South Korea Power Report Q1 2010

The new South Korea Power Report forecasts that the country will account for 4.74% of Asia Pacific regional power generation by 2014, with a theoretical generation surplus that should avoid the need for a net import requirement. Our Asia Pacific power generation assumption for 2009 is 7,223 terawatt hours (TWh), representing an increase of just 1.5% over the previous year thanks to reduced economic expansion. We are forecasting an increase in regional generation to 9,624TWh by 2014, representing a rise of 33.3%.

Thermal power generation in 2009 totalled an estimated 5,747TWh, accounting for 79.6% of the total electricity supplied in the region. Our forecast for 2014 is 7,493TWh, implying 30.38% growth that reduces the market share of thermal generation to 77.9%. This is thanks largely to environmental concerns promoting renewable sources, hydro-electricity and nuclear generation. South Korea’s thermal generation in 2009 was an estimated 291TWh, or 5.06% of the regional total. By 2014, it is expected to account for 4.23% of thermal generation.

For South Korea, oil is the dominant fuel, accounting for 43.0% of 2008 of primary energy demand (PED), followed by coal at 27.5%, nuclear at 14.2% and gas with 14.9%. Regional energy demand is forecast to reach 5,215mn tonnes of oil equivalent (toe) by 2014, representing 31.10% growth from the estimated 2009 level. South Korea’s estimated 2009 market share of 5.86% is set to fall to 4.84% by 2014. South Korea’s nuclear demand in 2009 is expected to have tumbled thanks to capacity reductions, rebounding to 135TWh in 2014, with its share of the Asia Pacific nuclear market falling from 21.55% to 18.74% over the period.

South Korea is ranked a lowly 13th, ahead only of Singapore and Taiwan, in our updated Power Business Environment rating, aided by the considerable size of the market, established competitive landscape and reasonable country risk profile but hampered by poor growth prospects. The country is three points ahead of Singapore and should be able to keep the island state at bay.

We are now forecasting that South Korea’s real GDP growth will average 3.04% per annum between 2010 and 2014, with a decline of 0.50% assumed in 2009. Population is expected to expand from 48.6mn to 49.1mn over the period, with GDP per capita and electricity consumption per capita forecast to increase by 33% and 9% respectively. The country’s power consumption is expected to increase from an estimated 374TWh in 2009 to 413TWh by the end of the forecast period, with surplus generation of an estimated 31TWh in 2009 rising to a potential 43TWh during the forecast period, assuming electricity generation reaching 456TWh.

Between 2009 and 2019, we are forecasting an increase in Korean electricity generation of 38.3%, which is near the bottom of the range for the Asia Pacific region. This equates to 22.8% in the 2014-2019 period, compared with 12.6% in 2009-2014. PED growth is set to increase from 8.4% in 2009-2014 to 11.0%, representing 20.3% for the entire forecast period. Nuclear generation is expected to rise by 82% between 2009 and 2019, with hydro generation unchanged over the same period. Thermal power generation is forecast to rise by 22% between 2009 and 2019. More details of the long-term power forecasts can be found later in this report.