Compendium on Energy
Conservation Legislation
in Countries of the Asia and Pacific Region
Previous Chapter Table of Contents Next Chapter
Part Two:
Country Profiles and Case Studies of National Legislation for
Promotion of Energy Conservation and Energy Efficiency
The Energy Conservation Programme
of the Republic of Korea
by Mi-Chung Ahn*
SECTIONS IN THIS CHAPTER
Introduction
Energy conservation policy
Major energy efficiency and conservation programmes
Financial and taxation assistance to energy efficiency investments
Regional energy planning
Energy impacts assessment on energy-intensive projects
Demand-side management
Management and publication of energy statistics
Public awareness programmes
Energy equipment efficiency management: standards and labelling
Inspection of heat-using equipment
Promotion of research and development of energy technologies
Training programme
Over the past 30 years, the Republic of Korea has sustained rapid economic growth, which has transformed it from an agrarian society into the industrialized middle-income nation it is today. Starting out with light industries such as textiles in the early stage of industrialization, the country has gradually shifted the emphasis to energy-intensive heavy industries such as petrochemicals, cement, iron, steel, machinery and automobiles. As the Republic of Korea has no significant energy sources, it has had to import almost all energies from abroad to fuel the growing economy, and therefore energy efficiency and conservation, together with a stable supply of energy, has had the utmost priority in its energy policies, particularly since the two oil crises in the 1970s.
In the wake of the second world oil shock, Republic of Korea immediately established the Ministry of Energy and Resources in 1978 (later incorporated into Ministry of Trade, Industry and Energy (MOTIE)) to exclusively administer the planning and enforcement of national energy policies. It also promulgated the Rational Energy Utilization Act (REUA) in December 1979 in an attempt to ensure energy security in an emergency (Articles 6 and 7 of the REUA refer to emergency preparedness) and promote energy efficiency and conservation.
The Republic of Korea's energy conservation programmes and activities are planned and implemented based on the REUA. They have been put into action by the Republic of Korea Energy Management Corporation (KEMCO) which was established in 1980 based on the REUA. KEMCO functions as the national energy efficiency center responsible for the implementation of the national energy efficiency and conservation programmes (REUA Articles 62 to 81 refer to KEMCO's organization and functions).
2 Energy conservation policy
The Basic National Energy Plan and the Basic Plan for Rational Use of Energy are to be drafted by the Minister of MOTIE every five years (REUA Articles 4 and 15) while the Action Plan for Rational Use of Energy is to be drafted by the heads of the authorities concerned and city/province governors (Article 16). Article 15-2 (newly inserted in 1997) prescribes the organization and operation of the National Energy Conservation Promotion Committee responsible for reviewing and assessing the Basic Plan for Rational Use of Energy and other related important matters. The Committee is headed by the prime minister and comprised of not more than 25 members including the prime minister. <return to top>
2.1 Policy objectives
Based on the 1997 Basic Plan for Rational Use of Energy, the Republic of Korea's current energy conservation policy objectives and directions are to:
a) improve trade deficit by reducing energy imports;
b) strengthen industrial competitiveness by reducing production costs resulting from reduced energy use;
c) contribute to global environment protection by minimizing CO2 emissions;
d) enhance efficiency in the whole energy flows of production, distribution and consumption to develop an energy-efficient socio-economic structure;
e) strengthen demand-side management (DSM) in power sector;
f) best use market mechanism to encourage energy efficiency investments;
g) intensify regulations to an appropriate level in key areas (including energy efficiency standards of the energy equipment and appliances);
h) foster an energy and resource-saving lifestyle by raising energy conservation awareness, adjusting energy price levels properly, and the like; and
i) strengthen international cooperation.
3 Major energy efficiency and conservation programmes
3.1 Management of energy-intensive industries and buildings
Over the past 20 years, the Government of Republic of Korea has made concentrated efforts to foster energy-intensive industries such as iron and steel, petrochemicals and machinery. This has led the industrial sector to account for more than half the nation's total energy consumption. The Government has extensive energy efficiency programmes particularly aimed at these energy-intensive industries. <return to top>
Based on REUA Article 24, the Minister of MOTIE may announce Energy Management Guidelines which should be adopted by heavy energy users. The minister may survey the energy conservation activities of the energy users if it is deemed necessary. If they do not follow the Guidelines, he or she may order mandatory energy management guidance by the Government.
