Facing up to the cold reality

By Cho Hee-kyoung

A lot of people got a nasty surprise when they opened their gas bills in January. Prices had risen by at least one-third compared to the same period last year. For many, the increase more than doubled their energy bill, affecting the least well-off the most. The bad news is that their next gas bill will be even bigger. The January bill did not reflect the recent increase in gas consumption due to the record-breaking cold snap that began on the last day of the Lunar New Year holiday.

The government is busy blaming the previous administration for the price surge. They claim that the steep price increase was inevitable because the previous government did not increase utility prices earlier. They also argue that the Moon administration's policy of retiring nuclear power plants reduced energy supply causing greater demand and leading to higher gas prices. But these are not the real causes of the gas price increase.

There are two main reasons for the recent dramatic spike in gas prices. First is the increased international demand for natural gas, as countries try to phase out conventional energy sources such as coal and turn to cleaner energy to combat global warming. However, solar and wind power have the drawback of being intermittent energy sources. Gas is the most convenient substitute for power generation when these renewable sources are unavailable. It requires almost no warm-up time for energy generation unlike nuclear power, for example.

The second reason for the price hike is the war in Ukraine which will soon approach its first anniversary. Russia has choked off the supply of natural gas to a heavily reliant Europe which has since scrambled to find alternative sources of gas. Inevitably, gas prices around the world rose. This combination has resulted in quadrupling the gas price in the last two years. For Korea, there was the added aggravation of softening currency, with the won weakening against the dollar.

The Moon administration had indeed failed to address the perennial deficit problem of public utility companies compelled to supply the market often at below cost. But the problem cannot be attributed solely to the previous administration. It is a historical legacy issue deeply rooted in the structure of the energy market. The Korean energy market differentiates prices according to usage purpose rather than watts voltage as is done in most other countries, instead providing artificially low prices for businesses. That policy dates back to the days when low energy prices were part of government policies to stimulate export industries.

While the steep price increase was an inevitable consequence of bad policies accumulated over the years, the response of the current administration leaves much to be desired. European countries have already had to contend with high energy prices since the beginning of the invasion of Ukraine. In places like Germany, gas bills increased tenfold as early as last April. But Korea simply looked on at the looming energy crisis unfolding around the world as if watching "a fire across the river." It is time that we begin to accept more realistic energy and water prices. But the government should have done more to prepare us for this inevitability.

The Yoon administration has promised to increase the subsidy for lower-income households for gas bills. But anyone with a modicum of economic sense knows that subsidies will only increase demand and will not address the fundamental issue with our energy consumption. Right now, it is the gas bills that are under attention but come summer, electricity bills for air conditioners will simply take their place. One of the contributing problems is the outdated housing stock in Korea with terrible insulation that leaves homes cold in winter and hot in summer. Inadequate building codes, construction laws and regulations pay little attention to issues such as insulation.

It is not enough to tell people to lower the indoor temperature and put on another jumper. Over time, housing stock needs to be either replaced or, where rebuilding is not viable, at least better insulated to decrease energy needs for heating and cooling. People should be encouraged and incentivized to build low-energy homes, install renewable energy sources for private homes and renovate their homes to boost energy efficiency. Laws will need to be amended and perhaps even relaxed, for example, to allow for better insulation of exterior walls.

It is clear as day that come summer, people will be receiving possibly the biggest electricity bills they have ever faced if the extraordinary heat waves that we have experienced in the last few years are anything to go by ― unless the government takes concrete steps to put in place the necessary measures to help the people and implement the right energy policies based on the principles of sustainability and energy independence. Unless they stop wasting time and resources on unnecessary and divisive political battles, the disappointment the people feel with this administration will only deepen.

Cho Hee-kyoung (hongikmail@gmail.com) is a professor at Hongik University College of Law.