Government Raises Nuclear Plant Capacity to 80% Amid Energy Crisis

The government and ruling party have unveiled plans to expand nuclear power generation as energy risks stemming from the Middle East threaten to rapidly spread throughout the real economy. At a meeting on the Middle East situation held on the 16th, the government and ruling party elevated the national crisis management level from "attention" to "caution." With tensions escalating—including U.S. demands for deployment to the Strait of Hormuz—and oil prices and exchange rates fluctuating simultaneously, authorities have moved to strengthen energy supply responses. Initial measures include the phased release of 24.46 million barrels of crude oil reserves over three months and the elimination of the 80% cap on coal-fired power generation. The government has entered an all-out mobilization posture, significantly raising nuclear plant utilization rates from the current 60% range to 80%. Maintenance on two nuclear reactors will be completed by the end of this month, with four additional units to follow by mid-May, bringing a total of six reactors online sequentially.

The government's decision to maximize the advantages of nuclear power—with its high generation flexibility—to break through the energy crisis during this emergency is the right choice. Nuclear utilization rates plummeted from 93.6% in 2008 under the Lee Myung-bak administration to 66.5% in 2018 under the Moon Jae-in administration. Rates subsequently rose back to the 80% range following the outbreak of the Russia-Ukraine war before falling again to the 60% range. In emergency situations where oil and gas prices surge, increasing nuclear generation is the most efficient approach for electricity price and supply stability. This expansion of nuclear operations also reflects the pragmatism the government espouses, while highlighting the inefficiency of the previous nuclear phase-out policy.

This Middle East crisis has once again exposed the vulnerabilities in Korea's energy structure. With its exceptionally high dependence on crude oil, the country is experiencing immediate cascading effects on prices, exchange rates, and industrial production from supply shocks. The won-dollar exchange rate breached 1,500 won during intraday trading on the 16th—the first time since the global financial crisis 17 years ago. This follows the classic "energy shock" pattern: rising oil prices stimulate import prices, which in turn fuel inflationary pressure and increased corporate costs. As long as the nation maintains its power generation and industrial structure with high crude oil dependence, geopolitical shocks will continue to roil the economy and drive stock market and exchange rate volatility.

Ultimately, the solution lies in strengthening the balance of the energy mix. Along with nuclear power serving as a stable baseload source, it is necessary to expand renewable energy sources such as solar and wind to reduce fossil fuel dependence. Korea should take the energy crises facing Germany and other European countries—now belatedly regretting their neglect of nuclear efficiency—as a cautionary lesson.