Volume 17, No. 4 ISSN 2093-7199
korea eNergy ecoNomIcS INStItute
KEEI
Korea Energy Demand Outlook
Winter / 2015
2 KOREA ENERGY ECONOMICS INSTITUTE Published by the Korea Energy Economics Institute (KEEI), Energy Demand Outlook takes a
closer look at the global energy market and supply and demand trends in domestic energy and examines the outlook for short-term energy demand.
This report outlines the recent changes in the supply and demand of energy and provides important data and policy implications in an effort to contribute to the establishment and adjustment of a series of energy policies by the government.
This report is written by the Energy Demand and Supply Division of the Center for Energy Information and Statistics in cooperation with the Energy Statistics Research Division of KEEI and other related research divisions.
Dr. Kim, Cheol-hyeon (Electricity and Transformation) wrote the report with the participation and support of Dr. Lee, Seung-moon(Oil and Economy), Mr. Lee, Sang-youl (Coal, Gas, and Heat), Ms. Kim, Sung-eun, and Ms. Nam, Bo-ra. Also, the report was reviewed carefully by Dr. Park, Gwang-su (Total Primary Energy and Electricity), Dr. Kim, Soo-il (Economy and Total Primary Energy), and Dr. Kang, Yoon-young (Total Primary Energy).
If you have any further inquiries, please send an email to [email protected] or call +82-52-714-2102.
Contents
Table of Contents
Summary... 4
1. Trends of Energy Consumption... 7
2. Energy Demand Outlook ... 11
Table
<Table 1> Increase Rates by Key Energy Source ... 5Figure
Figure 1. Latest Economic and TPED Growth Rate Trends... 8Figure 2. Trends in Growth Rates of Total Primary Energy Demand ... 9
Figure 3. Trends in Growth Rates of TFC by Sector... 10
Figure 4. Economic Growth and Total Primary Energy Growth ... 11
Figure 5. Energy Intensity and Per Capita Energy Consumption since 2005 ... 12
Figure 6. Total Primary Energy by Source in 2014 and 2016 (%) ... 13
Figure 7. Total Final Consumption Change by Energy Source and Sector in 2015 and 2016 ... 15
4 KOREA ENERGY ECONOMICS INSTITUTE
Summary
Trends in Energy Consumption
□ Total primary energy demand (TPED) in the third quarter of 2015 recorded 68.2 Mtoe—an increase of 0.1% on a year-on-year basis.
o Although the consumption of oil increased due to low oil price, the growth rate of total primary energy was constrained by stagnant industrial production.
□ By energy source, consumption of nuclear power generation and oil increased, whereas that of coal and natural gas declined.
o Oil (increased 3.2%): Due to plunging oil price, oil consumption in the transport sector increased markedly and thanks to the strengthened competitiveness of Korea’s naphtha cracking centers (NCC), the basic petrochemical of crude oil expanded, increasing the consumption of naphtha.
o Coal (decreased 1.6%): Coal demand for generation declined due to the increase in nuclear power generation.
o Natural gas (decreased 5.8%): Due to the increase in the number of base load power plants, natural gas demand for generation decreased drastically. Also, consumption of city gas declined due to weakened price competitiveness resulting from low oil price.
o Nuclear power generation (increased 5.4%): Increased with the resumed operation of Wolsung Reactor Unit 1 and establishment of Shinwolsung Reactor Unit 2 (July 2015).
o Electricity (increased 2.4%): Consumption of electricity for industrial uses remained stagnant, mainly due to low consumption in the iron and steel industry, but consumption in buildings recovered due to an increase in air conditioning cooling load and temporary reduction of residential electric rates.
□ Total final consumption (TFC) in the third quarter of 2015, despite the decline in the industrial sector, increased by 0.7% to 107.9 Mtoe year-on-year thanks to increasing consumption in the transport sector and buildings.
o Industrial (decreased 0.2%): TFC for materials production increased based on the consumption of naphtha, but TFC for fuel declined due to the stagnant electricity consumption for industrial uses and decreased consumption of gas.
o Transport (increased 6.8%): TFC was driven by low oil price and the increase in the number of registered vehicles.
o Buildings (increased 1.2%): Consumption of electricity increased with the recovery of consumption for household and commercial uses and increase in the consumption of oil, but its recovery was slow due to a drastic drop in the consumption of gas for commercial uses.
