Construction of Shinhanul Units 3 and 4 Collapsed Due to Energy Transition... "Local Economy Devastated"

Direct Hit from the Nuclear Phase-Out Policy: Visiting Gyeongbuk Uljin and Yeongdeok
Population Decline and Worsening Economy for Ordinary People... Triple Hardships Amid COVID-19
Nuclear Industry Shrinks... Renewable Energy Fails to Deliver Results
Domestic Companies Struggle with Losses Amid Competition from Foreign Equipment

[Asia Economy Reporters Kim Bo-kyung and Moon Chae-seok] On the 15th, we visited Uljin-eup, Uljin-gun, Gyeongbuk Province. The bustling street 'Jungang-ro,' about 15 km away from the planned site for the construction of Shin Hanul Units 3 and 4 nuclear power plants, had long lost its vitality. During one hour from 2 p.m., only about 20 pedestrians passed by. With the suspension of nuclear power plant construction and the impact of the novel coronavirus disease (COVID-19), the local economy has frozen solid. Nam Mo (65), who runs a tailor shop, sighed, "Since the declaration of nuclear phase-out, the population of Uljin has decreased, and my store sales have dropped by 25%. I doubt if there will be any compensation, but I wish they would at least finish building the nuclear plants that were already under construction."

The situation is similar in Yeongdeok-gun, Gyeongbuk Province, where Cheonji Units 1 and 2 were supposed to be built. At the planned site about 10 km from Yeongdeok Station, only a pension stands alone. The pension owner said, "The damage caused by the nuclear phase-out policy is severe. We are operating while hoping for the faint possibility of resuming nuclear power plant construction, but I don't know how long we can keep paying off loans."

Three years after President Moon Jae-in's energy transition declaration, the nuclear industry has not only shrunk in size but is also deteriorating rapidly. The rapid push for nuclear phase-out has caused problems. The local economy is collapsing along with it. Meanwhile, renewable energy industries such as solar and wind power have yet to establish a foothold. As a result, the domestic energy industry's competitiveness and jobs have both failed to be preserved. Experts emphasize the need to slow down the pace of nuclear phase-out, suggesting at least proceeding with Shin Hanul Units 3 and 4 as planned.

◆The nuclear industry is in a total crisis... local economies are also suffering= The Korea Nuclear Industry Association classifies nuclear power companies with sales exceeding 10 billion KRW into 'power generation companies (Korea Electric Power Corporation, Korea Hydro & Nuclear Power),' 'supply industry companies (KEPCO KDN and subsidiaries, Doosan Heavy Industries, etc.),' and 'research and public institutions (Korea Atomic Energy Research Institute, etc.).'

In 2017, power generation companies had sales of 18.1948 trillion KRW, which decreased by 16.7% to 15.1529 trillion KRW in 2018. During the same period, supply industry companies' sales dropped by 4.7%, from 4.714 trillion KRW to 4.4941 trillion KRW. Nuclear power companies are evaluated as lacking growth drivers such as electricity rate increases and nuclear industry revitalization, with no guarantee that fundamentals will improve in the future.

The supply industry companies have been directly hit by the nuclear phase-out. Doosan Heavy Industries is often mentioned as a victim of the suspension of Shin Hanul Units 3 and 4 construction, with sales halving from 7.9 trillion KRW in 2012 to 3.7 trillion KRW in 2019.

The local economy in areas where nuclear power plant construction has been suspended is suffering. In Uljin, Gyeongbuk Province, while Shin Hanul Units 1 to 4, with a total capacity of 5,600 MW, remain incomplete, financial independence and employment indicators have worsened. According to Statistics Korea, Uljin-gun's employment rate averaged 62.54% from the first half of 2015 to the first half of 2017 before the nuclear phase-out, but dropped to 61.74% from the second half of 2017 to the second half of 2019 after the phase-out.

Financial independence has been on a downward trend since 2017, the 'first year of nuclear phase-out.' It was 10.2% in 2016, 11.4% in 2017, 11.9% in 2018, and 9.8% in 2019. The land transaction area decreased from 11.055 million square meters in 2015 and 11.513 million square meters in 2016 to 10.876 million square meters in 2017, 9.846 million square meters in 2018, and 9.236 million square meters in 2019. The population growth rate, a basic indicator of urban vitality, increased by 0.21% in 2014 and 0.15% in 2015 but recorded -0.03% in 2016, -0.24% in 2017, and -0.41% in 2018. The decline deepened in 2017 and 2018 after the nuclear phase-out.

◆Renewable energy fails to fill the gap= The renewable energy-related industries proposed by the government as alternatives to nuclear power are not growing either. As the government rapidly pushed energy transition without domestic companies being prepared, foreign companies have taken over the vacant market. Although the government is belatedly promoting localization, it is difficult to guarantee success.

OCI, the largest domestic solar power company, recorded an operating loss of 92.9 billion KRW in the first quarter of this year, expanding its deficit compared to last year. In February, OCI decided to stop producing polysilicon for solar power in Korea due to price competition from Chinese companies. Woongjin Energy, the only domestic ingot and wafer manufacturer, entered corporate rehabilitation procedures after losing out to Chinese competitors. As of the end of last year, among the 690 wind turbines installed domestically, Denmark's Vestas turbines were the most numerous at 226 units.

The share of domestic renewable energy supply is gradually increasing, but it is uncertain whether the government’s target of '20% by 2030' can be achieved. According to the '2019 Korea Wind Industry Annual Report' published by the Korea Wind Industry Association, renewable energy accounted for only 5% of the total domestic power generation of 529,341 GWh as of the end of last year, producing 26,606 GWh. Among these, wind energy, which the government has recently been promoting vigorously, generated only 2,672 GWh, accounting for just 0.5% of total power generation.

◆Experts call for slowing down the pace= Professor Joo Han-kyu of the Department of Nuclear Engineering at Seoul National University said, "Regardless of procedural legitimacy surrounding the start of nuclear power plant construction, at least Shin Hanul Units 3 and 4 should be built. The construction of Shin Hanul Units 3 and 4 does not conflict with the government's climate change response rationale; rather, it can strengthen the government's 'eco-friendly' rationale through increased employment and carbon reduction."

Professor Jung Dong-wook of the Department of Energy Systems Engineering at Chung-Ang University suggested, "Instead of focusing solely on increasing subsidies to operators to expand power generation facilities, support should first be provided to our companies to strengthen corporate competitiveness → reduce unit costs → expand operators' investment sentiment, thereby enabling our companies to withstand competition with Chinese firms."

This content was produced with the assistance of AI translation services.