[2020 National Audit] New and Renewable Energy, Shin-Hanul Units 3 and 4 Construction Halted Faces Criticism at Audit (Comprehensive)

Public Enterprise Offshore Wind Project Feasibility and Solar Power Overdevelopment Issues Under Scrutiny
Controversy Over Halting Shin Hanul Units 3 and 4 Construction Without Consultation with KHNP

Sung Yun-mo, Minister of Trade, Industry and Energy, is responding to a lawmaker's question during the 2020 National Assembly audit of the Ministry of Trade, Industry and Energy held on the morning of the 7th at the National Assembly in Yeouido, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] The solar and wind power projects, which are key to the government's energy transition policy, came under heavy criticism from the opposition party during the National Assembly audit on the 7th. The Shin Hanul Nuclear Power Plant Units 3 and 4, whose construction was halted following the 'nuclear phase-out' declaration, were also brought into question.

"Public enterprises participating in low-profitability offshore wind power projects"… "Projects being pursued according to preliminary feasibility study conditions"

President Moon Jae-in emphasizing the importance of strengthening offshore wind power competitiveness and green energy at the "Korean New Deal, Green Energy Site - The Wind Blows" event held on July 17 in the offshore wind power demonstration complex in Buan-gun, Jeonbuk. (Image source=Yonhap News)

On this day, Lee Joo-hwan, a member of the People Power Party, pointed out at the Ministry of Trade, Industry and Energy audit by the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee that public enterprises are recklessly entering offshore wind power projects with low economic feasibility, raising concerns about worsening management conditions.

According to data submitted by energy public enterprises under the Ministry of Trade, Industry and Energy, including Korea Electric Power Corporation, there are a total of 34 offshore wind power projects being pursued by energy public enterprises, with a total project cost of 53.6686 trillion KRW.

Among these, only seven projects were subject to economic feasibility studies. Notably, two projects showed a benefit-cost ratio (B/C) below 1, indicating poor economic feasibility.

Specifically, the Donghae 1 floating offshore wind power project, promoted by Korea National Oil Corporation with a total project cost of 1.4 trillion KRW, had a B/C of 0.55 in the preliminary feasibility study.

The offshore wind power project in Sinan, Jeollanam-do, promoted by Korea South-East Power Co., Ltd., with a total project cost of 1.6127 trillion KRW, had a B/C of only 0.53 according to the preliminary feasibility study.

Lee said, "Despite most energy public enterprises having tens of trillions of won in debt or recording operating losses, they are recklessly pushing large-scale offshore wind power projects with significantly low economic feasibility," adding, "From now on, we need to prepare a solid energy policy without being obsessed with numbers."

Minister of Trade, Industry and Energy Sung Yun-mo responded, "In B/C analysis, public enterprises consider three criteria when undertaking energy projects: social costs, policy feasibility, and cash flow and profitability," adding, "We are currently pursuing projects that meet these three criteria."

"Serious problem of uncontrolled solar power development"… "Strengthening safety management of new facilities"

On the afternoon of August 8th, solar power facilities in Daerang-dong, Jecheon-si, Chungbuk were damaged by a landslide. (Image source=Yonhap News)

Concerns were also raised about the uncontrolled development of solar power facilities in mountainous areas, which was pointed out as a cause of landslides during the summer heavy rains.

According to data received by Lee from 17 cities and provinces nationwide, at least 272 locations have had solar power facilities installed in environmentally protected areas such as ecological landscape conservation zones and landslide grade 1 and 2 areas from 2018 to this year. The installation area is at least 608,000 pyeong, equivalent to about 281 soccer fields.

Among these, 81 locations had solar power facilities installed in ecological and natural grade 1 areas, and 52 locations had mountainous solar power facilities installed in landslide grade 1 and 2 areas.

Notably, among the 27 solar power facilities where landslides occurred during this summer's monsoon heavy rains, 14 were installed in landslide grade 1 and 2 areas.

Lee criticized, "Due to discord between the government and local governments, blind spots in management have occurred, and uncontrolled development along with landscape and forest damage caused by mountainous solar power facilities is a serious problem."

Minister Sung responded, "Right after announcing the Renewable Energy 3020 policy in 2017, the REC weighting for mountainous solar power was reduced and the slope limit was adjusted from 25 degrees to 15 degrees, making permits stricter," adding, "There are issues with already installed and under-construction facilities, so we will strengthen safety measures and proceed with caution in implementing the policy."

He added, "We will be very strict regarding the safety of new installations."

Kim Jung-jae, a member of the People Power Party, raised concerns that an additional area equivalent to 70% of Seoul's size would be needed to meet the government's solar power generation targets.

According to data Kim received from the Korea Energy Agency, the area required for 1GW (gigawatt) of solar power generation is 13.2 km². Considering the government's target to increase solar power capacity to 32.2GW by 2034, a total area of 425.04 km² would be needed, which is about 70% of Seoul's total area (605 km²).

Kim said, "It is questionable whether such a large-scale solar power site is feasible," urging, "The government should present a concrete roadmap for securing sites."

"Government's unilateral decision halted Shin Hanul Units 3 and 4 construction"… "KHNP also said it was difficult"

A panoramic view of the site for Shin Hanul Units 3 and 4 at the Hanul Nuclear Power Headquarters of Korea Hydro & Nuclear Power in Uljin-gun, Gyeongsangbuk-do. (Photo by Korea Hydro & Nuclear Power)

Criticism was also raised that the government unilaterally decided to halt construction of Shin Hanul Units 3 and 4 in 2017 without consulting the project operator, Korea Hydro & Nuclear Power (KHNP). Minister Sung countered that the intention survey form from KHNP was received according to procedure.

Yoon Young-seok, a member of the People Power Party, pointed out, "At the time of halting construction of Shin Hanul Units 3 and 4, the Ministry of Trade, Industry and Energy claimed it consulted KHNP and made the decision, but KHNP responded that there was no consultation at all."

Previously, the Shin Hanul Units 3 and 4 construction project was included in the 4th Basic Plan for Electricity Supply and Demand (Electricity Plan) and received a power generation business permit from the government in February 2017. However, after the Moon Jae-in administration took office, the government excluded the project from the Electricity Plan at the end of 2017, and the project was halted.

Yoon criticized, "The halt of Shin Hanul Units 3 and 4 is symbolic of the nuclear phase-out policy. Despite sunk costs reaching 780 billion KRW, KHNP had no choice but to stop the project. The government claims it consulted KHNP, but the responses are contradictory."

Minister Sung responded, "According to the Electricity Plan establishment procedure, power generators are requested to provide the status of power facilities, which includes an intention survey form," adding, "At that time, the intention survey form stated, 'It is expected that normal project progress will be difficult in the power generation business intention survey.'"

A heated exchange occurred over whether to disclose the intention survey form. Yoon demanded its disclosure, but Minister Sung refused.

Minister Sung stated, "The intention survey form is confidential by principle, so it cannot be disclosed."

Yoon asked, "Why is it confidential? Is it because it is not honorable to disclose it?"

Minister Sung replied, "Confidentiality is the principle, so that is what I said. Since there is a request, I will review how to verify it and get back to you."

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