A nuclear reactor in Barakah, the United Arab Emirates [YONHAP]
The “K-taxonomy” could help Korea in signing nuclear power projects overseas, but the green energy classification may not be enough for investors.
A green taxonomy is a list of economic activities considered environmentally sustainable. It describes which activities and assets that can be defined as green. As ambiguity over such definitions has long acted as a barrier to scaling up green finance, it will help banks and investors determine which companies or financial products are considered eco-friendly.
Amid the global comeback of once-shunned nuclear energy, the Korean version of the taxonomy will be announced as early as September, and is expected to have a significant effect on Korea’s plan to sell 10 nuclear power plants by 2030.
During a policy meeting with President Yoon Suk-yeol on July 22, Environment Minister Han Hwa-jin said that the ministry “will include nuclear power in the Korean green taxonomy to attract green investments from the financial industry.”
The first draft of Korea’s taxonomy guidelines was released in December last year under the Moon Jae-in administration, but nuclear power was not included in the list. Yoon’s transition committee in March pledged to scrap the former president’s nuclear phase-out policy, and to include nuclear energy as a green investment.
The ministry’s initial plan was to release the final draft by September and reflect the taxonomy guideline in the basic plan for electricity supply and demand — a roadmap biennially devised by the government that spells out the overall energy plan for the next 15 years — in December. But the Environment Minister suggested that it may take longer than expected to discuss the details.
Whether the local version of green taxonomy will follow the example of the EU’s classification, and to what extent, is the key issue.
The European Parliament on July 6 voted in favor of the European Commission’s decision to grant the green label to nuclear energy on the condition that an operational final disposal facility is built by 2050 for high-level radioactive waste, and switching to accident-tolerant fuel by 2025.
Minister Han said on July 18 that “Korea plans to include conditions related to the high-level waste disposal facility and accident-tolerant fuel, but the conditions may begin to be applied at a later point than in Europe considering the domestic situation.”
In July, Korea released a 1.4-trillion-won ($1.04-billion) plan to build an interim storage facility for high-level nuclear waste by 2043 and a final disposal facility by 2060. Its deadline developing the final disposal facility is 10 years behind the EU standard, meaning that Korea’s nuclear power business may not be able to attract loans or equity investments from European assets without stricter standards.
At this point, Finland is the only country with a final disposal facility. The country’s deep geological repository is scheduled to begin operation in 2024. The Swedish government approved a plan to construct one in January, and France plans to submit its licensing application sometime this year.
Korea does not have an interim storage facility for highly radioactive waste yet. Most of the highly-radioactive spent fuels are stacked inside cooling pools.
Since the $20-billion Barakah nuclear power plant project deal in the United Arab Emirates was signed in 2009, Korea hasn’t been able to win any plant deals. The government is eager to change that, with the aim of selling 10 nuclear power plant projects overseas over the next eight years.
Korea is competing with the United States and France for 8-trillion-won nuclear program in Dukovany, the Czech Republic, and is also bidding for a 40-trillion-won project to build a 6,000- to 9,000-megawatt plant in Poland. The Korea Hydro & Nuclear Energy Corporation was selected as the sole bidder for supplying parts for Egypt’s El-Dabaa nuclear power plant project in January as well.
Korea’s strength over its rivals — France, the United States, China, Russia and others — lies in its cost competitiveness. It cost $2,157 per kilowatt-electric (kWe) for Korea to construct a nuclear plant, according to International Energy Agency’s 2020 report. The price is $4,013 per kWe for France, $4,250 for the U.S., $2,271 for Russia and $2,500 for China.
Korea lags behind the competitors like China and France in terms of financing capabilities.
Financing capability is a must in order to land a multi-billion-dollar nuclear power plant contract. Nuclear power plant construction takes at least five years, requires great amounts of capital and are exposed to political risk. While traditional full-scale government funding is not a viable option for some countries or has lost its appeal due to high risk, vendor financing became increasingly common in the global market.
The Polish government hopes its partner for its 48.5-billion-euro ($48.2 billion) nuclear program to take a 49-percent stake to co-finance the project.
More relaxed requirements may undermine its financing capabilities in selling nuclear power plants in European countries.
Park Ho-jeong, a professor of resource and energy economics at Korea University, said that “the revision in the K-taxonomy guideline is expected to help us in not only bringing in the foreign investment but also expanding our investment overseas.”
Park added that “when the K-taxonomy is aligned with the EU’s taxonomy, it would contribute to expanding the market and collaborative response over the carbon border adjustment mechanism in terms of international cooperation.”
Source: Korea JoongAng Daily