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Recovering nuclear to cut South Korean 4Q coal burn

Unplanned nuclear outages in South Korea have increased the country’s reliance on coal and gas-fired power generation this month, but the potential return of capacity in early October and a less onerous reactor maintenance schedule is set to curb fossil fuel demand in the near term.

Five South Korean nuclear reactors with combined capacity of 4.6GW have been off line for most of September, after inflows of salt water following two typhoons at the start of the month caused the facilities to trip, according to a report from the Nuclear Safety and Security Commission (NSSC).

But operator Korea Hydro and Nuclear Power (KHNP) restarted its 700MW Wolsong 3 reactor on 26 September and has told Argus it aims to bring the other units back on line around the South Korea thanksgiving holiday on 30 September-2 October.

Four reactors — the 950MW Kori 3 and 4 and the 1GW Shin Kori 1 and 2 — remain off line because of unplanned outages, according to KHNP notices. But the NSSC said yesterday that it would allow operations at Shin Kori 1 and 2 to restart today.

The unplanned outages and scheduled maintenance across other units reduced South Korean nuclear availability to around 13GW in September, according to Argus calculations, which would be down from actual output of 14.3GW a year earlier. And average peak power demand has been around 1pc higher on the year according to Korea Power Exchange data, suggesting that overall power generation is likely to be little changed from last year’s 61.75GW.

Generation using fossil fuels has probably increased on the year to cover the nuclear shortfall, which may have given a small boost to coal burn year on year. But if the unplanned outages are resolved quickly, South Korean nuclear generation is still set to grow strongly on the year in the fourth quarter, potentially weighing on power-sector coal and gas demand.

South Korean nuclear availability is scheduled to average 18.8GW in the fourth quarter, according to Argus analysis of KHNP schedules, which could boost output by up to 4.4GW on the year if fully dispatched. This has the potential to displace a similar amount of coal and gas-fired generation, which would be compounded by any weakness in overall power demand or growth in renewable output.

Coal accounted for around 59pc of total coal and gas-fired output in the fourth quarter of last year, and if it maintains that share in 2020, the equivalent of around 2.3mn t of NAR 5,800 kcal/kg coal consumption — or 760,900 t/month — could be displaced by the expected growth in nuclear output, according to Argus analysis.

But lower oil-linked LNG import costs following the steep decline in oil prices in the spring continue to weigh on South Korean domestic gas prices, which will likely be at their most competitive with coal early in the fourth quarter. This could support some coal-to-gas fuel switching, with each percentage point shift from coal to gas potentially reducing coal burn by an additional 310,000t (103,000 t/month) in the fourth quarter, according to Argus analysis.

And the government said earlier this month that it is committed to expanding winter coal-fired plant restrictions as part of the seasonal fine dust management policy, which starts in December. This would likely limit any potential for growth in coal-fired generation during the peak heating months.

South Korean nuclear generation GW

South Korean coal generation GW

Source: Argus Media