South Korea Pivots to Coal as LNG Crisis Deepens

South Korea is shifting its near-term power generation back toward coal as soaring spot prices for liquefied natural gas and a lack of Middle Eastern deliveries constrain supplies, according to OilPrice. As the world's third-largest LNG buyer behind China and Japan, South Korea has faced severe supply disruptions originating from the Middle East crisis and restricted Qatari LNG shipments.

Running gas-fired power plants has become uneconomical compared to coal due to spot LNG prices reaching four-year highs, which are also driving up electricity costs. Climate, Energy and Environment Minister Kim Sungwhan told Bloomberg that the country must temporarily reduce gas consumption by expanding renewables and actively utilizing nuclear and coal power.

Winter Energy Security

Energy security for the winter has temporarily superseded South Korea's broader energy transition agenda. Gas-fired power generation in the country dropped earlier this year as the Middle East crisis unfolded, while coal-fired power supply surged by 40% in April, marking the largest increase since August 2019.

Despite the immediate reliance on fossil fuels to manage shortages, the South Korean government recently announced plans to invest up to one quadrillion Korean won, equivalent to $747 billion, in renewable energy, electric vehicle adoption, and industrial decarbonization by 2035.

Key Facts

• South Korea is the world's third-largest LNG buyer after China and Japan.
• Coal-fired power supply in South Korea jumped 40% in April, the largest increase since August 2019.
• Minister Kim Sungwhan stated that South Korea must urgently reduce short-term LNG demand through coal, nuclear, and renewables.
• Global fossil fuel imports for South Korea's energy sector were projected to hit $133 billion under early-June spot prices.