Feature

Market report: South Korea and its renewable energy ambition


Sarosh Bana

Part 3. Notably, Korea's powerful family-owned conglomerates (known locally as Chaebol) are now are muscling their way into the solar and wind spheres.

Note: this article first appeared in Renewable Energy Focus September/October 2012. Click here for a free signup.

For part 1 of this series click here. For part 2 click here.

Key players

Several have started to include wind turbines in their portfolios, for example, so they can compete both domestically and in the international marketplace. Simiarly, the wind turbine ancillary market is also flourishing, with companies supplying or planning to supply towers, blades, main shafts, generators, transformers, gearboxes, nacelle control systems and cables. And, the small wind turbine manufacturing sector is also very active, with South Korean firms looking to provide equipment to small and island grid systems.

“The country is aiming to develop its RE technologies into a strategic export industry, but I think before they become able to do that, they should enlarge their market shares in the domestic market,” says Kuang.

Korea Electric Power Corporation (KEPCO), comprising six subsidiaries, is Korea's leading power company involved in RE power development. They will develop 85 to 90% of Korea's RE capacity over the next decade,” the BNEF analyst continues. “On the manufacture side [in Korea], major companies include foreign players Vestas, Acciona, Gamesa, and Mitsubishi, and Korean players Unison, Hyosung, Hanjin, Doosan and Samsung.”

Denmark's Vestas remains the leading wind turbine supplier in South Korea in terms of installed capacity to date. With 280 turbines installed in the country since 1998, the firm accounts for almost 70% of Korea's operating wind capacity. “We see a lot of similarities between our two countries, both having clearly acknowledged that wind energy is a reliable and sustainable energy solution for the future,” says Vestas President & CEO Ditlev Engel. Although its last project in the country was a 33MW installation at Jeju Island back in 2009, Engel says that with the right policy frameworks in place, business will make the investments, take the risks, and create the new business opportunities in South Korea. “Korea is leading the way by systematically implementing policies required to spur green growth,” he says.

The domestic firms are starting to make their presence felt though. With an annual production capacity of 1GW, Unison is the leading Korean manufacturer of wind power equipment. It supplies direct drive generator technology (its units employ a gearless permanent magnet synchronous generator).

Meantime, South Korea's shipbuilders are particularly expected to challenge the likes of Vestas and Germany's Siemens in the global offshore wind turbine market, according to a report on the Korean market by Young Il Choung and Jun Hyuk Yoo from analysts Ernst & Young (E&Y) suggests. “Korean shipyards, including the world's three largest, Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co., are looking to their experience of building oil sector infrastructure, including the laying of underwater pipes and cables, to prove that they can compete effectively in the offshore market, not only producing the turbines but also installing them at sea.”

In fact, these firms are active across the renewables spectrum, although it still makes up just a small portion of their overall business. “We are an emerging player in global solar and wind power markets with state-of-the-art manufacturing capabilities in Korea and China and projects installed or underway in Asia, Europe, and North America,” says Dr Chang-ryong Lee, General Manager of Green Energy Business Planning, Hyundai Heavy Industries Co. Ltd (HHI).

The 40-year-old engineering giant's green energy business (solar, wind and tidal current generation) accounted for just 0.7% of its overall 2011 sales, but its successes have been significant, Lee says. The company's solar business (which accounts for 91% of its green business sales) has booked over $200mn in orders across Europe, including a $60mn contract with Ukraine's Active Solar for 51 MW of solar modules. Similarly, its wind business has recently secured orders for eight 2MW wind turbines from Finnish Power (the first such order for a Korean firm from Europe) and for 23MW in £21mn contract for the UK.

But like everyone in the industry, HHI is having to deal with a tough economic climate and constraining market conditions for renewables right now. “Although the global renewable energy market faces challenges on many fronts with shrinking government support, falling prices due to the excess capacity and large inventories of Chinese makers, and an uncertain global economy, we believe that concerns over energy security and independence, rising oil prices, and environmental issues will help the solar and wind industries grow in 2012,” says the firm confidently.

Indeed, Chaebols like HHI and Samsung have denied recent media reports that they were scaling back their solar businesses significantly in light of the difficult market conditions. HHI (and its domestic counterparts) is confronting market uncertainties by ramping up production of high-efficiency solar modules for the growing small and medium-size rooftop installation market and by providing technical support for large-scale projects to major installers. In the wind business, it is expanding its onshore lineup with new models to meet a broader range of customer needs, while also accelerating development of offshore turbines to get an early foothold in that market.

Another Chaebol briskly getting into green energy is Pohang Steel Company (POSCO), the world's fourth largest steel-maker and Korea's largest private power producer. “POSCO has designated renewable energy as a new growth strategy, in line with the Korean government's low carbon green growth policy, while expanding R&D and investment in fuel cell projects, perceived as the next generation of environmental energy,” explains Yu-hyun Lee, corporate PR manager of POSCO Energy.

“Currently, the company is the leader in the fuel cell segment, running 20 fuel cell power facilities in Korea.” It also has a Sinan photovoltaic power station in South Jeolla province, a wind farm off Jeju island and has plans to build a photovoltaic power plant in Nevada, US, by 2015. “As a leading independent power provider, we are pushing ahead with renewable energy business using sunlight, wind and waste to energy,” says Lee. “We plan to install 1.5GW renewable power plants in the world by 2020.”

On the solar front, another leading domestic player is LG CNS, a subsidiary LG Group. Also taking the lead in developing electric vehicle charging infrastructure and smart grid technology for South Korea, the company has completed around 30 solar power plants, including the 2.21MW Mungyeong plant in North Gyeongsang Province and the 13.77MW Taean plant in South Chungcheong Province. Buoyed by its success at home, the company has also built solar power projects overseas, including Sri Lanka's largest solar facility. The 500kW plant meets the monthly needs of some 190 Sri Landkan households.

Tidal lead

South Korea is of course looking at other renewables too. In fact, a showpiece of its renewable energy efforts has been its first tidal power plant. At 254MW, the Shihwa Lake project is the world's largest tidal power plant (overtaking France's 240MW La Rance tidal power plant in the rankings and came on stream in August 2011 after a seven-year construction phase.

Daewoo Engineering & Construction Co. Ltd, says his firm built the $276.7 million facility (the cost does not include dam construction, which was completed as part of an earlier project) for KOWACO (Korea Water Resources Corporation). Its 552GWh annual generation will offset 315,000 tonnes of carbon emissions a year, says Heekyong Oh, Daewoo's deputy GM, Environment & Energy Research Team.

Long-term feasibility studies have been completed on even larger tidal power plants at two other sites characterised by high tides and strong tidal currents on Korea's southern and western coasts. At Garolim, 480MW if tidal power capacity is planned, while a proposal for 1GW is being progressed at Incheon Bay.

Lastly, South Korea's clean energy target also includes fuel cells, high efficiency coal generation and nuclear. Nuclear, in fact, is a key plank of the country's green strategy – Seoul seeks to double South Korea's installed nuclear capacity from 29% today to 59% by 2030, with 10 new nuclear plants planned to add to seven already under construction and 21 currently operating.

See also - Factfile: RPS Framework drives South Korean market.

About: Sarosh Bana is India correspondent for Renewable Energy Focus magazine.

Note: this article first appeared in Renewable Energy Focus September/October 2012. Click here for a free signup.

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity  •  Wave and tidal energy  •  Wind power

 

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