Utilities / Renewable Energies: Green Day 23: Supply reserve ratio still falling significantly

The authors are analysts from NH Investment & Securities. You can be reached at [email protected] or [email protected]. – Ed.

In July, Korea had a supply reserve ratio of 10.5%, avoiding blackouts. However, the quota would have fallen below 7% had it not been for: 1) an earlier resumption of operation of three nuclear power plants with a total capacity of 3.1 GW; 2) a greater contribution from solar energy during peak periods; and 3) controlled demand for power in public organizations.

The power reserve ratio remained stable in July; The blackout scenario in July did not materialize

With the summer heat wave in full swing, Korea’s daily highs have been 35 ℃ or more since mid-July. Against this background, the market has become increasingly suspicious of blackout risks. As a reference, a blackout occurs when the electricity supply reserve rate, which indicates the remaining supply capacity of the electricity market, falls below the 5% level. At 6:00 p.m. on July 27, Korea’s hourly power consumption peaked at 91.1 GW, but the power reserve ratio remained stable at 10.5%. We note that the lowest supply reserve ratio for July was recorded on July 13th (5:00 p.m.) at 10.1%.

We attribute the stable supply reserve ratio for July to the following factors: 1) earlier than planned operation in the nuclear power plants Shin Kori # 4, Wolseung # 3 and Shin Wolseung # 1 (total 3.1 GW); and 2) the greater contribution of solar energy at peak times (14% maximum, 12.5 GW). We note that Korea’s lowest ever supply reserve ratio for the summer of 2021 excluding the impact of early nuclear operations is estimated at 7.1% with reserve capacity of 6.5 GW.

Concerns about solar power

As of 2H21, the country’s solar power generation was 16 GW, of which around 80% was used at peak times. Under the 9th Baseline Electricity Supply and Demand Plan, the government is aiming to expand the solar installation’s capacity to 34 GW by 2030, thereby increasing the contribution of solar energy to the grid during peak periods. The peak load time has already changed from noon to evening. If the solar energy input increases by a further 25 GW or more at peak times in the medium / long term, this should change the hours of the lowest net load, which leads to the formation of the “duck curve”.

Disputes over policies to reduce nuclear energy continue

In view of the development of electricity reserves this summer, we expect little adjustments to the government’s policy to reduce nuclear energy. However, while the government has put in place policies to reduce nuclear and coal-fired power, it has not provided sufficient support policies to improve grid stability in relation to renewable electricity production or to accelerate investments in renewable energy, starting in 2025, if a serious decline Implementation of a nuclear and coal-free policy is planned.

Most power generation sources, be it nuclear or offshore wind, take at least five years or more to obtain operating permits. In addition, if construction is delayed, combined cycle power plants will probably not be able to replace the entire electricity demand in time. Since government and opposition parties are currently at odds with each other on power politics, the energy policy disputes are likely to continue for some time.