Downside of subsidies: ‘South Korea blackout threat remains’

With some of the lowest rates in the region, demand is catching up on supply.

SEOUL: A rare blackout which sparked fury in South Korea could recur anytime because successive governments have kept electricity prices artificially low to appease voters, encouraging overuse, experts say.

The September 15 outage, unprecedented in recent years, hit more than 2.1 million households and other premises with rolling blackouts lasting up to one hour.

About 2,900 people were trapped in halted lifts, traffic lights were out in many cities and factory assembly lines came to a temporary halt when power authorities cut the supply because reserves were dangerously low.

President Lee Myung-Bak gave officials at sole generator Korea Electric Power Corp (KEPCO) an angry tongue-lashing for what he called their backwardness.

But South Korea prides itself on high-quality infrastructure and is also eager to export its expertise in nuclear power, which generates 35 percent of the country’s electricity, as a new growth engine.

Knowledge Economy Minister Choi Joong-Kyung admitted that reserve power stood at dangerously low levels because of miscalculated demand.

“Similar blackouts are likely to recur anytime in the future because of overuse,” Jeong Han-Gyeong, a researcher at the private Korea Energy Economics Institute, told AFP.

In 2009 national per capita consumption was 8,833 kilowatts per hour compared to 5,607 kilowatts in Britain and 7,818 kilowatts in Japan.

KEPCO figures show Britain’s electricity price is about twice that of South Korea while Japan’s is around two and a half times as much.

“Because of cheap prices, more people rely on electricity as a main source of energy, with almost all users enjoying discounts,” Jeong said. Farmers, for example, get a discount of up to 65 percent compared to the highest tariff.

Lee Soo-Il, a researcher at the state-run Korea Development Institute, suggested the only remedy right now is to reduce consumption.

Lee said supply would be relatively stable in 2015 when two nuclear reactors under construction come into operation.

Until then “we may see permanent shortages unless consumers change their perceptions right now”, he said, adding demand had increased by an average annual rate of 4.8 per cent in the past four years, twice as fast as predicted.

Other experts denounced governments for delaying a rise in electricity rates in their attempts to spur growth and curb inflation.

“Politicians are foolish if they think the best way to serve the people is to keep electricity cheap. They are precipitating an energy crisis — habitual blackouts,” Incheon University professor Sohn Yang-Hoon said in a newspaper commentary.

Newspapers called for a sweeping revamp of KEPCO, whose debt rose to 33.4 trillion won ($29.9 billion) last year from 20.6 trillion won in 2006.

“It is pitiful for the Lee administration, which has frequently boasted of striking multi-billion dollar contracts to build Korean-designed nuclear power plants overseas, to invite such a rudimentary accident,” the Korea JoongAng Daily said in an editorial.

Published in The Express Tribune, September 26^th,  2011.