Energy policy should be based on economics, not politics
Starting today, electricity consumers will pay an additional 8 won (0.6 cents) per kilowatt-hour (kWh).
That is 2,800 won ($2) more a month for a four-member family using 300 kWh. The power rate hike will reduce the operating loss of Korea Electric Power Corporation (KEPCO) by 2 trillion won in the second quarter.
However, that is only a fraction of the cumulative losses at the listed but state-controlled power utility, which snowballed to 44 trillion won as of the first quarter of this year. Company officials say they must increase the electricity rate by 50 won per kWh to stop the deficit.
But such chances are slim because of parliamentary elections set to be held next April.
The result of delays in rectifying the abnormally low power rates will be dismal. KEPCO's 192.8 trillion won debt will continue to swell, paralyzing operations and hindering necessary investments to expand and upgrade the nation's power grid and cause the industry to come to a grinding halt. Now is the time to normalize the power and other utility sectors.
President Yoon Suk Yeol accuses the previous government of disabling the power industry for political reasons. He is right, partly. The progressive Moon Jae-in government regarded electricity as a public good. The conservatives' attack on Moon's nuclear phase-out policy also kept him from raising power rates. But low electricity prices were due more to industry-friendly policies of former conservative governments.
Yoon wants to normalize the sector. His destination is correct, but his pace needs to be faster. The incumbent government's power rate hikes are so small as to cause criticism about "renewed populism." More importantly, Yoon is taking the wrong direction. He is running squarely counter to the trends of Western industrial countries by raising the share of nuclear generation and reducing that of renewables. Italy and Germany have shut down nuclear reactors for good and only developing countries still resort to them as a source of power.
By lowering targets for renewables, Yoon might miss all three rabbits. It will not secure energy security, attain carbon neutrality by the deadline and lose future growth engines. Russia's war with Ukraine has become a point of inflection for the global energy industry. Some countries reactivated atomic reactors and even coal-fired plants. Still, most countries, including the U.S., Europe, China and India, turned to solar and wind energy. Korea also has no other option but to join it. It must overcome its small, mountainous terrain by making the most of the seas on three sides of the peninsula.
Resuming nuclear generation cannot be more than a transient response. Korea could continue researching small reactor modules (SRMs) and nuclear fusion. Still, it should refrain from regressing to the increasingly expensive and unsafe method of power generation. Retaining nuclear generation for exports may be okay. But even that could risk drawing criticism for two-facedness. It's more than regrettable that the Ministry of Trade, Industry and Energy rejected requests from the Ministry of Environment to focus more on renewable energy. At least the industry ministry must not act with political and parochial ends in mind, but with economic and environmental goals.
Now is the time for Korea to reform the energy sector from a long-term economic and industrial perspective instead of a shortsighted and ideological approach. The government must restore the nuclear-renewable energy ratio to the levels of its predecessors and raise energy prices more boldly and rapidly.
There is a caveat: it must reduce the impact of higher power bills on small businesses and low-income consumers and let big companies and wealthy individuals pay their dues. The time has long passed for them to enjoy lifestyles based on cheap electricity if for no other reason than saving our planet.
KEPCO, for its part, must no longer function as the government's scapegoat. People know how the state utility lavished on losses exploiting the politicized electricity industry. It must trim payrolls but retain spending on future investments.
Yoon says he will normalize the abnormal. The energy industry is one such sector. One year into office, the president must stop blaming his predecessors for everything that has gone wrong.
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