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Why we should nurture new energy industries
Major countries, including the US, are pursuing bold policies to cut emissions, especially for energy industries which emit a high level of greenhouse gases. In response, Korea proposed to the United Nations a more proactive approach to reducing greenhouse gas emissions. Against this backdrop, the need for Korean industries to take bold and innovative actions addressing this issue has become more crucial than ever.
In response to global climate change, a total of 12.3 trillion dollars will be invested in the areas of renewable energy and energy efficiency by 2030, according to a report by the International Energy Agency. More specifically, around 4 trillion dollars will be invested in the renewable energy sector, while 8.3 trillion dollars will be poured into the strengthening energy efficiency of transportation, industries and buildings.
Korea’s current energy industry is focused on thermal power plants that run on coal, LNG, and nuclear power, among others. As a realistic alternative for greenhouse gas reduction, therefore, a new energy industry needs to be developed. Korean companies, however, are rather lukewarm about such development citing uncertainties in the future. It is under such circumstances that we should bolster our efforts to promote foreign investment in this area and thus secure competitiveness of related domestic industries.
Four Key New Energy Industries
| Industry | Details |
|---|---|
|
Energy-Prosumer |
Various types of new industries where anyone can become both a consumer and producer of electricity by utilizing small-scale renewable energy and ICT technologies (ex: micro-grid, demand resource market, zero-energy buildings, eco-friendly energy towns, solar powered homes, etc.) |
|
Low-carbon Development |
Deployment of renewable energy, efficient heat power generation, and next-generation electricity infrastructure that lower carbon emissions (ex: renewable energy power generation, ultra-supercritical power generation systems, large gas turbines, CCS, extra high voltage power transmissions, superconducting power cables, ESS, etc.) |
|
Electric Vehicle |
To revitalize EV value chain including manufacturing lines to revitalize (ex: battery-less recharging services, electric bicycles and motorcycles, utilization of used batteries, EV insurance, etc.) |
|
Eco-friendly process |
Industries that enhance efficiency of manufacturing factories, emit less greenhouse gas, and utilize unused heat (ex: smart factories, hydrogen reduction iron, eco-friendly refrigerants, , LNG thermal energy conversion, etc.) |
Strategies to attract investment for Korea’s new energy industries
New energy industries refer to businesses that contribute to improving energy efficiency, energy conservation, or reduction of greenhouse gas emissions; it also refers to industries that manage energy supply and demand in an innovative way. On this note, the Korean government set a target for the year 2030 in preparation for the new climate system and nurture four new energy industries as key areas.
Among the four major new energy industries, we need to identity the ones that require more foreign investment than the others, as well as pinpoint the industries with a wide technological gap as a way to can chart out the future direction of investment promotion. The following are the results of the SWOT analysis of Korea’s new energy industry, and the directions for investment promotion.
SWOT analysis of Korea's new energy industry
| Strength (S) | Weakness (W) |
|---|---|
|
•World’s best secondary battery technologies for ESS |
•Lack of government incentives compared to other advanced countries |
| Opportunity (O) | Threat(T) |
|
•Need to explore the new energy market created by 37 percent greenhouse gas emissions reduction target compared to the BAU |
•4 years of technological gap (approximately 64 percent) between domestic and foreign companies |
Deduced from the graph above, the SO strategy focuses on establishing an energy valley critical for power-related organizations. It targets top 200 companies and offers large-scale incentives by attracting investment from global companies. The WO strategy promotes investment in areas with technology that lags far behind those of other countries. This would reduce unnecessary R&D costs of the government and strengthen R&D for technological development. The ST strategy promotes Korean companies with core technological capabilities overseas, seeking integrated IR for trade and investment. The WT strategy increases the competitiveness of industries by pursuing joint investment (both domestic and international), and creates a new system to offer cash grants to foreign investors. It would lower risks for foreign investors when entering the Korean market and identify new opportunities to advance into Asian markets.
Prospects of Korea’s new energy industry
The Korean energy market is smaller in size than that of China, India, the US, and Europe. Therefore, it is advisable for Korea to become a gateway for other countries entering Asian markets and as such, it should increase the competitiveness of its industries to attract investment in the long term. The new energy industry is in its transition period though, with no legal foundations in place including special laws on new energy. In this respect, the governmental policies should be closely monitored, while investment promotion activities for foreign companies with advanced technologies should be urgently carried out. By doing so, these companies will be able to fully reap the benefits that Korea has to offer. To this end, it is time for legal and systemic foundations to be prepared to provide incentive premiums.
Min-young Choi
Executive Consultant, Invest Korea
mychoi13@kotra.or.krIK expert adviser,Choi Min-young
The above article does not necessarily reflect the views or position of KOTRA.