The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com — Ed.
Starting with Kori #2 (2033), 14 NPPs with a combined capacity of 12.5GW are to exceed 50 years of design life by 2050. The average useful life of NPPs in operation will rise to 30 years by 2035, and obsolescence is also an issue. Given that a new NPP takes more than 15 years on average to construct, talks over NPP construction need to begin in 2H23 with the goal of commencing operations in 2040. Standing to benefit from potential new NPP projects are KEPCO KPS and Doosan Energy.
Problem of aging NPPs to grow more acute from 2035
There are no new nuclear power plants (NPP) in Korea except for Shin Hanul plants #3 & #4 (scheduled to be completed in 2033). However, starting with Kori plant #2 in 2033, there are 14 NPPs (12.5GW) that will exceed 50 years of design life by 2050. Given such, we estimate that the share of overall domestic power generation represented by nuclear power will drop from 30% in 2033 to 20% by 2050. We note that 5 new NPPs (7.5GW) will be needed to maintain a 30% share of nuclear power over the mid/long haul.
The aging of NPPs is also a problem. The average useful life of NPPs in operation as of 2023 is 21 years, but this figure is to increase rapidly to 30 years by 2035 and 35 years by 2050 (assuming a 10yr design life extension). NPPs to be operated in 2050 are 22GW, and most of them reach their design life within 10 years, with the exception of the APR1400 (14GW).
Discussions regarding new NPPs to begin as early as 2H23
With the 11th Basic Plan for Electricity Supply and Demand (2024~2038) to be established, the issues of both a mid/long-term reduction in the portion of NPPs and aging are set to be major topics of discussion. In general, when a new NPP is included in the Basic Plan for Electricity Supply and Demand, it takes about 15 years or more to complete. For example, Shin Kori #5 & #6 are expected to be completed in 2025, about 17 years after they were included in the Basic Plan for Electricity Supply and Demand on Dec 28, 2008. Even if a new NPP is discussed in the near future and included in the 11th Basic Plan for Electricity Supply and Demand, it could only start being operated from around 2040. Of course, there are issues over the handling of radioactive waste from existing NPPs, and economic and social concerns related to new NPPs. Accordingly, a clear justification will need to be laid out for the construction of new NPPs.
NPPs offer way to offset electricity rate hikes
In 2022, power generation costs by fuel source (including fuel cost, depreciation cost, and environmental cost) are estimated to be W293.6bn for nuclear power, W980.6bn for coal, and W1.6127tn for gas, which implies that up to W1.3tn of costs can be saved per NPP. Replacement of gas power generation by one NPP could offset an electricity fee hike of W2 per kWh.