Summary
Energy Demand Outlook
□ TPED is expected to be 284.7 Mtoe (increase of 0.6%) and 292.7 Mtoe (increase of 2.8%) in 2015 and 2016, respectively.
o In 2015, due to the prolonged economic downturn and low oil price, energy consumption for industrial uses remained stagnant, showing a marginal increase of less than 1%, in terms of total primary energy demand.
o In 2016, energy price will remain low and the domestic economy will recover driven by domestic consumption, bouncing back to the 2.0% level with an increase in the rate of TPED.
※ Domestic economic growth (%): 2.3% (2012) à 2.9% (2013) à 3.3% (2014) à 2.6% (end of 2015) à 3.0% (end of 2016)
□ By energy source, coal and nuclear power generation will lead the increase in energy demand, while demand for natural gas will continue to decline.
o Coal (1.1% in 2015, 6.1% in 2016): Even though the growing demand of coal for industrial uses is expected to slow down, coal demand for power generation is projected to rise significantly with a total of nine newly-built, coal-fired generation facilities going into operation by the end of 2016.
o Oil (3.7%, 1.9%): As the effect of the sudden drop in oil price weakens, the growth trend is expected to slow, but with continued low oil price and the economic recovery, consumption of oil for industrial uses and transport will increase, maintaining a favorable upward trend.
o Natural gas (-6.4%, -5.8%): With the expansion of large-scale base load power plants (coal + nuclear power generation), the natural gas demand for generation will be on the decrease, maintaining a high rate of decline throughout 2016.
o Nuclear power generation (3.0%, 7.2%): The resumption of operations of some nuclear power plants and introduction of new nuclear power plants are expected to drive the consumption of nuclear power generation higher.
o Electricity (1.5%, 2.3%): Even with the increase of electricity consumption in buildings in 2015, stagnant consumption for industrial uses dampened the overall demand, but with the recovery of consumption for industrial uses in 2016, the rate of increase of electricity consumption is expected to reach approximately 2.0%.
<Table 1> Increase Rates by Key Energy Source
2012 2013 2014 2015e 2016e
Total Primary Energy 0.7 0.6 1.0 0.6 2.8
Coal - 3.2 1.2 3.2 1.1 6.1
Oil 1.0 - 0.4 - 0.6 3.7 1.9
Natural Gas 8.4 5.0 - 9.0 - 6.4 - 5.8
Nuclear Power Generation - 4.6 - 7.7 12.7 3.0 7.2
Electricity 2.5 1.8 0.6 1.5 2.3
6 KOREA ENERGY ECONOMICS INSTITUTE
□ Total final consumption (TFC) is expected to grow by 0.7% to 215.5 Mtoe and 1.7% to 219.2 Mtoe in 2015 and 2016, respectively.
o Industrial (-0.9%, 1.5%): Due to the slowdown in industrial activities, particularly in the iron and steel industry, consumption will decrease in 2015 compared to last year, but is anticipated to increase in 2016 as the economy bounces back.
o Transport (6.6%, 2.4%): A significant increase in consumption was observed due to the drop in oil price in 2015, but the rise may slow as the price effect of low oil price is expected to diminish due to the base effect in 2016.
o Buildings (0.5%, 1.7%): Consumption of gas in buildings declined considerably as a result of plummeting oil price in 2015, but it is expected that the increasing demand for heating with the rise in heating degree days will lead consumption to recover, reaching the mid to upper 1.0% range in 2016.
Major Features and Significance
□ In 2016, coal demand and nuclear power generation is expected to increase considerably, and energy consumption in the industrial sector will rebound.
o With the increasing use of coal for generation and the dramatic increase in nuclear power generation with the expansion of nuclear power plants, TPED is projected to resume its growth trend.
o In 2015, due to plummeting oil price, transport drove the increase in TFC, but with the recovery of the domestic economy in 2016, the industrial sector is expected to lead the increase in energy consumption with increased production activities.
