'Carbon Neutrality and Nuclear Phase-Out' Many Areas Need Funding... Electricity Fund Actually Decreased Last Year

New Fund Formation Amount in 2020 at 1.9718 Trillion KRW... Decreased by 115.5 Billion KRW from Previous Year
Impact of Reduced Electricity Sales Due to COVID-19
Cumulative Deposit Size of Public Fund Falls Below 4 Trillion KRW

Project Expenses Scale Increasing
More Than 60% Allocated to New and Renewable Energy

From Year-End, Costs for Nuclear Power Plant Closure and Cancellation Also Compensated

[Sejong=Asia Economy Reporter Joo Sang-don] Last year, the scale of the Electricity Industry Infrastructure Fund decreased for the first time since its establishment in 2001. This was due to a reduction in new fund formation caused by decreased electricity sales amid COVID-19, while project expenses increased for the expansion of new and renewable energy supply.

According to the supplementary documents of the 2022 budget submitted by the government to the National Assembly on the 6th, the new fund formation amount of the electricity fund in 2020 was 1.9718 trillion KRW, down 115.5 billion KRW (5.5%) from the previous year (2.0873 trillion KRW).

The electricity fund is formed by collecting 3.7% of electricity charges as a statutory burden to continuously develop and establish the foundation of the electricity industry. The scale of new fund formation is thus determined by electricity sales volume. According to statistics from the Korea Power Exchange, electricity sales volume decreased by 2.2%, from 520.5 million MWh in 2019 to 509.27 million MWh in 2020. Accordingly, sales revenue decreased by 1.1% (63.79 billion KRW), from 56.5565 trillion KRW to 55.9186 trillion KRW during the same period.

As electricity sales revenue declined, the statutory burden collected for the electricity fund was less than expected. When the budget was initially prepared last year, it was anticipated that 2.2229 trillion KRW would be collected, but in reality, only 1.9718 trillion KRW was collected, which is 251.1 billion KRW (11.3%) less.

The electricity fund started in 2001 with 379.3 billion KRW formed by the government during the restructuring of the electricity industry. This year, including support project expenses and operating funds, the scale has grown to 6.394 trillion KRW. However, as the statutory burden decreased to 1.9718 trillion KRW last year and project expenses increased, the cumulative deposit amount in the Public Fund Management Fund (Gongja Fund) decreased from 4.03 trillion KRW in 2019 to 3.96 trillion KRW last year. This is the first time in three years that the Gongja Fund deposit size has fallen below 4 trillion KRW.

On the other hand, the scale of project expenses used for new and renewable energy supply, electricity supply to islands and remote areas, electricity safety management, support for areas surrounding power plants, electricity demand management, and electricity research and development (R&D) has steadily increased. From 1.668 trillion KRW in 2017, the first year of the Moon Jae-in administration, it rose to 1.8364 trillion KRW in 2018, 2.6484 trillion KRW last year, and 2.6834 trillion KRW this year.

Especially this year, more than 60% of the fund is allocated to the new and renewable energy sector. According to the ‘Detailed Usage of the Electricity Industry Infrastructure Fund’ submitted by the Ministry of Trade, Industry and Energy to Yoon Young-seok, a member of the People Power Party, 1.6893 trillion KRW (62.8%) will be spent on new and renewable energy sectors such as wind and solar power. If the electricity fund decreases, support projects for expanding new and renewable energy supply may face setbacks.

Not only the amount but also the usage of the electricity fund is increasing. The government established a principle through the ‘Energy Transition Roadmap’ deliberated and resolved at the Cabinet meeting in October 2017 to compensate operators’ expenses caused by the phased reduction of nuclear power plants using funds such as the electricity fund. The legal basis was secured by revising the Enforcement Decree of the Electricity Business Act in June. Accordingly, from December this year, costs for nuclear power plants that were closed early or canceled due to the nuclear phase-out policy can be compensated from the electricity fund. According to the office of Han Moo-kyung, a member of the People Power Party, a total of seven nuclear power plants have been suspended, put on hold, or closed early under the current administration, with estimated losses of 1.4445 trillion KRW for these plants.

A Ministry of Trade, Industry and Energy official said, "We are still operating with nearly 4 trillion KRW in surplus funds, and as the global economy is recovering, it is hard to say that the fund scale will continue to decline," adding, "The possibility of setbacks in support projects for expanding new and renewable energy through the electricity fund is also low."

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