Concerns grow over possible summer blackout
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| A woman passes by an electricity meter box in an apartment in Seoul. Korea Times file |
By Lee Kyung-min
Concerns are growing over a possible blackout in the summer as power demand has soared due to the unusually hot weather, according to market watchers and economists Sunday.
The state-run Korea Electric Power Corp. (KEPCO) has been unable to raise utility rates, despite surging prices of coal, natural gas and other raw materials, making the nation's power grid system more vulnerable, they said.
Over the past two years, the state-run energy firm has been unable to increase electricity rates, due to an emergency measure that was implemented so as to weather the COVID-19 pandemic as well as the former Moon Jae-in administration's attempt to try to subdue inflation.
The analysts said it now has little room to withstand the rate increase pressure, as indicated by the record-high energy demand and falling reserve margin in May, with its estimated operating loss of up to 30 trillion won this year.
Data from Korea Power Exchange showed Korea's monthly maximum electricity power demand averaged 66,243 megawatts in May, up 4.5 percent from a year earlier. It was the highest figure since 2005 when the government began compiling related data.
Maximum power demand is measured at the moment when the power usage of certain day peaks.
The record-high figure is explained in large part by the early arrival of hot weather and the substantial economic recovery after years of the pandemic following eased social distancing rules and the lifting of movement bans.
The monthly maximum figure coming about two months early is a red flag, likely to prompt energy authorities to better prepare against a highly probable blackout in the summer. The monthly figure peaked in July last year when the country was gripped by the scorching heat.
Korea Meteorological Administration said last month that it is 40 percent more likely for Korea to experience hotter weather in June. The figure is inching up to a 50 percent likelihood that the daytime highs will remain elevated in July and August compared to the seasonal average.
KEPCO in trouble
KEPCO registered a staggering operating loss of 7.78 trillion won ($6.2 billion) in the first quarter of this year, compared to its 5.86 trillion won operating loss for all of last year.
Market experts say operating losses will amount to at least 17 trillion won and up to 30 trillion won this year, depending on developments in the geopolitical arena, which carries a lot of uncertainty at the moment as well as its impact on the global and local energy market.
KEPCO raised electricity rates in April, a 6.9 won per kilowatt-hour (kWh) increase that reflected global oil prices. Further cornering the firm is a 2.6―fold year-on-year increase in the unit wholesale price in the same month, meaning higher raw material input costs that are eating into profit margins.
Seoul National University economist Lee In-ho said the government faces a tall task of striking a balance between KEPCO's steep losses and curbing inflation.
"The pressure to raise electricity rates will intensify in the coming months," he said. "Whether and how well the government broaches the politically risky issue will determine the course of economic and energy policies of the Yoon administration."
