June 16, 2024

When the war in Ukraine upended global energy supplies in 2022, South Korea was suddenly competing for natural gas. Cut off from Russia’s supply, an energy-starved Europe has begun buying up global supplies. In 2022 alone, South Korea electricity costs rose about $17 billion due to the global rise in natural gas prices.

To improve its energy security after this upheaval, South Korea is doubling its imports. The country uses government funding to develop liquefied natural gas (LNG) supply terminals both at home and abroad. Its overinvestment in LNG has already been costly: South Korea’s citizens pay higher energy prices, without any gains in energy security, economic strength or sustainability.

And even as the government invests billions in new capacity, the country’s demand for natural gas is expected to decline over the next decade. By the time the new South Korean terminals start operating, they may end up sitting idle for much of the time.

A complex and expensive fuel

Today, natural gas fuels over 25% of South Korea’s energy mix, used for everything from cooking stoves to industrial manufacturing. Many of these are transported as liquefied natural gasor LNG – a process that cools the gas until it turns into a liquid, making it safer and easier to transport. The process requires enormous, specialized infrastructure. Custom refrigeration and regasification terminals must be built on either side of the shipping route, and the specially built tankers that move the LNG also require supercooled tanks.

This infrastructure is colossally expensive. From 2013 to 2023, South Korea’s public financial investment in new LNG carriers totaled approx. $44.1 billionand the government plans to pay as much as $5 billion US dollars for the new LNG terminals in the next few years.

“This would hinder the country’s energy transition to cheaper domestically sourced renewable energy,” Michelle Kim, an energy finance specialist at the Institute for Energy Economics and Financial Analysis, wrote in a recent report about South Korea’s LNG industry. Kim’s research shows that the country is on track to more than double its LNG import capacity. Yet as the country works on transition to net zero by 2050, the government’s own projections show a dramatic decline in demand for natural gas. The new terminal that South Korea is building is expected to fall to the bottom 20% of their capacity by 2036. This will create what are known as “stranded assets,” meaning the government invests billions of dollars in highly specialized infrastructure that will soon remain largely unused.

South Korea’s focus on LNG also has major implications for the global climate. “What we are seeing is the development of a massive excess capacity of LNG, compared to what is needed to keep warming to 1.5 degrees,” said scientist Bill Hare, the CEO of Climate Analytics, a climate science and policy institute. . A new report by a global collaboration of clean energy advocates shows that South Korea is one of the top international public financiers of fossil fuels.

Over the past decade, South Korea has invested more than $3 billion in government funding into major U.S. LNG infrastructure projects, such as the enormous new Rio Grande and Port Arthur facilities. And South Korean energy giant Hanwha plans to invest even more in the Rio Grande project, with multi-million dollar loans from public and private banks in Korea.

This investment dramatically increases the United States’ LNG export capacity. “The US is going to double its existing capacity by the end of 2027,” says Jamie Lee, an international climate specialist at the Natural Resources Defense Council (NRDC). “This is staggering because the United States is already the leading LNG exporter in the world.” Much of this rapid expansion is driven by South Korea’s investment – ​​the country is one of the biggest consumers of United States LNG exports.

Such investments are out of step with other developed countries, which are pushing back on gas: Other regions, including the European Union, the United Kingdom and Canada, have committed to end government funding for international fossil fuel infrastructure.

Ironically, the South Korean government has prioritized natural gas in part because of a misconception that it is cleaner than coal, which plays a major role in South Korea’s energy use. But when the emissions from its extraction, transport, processing and consumption are taken into account, natural gas shows little or no improvement over other fossil fuels. In fact, natural gas currently accounts for 22% of global fossil fuel emissions.

Sejong Youn, the founder of the climate policy advocacy organization Plan 1.5, says: “The myth was attractive. If you didn’t look too closely, this was a better alternative. And that myth has allowed policymakers and companies to continue business as usual, without the complexities that renewables bring to the energy system.”

