April 13 (Bloomberg) -- South Korea may expand record imports of power-station coal as a nuclear-plant failure that was hidden for a month stokes opposition to atomic energy a year after Japan’s Fukushima disaster.
Korea Electric Power Corp., the nation’s electricity monopoly, says it may boost coal purchases to replace nuclear power generation if the Kori 1 reactor remains shut and the government fails to extend the lifespan of a second reactor. Kori 1 was closed for safety checks on March 13, five weeks after a power failure caused the temperature of its core to rise. The operating permit for Wolsong 1 expires in November.
Asia’s fourth-biggest economy may increase its reliance on coal just as China and India buy unprecedented amounts of the fuel and prices rebound from a slump. While generating electricity from coal costs almost twice as much as atomic energy, it is cheaper than natural gas or oil, according to the Korea Energy Economics Institute.
“Economically, coal is the best,” said Osamu Fujisawa, an independent energy economist in Tokyo who estimates coal imports may gain as much as 2.45 million metric tons a year if both South Korean reactors are closed. “If you’re trying to increase summer power generation, coal is the best in terms of cost.”
South Korea’s imports of thermal coal were a record 94.5 million tons last year, up from 87.8 million in 2010, according to Simpson Spence & Young Ltd., a London-based shipbroker. The nation was the world’s third-largest importer after China and Japan. The country will buy 103 million tons of seaborne thermal coal this year, Bank of America Corp. said in an April 3 report by its Merrill Lynch unit.
Coal at Newcastle, Australia, with an energy value of 6,700 kilocalories per kilogram, a benchmark grade for Asia, gained $1.15 to $105.55 a ton in the seven days ended April 6. Prices dropped 14 percent the past two quarters, the steepest decline since the six months ended March 2009, amid rising supplies and a slowing global economy.
Indonesia, the world’s biggest exporter of thermal coal, cut its reference price this month for sales of the fuel with a heating value of 6,322 kilocalories per kilogram to $105.61 a ton, the lowest level in 16 months.
Newcastle coal will average $109 a ton in the fourth quarter and $110 next year as China’s production costs gain and India faces domestic shortages, Merrill Lynch said in its report. India will import a record 117.8 million tons of power-station coal, up 7 percent from this year, and Chinese purchases will rise 11 percent to an all-time high of 115.7 million tons, its data show.
Credit Suisse Group AG cut its forecast for thermal coal at Newcastle as ample stockpiles and reduced industrial output in the northern hemisphere freed up Colombian coal for Asian buyers, the bank said today in a report. Prices will average $113 a metric ton this year from an earlier forecast of $126.
Japan has boosted thermal generation after shutting 53 of its 54 atomic plants since March 2011, when an earthquake and tsunami knocked out cooling systems and caused the meltdown of three reactor cores at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. That was the world’s worst nuclear accident since Chernobyl in 1986.
Korea Hydro & Nuclear Power Co., a unit of Korea Electric that operates the Kori plant, announced its power failure on March 12, a day after the first anniversary of Fukushima. A 12-minute power loss occurred on Feb. 9 and sent the core temperature to 58.3 degrees Celsius (137 degrees Fahrenheit) from 36.9 degrees, according to the Nuclear Safety and Security Commission.
Korea Hydro didn’t report the blackout and deleted it from its records before an outside inquiry discovered it, the committee said last month. The government is investigating why the incident wasn’t reported immediately, Energy Minister Hong Suk Woo said March 14. The government will review South Korea’s nuclear plants by July and has pledged to upgrade safety systems, in particular at plants older than 20 years, the Ministry of Knowledge Economy said in a statement today.
South Korea held parliamentary elections on April 11 and has a presidential election in December. Local citizen groups including the Kyungjoo Environment Movement Association say they will campaign against Wolsong 1’s extension. Almost 80 percent of respondents opposed extending the life of older reactors in a February poll of 1,100 people by the Korean Federation for Environmental Movement.