□ In 2016, improvement in energy intensity will slow down significantly as energy consumption outpaces the economic recovery.
o From 2011 to 2014, the GDP increased 2.8% annually, but TPED increased only 0.8% on a year-on- year basis.
o In 2016, thanks to abrupt increases in nuclear power generation and the coal demand for generation, prompted by the expansion of generation facilities, TPED is expected to increase rapidly in comparison to the GDP.
o Energy intensity (toe/million KRW) has improved, declining from 0.1945 in 2015 to 0.1941 in 2016, but the pace of this improvement is expected to remain stagnant.
□ Due to an increase in electricity demand and the number of low-efficiency base load power plants, the input of energy into the transformation sector is expected to grow significantly.
o As electricity consumption recovers from the 1% range and the proportions of coal and nuclear power generation increase, the proportion of gas, which has the highest generation efficiency, is expected to decline considerably, resulting in an increase in fuel consumption of power plants on a year-on-year basis.
o In 2016, with the increase in fuel consumption of power plants, the increase rate of TPED is projected to be better than that of TFC.
Summary
□ In 2015, due to low oil price, consumption of petroleum products is expected to record the highest growth rate among all energy sources.
o Consumption of petroleum products increased 3.7% in 2015 compared to the previous year, based on total primary energy demand, which is projected to record its highest growth rate since 1999.
o In particular, the increase in vehicle use due to low oil price is attributable to the growing consumption of petroleum products used in transport, which recorded its highest growth rate (6.2%) since 2000.
o Due to low oil price, consumption of petroleum products in buildings, which has declined continuously, mainly in kerosene oil, since 2011, is projected to rebound thanks to an increase in both kerosene oil and LPG consumption in buildings in 2015, showing an increase rate of 14.8%.
1. Trends in Energy Consumption
1□ Total primary energy demand (TPED) in the third quarter of 2015 was 68.2 Mtoe, having increased by 0.1% year-on-year.
o Although oil consumption increased thanks to low oil price, TPED showed only a marginal increase due to stagnant industrial production.
- The GDP recovered slightly, but the index of the mining and manufacturing and industrial products sectors has declined for four consecutive quarters, causing TPED to remain at the same level.
- Since the second quarter of 2012, when the index of the mining and manufacturing and industrial products sectors had remained relatively unchanged from that of 2011, the growth rate of TPED has continued to remain lower than the rate of economic growth.
- Stagnant industrial production and the weakening of the impact from the expansion of facilities in the iron, steel, and petrochemical sectors from 2010 to 2011, the modification of the transformation standard of energy volume (2012), the stringent electricity demand management policy prompted by the suspension of operations of some nuclear power plants (2013), and the sharp decline in both cooling and heating degree days (2014) are all pointed to as major factors behind the slowdown in TPED over the past several years.
1 The rates of increase of total primary energy demand (TPED) and total final consumption (TFC) by energy source and sector indicate the rate of increase based on toe. The energy trends by energy source and outlook illustrated in this report are based on inherent units; thus, a slight difference between the rates of increase of TPED and TFC can be observed.
8 KOREA ENERGY ECONOMICS INSTITUTE Figure 1. Latest Economic and TPED Growth Rate Trends
* Difference (index) on a year-on year basis
o If feedstock energy (non-energy oil and coal for iron-making) is excluded, TPED in the third quarter of 2015 decreased 0.3% year-on-year.
- Consumption of naphtha increased consistently, and that of coal for iron-making showed a marginal increase year-on-year, resulting in a 1.2% increase in the consumption of feedstock energy.
- Accordingly, feedstock energy accounted for 29.8% of TPED, increasing by only a small margin (0.3%p) year-on-year.
