Korea goes nuclear to meet power demand

Korea Herald 20100224 Korea's Nuclear Technology (3)

Electricity is not just a commodity; it is a key underpinning of the modern way of life and an indispensable engine of prosperity and growth. Seen from a historical perspective, power use and economic growth have been and will probably continue to be strongly correlated. Power demand forecasts are usually preceded by macroeconomic outlooks such as economic growth and demographic change. This is the main reason why it is mostly governments who prepare long-term electricity supply plans. In Korea, the government prepares and announces "The Basic Plan of Long-Term Electricity Supply and Demand" (BPE for short) on a biennial basis. The most recent BPE was established in 2008 and covers a planning period from 2008 to 2022. The BPE provides the long-term energy policy directions and information on electricity supply and demand such as the electricity facility plan to secure stable electricity supply. Generation companies can apply for the government approval of their generation business and power plant construction plans based on the BPE.

Electricity demand The BPE provides all information regarding electricity demand, generation capacity plan and demand side management in Korea. Power demand is predicted primarily based on economic growth. However, other factors such as the historical increase of demand, industrial structure,

the elasticity of electricity prices and technological advancement in the end use are also considered in the process. Historically, the electricity consumption growth rate has gradually decreased as shown in Table 1. The increase rate of annual average power demand in Korea has fallen from 11.6 percent to 8 percent during the 1990s. It further fell to 5.7 percent during the 2005-07 period. The Increase rate of peak demand growth has also gradually slowed, dropping from 9.5 percent in the 1990s to 5.5 percent since 2001. The recent rise in peak demand is the result of the increased use of air conditioning due to abnormally high daytime temperatures and climate change. In the BPE, the peak demand growth rate is projected to slow to 2.8 percent per annum during the 2008-10 period and further to 2.2 percent per annum in 2020. Korea's per capita electricity consumption in 2007 was 8,064 kWh, up from 850 kWh per year in 1980. This figure is only 56 percent of the consumption in the United States. But it is higher than that in Germany and England and equivalent to that of Japan. This implies that demand increase due to increase in per capita consumption is not expected in the long term. Over the last three decades, Korea has enjoyed 8.6 percent average annual growth in gross domestic product, which has caused a corresponding growth in electricity consumption - from 33 billion kWh in 1980 to 371 billion kWh in 2006. Korea's economic growth rate during the 200820 period covered by the latest BPE is estimated at 4.2 percent, which implies a slower growth in power consumption. In the demand side, the increase in electricity demand in Korea is expected to further slow in the future since many innovative technologies aimed at enhancing energy efficiency and energy saving are being introduced in connection with climate change. Generation capacity According to the BPE, Korea's reserve margin - a measure of available capacity over and above the capacity needed to meet normal peak demand levels - is expected to be less than 10 percent until 2011, lower than the usually required margin of 10-20 percent of normal capacity. After 2012, the reserve margin is expected to remain 12-20 percent, which ensures a stabilization of demand and supply. Korea's gross power production reached 439 Gwh in 2007. Korea's generation capacity is expected to grow from 72.5 GWe in 2008 to 100 GWe in 2020. Nuclear power generation capacity is expected to total 32 GW in 2020, accounting for 31.5 percent of the total generation capacity. Nuclear plants are expected to generate 250 TWh of power in 2020, covering 45.8 percent of national demand (see Figure 1 and Table 3). However, the role of nuclear energy is expected to grow in Korea in the future as the government revised its energy supply plan to cope with climate change. In 2008, the government finalized the first "Korean National Energy Master Plan" which covers the 20082030 period. Under this plan, 11 more nuclear units (9,200 MW) are to be constructed by 2030 (in addition to the eight under construction), while two units would have been decommissioned around 2008 if licenses were not extended. This would boost the share of nuclear to 41 percent of total generating capacity and to 60 percent of power supply. The status of Korea's nuclear industry

