Our energy crisis is just beginningThe policy of phasing out of nuclear power by the Moon Jae-in government has exacted a high price from the public sector and our economy. Korea Electric Power Corp. (KEPCO) reported 7.8 trillion won ($6.2 billion) in operating losses in the first quarter, eclipsing the record loss of 5.86 trillion won for all of 2021. The state utility is planning a sweeping restructuring through sale of stakes in subsidiaries and real estate assets. But such a streamlining cannot be a fundamental solution.
The previous government pursued a nuclear reactor phase-out despite public disapproval of 70 percent. It retired the Gori 1 reactor and unplugged the Wolseong 1 reactor ahead of its legal retirement period. The new Hanvit 4 reactor sat idle through the last five years. All new reactor construction was cancelled. The nuclear reactor industry sharply deteriorated as it takes at least 10 years to plan and construct a reactor, shrinking the skilled labor force as well.
The Moon government instead tried to increase the role of liquified natural gas (LNG), which moves in tandem with volatile oil prices. The Wolseong 1 reactor, which was renovated at the cost of 700 billion won, was shuttered based on a report questioning its economic worth and safety. Industry ministry officials have been indicted and arrested for deleting files to back such an assessment. The investigation is still ongoing.
Energy security is pivotal to national security and the economy due to our lack of natural resources for power. Energy prices directly affect consumer prices and production costs. Their volatility can shake our economic foundation. The crisis worsened by Russia’s invasion of Ukraine has once again highlighted energy instability that rocks the world every 10 years or so. During the oil shocks of the 1970s, oil was weaponized. KEPCO has since diversified its energy mix. The surge in international oil prices has fanned prices of gasoline and diesel in Korea. KEPCO’s snowballing deficit could be the beginning of a greater crisis.
Since late 2020, the government set a legal basis to connect electricity charges to production costs. But the government capped rises ahead of elections. The new government under President Yoon Suk-yeol is saddled with runaway inflation. The government cannot sharply raise prices as it would hurt households and companies. Raising electric bills won’t immediately help KEPCO.
Policy decisions based on ideological belief and reasoning can result in catastrophe. The U.K. and France are increasing the role of nuclear reactors. Germany is in energy crisis due to suspension of gas pipeline project with Russia. Dangerous policy experiments should never be repeated.