□ Consumption of petroleum products and amount of nuclear power generation increased, but that of coal and natural gas (LNG) declined.
o In terms of the consumption of petroleum products, falling oil price led to a significant increase in consumption in the transport sector, and thanks to the strengthened competitiveness of Korea’s naphtha cracking centers (NCC), the basic petrochemical of crude oil expanded, increasing the consumption of naphtha gradually by over 3.0% year-on-year.
o In terms of the consumption of coal, consumption for steel-making increased only marginally due to the expanded production of pig iron in July, but, the increase in nuclear power generation resulted in decreasing the coal demand for generation by 1.6% year-on-year.
o Natural gas demand for generation decreased dramatically due to the expansion of base load power plants. Also, consumption of city gas decreased by over 5.0% year-on-year due to weakening price competitiveness caused by low oil price.
o Regarding the amount of nuclear power generation, with the resumed operation of Wolsung Reactor Unit 12 and establishment of Shin-Wolsung Reactor Unit 2 (July 2015), consumption increased by 5.4%.
o In terms of TPED by energy source from January to September of 2015, oil (38.2%) was the highest, followed by coal (30.3%), gas (15.3%), and nuclear power generation (12.1%).
2 After being shut down temporarily due to the expiration of its operating license in November 2012, Wolsung Reactor Unit 1 resumed operations at the end of June 2015 upon receiving a 10-year license extension.
1. Trends of Energy Consumption
Figure 2. Trends in Growth Rates of Total Primary Energy Demand
□ Total final consumption (TFC), despite experiencing a decline in the industrial sector, increased by 1.3% year-on-year based on growing consumption in the transport sector.
o In terms of energy consumption in industry, feedstock energy increased, while fuel energy declined, leading energy consumption for industrial uses to decrease 0.2% year-on-year.
- Consumption of feedstock energy increased, mainly due to the increased consumption of naphtha, but that of fuel energy declined 2.2% as a result of a slump in electricity consumption and diminishing consumption of gas.
- Due to slowdown in industrial production activities and fall in oil price, city gas for industrial uses continued to decline, dropping at a rate in the double digits.
o Energy consumption in transport increased by 6.8% year-on-year as a result of low oil price, leading to an increase in TFC.
- Thanks to the increases in vehicle use and the number of registered cars, prompted by low oil price, the consumption of diesel and gasoline increased significantly, but the consumption of LPG showed a downward trend with the decreasing number of registered LPG cars.
- The consumption of jet fuel increased markedly as the MERS outbreak showed signs of slowing, and the consumption of crude oil for shipping increased sharply due to falling oil price.
o Energy consumption in buildings increased merely 1.2% year-on-year due to the sharp decline in gas consumption for commercial uses, despite the recovery of electricity consumption with increasing oil consumption.
- The rate of increase in petroleum product consumption in buildings reached the double digits with a surge in the consumption of LPG caused by low oil price, but gas consumption dropped considerably as gas for commercial uses was replaced by oil.
10 KOREA ENERGY ECONOMICS INSTITUTE Figure 3. Trends in Growth Rates of TFC by Sector
* “Buildings” refers to the consumption of energy for residential, commercial, and public uses.
o In terms of electricity consumption, the growth rate of electricity for industrial uses came to a standstill, mainly due to slowdown in the growth trends of consumption in the steel industry, but electricity used in buildings recovered thanks to an increase in air conditioning, cooling load and a temporary reduction of residential electric rates, increasing approximately 2.4% on a year-on-year basis.
- On the other hand, the proportion of TFC occupied by electricity rose slightly in the third quarter of 2015 due to seasonal factors, but it has remained stagnant at around 19.0% due to the slump in the growth rate of electricity consumption since 2010.
o In terms of the growth rate of TFC in the third quarter of 2015, oil (3.7%) was the highest, followed by electricity (2.4%), coal (0.9%), and gas (-10.8%).
- If feedstock energy (non-energy oil and coal for iron-making) is excluded, the coal and oil demand, in terms of TFC, increased by 0.4% and 6.6%, respectively, on a year-on-year basis.
2. Energy Demand Outlook
2. Energy Demand Outlook
□ Total primary energy demand (TPED) is expected to be 284.7 Mtoe (increase of 0.6%) and 292.7 Mtoe (increase of 2.8%) in 2015 and 2016, respectively.
o Even though oil price was low in 2015, TPED is projected to increase less than 1.0% due to the prolonged economic recession.
o However, in 2016, with the likelihood of energy price remaining low and the domestic economy expected to experience a partial recovery, the growth rate of TPED is anticipated to bounce back to around 2.0%.
