Korea braces for winter energy crisis

The Korea Times

The Korea Times

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Wed, November 29, 2023 | 06:28

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Korea braces for winter energy crisis

Posted : 2022-11-07 16:59

Updated : 2022-11-08 16:24

A Gas meter in Seoul. Korea Times file

By Lee Kyung-min

Korea is expected to grapple with soaring energy prices this winter, as evidenced by about a 40 percent spike in heating costs this year, brought on by elevated global key commodity prices in the wake of Russia's invasion of Ukraine, according to market watchers, Monday.

Further advancing the grim outlook is the rapid weakening of the Korean currency against the U.S. dollar, the key factor in surging energy import costs.

The increase in costs has and will continue to be shouldered entirely by taxpayers, in a gradual yet steady hike in electricity rates through the first half of next year, months before the April 10 general election in 2024.

40 percent increase

Data from Korea District Heating Corp. shows that the rate for household heating costs per 1 megacalorie (1Mcal) this year rose to 89.88 won ($0.06) last month, up from 74.49 won in July and 66.98 won in April. The figure marked a 38 percent jump from 65.23 won in March.

This year's increases come roughly three years after the last hike in August 2019.

The increase of 20.7 percent for households last month was the highest monthly jump since the government began compiling related data.

Behind the rapid increase over the past few months is a surge in global energy prices, notably liquefied natural gas (LNG). Also at play is the rising demand for energy amid the gradual economic recovery from the COVID-19 pandemic.

The import price of LNG surged to $1,465 per 1 ton in September this year, compared to $571.15 in September of 2021. The year-on-year increase has led to an over 30 percent hike in gas rates this year.

The recent steep rise in gas rates is due in large part to the volatility in the global energy market, highly vulnerable to geopolitical uncertainties, said Jung Jun-hwan, an oil policy research team head at the Korea Energy Economics Institute (KEEI).

"Korea relies on other resource-rich countries for about 97 percent of energy imports," he said. "Korea has no control over war-induced uncertainties in the global energy sector, nor can it predict when the conflict will die down. The rate hikes are inevitable since the state-run energy firm has to set the gas rates after factoring in energy import costs, among other variables," Jung added.

LNG importers will be exempt from tariffs through March next year, a temporary discretion to lower the burden of winter energy costs.

However, the emergency measure will not be as effective as energy-saving campaigns, according to an energy ministry official.

"Some European countries are taking extreme consumption-curbing measures, including placing a ceiling on electricity and gas usage for households," a ministry official said.

"Korea would not go that far, but raising awareness to save energy will be the fundamental solution to overcome the national energy crisis this winter," the official added.

lkm@koreatimes.co.kr