Article 25 authorizes the Minister of MOTIE to designate some heavy energy users as Energy Management-Required Users (EMRUs) which must report to the Government their annual production, energy facilities, equipment, annual energy use, and corporate energy conservation plan along with the results of implementing the previous year's plan. Currently, those companies whose annual fuel consumption is greater than 1,000 TOE or whose annual electricity consumption is greater an 4 million kWh are defined as EMRUs.
3.2 Five-year corporate energy saving plan: a partnership programme
Among the EMRUs, approximately 200 companies are designated as special EMRUs. These are intensively managed by the Government since they represent roughly 50 per cent of the total industrial energy use in the Republic of Korea. They are required to set up and implement, through consultation with KEMCO, their own 5-year Corporate Energy Conservation Plan within the framework of the Basic Plan for Rational Use of Energy.
This plan should contain energy-saving measures such as replacement of inefficient energy facilities, process improvement and waste heat recovery. KEMCO helps them establish annual energy conservation plans, recommends, through detailed energy audits, appropriate efficiency measures, and conducts monitoring. Technical assistance and financial aids may be provided to these buildings on request when they install or retrofit energy efficiency facilities. In addition, Article 34 states that these special EMRUs may be recommended to try to achieve the target energy intensity of their products, or their buildings, set up and announced by the Government.
3.3 Energy audits and technical support
Article 30 states that the Minister of MOTIE may order the energy users to have an energy audit by the designated energy auditing institution if its need is recognized in the Government's energy management guidance. In this case, some energy audit regulations and requirements are also to be announced as stipulated by Article 31. <return to top>
Energy audits in Republic of Korea have been conducted mainly by KEMCO since 1980. KEMCO has the manpower and the latest audit facilities as required by governmental regulations and requirements regarding energy auditing. It has six specialized audit teams for the chemical, metal, ceramic, textile, forest (pulp and paper) and food industries.
KEMCO offers a fee-based detailed audit called a technical service audit for large companies and a free audit (not detailed) for small and medium companies. After auditing, identified energy-saving measures are recommended together with technical assistance. The Minister of MOTIE may order the correction and improvement of energy loss factors identified by the audit or energy management guidance, as stated in Article 33.
3.4 Promotion of waste heat recovery and utilization
Article 35 instructs energy users to try to recover and utilize waste heat produced in their workplace or to help other third companies utilize it. The Government may recommend this for the waste heat-generating users, when necessary.
3.5 Promotion of energy service companies' activities
Based upon Article 22, the Government supports energy service companies (ESCOs) by providing them with relevant information on new commercializable energy efficiency technologies, financial and taxation incentives and by holding relevant seminars in an attempt to induce investments in energy efficiency and conservation through third party financing. To further promote ESCO activities, the Government began to provide preferential conditions for loans and taxation from 1997, such as the granting of tax incentives to a facility owner.
Noteworthy is the Energy Saving Mart that was started in 1996 and has been held once a year since then. This is organized by KEMCO in cooperation with MOTIE for the purpose of providing a match-making venue for the ESCOs and EMRUs who may be their most prospective customers. At the event, ESCOs are given an opportunity to explain their business, showcase some successful projects performed, exhibit their energy efficiency and conservation technologies and give consulting services about energy efficiency investments. <return to top>
4 Financial and taxation assistance to energy efficiency investments
Since 1980, the Government of the Republic of Korea has provided long term and low interest rate loans from the Fund for Rational Use of Energy for energy efficiency and conservation investments, based upon Article 21. Every fiscal year, a given amount from the Fund is allotted to the eligible loan applicants from a government financial source named the Special Accounts for Energy and Resources. Loans are provided mainly for research and development, installation of energy conservation facilities and DH and CHP projects. Terms of the loans depend on the type of project, but typically a three- to five-year grace period and five-year repayment period are offered with a 5-10 per cent interest rate — about half the market or prime rates.The Government also offers tax credit for energy efficiency investments based on Article 21 of the REUA and Article 26 of the Regulations on Tax Reduction and Exemption. Replacement of inefficient industrial furnaces and kilns, installation of cogeneration facilities, alternative fuel-using facilities and other facilities that are assessed to achieve more than 10 per cent of energy saving are all qualified for a 5 per cent income tax deduction both for domestic and foreign products.