- Thanks to the recovery of electricity consumption and the drastic expansion of coal-fired generation facilities, which have relatively low power generation efficiency, the increase in TPED is expected to outpace that of TFC.
Figure 4. Economic Growth and Total Primary Energy Growth
□ The growth rate of energy intensity will remain stagnant in 2016, and per capita energy consumption will continue to increase.
o In 2015, energy intensity (toe/million KRW) will improve, decreasing by 2.0%, but in 2016, it is projected to be similar to the previous level as the growth rate of TPED is expected to approach the economic growth rate.
- Energy intensity is expected to decrease in 2016, but the rate of decrease is expected to be small as growth rate of energy consumption is projected to be high relatively to economic growth.
o Per capita energy consumption in 2015 is expected to be 5.6 toe, maintaining a growth rate of less than 1% since 2012, but with the recovery of total primary energy’s growth momentum in 2016, the growth rate is expected to rise, pushing per capita energy consumption up to 5.8 toe.
12 KOREA ENERGY ECONOMICS INSTITUTE Figure 5. Energy Intensity and Per Capita Energy Consumption since 2005
□ Coal and nuclear power generation will lead the increase in energy demand, while demand for natural gas will continue to decline.
o In 2016, although coal demand for industrial uses will remain stagnant, the total coal demand is expected to increase significantly, driven by a sharp increase in the coal demand for generation.
- By the end of 2016, a total of nine coal-fired power plants, including Dangjin Unit 9 and 10, Bukpyeong Unit 1 and 2, and Samcheok Green Unit 1 and 2, providing 7.7 GW of capacity, will begin operations, leading to expectations that the total coal demand will increase at a rate in the double digits.
o Resuming the operations of some nuclear power plants and introducing new plants are expected to increase nuclear power generation by up to 7%.
- Hanbit Reactor Unit 33 and Wolsung Unit 1 resumed operations in June 2015, and the construction of Shinwolsung Reactor Unit 2 was completed at the end of July 2015.
- If Shingori Reactor Unit 34 (set for a test-run in May 2016) enters operation as scheduled, the amount of nuclear power generated will increase considerably in 2016.
o Natural gas demand is expected to experience a rapid decline in 2016 due to a decline in natural gas demand for power generation.
- Even with a moderate recovery of electricity demand, due to the expansion of large-scale base load power plants (coal + nuclear power), the usage rate of LNG combined-cycle power is expected to fall dramatically to the lower 30% range in 2016.
- The usage rate of LNG combined-cycle power declined from the 60% range in 2013 to the upper 40%
range and upper 30% range in 2014 and 2015, respectively, due to a slump in the growth rate of electricity consumption.
3 Hanbit Reactor Unit 3 resumed operation in June 2015 after shutting down for repair work following a nuclear reactor accident that took place in October 2014.
4 It succeeded in establishing network synchronization in January 2016, allowing it to transmit electricity directly to general houses and industrial sites through transmission lines.
2. Energy Demand Outlook
- In 2016, city gas demand is expected to recover somewhat from its recent decline due to increasing industrial production activities, but is forecasted to show an overall downward trend as a result of low oil price.
o The growth trend of petroleum product demand will slow in line with the entirely fading effect of plummeting oil price, but is projected to show a moderate upward trend in terms of demand in the transport sector and for industrial uses with continued low oil price and the recovery of economic growth.
- Due to the prolonged low oil price and increase in the export of petroleum products in line with the Korea-China FTA, the naphtha demand will increase by about 3%, serving as a driving force behind an increase in oil demand for industrial uses.
- Fuel oil demand for transport is expected to increase by around 2% as car sales and vehicle use increase as a result of the increasing economic growth rate and prolonged low oil price.
o In terms of energy demand by source in 2016, oil, coal, and nuclear power generation will increase, while natural gas will be on the decline.
