[Yoo Choon-sik] Power grid bottlenecks could stall Lee's AI ambitions

President Lee Jae Myung's trip to Ulsan late last week drew attention from around the world as an event that clearly demonstrated his government's pledge to place top policy priority on fostering the AI industry as a means to help South Korea overcome economic challenges and discover a new engine of growth.
While attending a ceremony to mark the start of a massive project to establish a high-performance artificial intelligence data center in the southeastern industrial city of Ulsan, he expressed his appreciation to business executives for their hard work and promised his government's full support for more investment in the AI sector.
His near-absolute control of both the administration and the legislature bodes well for President Lee's ability to implement his election pledges to narrow the country's seemingly widening gap not only with global leaders but also with its peers in AI.
Lee's first two weeks in office were well received: stock prices soared, the currency strengthened and public approval ratings increased from the levels seen before the election, as investors hoped his control over both the administration and legislature would ensure swift implementation of his promises.
These positive responses come even as he has yet to nominate his first cabinet members, who will be responsible for developing detailed policies. This process is expected to take some time, because his first prime minister nominee is himself awaiting confirmation hearings and parliamentary approval.
However, Lee has announced several key appointments at the Office of the President, including veteran technocrat and former Vice Finance Minister Kim Yong-beom as his policy chief and influential AI expert Ha Jung-woo of Naver Corp. as his inaugural chief secretary for AI and future planning.
These appointments reflect Lee's intention to break from the long-standing tradition of filling key presidential office positions based on personal or political considerations, especially given the fact that Kim has been working in the digital asset sector while Ha has led the tech giant's AI businesses.
As one of the early adopters of AI innovation, South Korea once boasted that it was one of only a few countries having a well-established ecosystem of its own, ranging from high-end hardware manufacturers and software developers to homegrown network services and a population receptive to AI.
However, several years of low-key policy stances under the previous government have left the country at risk of falling behind its rivals. South Korea ranked 30th in the number of data centers — a key measure of AI infrastructure — with only an estimated 43 centers, a fraction of those in the United States and fewer than a tenth of those even in Germany, Britain, or China, according to Australia-based Cloudscene.
Lee has pledged to reverse this trend by channeling tens of billions of dollars in public and private investment into enhancing AI infrastructure, positioning it as the main driver of efforts to close the gap with global leaders and remain in the group of countries closely trailing the US and China.
He reaffirmed his promise to provide full support for the AI industry during the ceremony held in Ulsan on Friday, which many high-profile business executives also attended — including leaders of the SK Group, Amazon Web Services, Kakao Corp., Samsung SDS Co., LG AI Research Institute, Lunit, FuriosaAI and Naver Cloud.
Power grid problems
Meanwhile, Lee also promised during the election campaign a sweeping transition in energy policy, aiming to drastically increase renewable energy generation. South Korea lags far behind major countries in renewable energy generation, which accounted for less than 10 percent of total output in 2023, compared to averages of over 30 percent for member states of the Organization for Economic Cooperation and Development.
Even without factoring in the accelerating pace of AI innovation and the associated surge in power demand, Lee's ambitious energy plan appears easier said than done, given the South Korean economy's heavy reliance on the manufacturing sector, which requires affordable energy by nature.
In 2023, electricity consumption by the industrial sector accounted for 51.4 percent — far higher than 21.1 percent in the US, 31 percent in Britain, or 43.4 percent in Germany, according to the Korea Chamber of Commerce and Industry, citing the latest data from the World Bank and the International Energy Agency.
South Korea's latest energy generation targets, set by the previous administration, aim to increase carbon-free generation to 53 percent by 2030, up from an estimated 39.1 percent in 2023. The Lee administration is expected to raise this target further in line with its promises to significantly boost generation from renewable sources such as wind and solar.
The real challenge for South Korea's government lies not in finding sites for massive wind or solar power plants — in fact, many provincial governments are eager to host such facilities on remote islands or depopulated land — but in expanding the power grid quickly and economically enough.
Experts warn that building new power plants will be meaningless unless distribution networks are in place to connect them with consumers, such as semiconductor factories in the southern regions of Gyeonggi Province.
South Korea has already experienced yearslong delays in laying power distribution networks due to conflicts with residents over property rights or health concerns. In one case, a 40-kilometer network took 150 months longer than planned, according to Korea Electric Power Corp.
Experts have argued that the central government should take over the responsibility for constructing and managing power networks from KEPCO — the state-run utility — because conflicts with residents are intensifying, and KEPCO's financial condition has deteriorated due to repeated refusals by previous governments to raise electricity rates largely for political reasons.
I understand that it is premature to judge whether President Lee is able to tackle these energy policy issues because he is still in his first month in office after being inaugurated without the usual transition period.
I do believe, however, that it is far from certain that his AI-first policy could succeed without solving these issues.

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