Moon’s Phase-Out: What does it imply?

Moon Jae-in, the newly-elected President of the Republic of Korea, has vowed to wind down Korea’s nuclear power program. Because Korea steadily built up its nuclear industry for four decades, has 25 power reactors generating nearly a third of its electricity, and is now exporting modern nuclear power plants, Moon’s statements about nuclear energy have taken some people by surprise. Let’s look at what they imply.

Moon was elected for a five-year term; he cannot be re-elected. If he wants to launch a nuclear phase-out he has two basic options: He can arrest future development by halting a half-dozen new power plant construction projects and not re-licensing older units for extended lifetimes. He could also scale back Korea’s nuclear program by ordering operating nuclear power plants closed, cancelling previously initiated projects, and defunding ongoing research programs.

In principle both options would be reversible after five years. His successor could relaunch shelved new projects. The second option would entail more risk, because some actions–for example plant closings–might be difficult to reverse. Should Moon be followed by a politician from one of several parties likewise opposed to nuclear power, then his policies may be extended, with greater likelihood that they will become permanent.

So far, Moon does not appear to be following the path of another anti-nuclear political figure in East Asia, former Taiwan President Chen Shui-bian. In 2000, the newly-elected Chen, supported by a reformist democracy movement and civil society activists who championed a “nuclear-free homeland,” abruptly cancelled an ongoing project to build a nuclear power plant southeast of Taipei. The snap decision unleashed industrial policy turmoil on Taiwan and ultimately added hundreds of millions of dollars to the cost of the nuclear project when it later resumed after supreme court judges ruled Chen’s action unconstitutional.

Echoing Chen’s reformist rhetoric, since his May 10 inauguration Moon has reiterated his vow to launch a “nuclear-free era” for Korea. But so far he has announced few details, none of them dramatic.

On June 19 Moon said that he would prevent existing power reactors from extending their lifetimes. There are two 1970s-vintage reactors in this category: Kori-1, Korea’s oldest, and Wolsung-1. Kori-1’s fate was sealed by its owner, Korea Hydro & Nuclear Power Co. (KHNP) in 2015, under Moon’s predecessor Park Geun-hye. Nuclear regulators under Park allowed Wolsong-1 to be operated until 2022, but before this year’s election court judges overturned that decision in favor of intervenors who argued that regulators violated procedures. Moon so far has been prudent, telling news media on June 19 he aims to close Wolsung-1 “as soon as possible after reviewing electricity demand.” Licenses for five more reactors expire by 2025, but all of them after Moon leaves office.

In principle, Moon can walk back plans by government-owned KHNP to build most of the eight reactors it has planned to set up during the 2020s. That ambitious plan had already been pruned after the nuclear accident at Fukushima-Daichi in Japan. In anticipation of further cuts by Moon, KHNP last month halted preparations for two of these planned units, Shin-Hanul-3 and -4. But Moon hasn’t weighed in on the fate of the first two projects, Kori-5 and -6, which are under construction and about one-quarter finished. Matching his apparent lack of haste in the Wolsong-1 case, Moon on June 19 said that the decision will be made “after reviewing how much of the construction has been completed, how much we will need to pay in compensation when halting it, and how much electricity is in reserve.” This suggests that a cost-benefit analysis of various phase-out options has not yet been conducted.

So it is possible that Moon may craft a cautious, even minimalist approach to trim nuclear power sufficient to appeal to his liberal political base. Should Moon instead take aggressive actions to actually reverse Korea’s nuclear development, the potential for profound changes in Korea’s nuclear energy profile would be particularly significant in three key areas: the nuclear fuel cycle; nuclear power plant exports; and the country’s electricity source profile.

Fuel Cycle Policy

Beginning in 1997 Korea set the goal of developing an industrial capacity to use pyroprocessing technology to recover uranium and plutonium from spent power reactor fuel and use it in advanced fast-neutron reactors. The technology was developed a half-century before but not at the scale required by a commercial nuclear power program. Because of the potential proliferation challenges this technology poses, the United States wants to put Korea’s pyroprocessing ambitions on a longer time line and has persuaded Korea to cooperate in a bilateral feasibility study through the early 2020s.

The goals of the closed fuel cycle in Korea are fuel supply security and reduction in both heat load and toxicity of spent fuel, under the critical assumption that Korea will need nuclear energy for centuries. If instead Korea joins common assumptions in Western countries that nuclear power will likely be replaced by other sources that are more publicly acceptable and deemed less risky, an expensive and complex closed fuel cycle will have little justification. In that case, Moon might substantially reduce or even terminate the government’s support for advanced R&D at the Korea Atomic Energy Research Institute which is leading the pyroprocessing program. Independent of other policy decision making by Korea, the United States might on balance welcome that outcome.

Nuclear Power Plant Exports

A strategic component of Korea’s nuclear energy development is its ambition to export nuclear power plants and equipment. A breakthrough was made in 2009 when Korean firms were chosen to build nuclear power reactors in the United Arab Emirates. Contracts were awarded on the basis of Korea’s highly-competitive price; the track record of Korean technology in Korea; a promise by Korea to invest in nuclear training and education in the UAE; a tight relationship between Korean industry and American vendor Westinghouse (reflecting a firm U.S.-ROK nuclear energy partnership at the government level); and high-level Korean government support for flanking ROK-UAE diplomacy.

