A Paradigm Shift to Low-Carbon, Green Growth

The government endeavors to nurture the green energy industry

Recognizing a shift to a win-win paradigm to help the energy and environment sectors take the lead in growth, the government strives to nurture the green energy industry by focusing the development of the top nine technologies badly needed as new growth engines, said Vice Minister for Trade and Energy Kim Young-hak.
"As was the case of the domestic semiconductor industry in the past, if we take such preemptive actions as the development of new green technologies and expanded R&D investments, I bet that it will prove to be an opportunity for Korea to secure new growth engines that will serve as the breadwinners of the 21st century," Vice Minister Kim said.
The technologies the government wants to develop as future growth engines include photovoltaic power, wind power, light-emitting display (LED), electric IT, fuel cell, gas-to-liquids/coal-to-liquids (GTL/CTL), integrated gasification combined cycle (IGCC), carbon capture & storage (CCS) and energy storage.
The following are excerpts of a written interview between NewsWorld and Vice Minister Kim, who touches on the government's responses to climate change and other policies on energy and trade.
Question: Will you tell our readers about the background and the direction of a paradigm to pursue low-carbon, green growth during 2009?
Answer: In the past, the development of the economy was based on the belief that "growth destroys the environment, and the environment hinders growth." The green growth initiative is a shift to a win-win paradigm designed to help the energy and environment sectors take the lead in growth and for growth to protect the environment.
The existing product factor-oriented growth mode is likely to hit a wall with the arrival of a crisis over resources and the environment, and unless there is no shift toward a low-carbon economy, regulations on greenhouse gas emissions are most likely to be enforced. Advanced countries are establishing mid- and long-term technology development strategies to make the most of climate change and the dearth of natural resources as new growth opportunities. They are pushing ahead with plans to nurture the green energy industry as their future growth engines. For instance, the United States, which established the Climate Change Technology Program starting in 2006, has set short- and mid-term technology goals, while the EU established the Strategic Energy Technology Plan in 2007.
As was the case of the domestic semiconductor industry in the past, if we take such preemptive actions as the development of new green technologies and expanded R&D investments, I bet that it will prove to be an opportunity for Korea to secure new growth engines that will serve as the breadwinners of the 21st century.
Last year, the MKE established the national energy master plan, the green energy industry development strategy and the industry development strategy for green growth to specify strategies on green growth and translate them into policies.
Together with the proliferation of new and renewable energy sources, the ministry plans to expand its R&D support for the localization of solar energy and wind energy equipment from 194.4 billion won in 2008 to 225.6 billion won in 2009, while revamping a system on the proliferation of new and renewable energy sources. The localization of wind power facilities will increase from three units with a combined capacity of 3.5MW to 20 units with an aggregate capacity of 28MW. It seeks to spearhead an era of green growth by ensuring the so-called green transformation that embraces green technology in the nation's nine mainstay industries, including automobiles and shipbuilding. A case in focus is Hyundai Heavy Industries, which developed the Thrust Fin system to lead a 4 percent to 6 percent fuel reduction and the Dual Fuel Diesel Electric (DFDE) system, with fuel-savings of 10 percent compared to the existing steam turbine LNG ship. Fifteen highly energy-efficient technologies, including green IT, high-performance server and eco-friendly materials, will be developed by March 2009.
Q: Are there any government steps to respond to climate change, including the facilitation of the carbon market?
A: 2009 will be a crucial time for Korea, as the final conclusion of the post-Kyoto Protocol on Climate Change needs to be made. The Bali roadmap on climate change, made in December 2007, calls for advanced countries to make commitments on the reduction of greenhouse gas emissions or push action plans through measurable and verifiable means and developing economies to arrange plans on proper reductions.
In this regard, the government has established strategies to effectively cope with international negotiations on climate change while seeking to build infrastructure to respond to climate change. It is pushing to lay a foundation to ensure low-carbon, green growth in the mid- and long-term perspective.