5 Regional energy planning
All local governments are required to make and implement their own regional energy plan every five years in tune with the Basic National Energy Plan (Article 5). The Government, through KEMCO, helps them establish an energy plan suitable for their geographical and socio-economic needs and conditions. KEMCO also provides training and education to the local governmental officials in charge of energy planning (as prescribed by Article 88). KEMCO produces a guidebook on the fundamentals of regional energy planning which it distributes to local officials in charge of energy planning. In the future, the Government intends to organize and operate a Regional Energy Consulting Committee comprised of experts and provide loans and subsidies, along with technical assistance, for the energy planning projects of local governments.
6 Energy impacts assessment on energy-intensive projects
Articles 8, 9, 10 and 11 address a reporting and consultation system of large-scale, energy-intensive projects. If a governmental or public institution desires to carry out a high energy-consuming project such as large-scale urban development projects, energy resources development projects, industrial site or complex preparation projects, port and railroad construction projects, airport complex construction projects or tourist complex development projects it should set up an energy use plan and ask MOTIE for consultation before executing it. <return to top>
Either a project planner or a designated agent is qualified to prepare the energy use plan which must contain the project description, an energy demand and supply projection, an analysis of the energy impact, measures for energy efficiency improvement, efficient land use and facility disposition, measures for leveling electrical load, an installation plan for highly efficient energy systems and facilities, a waste heat recovery and utilization plan and a waste material and alternative energy utilization plan. A correction or supplement of the energy use plan may be recommended by MOTIE if it is deemed inadequate or insufficient and KEMCO may also monitor the plan.
KEMCO has pooled 120 experts in six subcommittees to perform preliminary examination of the energy use plans submitted to MOTIE. It also monitors whether the consultation results have been reflected. On the contrary, if a private organization desires to execute projects which are estimated to consume energy in excess of a certain scale, it should prepare an energy use plan and report it to KEMCO before it initiates the projects. The projects subject to report on their energy use plan are the same as indicated in the consultation scheme. Either a project planner or a designated agent is qualified to prepare the energy use plan. KEMCO may recommend the report submitter to adjust, correct or supplement the energy use plan. KEMCO may conduct an on-site inspection to see if the energy use plan is executed as recommended.
7 Demand-side management
Because of growing difficulties in securing suitable sites and the huge investment capital for constructing new power supply facilities in the Republic of Korea today, DSM is progressively pursued. In particular, since the beginning of the 1990s, the dramatic increase in the use of air-conditioners in the hot summer months has caused a severe drain on electricity reserves and has resulted on several occasions in a shortage.
To cope with this adverse situation, the Government revised the REUA (Article 12) in July 1995 to make it mandatory that, beginning from 1996, all the utilities establish and implement a DSM investment plan on an annual basis and report the plan and its implementation results to the Government. As a consequence, Republic of Korea Electric Power Corporation (KEPCO), Republic of Korea Gas Corporation (KGC) and Republic of Korea District Heating Corporation (KDHC) have invested a considerable amount of money in DSM every year. Article 12 also prescribes Government's possible assistance to utilities when necessary including measures for offsetting their investments. <return to top>
8 Management and publication of energy statistics
Article 13 addresses the management and publication of energy statistics by the Government. The Minister of MOTIE should gather, analyze and manage domestic and foreign energy statistics and may publish them, as long as it does not violate any other related laws, in order to use it in establishing and implementing effectively the National Energy Basic Plan and related policy measures stated in Article 4.
