Chapter Ⅴ Outlook characteristics and implications Energy demand is expected to continually rise. During the forecast period (2012-2017), primary energy demand is expected to continually rise at an annual average rate of 2.7%. The rate of increase in energy consumption is forecast to be lower than the annual average economic growth rate of 3.6%. - Accordingly, energy intensity is expected to improve at an annual average rate of 0.7%, declining from 0.251 in 2012 to 0.241 in 2017. * Energy intensity (toe/KRW 1 million): (’07) 0.247 → (’12) 0.251 → (’17) 0.241 However, per-capita energy consumption will likely reach 6.23 toe in 2017, placing Korea third on the list of OECD countries with the highest per-capita energy consumption, following Canada and the US. * Comparison with other countries in per-capita energy consumption (2011): (OECD average) 4.29, (Japan) 3.61, (Germany) 3.76, (UK) 3.03, (US) 7.03 The sector that is leading energy demand is the industrial sector, with a contribution of 72%. In terms of energy source, electricity demand triggers 53% of the increase in primary energy. The rate of increase in electricity demand will likely exceed the economic growth rate. Electricity demand is forecast to go up at an annual average rate of 3.7% during the forecast period, mainly led by demand for industrial use (annual average increase of 4.1%). This is expected to be higher than the annual average economic growth rate of 3.6%. Consumption of electricity, a high-quality energy source, continued to rise relatively sharply until recently due to several factors. - First of all, the basic metal industry and the fabricated metal industry (machinery and equipment, electricity and electronics, semiconductors, automobiles, etc.), which consume great amounts of electricity, grew rapidly and led the rise in electricity consumption. - Consumption of electricity for commercial use continued to rise sharply as a result of the increasing use of air-conditioning in tandem with the rise in national income and growth of the service industry. http://www.keei.re.kr 57 KEEI Korea Energy Demand Outlook - Electricity replaced oil in the energy market for heating, attributable to the billing of low electricity charges that do not duly reflect actual power generation costs and the persistence of high oil prices. Electricity is projected to remain the leading energy source consumed in many cases for the time being due to several factors: continued growth of industries that consume great amounts of electricity, convenience in use, and development and distribution of various electric devices resulting from technological development. As such, there is a need to set electricity charges at proper levels. This would encourage greater efficiency in electricity consumption. The industrial sector is expected to lead the rise in energy demand. Energy demand in the industrial sector is expected to go up at an annual average rate of 2.8% between 2012 and 2017 if the Korean economy approaches its potential growth rate, which is an annual average rate of 3.6%. The share of final energy demand accounted for by the industrial sector was steady at 55 to 56% until the mid-2000s. It steadily rose afterwards and reached 61.4% in 2012. It is expected to increase to 62.6% in 2017. - This is a result of a sound increase in energy consumption in the industrial sector owing to steady growth of energy-intensive industries and a relatively rapid slowdown in demand growth in the transport and residential/commercial sectors. The rapid increase in energy consumption by the industrial sector is a result of production activities in the economy. This is why it is unavoidable. However, there is a need to improve the energy efficiency of the industrial sector in order to become a low-energy consuming society in the long term. This would entail promoting low-energy consuming, high added-value industries and continually developing energy efficiency technologies. 58 KOREA ENERGY ECONOMICS INSTITUTE Chapter Ⅴ Outlook characteristics and implications [FigureⅤ-1] Changes in and outlook on share of consumption by the industrial sector The share of primary energy taken up by bituminous coal for power generation and nuclear power is projected to increase. Assuming that power generation facilities will be expanded in accordance with the 6th Electricity Supply and Demand Plan, demand for nuclear power and bituminous coal for power generation should rise quickly. - Demand for nuclear power and bituminous coal for power generation is projected to rise at annual average rates of 5.0% and 5.6%, respectively, from 2012 to 2017. The share of primary energy accounted for by nuclear power, which is a major base-load power generation source, went down from 16.1% in 2005 to 11.4% in 2012, but is expected to go up to around 12.7% in 2017, owing to large-scale power generation facility expansion during the forecast period. - During the forecast period, nuclear power generation capacity will be expanded by a total of 5,200 MW. Total facility capacity will go up from 20,716 MW in 2012 to 25,916 