“We should shut down old reactors like an old, used car should go to a junkyard,” Kyungjoo Environment Movement’s co-chairman Kim Ik Joong said. “Extending a lifespan would only boost the chance of things getting out of order.”
South Korea, which gets about a third of its electricity from nuclear generation, started trial operations in 1977 and currently has 21 reactors with seven more under construction. The 587-megawatt Kori 1 unit and the 679-megawatt Wolsong 1 account for about 7 percent of the nation’s nuclear capacity. Kori 1 won a 10-year license extension starting in 2008.
Coal Versus Gas
The country’s private power producers are already applying to build more coal-fired capacity as it’s cheaper than gas, according to Kim Joong Kyum, chief executive officer of Korea Electric, known as Kepco. The cost of generating electricity from coal in South Korea is 67 won per kilowatt-hour, compared with 142 won from liquefied natural gas and 224 won from oil, based on 2011 prices, according to the Korea Energy Economics Institute, a state-run energy-policy adviser.
“If talks with residents nearby don’t make progress, we may have to speed up construction of new reactors or shift to thermal plants,” Kim said in an April 2 interview. “We may need to increase the use of coal and that would be a step in the right direction.”
While coal may be cheaper than other thermal power sources, it is still more expensive than nuclear. The cost of generating electricity from atomic power in South Korea is 39 won per kilowatt-hour, the institute’s data show.
The thermal variety is used by power plants for electricity, while coking coal is needed by steelmakers.
The change will increase financial pressure on Kepco, which lost $5.8 billion in the past four years as the government capped power prices. Switching 1,000 megawatts of nuclear capacity to thermal generation will cost the company an additional 3.8 billion won ($3.3 million) a day, Kim said.
South Korea also needs to ensure utilities can meet demand. The nation’s generating capacity has risen 60 percent in the past 10 years, lagging behind power output that has doubled, according to ministry data. The electricity reserve ratio, or the difference between generating capacity and peak demand, was the lowest in at least 12 years at 5.5 percent in 2011. Utilities typically target 8 percent, according to Fujisawa.
“A shift away from nuclear as a result of this incident would be a major turnaround from long-term energy policy,” said Michael Parker, an analyst for Sanford C. Bernstein & Co. in Hong Kong. “Given current plans to increase nuclear capacity and expand technology exports, the shutdown scenario seems highly unlikely.”
South Korea’s nuclear industry says the emotional response to the Kori 1 incident shouldn’t cloud the license extension review around Wolsong 1 and the economics of power generation in the country, which sells electricity to consumers for half the price in Japan.
“It’s not proper to be carried away by people’s feelings in approaching the issues,” said Chang Soon Heung, president of the Korean Nuclear Society and a scientist at the Korea Advanced Institute of Science and Technology. “It’ll be a big waste if we shut it down if results show the reactors are safe.”
Still, the idling of Kori 1 and the lack of a deadline by regulators for a decision on its resumption echoes the situation in Japan, where reactors have failed to resume operations since the earthquake or after scheduled maintenance amid public concern over atomic safety.
Hiromitsu Ino, a professor emeritus at the University of Tokyo, who acts as a government adviser on nuclear reactor stress tests, in January called for all reactors over the age of 40 to be closed due to wear and tear and the inadequacies of older plant designs to incorporate modern safety features.
The U.K., India, Japan, Russia, Switzerland and the U.S. have the world’s oldest nuclear plants, with 31 operating reactors aged 40 years or more, according to the London-based World Nuclear Association. No reactor has yet operated 50 years.
The U.S., which has the most nuclear reactors, originally licensed its units to run 40 years. Today, 71 of the 104 U.S. reactors have 60-year permits and 15 more applications are under review, according to the country’s Nuclear Regulatory Commission website.
Politics will decide the fate of Kori 1 and other older reactors in South Korea, said Kim Wan Joo, a senior researcher at the safety preparedness division of the Korea Institute of Nuclear Safety.
“A new president can stop Kori 1,” Kim said. “But it will result in the rising cost of electricity.”
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