To this end, energy-related institutions and major energy users may be requested to submit raw energy data to the Government. The Minister of MOTIE may also take a census of energy use when necessary. KEMCO is designated to do all of these works for the Government. Raw energy data is currently reported to KEMCO from over 3,000 government-designated EMRUs. The processed data is also used to identify the energy conservation potential of those industries. It is also provided to other relevant organizations who need it.
9 Public awareness programmes
Article 20 prescribes that "the Government shall devise measures of publicizing the government's energy policies, basic national plans for rational use of energy, and ways of efficient use of energy and the like to promote rational use of energy."
On behalf of the Government, KEMCO engages in public campaigns. It produces and distributes films and leaflets but uses mass media such as television, radio, newspapers and publications as the major means of communicating its messages. It carries out joint activities with businesses and non-governmental organizations to boost people's awareness and participation on a voluntary basis. It organizes exhibitions and diverse cultural events on a regional basis to showcase successful energy conservation activities and projects. It designates some model schools for energy conservation programmes and has had energy conservation included in the curricula of elementary and middle schools to educate the younger generation about the importance of conserving energy and protecting the environment.
Every other year, KEMCO holds an Energy Conservation Rally to generate the dynamism for an energy conservation drive throughout the nation by recognizing those who have made a great contribution to energy conservation. Since 1975, it has organized an annual Energy Conservation Exhibition with the dual purpose of disseminating both the latest energy efficiency technologies and promoting energy saving awareness. <return to top>
10 Energy equipment efficiency management: standards and labelling
A Standards and Labelling Programme was launched in 1992 with the provisions of Article 17, 18 and 19. MOTIE sets and announces the standards levels, the effective dates and the methods of energy use measurement. KEMCO implements and monitors the programme. The objective of this programme is to create a "market push" by directing manufacturers to make products with higher efficiency. The programme is applied to both domestic and imported products. The standards are developed for MOTIE by Republic of Korea Institute for Energy Research (KIER) through a government and private sector negotiation process. The compliance testing is carried out by the designated testing laboratories.
10.1 Energy efficiency standards
Target energy performance standards (TEPS) and minimum energy performance standards (MEPS) are currently applied to six items: electric refrigerators, air-conditioners, fluorescent lamps, lamp ballasts, incandescent bulbs and passenger cars. MEPS aim to expel inefficient designs from the market, while TEPS are designed to encourage manufacturers to make more energy-efficient goods.
10.2 Labelling (efficiency indication)
Article 48 prescribes the labelling duty of the heat-using equipment manufacturers/ importers. The label must contain specifications, performance and other features of the product as required by MOTIE. Products with no label are not allowed for sale or display in shops with the purpose of sale, as stated by Article 49. Currently, target items include steel boilers, cast iron boilers, hot water boilers, oil-fueled heaters, LPG-fueled instantaneous water heaters, LNG-fueled water heaters, LPG-fueled hot water boilers and lighting appliances.
10.3 Rating labelling
The Rating Labelling Programme provides the consumer with a relative ranking of the energy use of equipment and appliances. Product models are classed into one of five different grades with 1st being the highest and 5th the lowest. Rating labelling is applied to electric refrigerators, electric air-conditioners, incandescent lamps, fluorescent lamps and fluorescent lamp ballasts. <return to top>
This rating labelling system provides consumers with better information for decision making. Importers and domestic manufacturers are required to get designated products tested by one of the government-accredited test labs and to report the test results to the Government. In addition, they should indicate on each of the products the certified grade, energy efficiency and ways of efficient use in the products' advertisements or manuals.
KEMCO checks up to three times a year whether: a) all products covered by the law are correctly labeled; b) instructions for efficient use are indicated; and c) the labels accurately reflect the product's energy efficiency. This programme is expected to stimulate the manufacturers or importers to produce or import more energy-efficient technologies while helping consumers choose more energy efficient equipment and appliances, thereby facilitating market penetration of more energy efficient technologies. The Government is considering extending the scope of the labelling system to embrace other appliances such as dishwashers, televisions and vending machines.
11 Inspection of heat-using equipment
The Minister of MOTIE specifically designates some kinds of heat-using equipment as follows, as prescribed by Article 51. Installation or construction of this equipment should be done in accordance with the rules and regulations set by MOTIE Ministerial Ordinance (Article 53), and it should be inspected by the city/province governor (Article 55).
