[Graphics by Song Ji-yoon]
South Korea’s state-run main utility Korea Electric Power Corp. (KEPCO) and umbrella energy suppliers are under mounting losses as they shoulder the heavy cost of fast transition to renewables under ambitious carbon neutrality goal and cap on electricity bills amid inflationary pressure and Covid-19 hardship.
KEPCO’s operating loss is expected to stretch to 3.85 trillion won ($3.3 billion) on a consolidated basis this year due to the increasing cost for renewable energy purchases amid the government’s nuclear and coal phase-out policy, according to its fiscal plan from 2021 to 2025.
The red would exceed the 2.8 trillion won loss the company recorded in 2008 amid the global financial crisis. KEPCO said its renewable energy cost is expected to reach above 22 trillion won from 2021 to 2025.
Its standalone operating loss this year would reach 4.38 trillion won, its biggest-ever.
Shares of KEPCO are down 0.4 percent at 23,300 won as of 1:00 p.m. Thursday
The company had made more than 4 trillion won surplus last year thanks to the fall in energy prices but it has now been weighed down by rising international crude prices and costs for renewable energy it has spent to meet the government’s clean energy targets. It argues for a raise in the fourth quarter electricity bill to improve its balance sheet, but the government is reluctant due to the impact on inflation already above 2 percent target. Electricity bills had been capped throughout this year.
KEPCO estimates that a 1 percent increase in electricity bill can bump up pre-tax net income by 268.8 billion won on a half-year basis and 537.5 billion won on a yearly basis. Considering an estimated 700 billion won annual increase in the cost to meet the renewable portfolio standards (RPS), electricity bill should go up more than 1 percent.
But the unpopular move of raising electric rates cannot be easy ahead of the presidential election in March next year.
The ruling party wants to go more aggressive in carbon goal by raisin the nationally determined contribution (NDC), a national target for greenhouse gas emission reduction, from the current 35 percent to 40 percent.
By Oh Chan-jong and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]