Energy Security Amid the War in Ukraine

Two years have passed since Russia’s full-scale invasion of Ukraine began, yet the repercussions of this conflict continue to reverberate globally, particularly in the energy sector. The ripple effects of the energy price fluctuations triggered by the war have been acutely felt across East Asia, including South Korea. Russia, is the world’s largest exporter of natural gas and the second largest producer of both crude oil and natural gas. In 2021, Russia produced 762 billion cubic meters (bcm) of natural gas, exporting 210 bcm via pipelines. It also ranks as the world’s third largest overall energy producer. The war has disrupted this major energy powerhouse, leading to severe fluctuations in energy prices. The price of West Texas Intermediate (WTI) crude oil surged by 52.33%, while Europe’s Brent crude oil prices soared by 56.33%.

Impact of Global Energy Shocks on South Korea

According to Michelle Chaewon Kim, an energy finance specialist at the Institute for Energy Economics, Japan (IEEFA), “The rationale for South Korea’s reliance on fossil fuels in the name of energy security began to unravel when Russia invaded Ukraine in 2022, shocking global energy markets.”  The domestic average price of gasoline in South Korea jumped from ₩1,718 ($1.27) per liter in early February 2022 to ₩2,138 ($1.58) by June 2022. This increase reflected broader challenges, including the financial strain on Liquefied Natural Gas (LNG)-fired power generation, which incurred an additional ₩22 trillion ($16.2 billion) in costs—equivalent to ₩432,015 ($318) per person.

KEPCO

The Korea Electric Power Corporation (KEPCO) is also struggling under the weight of rising costs. President and CEO Kim Dong-Cheol has voiced concerns about KEPCO’s ability to meet its working capital requirements and debt obligations in 2023 unless substantial interventions are made. The crisis represents an unprecedented challenge for South Korea, highlighting the vulnerabilities in its energy security strategy and the broader implications of global conflicts on national energy stability.

External Dependencies

The collapse of energy security in South Korea was, in many ways, predictable. This vulnerability is primarily due to the country’s heavy dependence on external sources for its energy needs. With inadequate domestic energy resources, South Korea imports approximately 98% of its fossil fuels from the Middle East and the United States. According to the IEEFA, the surge in electricity prices caused by the war in Ukraine underscored South Korea’s overreliance on fossil fuels, its lack of competitiveness in the energy market, and its sluggish progress toward green energy alternatives. This dependence on imported fossil fuels exposes South Korea to volatile global energy prices.

How Other Countries Are Coping with Energy Security

In response to the ongoing geopolitical turmoil, countries are increasingly seeking to bolster their energy independence. Japan, for instance, is accelerating its transition to renewable energy as a direct reaction to the war. Through its ambitious GX Green Programme, Japan aims to have 38% of its domestic electricity generated from renewable sources by 2030. European nations are also advancing their efforts to enhance energy security through their RE Power Plans. The International Energy Agency (IEA) is collaborating with the EU to assist Ukraine in improving its energy security and transitioning to renewables. Similarly, the US and Taiwan are significantly increasing their share of renewable energy in their total power generation.

Global Trend

For the first time, the share of renewable energy out of the total global power generation has surpassed 30% globally.  The World Energy Outlook projects that, based on current government policies, renewables could make up nearly 50% of the global electricity mix in the near future. This shift highlights a growing global commitment to reducing dependence on fossil fuels and enhancing energy resilience.

Renewable Energy as a Key to Energy Security

South Korea’s progression towards renewable energy remains sluggish. In 2023, renewable energy generation in South Korea stood at only 9%, significantly below the global average of 13%. When it comes to solar and wind power, South Korea lags behind not only the global average but also neighboring countries such as Japan (12%) and China (16%). Kim from the IEEFA says, “If Korea increases the development of renewable energy to enable energy self-sufficiency, they will not be greatly affected by external shocks.” She further warns that “an obsession with energy security centered on fossil fuels could lead to increased energy instability.”

South Korea’s Stalled Renewable Energy Ambitions

The current South Korean government under President Yoon has reduced funding for renewable energy projects. The budget for the “Renewable Energy Distribution Support Project” was cut by 32.2%, from ₩247 billion ($181 million) in 2023 to ₩167.5 billion ($123 million) in 2024. Additionally, the budget for the “Renewable Energy Financial Support Project”, which provides low-interest loans to businesses using renewable energy, was reduced by 21% compared to the previous year. This reduction in funding reflects a broader trend of declining ambition. Jongho Hong, an economist at Seoul National University, points out, “The previous government planned to increase the proportion of renewable energy generation to 30% by 2030. This target was modest compared to Denmark’s 90% and Germany’s 52%.” However, the current administration has lowered this target to 21.6%, signaling a regression in renewable energy policies. A lesson from the war in Ukraine appears that relying on fossil fuels for energy security can lead to energy instability. For South Korea, the path forward seems to require a significant shift in strategy.