11.1 Inspection
Some kinds of heat-using equipment are to be inspected by the city/province governor during their manufacture, installation, re-installation, modification or replacement, as required by Article 58. KEMCO is commissioned to inspect this heat-using equipment, including boilers and pressure vessels, for the purpose of their safety management and fuel efficiency enhancement.
Currently, six items (steel boiler, cast iron boiler, water heating boiler, pressure vessels group I, and metal heating furnace) in three categories of the heat-using equipment are subject to inspection. (See Table 2.3.1 "Designated heat-using equipment to be periodically inspected under the Rational Energy Utilization Act") The installer of this heat-using equipment is required to appoint a qualified operator(s) and to report to the Government when an operator is dismissed or newly appointed (Article 59). Manufactures of the above-mentioned equipment are required to make a self-inspection in accordance with self-inspection codes and standards which are stipulated by the Government (Article 57). KEMCO inspects equipment not self-inspected by the manufacturer. <return to top>
12 Promotion of research and development of energy technologies
Article 37 prescribes the National Energy Technology Research and Development Plan and its Annual Action Plan which the Minister of MOTIE is to establish to promote the development and dissemination of energy technologies. The Government leads research and development (R&D) activities in collaboration with industry, universities and research institutes. Priority projects are financed by the government budget and energy-related funds from the Government and industry.
The Research and Development Center for Energy and Resources (RACER) was founded as an affiliate of KEMCO in 1992 to take charge of managing the whole R&D process as well as financial assistance (related Articles: 38, 39, 40 and 41). At present, a 10-Year Energy Technology Development Plan (1997 to 2006) is being implemented. This plan focuses on the following three categories of energy conservation technologies:
a) core technologies such as photovoltaic, solar thermal, fuel-cell and IGCC;
b) general technologies such as waste, bio, wind power and coal utilization technology; and
c) basic technologies such as small hydro, ocean, hydrogen and geothermal.
In the case of new and renewable energy technologies, the Republic of Korea has another act named the 1987 Alternative Energy Development Promotion Act under which a Basic Plan for the Development of New and Renewable Energy Technologies was established in 1988. The Basic Plan sets out four phases for enhancing new and renewable sources of energy. If the fourth phase has been completed by the year 2006, new and renewable sources of energy (NRSE) are planned to contribute 2 per cent of total energy demand.
Currently, eight energy sources (solar, bio, waste, small hydro, wind, hydrogen, ocean and geothermal) and two related technologies (fuel cell and coal utilization technologies) are defined by the Alternative Energy Development Promotion Act as target technologies. RACER is responsible for managing research and development for new and renewable energy sources through selection, support, operation, evaluation and management of the research and development projects. RACER receives applications for research projects for the following year, selects the appropriate research projects and provides full funding for universities and research centers and a portion of the funding for private companies. Typically, universities focus on basic technologies, research institutes on applied technologies, and private companies on technologies with good commercial potential. <return to top>
Article 88 stipulates training and education for energy managers, installing engineers or operators of the heat-using equipment. KEMCO is authorized to run an energy management training centre for this purpose. There are three basic training courses as shown in Table 2.3.2 "Overview of training courses and energy conservation programmes in Republic of Korea".
Previous Chapter Table of Contents Next Chapter
* At the time of the preparation of the paper in February 1998, the author was Deputy Director, Energy Conservation Policy Division, Ministry of Trade, Industry and Energy (MOTIE), Seoul, Republic of Korea. Changes in institutional arrangements and legislative provisions which have occurred after that date are thus not reflected in this paper.
Dr. Mi-Chung Ahn
Chemicals and Biotechnology Industries Division
Ministry of Commerce, Industry and Energy
Seoul, Republic of Korea
Phone: (82)(2) 500 2546
Fax: (82)(2) 503 9492
E-mail: michung@hanimail.com
<return to place in text>
Previous Chapter Table of Contents Next Chapter
Updated 26-8-99 webmaster 1999 United Nations. Legal Notice