A financial black hole

Youn also points out other dangers of pouring public money into new natural gas infrastructure. “Whatever we build at this point will determine our future. The expansion of gas infrastructure locks our country into a fossil fuel system,” he says.

Public financing of LNG infrastructure is based on financial calculations that assume it will be used for many decades. But to achieve the country’s goal of global carbon neutrality by 2050, these facilities will have to cease operations long before their functional lifetimes expire, causing an enormous net loss for South Korea’s government.

But despite the government’s current illogical funding trajectory, it may still be possible to reverse course.

Think globally, act locally

The South Korean coastal city of Dangjin is a fossil fuel hub, where coal-fired power plants and blast-furnace steel mills spew pollutants. A 2021 report of the Center for Energy and Clean Air Research found that pollution from Dangjin’s plants causes more than 210 premature deaths annually. Plans for new LNG terminals will add to these pollutants, making the city the third largest LNG storage center in the world.

Jungjin Kim, a leading local activist at the Korea Federation for Environmental Movements (KFEM), says Dangjin bears the burden of powering the country, while demand for energy is concentrated in dense urban areas like Seoul. “Because most energy facilities cause great environmental impact and damage, these facilities are located in Dangjin to avoid the backlash from city residents,” he says.

Focusing public investment on natural gas, he says, also carries serious economic risks for the area. “If all the jobs are in the fossil fuel sector, the whole region will be in a very dire economic situation when the demand for it goes down,” he says. “It will be similar to what happened to Detroit.”

Government investment in domestic renewable energy can have the opposite effect. Research by Climate Analytics shows that if the South Korean government refocuses on offshore wind, solar and other domestic production, it can both boost employment and increase energy security. “There is enormous potential in South Korea for renewable energy development that will create a net increase in local jobs,” says Hare. It could also support other industries in South Korea, such as converting LNG shipbuilders to green fuel transport to support the country’s chemical and steel industries. A 2023 report by NRDC shows that replacing LNG with renewable alternatives can be much less expensive for both the government and consumers.

Despite the push to build natural gas infrastructure, activists in Dangjin have already successfully stopped government funding for coal there. Korea Beyond Coal, a coalition of South Korean climate organizations working to end coal, successfully campaigned to end their government’s overseas coal investments in 2021. The effort helped shift private investment away from the sector. “South Korea can play a major role in accelerating the global energy transition,” said Dongjae Oh, the head of the oil and gas program at Solutions for our Climate (SFOC). “South Korea can shift its massive overseas fossil financing to renewable energy and work with other governments to expand clean, healthy and affordable energy, such as solar and wind.”

This is not to say that the road to energy security and economic growth via renewable energy will be smooth sailing. The Korean Peninsula’s history of geopolitical instability, South Korea’s mountainous terrain, and urban population concentration all present challenges. But the biggest obstacle to renewable energy is the lack of political will and concrete policies to support the country’s production potential of renewable energy.

And that potential is huge: A 2023 report by the Lawrence Berkeley National Laboratory found that with the right government policy and support, South Korea could meet 80% of the country’s electricity needs with clean power by 2035.

A golden opportunity

Advocates argue that despite its difficulties, such a transition would be very worthwhile. “Renewable energy is the biggest economic opportunity we’ve had since World War II,” says Hare. “The scale of government investment required is huge, and it will generate far more jobs than continued funding of fossil fuels. It’s a win-win. Governments can make investments that bring us to zero emissions, and citizens will benefit economically.”

Project 1.5 founder Sejong Youn agrees. “The government needs to spend money on renewable energy infrastructure and job creation,” he says. “This is an area where we as citizens can and must demand change.”

Solutions for Our Climate (SFOC) is an independent non-profit organization based in South Korea that works to accelerate global greenhouse gas emissions reduction and energy transition. SFOC uses research, litigation, community organizing and strategic communication to deliver practical climate solutions and build movements for change. Working with partners from around the world, we strive to grow and strengthen the global network of climate actors driving bold solutions.

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