The government is seeking to expand financial support and tax benefits to investments in energy facilities in order to ramp up energy efficiency by 11.3 percent by 2012, while trying to introduce a negotiated agreement in which businesses meeting goals to reduce greenhouse gas emissions would be given such incentives as carbon credits. It is seeking to revamp subsidies for the proliferation of new and renewable energy resources and introduce the Renewable Portfolio Standard (RPS) that would require power companies to turn a given portion of their power generation to new and renewable energy sources.
The government is working hard toward boosting the carbon credit market in order to facilitate the trading of Korea Carbon Credits (KCER) by putting the reduction of greenhouse gas emissions to the forces of the market. It strives to export CERs abroad by linking Korean and foreign carbon credit trading markets with a goal of nurturing the Northeast Asian region into a global carbon hub in the mid- and long-term perspective.
In particular, each nation is to announce its greenhouse gas emission reduction goal within the year. Task forces on greenhouse gas emission reductions by the industrial field and so-called "Help Desks" will be set up in order to provide a package of support ranging from diagnosis to post-factum management to the domestic industry circles, while such programs as carbon cash-back refunding and carbon-neutral systems will be expanded or improved to spread the public cause of reducing greenhouse gas emissions on a voluntary basis.
Q: What size of investment is set aside for ensuring low-carbon, green growth and what areas will it be focused on?
A: The green energy industry, covering new and renewable energy and green fuel, is forecast to emerge as an enormous growth engine equivalent to the early stage of the IT revolution era, which registered a growth rate of 16.8 percent. The U.S. survey agency, Clean Edge, predicted in March 2007 that the green energy market will grow at an annual rate of an overwhelming 15.1 percent over the next 10 years. The government announced during a session on the green energy industry, presided over by President Lee Myung-bak, a decision to develop the top nine technologies badly needed as new growth engines in order to nurture the green energy industry in an efficient and strategic manner through choice and concentration. They include photovoltaic power, wind power, light-emitting display (LED), electric IT, fuel cell, gas-to-liquids/coal-to-liquids (GTL/CTL), integrated gasification combined cycle (IGCC), carbon capture & storage (CCS) and energy storage.
In the next five years, the government will set aside 1.7 trillion won in its R&D outlay for the development of the top nine focus areas and 4 trillion won in providing support for the spread of the technologies. The government's outlay is expected to induce approximately 10 trillion won in investments from the private sector -- 1.3 trillion in R&D outlay and 9.1 trillion won in facility investments.
In order to raise investment funds, the government will turn to the fund on electricity infrastructure and the special account for energy resource projects. It plans to introduce a system in which a fund will be extended from banks in connection with the government's policy funds. Currently, 100 percent of investments in the new and renewable energy sectors is drawn from the government's policy funds, but the government and banks will split the financing 50/50, for a total of 260 billion won for 2009. A green energy fund of 50 billion won will be raised to introduce such systems as renewable portfolio standard/renewable funds standard (RPS/RFS) and encourage the private sector to invest.
Q: Will you tell us about the government's principal policies to secure natural resources abroad and what areas will be the focus for 2009?
A: As the asset value of promising mining fields has plunged more than 60 percent due to the recent drop in crude oil prices and the financial crisis, our rivals, including China, are aggressively exploring the overseas resources development market through M&As and the purchase of mining blocks. The Korean government plans to turn to an aggressive overseas resources exploration strategy through preemptive investments, seizing the year 2009 as a golden opportunity to push its own development capacity now that our exploration of overseas resources is getting easier.
To this end, the government is striving to go for securing large-size M&As and the purchase of large mining fields, departing from the past practice of exploring small- and mid-size mining blocks. This past February, Korea acquired a stake in Petro-Tech of Peru, which is equivalent to a daily capacity of 10,000 barrels of oil per day.
The government has set aside 197 billion won, an increase of 16.7 billion won from last year, in loans for investing in overseas resources exploration on condition of repayment in case of successful projects to private companies, financing funds through the Export-Import Bank of Korea and Korea Export Insurance Corp. and having public enterprises finance advance exploration investment funds. The money represents a 73 percent portion of the government's total budget for exploring overseas resources, not including funds in the budget for developing the nation's continental sea beds.