- Of total primary energy, the proportion of oil declined to 37.3% in 2014, but is expected to jump up 1.1%p due to the drastic drop in oil price in 2015. In 2016, the effect of plummeting oil price on oil demand is expected to weaken, but consumption is anticipated to display an upward trend due to continued low oil price.
- In 2016, the proportions of coal and nuclear power generation are expected to increase by about 1%p each compared to 2014, but that of natural gas is projected to decline 2.5%p.
Figure 6. Total Primary Energy by Source in 2014 and 2016 (%)
14 KOREA ENERGY ECONOMICS INSTITUTE
□ Total final consumption (TFC) is expected to grow by 0.7% to 215.5 Mtoe and 1.7% to 219.2 Mtoe in 2015 and 2016, respectively.
o In 2015, energy consumption in the industrial sector is forecasted to decline -0.9% year-on-year due to sagging production in the steel industry, but is expected to experience positive growth of 1.5% with the economic recovery in 2016.
- The growth trend of feedstock energy consumption in 2015 will slow down due to the decline in coal demand for iron-making (1.4%), but feedstock energy consumption is expected to grow by 1.9%
year-on-year in 2016 based on moderate increases in the consumption of naphtha and coal for iron- making.
- Consumption of fuel energy in the industrial sector is expected to bounce back with an increase of 1.4% in 2016 in line with the recovery of electricity consumption, following its decline of 2.9% in 2015.
o Due to the sudden decline in oil price, consumption in the transport sector is expected to increase by 6.6% in 2015, but if the impact of plunging oil price wanes in 2016, the rate of increase will slow to 2.4%.
- Due to the outbreak of the Middle East Respiratory Syndrome (MERS), the consumption of petroleum products in the transport sector temporarily will falter in the second quarter of 2015, but due to the effect of the sharp decline in oil price since the latter half of 2014, consumption in the transport sector is expected to rise in 2015.
- Oil price will remain stagnant in 2016, but the effect of the plunge in oil price will fade away, leading to a decrease in the growth rate of energy consumption.
o In terms of buildings, as city gas demand for commercial uses is substituted by oil, it is expected to increase by a mere 0.5% in 2015. However, in 2016, with the increase in consumption for heating, the rate of increase will rise to 1.7%.
- In 2016, city gas consumption in buildings is expected to increase marginally on a year-on-year basis due to the increase in heating degree days, despite the fact that consumption for commercial uses will be replaced by oil.
- The growth rate of electricity consumption, which accounts for the largest proportion of energy consumption in buildings, is expected to drop from 2.6% in 2015 to less than 2% in 2016 due to the diminishing effect of the temporary reduction of electric rates.
o In 2015, electricity demand will be weakened, despite the increase of electricity use in buildings, due to stagnant electricity demand for industrial uses. However, as electricity for industrial uses bounces back, the rate of increase is expected to reach 2% in 2016.
- In 2015, electricity demand is anticipated to increase due to the base effect of low electricity consumption in 2014, temporary reduction of the residential electricity rate in the summer, and increase in the number of cooling and heating degree days.
2. Energy Demand Outlook
- In 2016, electricity demand will increase based on a rise in demand for industrial uses, but with the stagnation of the steel industry, which is known to consume large amounts of electricity, the growth rate of electricity demand is expected to lag behind the economic growth rate.
Figure 7. Total Final Consumption Change by Energy Source and Sector in 2015 and 2016
KEEI Korea Energy Demand Outlook (Volume 17 No. 4)
Printed in Winter 2015 Issued in Winter 2015
CEO of publisher: Park Joo-heon
Publisher: Korea Energy Economics Institute
405-11, Jongga-ro, Jung-gu, Ulsan, Korea, 44543 Phone: (052)714-2270, Fax: (052)714-2025
Registration: No. 8 on December 7, 1992 Printed by: Bumshinsa (052)245-8737
ⓒ Korea Energy Economic Institute 2015
KEEI
Korea Energy Demand Outlook
Korea Energy Demand Outlook
405-11, Jongga-ro, Jung-gu, Ulsan, Korea, 44543 Phone: (052)714-2270
Fax: (052)714-2025
