S Korea to convert half of existing coal fleet to gas

The closure or conversion of ageing South Korean coal-fired power plants could cut power sector consumption by 19mn-28mn t/yr by 2034, although the decline may be slowed in the near term by the start-up of new plants in the next five years.

South Korea plans to shut a total of 15.3GW of coal-fired capacity by 2034, according to a draft of the country's ninth basic electricity plan released on 7 May, of which 12.7GW will be switched to run on LNG. South Korean state-owned Kepco utilities currently operate 33.7GW of coal capacity across 56 units.

Some 30 of those coal units that reach 30 years of service by 2034 will be retired, 24 of which will be converted to run on natural gas, according to the draft. The exact units to be converted were not specified, but are likely to comprise power plants earmarked for conversion by the five individual state-owned utilities.

The existing eighth electricity plan already includes the conversion of the 500MW Dangjin 1 and 2 units to run on gas in 2029, with the 560MW Samcheonpo 3 and 4 units to be retired in March 2023 and the 500MW Taean 1 and 2 units scheduled to close in 2025.

In addition, Korea East-West Power has proposed the conversion of its 500MW Dangjin 3 and 4 in 2030, according to board meeting notes published on its website.

Fellow state-owned utility Korea South East Power (Koen) has proposed converting its 500MW Samcheonpo units 5 and 6 in July 2027 and January 2028, respectively, and its 800MW Youngheung units 1 and 2 in June 2034 and December 2034. Koen's 560MW Samcheonpo units 1 and 2 are already scheduled to retire as part of the eighth plan.

Korea Southern Power (Kospo) plans to convert a total of 3GW of ageing coal capacity across six units in 2026-31. Kospo's meeting notes do not specify the exact units to be converted, but the 500MW Hadong units 1-6 are the oldest in its fleet. Kospo is already scheduled to retire its 250MW Honam units 1 and 2 in January 2021.

Korea Western Power's (Kowepo) 500MW Taean units 3 and 4 have been proposed for conversion to LNG in December 2032 and Korea Midland Power's (Komipo) 500MW Boryeong units 5 and 6 in December 2024 and December 2025, respectively. The 500MW Boryeong units 1 and 2 are scheduled to close in December this year as part of the eighth plan, but Komipo has decided to convert the units to run on LNG in December 2026, according to board meeting minutes.

But despite the swathe of plant retirements and fuel conversions, seven new coal units are currently under construction with a combined capacity of 7.26GW. This means that South Korea's installed coal capacity will likely peak around 2024-25, potentially slowing the decline in coal burn until later this decade.

State-owned utilities consumed 83.3mn t of coal (with an unspecified calorific value) to generate 226.8TWh in 2019, according to Kepco data. This represented a 71pc utilisation rate of the country's state-owned fleet, down from 75pc in 2018. Coal-fired load factors may remain under pressure in the coming years, as the government has pledged to restrict the use of coal plants to improve air quality during the peak winter heating season each year. Increasingly competitive gas prices and rising nuclear and renewable capacity may also stem the use of coal plants.

If the use of South Korea's installed state-owned coal capacity ranges between 60pc and 70pc, annual coal consumption for power could drop to as low as 53mn-62mn t/yr in 2034, according to Argus analysis. But annual power sector demand is set to average around 80mn t/yr in the next five years, assuming a 70pc average load each year, as new capacity additions will outpace retirements in the near term. But the record 89.3mn t of consumption recorded in 2018 may be unlikely to be repeated.

Ninth plan targets renewables growth

The government — recently strengthened by the success of President Moon Jae-in's party in last month's national assembly elections — is targeting a 62.3GW increase in renewable capacity by 2034, in line with a previous target set out in the third energy plan.

This would bring total renewable capacity to around 79GW, which the government expects to represent around 40pc of the country's installed capacity, compared with 15pc now. The ninth plan sees coal, nuclear and gas-fired capacity accounting for 14.9pc, 9.9pc and 31pc, respectively, by 2034.

The increase in renewable generation would offset declines in coal, gas and nuclear generation and cater for growth in overall power demand. The eighth plan targeted a 24 percentage point increase in renewables' share of power generation to 33.7pc by 2030, with coal, gas and nuclear shares falling by around nine, five and seven percentage points. The targets in the ninth plan — to be confirmed in the second half of the year — may now be even tougher on coal.

By Evelyn Lee and Jake Horslen

Change in Korean generation mix 2019-34 GW

South Korean coal burn vs installed capacity mn t, GW