South Korea's rapid development as a major economic and industrial power has resulted in a surge in energy demand. Since the country lacks any significant local energy resources of its own, it finds itself relying on imports for over 96% of its energy needs.
According to Korea Energy Economic Institute (KEEI), primary energy demand will grow at an annual rate of 2.7% until 2020, while electricity demand growth is projected at 2.5% per year over the same period. Industry accounts for 50% of electricity demand, while residential consumption represents a further 24%. With industrial use of electricity expected to grow more slowly in future, the residential and commercial sectors are expected to account for most new electricity demand, with CHP district heating having a potentially important role to play.
South Korea’s ambitious plans for CHP market
CHP development has been sluggish in South Korea, currently accounting for a mere 7% of the national mix since the late 2000s. Most CHP in the country (about two thirds of the total) is integrated into district heating applications which represent the main source of growth in recent years. Currently, the country delivers district heating to about 15% of its population.
One good example of where South Korea is headed with CHP can be seen in the new 834MWe and 290MWt Ansan combined cycle plant, which came online in early January. Built by Siemens and POSCO, the two-unit LNG-fired facility supplies both power and district heating for the city of Ansan and was completed in only 2 years.
Meanwhile, industrial CHP growth has been slow mainly due to high LNG prices. District heating already supplies many of the large urban areas in South Korea, so future growth in that area may be limited). Because large users directly import LNG themselves, this has increased the cost effectiveness of large-scale gas-fired CHP.
South Korea has its own national fuel cell CHP initiative, though on a smaller scale, with a target of 100,000 systems by 2020. FuelCell Energy is currently one of the major suppliers of fuel cells in South Korea, with several projects in progress. The total installed capacity of fuel cell CHP stands at 62MW.
The small-scale CHP/district heating market is already fairly saturated, and this is not seen as an area of significant future growth. Renewable CHP is gaining attention, however, with several biomass, biogas, and solid waste–fueled plants in operation.
Benefits of CHP
Having set a 2030 deadline to reduce emissions of greenhouse gases by 30%, the government of South Korea is promoting the development of clean, alternative and renewable energies through a $36 billion, 5-year plan that is already directly affecting domestic power policies. CHP will be able to deliver on this environmental goal. Because less fuel is burned to produce each unit of energy output and because transmission and distribution losses are avoided, CHP reduces emissions of greenhouse gases and other air pollutants.
It’s also good for the purse strings. CHP can save facilities significant money on their energy bills due to its high efficiency, and it can provide a hedge against electricity cost increases.
Because a CHP unit generates electricity on-site using natural gas, a business does not have to purchase as much (if any) grid electricity. Lower electricity bills mean big cost savings.
And the process is very efficient. Getting more useful energy from the same amount of fuel means companies can purchase less, cut costs and reduce emissions.
With increased natural gas production and a strengthened resource base driven by technological advances, lower and more stable natural gas prices can help strengthen the economics and make CHP a more attractive investment. Lower natural gas prices – especially in areas where electricity prices are high – mean that, all things being equal, CHP begins to make more sense.