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LNG Power Plants Suffer from Low Capacity Use in Peak Winter Months

LNG Power PlantsThe capacity utilization of liquefied natural gas-fueled power plants has fallen to a low of 39 percent. Private power plant operators complained, “There are so many power plants left idle even during the peak winter season.”
According to the Korea Power Exchange on February 15, the average capacity use of LNG power plants was 38.8 percent last year. This is the lowest level since 2005 when the exchange began collecting related data. The capacity use ratio has been on a downward spiral after peaking 67.1 percent in 2013. The main reason for the ever-declining capacity use rate has to do with the fact that the government orders power plant operators to run their plants based on power generation unit price.
For this reason, coal-fired and nuclear power plants are running almost always while LNG-fueled plants with higher generation cost were often ordered to stay underutilized.
The total number of LNG power generation plants in Korea is 78. Of these, eight private-sector operators are running 20 locations. As publicly run power generators (all Korea Electric Power Corp. affiliates) operate all different power plants including coal-fired, nuclear, and LNG-fueled plants, they can absorb losses incurred by LNG unit through profits earned elsewhere.
In contrast, private power generators have no such recourse and have to suffer losses when their capacity utilization gets lower. The cumulative net profit of the nine-month period last year for the seven private power generators was a loss of 101.8 billion won. It was a far cry from a profit of 570.7 billion won only a year ago.
Of the seven private-sector power generators, five companies including POSCO Energy, Pocheon Combined Cycle Power, Dongducheon Dream Power, S-Power, and Pyeongtaek Energy Service took losses last year. SK E&S saw its net profit plunge 90.2 percent from 567.1 billion won to 55.4 billion won. The only private power operator that enjoyed better results than the previous year was GS EPS from 20.5 billion won to 33.2 billion won. But even the company’s three LNG power plants including Dangjin No. 1, 2, and 3 took losses while its biomass power plant brought the whole company’s financial results to the black.
The Original Posted by hohoboy@hankyung.com
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