Korea Electric Power Corporation (KEPCO/Hanjeon)

KEPCO’s locked-in emissions strongly exceed the budget allocated to the company under its decarbonisation pathway. The company’s planned future assets demonstrate it is aiming for extensive coal expansion in the ASEAN region, where coal assets are scheduled for launch as late as 2030. This region is expected to undergo rapid decarbonisation from 2030 onwards. Regulatory pressures to achieve this could result in falling profitability or devaluing of fossil fuel plants, exposing KEPCO to the risk of stranded assets. KEPCO’s plans for coal expansion have raised questions in the investment community, with BlackRock challenging the rationale of the company’s coal investments in Vietnam and Indonesia. To mitigate the risk of stranded assets and align with its low-carbon pathway, KEPCO should schedule the early closure of its existing fossil plants and abandon future fossil assets, instead focusing on constructing low-carbon capacity.

KEPCO reports expenditure on the R&D of low-carbon technologies, including smart grids, hydrogen energy, carbon capture and storage, energy storage, wind turbine development and PV solar development. However, the ratio between this spend and the company’s total capital expenditure does not meet the low-carbon level for R&D expenditure. A more focused investment strategy regarding these low-carbon technologies would demonstrate KEPCO’s commitment to the low-carbon transition and improve its alignment with the Paris goals.

In response to the climate change regime of the government of the Republic of Korea, KEPCO and its subsidiaries have developed a strategic plan to 2030. This plan has sign-off from the company’s board, and at a high level its key focus points relate to the low-carbon transition. However, overall ambition is lacking and much of the focus still centres around fossil fuel efficiency improvements. KEPCO can improve its performance by embedding a low-carbon-aligned emissions reduction target that covers the lifetime of its thermal assets into this plan. The plan should also contain a quantified estimate for a future, low-carbon electricity generation portfolio as well as a clear commitment to fossil fuel phase-out. To ensure the resiliency of this plan, KEPCO should stress-test it against low-carbon scenarios.

KEPCO intends to increase its renewable capacity, excluding large hydro, to 5.8 GW by 2030. The amount will comprise 2.9 GW each of wind and solar. The company also states it will reduce emissions by 950,000 tons – to contribute to the national energy conversion sector in the Republic of Korea’s reduction goal of 58 million tons. The base year for this target is not reported.

KEPCO’s plan is largely thermal focused. Depending on regulatory obligations, decrepit coal plants will be retired or improved. In some instances, coal plants will be converted to gas plants. KEPCO has not committed to phase out thermal generation.

Fossil fuels accounted for 65% of KEPCO’s generation in 2018. The company has an extensive coal expansion plan, with coal assets scheduled for launch as late as 2030 in the ASEAN region. The company is investing in R&D for non-mature technologies but not at a low-carbon-aligned rate.

Increasing coal-fired generation between 2013 and 2018 drove an increase of 9% in KEPCO’s emissions intensity.

KEPCO’s decarbonisation efforts are insufficient. The company’s targeted renewable capacity will have insufficient impact on its decarbonisation, if it continues to expand its coal and other fossil fuel capacity.