South Korea Lenders Will End Support for Coal

Affiliates of one of South Korea’s largest business conglomerates announced they no longer will provide financial support for coal projects, putting in jeopardy plans to finish a 2,100-MW coal-fired power plant project that has been expected to come online in 2024.

The six financial affiliates of the Hanwha Group, during a video conference on Jan. 5, pledged to divest any investments in future coal projects, both in South Korea and elsewhere. The six in a news release also said they “will not purchase any corporate bonds issued for the construction of domestic and foreign coal plants.”

Investors worldwide have been moving away from coal projects, along with oil and natural gas exploration, instead pouring money into renewable energy such as solar and wind power. Some major companies involved in power generation, such as General Electric, also are moving away from coal-fired power.

Carbon-Neutral Pledge

Tuesday’s announcement comes after South Korean officials, including President Moon Jae-in, in October of last year pledged to spend about 8 trillion won ($7 billion) to make the country carbon-neutral by 2050. The Hanwha affiliates’ move follows other divestment commitments from large Korean finance companies over the past year, including Samsung, Shinhan, KB, and Woori Financial Group.

“As a leader in the global renewable energy field, we will work to act decisively on climate change, and incorporate more environmentally friendly practices to usher in a net-zero society,” said Kim Seung-yeon, president of Hanwha Group, in an email to POWER. The six Hanwha affiliates include Hanwha Life Insurance, Hanwha General Insurance, Hanwha Investment & Securities, Hanwha Asset Management, Hanwha Savings Bank, and Carrot General Insurance.

Hanwha General Insurance also pledged to not take over insurance contracts for future coal power projects. Hanwha Investment & Securities announced it would not take part in additional refinancing for a midstream coal port facility in Australia.

Sejong Youn, director of climate finance at Seoul-based NGO Solutions for Our Climate, said after Tuesday’s announcement: “We welcome Hanwha joining other major financial groups in ending coal finance. Korea’s financial sector is quickly coming to terms with the significant financial risks of support to coal power projects which calls for a serious reconsideration of the remaining coal projects in the pipeline.” 

Those remaining projects include the Samcheok Bluepower coal-fired plant, a target of the Korea Beyond Coal campaign, a network of civic and environmental groups advocating for a 2030 coal phaseout in South Korea. The plant is being built by industrial groups Posco Energy and Doosan Heavy Industries & Construction, who began construction in 2019. The Beyond Coal group has pressured the country’s top 30 asset management firms to end investments in coal; at least 10, including Hanwha, have said they would not invest in the Samcheok project, representing management of 69% of the bond assets for the plant. Officials said Tuesday the project still needs about $730 million, about 16% of the project’s cost, to complete construction.

Many South Korean manufacturing companies have argued against ending support for coal because they depend on the fuel in their operations.

Half of Coal Fleet Will Close

Jae-in in September of last year, in a speech during the United Nations’ International Day for Clean Air for blue skies event, said South Korea would close more than 30 coal-fired power plants—about half the country’s entire fleet—by 2034. He said his administration would close at least 10 of those operating coal-fired plants by the end of 2022. He also has called for the country to phase out nuclear power.

South Korea has about 60 operating coal-fired plants, which generate about 40% of the country’s electricity. The country over the past three years has at times temporarily idled plants that are more than 30 years old, including shutting down about half the coal-fired fleet for a time in 2020 in an effort to reduce air pollution.

The country’s Ministry of Trade, Industry and Energy in a statement in November 2020 said, “A total of 9 to 16 coal-fired power plants will be shut from Dec. 1 to Feb. 28 [2021] as part of efforts to reduce fine dust emissions in the winter period.” The statement said that other coal plants in the country will operate at no higher than 80% capacity from December 2020 to February 2021, and said “The government will try to idle coal power plants as many as possible on the condition of stable electricity supply.”

Jae-in has called for South Korea to more than triple the number of operating solar and wind power installations by 2025, compared with the number online as of 2019. The country is providing incentives to increase the number of electric vehicles on its roads to 1.13 million, up from the current 110,000, and to increase the number of hydrogen-powered vehicles to 200,000, up from the current 8,000.

Energy experts have said the Samcheok Bluepower plant carries both environmental and financial risks. Analysts predict solar power will become cheaper than coal in South Korea as soon as this year. They have said the carbon-neutral-by-2050 goal also means the plant would never fully operate. The plant was forecast to run for 30 years—to 2054—and the country’s carbon-neutral pledge means an early retirement for Samcheok Bluepower is likely inevitable.

Government data shows about $55 billion was invested in coal-fired power projects in South Korea between 2009 and 2020. A 2019 report by Carbon Tracker Initiative at that time said the amount of financing for those projects makes South Korea’s stranded asset risk from coal the largest in the world.

Though investment companies continue to embrace climate change initiatives in their portfolios, money still is going to fossil fuels. A report last year from a half-dozen environmental groups said global banks financed $2.7 trillion of fossil fuel projects from December 2015, when the Paris Agreement on climate was reached, through year-end 2019. The Energy Policy Tracker, prepared by six groups including Columbia University, last summer said the U.S. had committed more than $72 billion to fossil fuels in 2020. The group’s latest information, through year-end 2020, said G20 countries committed at least $22.46 billion to coal last year.

The tracker said at least $241 billion was committed by G20 nations to fossil fuels in 2020, with about $162 billion earmarked for clean energy.

—Darrell Proctor is associate editor for POWER (@POWERmagazine).