On the heels of the UAE contract, Korean government officials calculated on the back of an envelope (based on their thumbnail estimate of Korea’s share of future world nuclear construction projects) that Korea could, and should export 30 nuclear power plants by 2035. Setting aside the reduction in expectations for nuclear construction after Fukushima, that looks far-fetched above all because Korean firms were challenged by human resources bottlenecks in carrying out the UAE project. Were Moon to cancel foreseen nuclear construction projects in Korea in coming years, Korea’s nuclear power plant export capacity in the short term would be enhanced. At the same time, however, if Moon backs off supporting Korean industry, it will not benefit from diplomatic weight that pushed Korea over the top in the UAE competition. What’s more, Seoul’s commitment to nuclear exporters in coming years may be more critical to success in light of uncertain prospects for Korea’s partner Westinghouse, whose intellectual property is the technology basis for most of Korea’s power reactors. Korean industry has in fact considered acquiring Westinghouse, but that transaction would probably make little sense to Westinghouse shareholders if they concluded that the Korean government at the highest level would not support its nuclear industry.

Electricity Source Profile

Nearly all of Korea’s electricity is generated from three sources: nuclear (30%), coal (40%), and LNG (25%). Moon has indicated that he plans to increase the share of LNG and renewables to compensate for a forthcoming reduction in production from nuclear and coal. Can he do this? Not without dramatically intervening in current plans to build new power plants and assuming the concomitant financial and political risk.

Twenty-five nuclear power plants and double that number of coal-fired power plants account for nearly all of the base load electricity that Korea generates 24/7.  During Moon’s term of office, Korea won’t likely produce less nuclear power unless Moon orders KHNP to idle or close its operating reactors. Moon hasn’t said he would do that, but he has spelled out that he aims to close down eight of Korea’s 53 coal-burning stations. The fine print however suggests that Moon may quickly encounter problems if he aims to accomplish a significant reduction in coal-burning. The eight oldest coal-fired power stations targeted by Moon will be shuttered only during off-peak months of March through June, and the plants would be scheduled to be switched off for good only in 2022 when Moon’s term is concluding.

As in the nuclear case, attention is focused on Moon’s plans for current planned construction of coal plants representing five gigawatt (GWe) in capacity. Here, too, Moon may be constrained, as private investors have already paid out about US 1 billion for these projects and would likely sue the government should Moon go back on plans to expand the coal sector that were made under his predecessor Park.

That leaves LNG and renewables. Neither are base-load generators in Korea. If Moon shifts electricity fuels policy toward LNG, he will reverse a government policy that has been in place for most of this decade to replace expensive gas with cheaper nuclear, after Korea experienced a doubling of LNG imports during the 2000s. Before Moon was elected, Korea had anticipated a further reduction in Korean LNG demand of some 40% by 2029. Some observers profess to be worried about future Korean dependence upon future LNG imports from Russia should Moon change the policy, but in principle other vendors, including in Australia, Iran and the U.S., could sell more LNG to Korea. Renewables account for just 2% of Korea’s power generation, and before Moon was elected, his predecessors have launched government programs aimed to increase this share to over 10% by 2020. Moon has announced the ambition of increasing it still further to 20% by 2030–that’s eight years after his term of office concludes.

The economic impacts of these shifts are profound, and it easy to imagine that any precipitous moves could shave a percentage point or two off Korean GDP growth. At a time of general global economic uncertainty, major Korean industry will undoubtedly seek to temper Moon’s energy planning.

Nuclear Policy Trajectory

Since the 1970s Korea has built up its nuclear power infrastructure by virtue of an aggressive policy of import substitution, foreign technology and intellectual property acquisition, and investment in infrastructure and know-how. Korea today is the world’s fifth-leading nuclear power generating country. The official view that resource-poor Korea will need nuclear power for a long time rationalized the government’s heavy commitment to nuclear R&D in many areas, so bureaucratic and industry battle lines will be quickly drawn if Moon elects to take on Korea’s nuclear power sector.

On the other side of the ledger, Korea’s nuclear program is on the defensive politically and the overall trend has been downward. Since the 1990s, when nuclear power generated close to half of Korea’s electricity, ever-greater demand for electricity in Korea has largely been met by expanding coal-fired power production, not nuclear; today’s nuclear share of power generation is less than one-third. Nuclear new-build targets have been shifted lower this decade to better reflect Korea’s macroeconomic shift toward consumption and away from energy-intensive capital goods production (some unofficial targets for future nuclear power plant construction advanced by industry around the turn of the century envisaged a capacity of 60 GWe-75 GWe sometime after 2050; after Fukushima the horizon for projections has been limited to 2035 and projected capacity levels set at 38 GWe.) At the same time, when Moon was elected, Korea planned on a continued expansion of coal consumption through at least 2030, prompting climate mitigation activists to charge that in recent years Korea’s commitment to cutting carbon emissions is weakening.  Indeed Korea’s Intended Nationally Determined Contribution (INDA) toward meeting the targets for climate change mitigation expressed by the U.N. Framework Convention apologizes that “Given the decreased level of public acceptance following the Fukushima accident, there are now limits to the extent that Korea can make use of nuclear energy, one of the major mitigation measures available to it.” Especially following revelations of corruption that permitted serious quality control lapses at Korean nuclear power plants, it would appear that Korea’s nuclear industry has failed to gain public confidence needed for a major increase in nuclear power investment in the country during the 2020s. Lack of public support was expressed during the 2017 presidential election by a campaign pledge signed by seven candidates, including Moon, to oppose nuclear energy.

Moon has five years to rule. The biggest unknown is whether he will be able to harvest post-Fukushima political opposition to nuclear power, environmentalist opposition to coal-burning, and secure support for alternative sources, sufficient to compel Korean industry to make significant changes in Korea’s electricity fuels profile.  If yes, Moon may point Korea’s nuclear sector in a continued negative direction and put Korea on an electricity fuels policy path more consistent with the global industrial country mainstream: less coal, more gas, more renewables. If not, Korea’s President may instead set up signposts for ambitious electricity fuels and nuclear policy destinations that can’t be reached before 2023 when Moon will no longer be in the Blue House.