The government is striving to promote collaboration in overseas resources exploration with major strategic areas, including Central Asia, and Central and South America through summit talks and inviting ranking officials to Korea in order to help our companies land promising projects.
It plans to expand such infrastructure for exploring overseas resources as the cultivation of experts through the promotion of colleges specializing in natural resources exploration.
Q: Will you elaborate on the significance and the progress of a project to import natural gas from Russia?
A: Korea Gas Corp. and the Russian state-run gas company Gazprom signed an MOU on the import of natural gas from Russia in the presence of the heads of state of the two countries last September. The project calls for Korea to import natural gas being produced in Siberia and the Far East region from 2015 and expanding imports to more than 7.5 million tons of gas annually from 2017. Bringing the gas via a pipeline across North Korea will be preferable and the maritime transportation of liquefied natural gas (LNG) from Vladivostok is also under study. The Korean government is also seeking to implement another project to bring in 1.5 million tons of LNG annually beginning in April from Sakhalin.
This move is designed to diversify importation sources of natural gas, for which Korea depends on the Middle East and Southeast Asia for more than 90 percent of its imports, and cut down on gas importation costs. Shifting the importation of about 25 percent of the nation's gas demand to Russia via pipeline transportation would save some 20 percent compared to the importation of LNG.
The Korean and Russian sides are actively cooperating in promoting the Russian gas importation project. In late 2008, the president of Korea Gas Corp. visited Russia, while a Gazprom vice president reciprocated it by visiting Korea to discuss ways of conducting a feasibility study. This past January, the Korean vice minister for trade and energy visited the Russian Energy Department and in February, the Korean minister of knowledge economy and Russian Vice Premier Igor Sechin reciprocated their visits to discuss the government-level implementation of the project.
The two countries are to sign a contract to import natural gas from Russia in late 2010 after wrapping up a feasibility study and their discussions.
Q: Will you give us specifics on the status and future plans of a project to develop smart-grid technologies?
A: The latest subject of talk regarding green growth is the smart grid. The smart power grid, a combination of the existing power grid and information technology, is the next-generation power grid designed to optimize energy efficiency by allowing power companies and their clients to interactively exchange information in real-time. Thomas Friedman forecast an "Energy Internet," a concept of the Internet playing a major role in the future energy sector. An intelligent power grid buildup would optimize electric energy efficiency, reducing national energy consumption by 6 percent and establishing infrastructure for supplying new and renewable energy resources. This is projected to cut down on the nation's greenhouse gas emissions by 4.6 percent.
Our ministry reported a plan to make Korea the world's first country with a smart power grid during the first meeting of the Green Growth Commission, presided over by President Lee Myung-bak on Feb. 16, 2009.
If we make the most of such opportunities as the world's first broadband buildup, dense national territory and sole power transmission and distribution company, we would be able to attain the goal. To this end, Korea has steadily developed technologies for a smart power grid. The government and the private sector are to pour 254.7 billion won into the smart power grid project during the period between 2005 and 2011. It will complete the establishment of a roadmap on the smart power grid covering all stages ranging from R&D to testing, proliferation and commercialization.
Q: Will you explain the latest trends and forecasts for crude oil prices?
A: Dubai oil prices have recently hovered over the lower end the $40 per barrel range due to a drop in demand caused by the global economic downturn.
Global petroleum product prices, a yardstick for determining domestic petroleum product prices, have been stable due to the stable crude oil price movements. Global crude oil prices had moved up since the first week of January before dropping off in the third week of February. Despite a cost push in domestic petroleum prices, caused by the weak Korean currency against the dollar, domestic petroleum product prices have remained stable. Domestic gasoline prices, which have continued to rise so far, show signs of a slower increase.
Global crude oil prices are predicted to remain at a lower price range of $40 to $60 per barrel for 2009 due to a slowdown of global crude oil demand arising from the sagging global economy. As a result, domestic petroleum prices are projected to be relatively stable. Crude oil prices are expected to stabilize in the next two weeks if the Korean currency against the dollar is stabilized. A continued drop in the won-dollar exchange rate would to lead to lower domestic petroleum prices. nw

Vice Minister for Trade and Energy Kim Young-hak