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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Korea's Winter Power Shortages: Causes and Cures

Korea's Winter Power Shortages: Causes and Cures

LEE Won-Hee

Mar. 6, 2012

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Originally released in January 2011

Serious power shortages in Korea are likely to continue for the time being, as reserve power for the 2012/2013 winter season is likely to dip to 500,000 kW, nearly equivalent to the levels prevailing during the nationwide rolling blackouts of September 15, 2011. Prolonged power shortages have the potential to induce numerous negative effects, including disruption of social systems, lowering of industrial productivity, and even the transfer of operations overseas. Recent electricity shortfalls in Korea are neither a one-time anomaly, nor a seasonal concern for the winter months, but are the end result of years of inaccurate forecasts of power demand. Hence, resolving Korea's power shortages will require structural solutions that address the underlying causes.

The reason for Korea's current conundrum is that its power supply has not kept up with changes in demand. Demand for power has shifted as Korean consumers have turned increasingly to electric heating and cooling equipment, aggravated by seasonal demand spikes from climate change, increased power consumption by the service industry; and increased demand from higher living standards. On the supply side, however, capacity expansion has fallen well short of meeting demand, not only because of inaccurate forecasting, but also because of delays in plant construction due to public opposition and a more complex policy environment.

Plant construction requires a bare minimum of two to three years, making it critical to strengthen Korea's power demand management in the short term. To address this issue, Korea must put first priority on seasonal demand management; and in particular, on increasing load leveling on commercial consumers, whose power consumption spikes with the seasons. Second, Korea needs a systematic emergency response system in its power infrastructure. Load leveling and mandatory restrictions must be extended to minimize social disruption and economic losses when a major emergency occurs. Over the mid to long term, Korea needs to address the supply side of its power issues through increased production. To this end, Korea will need accurate demand forecasts that reflect the country's changing demand patterns, and power supply plans that reflect such forecasts. Private investment in new plants must also be facilitated to ensure that new plants are constructed without the usual delays. Finally Korea needs to retool its p ower infrastructure with more advanced technology and leverage such investments to promote new investment and growth. For this purpose, a range of new technologies is available, including IT-powered smart grids, high-efficiency clean coal power plants, next generation nuclear power plants, and high efficiency devices like LED lighting products.

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