MW in 2017. The share of primary energy accounted for by bituminous coal is expected to rise from http://www.keei.re.kr 59 KEEI Korea Energy Demand Outlook 27.1% in 2012 to 29.8% in 2017, assuming that there will be a major bituminous coalfired power generation facility expansion from 2014 through 2017. Dependence on LNG for power generation, which is used to handle peak load, will likely rise until 2015 and then begin to fall in 2016 owing to the expansion of bituminous coal-fired power plants. - LNG demand for power generation will likely go up at an annual average rate of 3.2% until 2015, rising from 18.4 million tons in 2012. It will then likely peak and indicate a downward trend. [FigureⅤ-2] Changes in and outlook on share of primary energy taken up by major energy sources for power generation Oil dependence should continue to fall. Oil dependence regarding primary energy peaked at 63% in 1994 and has since fallen steadily. It stood at 38.2% in 2012 and is projected to fall to 35.0% in 2017. - The share of primary energy accounted for by naphtha, a raw material in the petrochemical industry, rose from 15.2% in 2005 to 17.0% in 2012. It is projected to drop slightly to 16.7% in 2017. - Excluding naphtha, oil dependence is projected to decline from 19.6% in 2012 to 16.6% in 2017. 60 KOREA ENERGY ECONOMICS INSTITUTE Chapter Ⅴ Outlook characteristics and implications [FigureⅤ-3] Changes in and outlook on oil dependence The decrease in oil dependence is seen as a result of the government's diversification of energy sources to increase energy security. - The government laid town gas pipes in the metropolitan area to reduce oil dependence and tightened environmental regulations. - This, and the international oil prices, which have remained stubbornly high since the mid-2000s, further expedited the reduction in oil consumption and the substitution of fuel by other energy sources. In the industrial sector and residential/commercial/public sector, replacement of oil by town gas and electricity remains on-going and is forecast to continue. - Many alternative energy sources have become economical in the face of the high oil prices, resulting in the replacement of oil by electricity in the heating energy market. The rate of increase in primary energy demand in consideration of the uncertainties in economic growth is forecast at an annual average of 2.3 to 3.2%, a result of the economic growth scenario-based outlook. Primary energy demand is forecast to rise at an annual average rate of 2.3 to 3.2% in consideration of uncertainties in the economic environment from 2012 through 2017. http://www.keei.re.kr 61 KEEI Korea Energy Demand Outlook The annual average economic growth rate is forecast at 2.7 to 4.5%. Energy intensity is forecast to improve at an annual average rate of 1.3% in the highgrowth scenario and 0.4% in the low-growth scenario. Energy intensity is forecast to improve at a quicker pace if the economy grows faster. - In general, energy intensity improves relatively quickly when the economic growth rate is high. Conversely, the improvement rate tends to go down when the economic growth rate is low. The variation in demand forecasts among scenarios is significant in the case of LNG and oil in comparison to coal and nuclear power. - LNG demand for power generation, which is used to handle peak load, accounts for about half of overall LNG demand. For this reason, demand for it is very elastic to fluctuations in electricity demand stemming from changes in economic growth. - In contrast, demand for nuclear power and coal (bituminous coal), which is used to handle base load, is relatively inelastic to changes in economic growth. 62 KOREA ENERGY ECONOMICS INSTITUTE Reference Materials Reference Materials KEEI, 2012 Long-Term Korea Energy Demand Outlook, December 2012 Korea Institute for Industrial Economics & Trade, KIET Industry Trend Brief, March 2012 Ministry of Trade, Industry and Energy, 11th Long-Term Natural Gas Supply and Demand Plan (Year 2013-2027), April 2013 Ministry of Knowledge Economy, 6th Electricity Supply and Demand Plan (Year 20132027), February 2013 Korea City Gas Association, City Gas Business Manual, 2012 Korea Cement Association, 2011 Annual Report on Cement Statistics, 2012 Bank of Korea, Economic Outlook of the Bank of Korea, January 2013 KEPCO, monthly issues of the Electricity Statistics Newsflash Korea Iron & Steel Association, Outlook on Domestic Supply and Demand of Steel Products in 2013, February 2013 http://www.kesis.net (KEEI, Korea Energy Statistics Information System) http://www.kpx.or.kr (Korea Power Exchange) http://www.petronet.co.kr (Korea National Oil Corporation, Oil information network) http://www.cement.or.kr (Korea Cement Association) http://steeldata.kosa.or.kr (Korea Iron & Steel Association, Steel Data) http://kosis.kr (Statistics Korea, National statistics portal) http://www.khnp.co.kr (Korea Hydro & Nuclear Power) http://www.ecos.bok.or.kr (The Bank of Korea, Economic statistics system) http://www.keei.re.kr 63
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