KHNP reports a loss in 2022 even as nuclear energy output rises

Shin Hanul unit 1 at Shin Hanul Nuclear Power Plant in Uljin, North Gyeongsang [KOREA HYDRO & NUCLEAR POWER]

Korea Hydro & Nuclear Power (KHNP) posted a deficit in 2022, its first in four years, despite the increased operation of nuclear plants.

KHNP is the operator of the reactors in the country and a subsidiary of the Korea Electric Power Corporation (Kepco).

Despite running nuclear power plants at full tilt amid worldwide energy crisis, the decrease in the selling prices for electricity generated from the reactors — and the structure of the current electricity market — were blamed for the deficit.

KHNP logged red ink as it sold its electricity at a low price to Kepco. The exact figures were not released by the company.

According to Kepco’s latest monthly report on power statistics, soaring LNG prices and demand for cooling and heating have boosted operations of nuclear plants. The operation rate jumped to 81.6 percent in 2022 from 74.5 percent a year earlier, equivalent to the operation of two new nuclear power plants. The savings from replacing LNG power generation alone amount to 5 trillion won ($3.8 billion).

Nuclear power generation reached a record high of 176,054 gigawatt-hours. Coal-fired and LNG-fired power generation, on the other hand, decreased compared to the previous year.

Nuclear energy's share of the total power generation reached 29.6 percent, the highest since 30 percent in 2016, with President Yoon Suk Yeol making a U-turn from a yearslong nuclear phase-out drive and making the country a powerhouse in nuclear power generation. Reactors including Hanul Unit 1 restarted upon the completion of maintenance inspections, and the commercial operation of the Shin Hanul Unit 1 nuclear power plant started in December last year.

KHNP sales reached an all-time high.

According to the Korea Power Exchange, nuclear power cost 52.5 won per kilowatt-hour — much lower compared to the price of bituminous coal, at 158.7, won or LNG, at 239.3 won. Nuclear power is the only source that produces and supplies electricity below Kepco's 120.5 price.

“The cost of nuclear power should be around 60 won to make a profit,” a source in the electric power industry said.

The state-run nuclear operator eventually turned a deficit last year, recording the first net loss following minus 102 billion won in 2018 after shutting down Wolsong Unit 1.

Behind KHNP's imbalance in power production and sales lies the financial problem of Kepco, which recorded an operating loss of more than 32 trillion won last year. Kepco's electricity purchase costs have soared since last year due to a surge in fuel costs, but the electricity rate failed to keep up with it, increasing only 29.5 percent in a year. Amid a difficult financial situation, Kepco reduced costs by purchasing electricity as cheaply as possible from nuclear power plants.

Last year, the cost of nuclear power was found to have fallen by 10 won even compared to 2018, when the utilization rate of nuclear power plants decreased to 65.9 percent. Yet the cost of other power sources, such as LNG and bituminous coal, nearly doubled during the same period. In January and February this year, the unit price difference between nuclear power (43.8 won) and LNG (283.2 won) widened even more.

Critics call for the rationalization of electricity rates and the reorganization of the power market.

“Nuclear power costs should not be lowered unconditionally because they are directly linked to safety issues if they are short of cost,” said Yoo Seung-hoon, professor of energy policy at Seoul National University of Science & Technology. “As the losses of Kepco and KHNP are expected to continue until 2026, that should be reduced as much as possible through a phased increase in electricity rates.”

“The government should introduce a vesting contract that compensate for power generation costs so that nuclear power plants can be operated stably,” Yoo added.

BY JEONG JONG-HOON [seo.jieun1@joongang.co.kr]