Electricity rates will increase from October. Korea Electric Power Corp., South Korea’s state-run utility firm, plans to raise the rate in the fourth quarter. It is the first rise in about eight years. The move reflects hikes in global prices of fuels.
Higher electricity rates will likely push up fees of other utilities, increasing inflationary pressure. It will increase burden particularly on the low-income working class and small-scale self-employed already reeling from the economic impacts of COVID-19.
Starting this year, the government adopted a system linking electricity rates to international fuel prices in a bid to curb energy consumption. But it did not apply the system for the second and third quarters, citing financial woes of low-income earners due to the pandemic.
The government says the electricity rate hike was unavoidable because prices of fuels such as oil and natural gas have been soaring. Actually, it is hard to deny that the current government’s policy to phase out nuclear energy created a situation where it can no longer freeze electricity rates.
Kepco’s expenses on purchasing electricity generated from renewable energies such as solar and wind power have increased rapidly. The utility firm expects to spend more than 3 trillion won ($2.55 billion) this year alone purchasing electricity generated from renewable sources. The amount is expected to double to 6 trillion won in 2025.
In order to fill the shortage of electricity due to the nuclear phase-out policy, it could not but increase the proportion of generation from costly renewables and natural gas.
The authorities’ freeze on the rate caused Kepco’s losses to pile up. In the first quarter of 2017 when President Moon Jae-in took office, the firm had a surplus of more than 1.4 trillion won. That turned into a deficit of 129.4 billion won in the fourth quarter of the same year. Its losses are expected to exceed 4 trillion won this year. The suppression of rate hikes has reached its limit.
According to an analysis by the National Assembly Research Service, the country’s accumulated economic loss due to the Moon Jae-in administration’s energy policy is expected to reach 58 trillion won over five years and 177.4 trillion for 10 years.
An immediate problem in the electricity rate hike lies in its great influence on prices. Grocery prices and service fees have already soared in recent months. The country’s consumer prices jumped more than 2 percent for the fifth consecutive month in August. The government should double its efforts to stabilize prices.
The Moon administration has tried to calm criticisms of its nuclear phase-out policy. In that vein, it vowed not to raise electricity rates during his presidency. However, experts warned from the beginning that a rate hike would be inevitable. But the government ignored the warning. Critics say that if it had kept nuclear power plants generating electricity invariably, there would be no need to raise the electricity rate.
The government seeks to accomplish carbon neutrality by expanding electricity generation from renewables. Korea has few options to reduce carbon emissions without the help of atomic power.
Experts estimate that if the country is to attain carbon neutrality by 2050 while maintaining the current energy policy, the total capacity of solar facilities should be increased to more than 400 gigawatts. In this case, an area 6.54 times as large as Seoul is said to be required. Besides, an enormous amount of energy storage systems will be needed to overcome the problem of sporadic electricity generation from solar and wind power. Installation costs are estimated at more than 300 trillion won.
The government says it can make up for the shortfall of electricity by using natural gas, but the unit cost of natural gas in generating electricity is said to be more than double that of nuclear power. From an economic viewpoint, the country must increase the proportion of nuclear power generation. But, blinded by a nuclear phase-out ideology, the government is increasing the use of natural gas in power generation, though the resource is costly and the country must import all the natural gas it consumes.
This is pathetic. The bill of increased expense due to a mistaken course has to be shouldered by all people.
By Korea Herald (firstname.lastname@example.org