At the present time, as shown in Figure 3, 20 nuclear units with 17,716 MW capacity are in operation and eight more units are under construction. Korea Hydro and Nuclear Power Co. (KHNP) and the Ministry of Education, Science and Technology, a regulatory agency in Korea, are negotiating license renewals for old nuclear plants to extend 30-year operating lifetime by another 10 years, starting with Kori-1 and Wolsong-1. A six-month upgrading and inspection outage at Kori-1 in the second half of 2007 concluded a major refurbishment program and enabled its relicensing for a further 10 years. At Wolsong-1, considerable refurbishment is being undertaken in a longer outage that started in April 2009 and continues to late 2010, including pressure tube replacement. After drawing on Westinghouse and Framatome (now Areva) technology for its first eight pressurized-water reactor units and Combustion Engineering (which became part of Westinghouse) for another two, Korea developed the Korean Standard Nuclear Power Plant (KSNP). The KSPN became a recognized design and evolved into the KSNP+. In 2005 the KSNP/KSNP+ was rebranded as the OPR-1000. OPR stands for Optimized Power Reactor. Six operating units and four under construction use the OPR-1000 design. Construction of the first pair of third-generation APR-1400 reactors - Shin-Kori 3 and 4 - was authorized in 2006, with the actual construction license issued in 2009. In anticipation of the project, KHNP placed a $1.2 billion order with Doosan Heavy Industries in August 2006 to provide major components. Westinghouse has a $300 million contract with Doosan for part of this order. The final construction permit was issued and construction started in February 2007. In April 2009, the government authorized construction of Shin-Uljin 1 and 2 and contracts for major components were signed with Doosan. The two units will be the first to be virtually free of Westinghouse intellectual property content and are expected to be completed in 2016. Korea's energy policy has been driven by considerations of energy security and the need to minimize dependence on oil and gas imports. Korea's energy policy will continue to have nuclear power as a major element of electricity production. One important reason for the expanding role of nuclear energy is the cost advantage of nuclear energy compared to other fuels. As shown in Table 4, nuclear power costs are lowest in Korea: for 2008, the generation cost of nuclear was 39 won per kWh, compared with coal at 53.7 won, LNG at 143.6 won and hydro at 162 won. The low cost of nuclear power comes from the economies of scale and learning effect resulting from continuous construction of nuclear power plants in Korea. The huge R&D investment in operations and maintenance process improvement also contributed to reducing cost and enhancing performance, including the utilization factor (the maximum demand of a system divided by its rated capacity) of nuclear plants, which then makes nuclear power more economic in the Korean market. Korean nuclear power plants have shown the highest level of performance in the world. As shown in Table 5, Korea's average capacity factor during the 2001-2008 period was higher than 90 percent, which is a better performance compared with the world average. The shut down rate per unit year, which represents the safety level of a nuclear power plant, is around 0.4 to 0.6. This rate means that one unit will be shut down around one time during the span of two years. With the help of continuous R&D investment in process innovation such as the reduction of construction duration, the cost of nuclear power plants dropped dramatically. The construction duration was reduced from 61 months for Uljin-3 to 47 months for Shin-Wolsong 1 and 2, which are OPR-1000 models. For the APR-1400 model like Shin-Kori 3 and 4, construction took 55 months. However, the period is expected to be reduced to 48 months. Competitive advantage of Korean nuclear industry

The success of the nuclear business in the Korean market is the result of the continuous construction of nuclear plants. A steady flow of new nuclear plants made it possible to generate electricity at a low cost and the learning effects from it enabled the building schedule to be right on track. The price of Korea's nuclear plants is also low due to standardization. Excellent operation performance also contributes to the continuous construction. As shown in Figure 4, from the operations management point of view, the success in the domestic market can be explained using three feedback loops: the economy of scale loop, R&D investment loop and operations and maintenance process improvement loop. Continuous construction guaranteed the stable supply chain in design and manufacturing, which contributed to reducing the cost. It also generates stable revenue and profit to enhance R&D investment and O&M process improvement. New localized design or new features such as the OPR-1000 and APR-1400 could be developed through R&D investment and construction duration dramatically dropped as a result. Korea's competitive advantage in the global market results from the expertise that many industry players could accumulate in the domestic market. First, the unit price is low due to the standardization achieved in plant and component design and continuous construction experience. Second, an excellent operation track record also acts as a differentiating point compared to other competitors. They enable Korean nuclear power plants to be the most competitive in the global market. As shown in Figure 5, we can find three main feedback loops that explain the success of the Korean nuclear industry in the global market: the domestic feedback loop, vendor feedback loop and export feedback loop. The more nuclear power plants are built in the domestic market, the more economic a nuclear power plant becomes. This leads to construction of more nuclear power plants in the domestic market. In the vendor feedback loop, as more nuclear power plants are ordered, the less the cost of manufacturing because of the economy of scale or learning effect. These two virtuous feedback loops reinforce each other and increase the competitive advantage of Korean nuclear power plants in the global market. The lower the price of Korean nuclear unit, the more attractive the Korean nuclear unit becomes, which enables Korea to get more export orders, which in turn enhances the economics of Korean nuclear units further. This competitive advantage played an important role in making Korea the successful bidder in the UAE market. Actually, the UAE's choice of Korea was made on the basis of cost and the reliability of construction schedule. However, these virtuous circles can be converted to vicious circles if the expansion of the domestic market is limited due to other factors. Cost advantage is not the only factor that makes nuclear the energy mode of choice in the local market. There are many challenges in expanding nuclear units in Korea, including safety issues, site problems and socio-political factors such as public acceptance. Also, the price of oil plays an even more important role. If the domestic loop changes to a vicious circle, the competitive advantage of the Korean nuclear industry will decrease very rapidly. In order to maintain the competitive advantage of the Korean nuclear industry, it is very important to keep expanding the domestic market, ensure the safe operation of nuclear plants and find ways to enhance public acceptance of nuclear power.

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