption in India. In terms of value, this amounts to about 150 trillion won. This means the power industry will nearly triple in size within 30 years. Significant changes are also expected in the power generation mix. Currently, South Korea's power generation consists of 60-65% thermal power such as coal and gas, 25-30% nuclear power, and less than 10% renewable energy. Although renewable energy capacity has significantly increased?equivalent to four 1000 MW-class nuclear reactors in 2019 alone?its contribution to power generation remains low due to intermittency (the characteristic of fluctuating power output). According to the International Energy Agency's carbon neutrality scenario, the current mainstay thermal power must be entirely replaced by renewable energy and nuclear power by 2050. Some thermal power may remain depending on the development of carbon capture technology, but the scale will not be large. Only thermal power using bioenergy will be suitable for carbon neutrality.

The changes in the power industry are not limited to the power generation mix. Renewable energy ranges from small-scale distributed power sources to large-scale power complexes. With the advent of small modular reactors, nuclear power can also shift from large complexes to distributed power sources. The scale of power grids will expand, and the configuration will become more complex, ranging from ultra-small grids for distributed power to large-scale grids. Additionally, to manage intermittency such as surplus power from expanded renewable energy, grid connections with China and Russia will be necessary. Power grids will become much larger and more complex than they are now.

While the power industry will expand dramatically to achieve carbon neutrality by 2050, it will require enormous investment capital and bring significant changes to the industrial structure and power market. The power industry must contemplate how to respond to these anticipated changes. Considerations include whether the current public enterprise system centered on Korea Electric Power Corporation is efficient for these changes, whether the currently limited open power market is suitable, and support for thermal power companies to adapt to carbon neutrality by transitioning to renewable energy and finding breakthroughs through carbon capture technology. Corporate management environments will increasingly be affected by carbon neutrality. A representative example is the carbon border tax that Europe will implement from 2023. To avoid this, large electricity-consuming companies must be allowed to directly contract not only renewable energy but also nuclear power to use zero-carbon electricity, thereby opening up electricity trading. Preparing for the changes that carbon neutrality will bring to the power industry is never too early to start.

Jung Dong-wook, Professor, Department of Energy Systems Engineering, Chung-Ang University