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[Energy] Korea’s Renewable Energy: Government Policies and Foreign Investment Trends
Korea is globally renowned as a leading manufacturer of solar and wind power plant components, and the country has exported significant volumes to major economies around the world. However, the recent rise of Southeast Asian manufacturers along with its traditional competitor, China, has pushed the Korean renewable energy industry to look for a breakthrough to stay competitive in the export market. In this regard, the industry says a rapid domestic distribution of developed products will help create the track record for facilitating exports. To this end, Korea has actively promoted solar and wind power in recent years, and investment opportunities in related businesses are open to foreign companies.

Korean Government's Renewable Energy Policies

On May 16, 2024, the Ministry of Trade, Industry and Energy (MOTIE) announced the Strategy for Expanding Renewable Energy Supply and Strengthening Supply Chain. The gist of the strategy is first, to ensure a systematic deployment of offshore wind power, led by the government, to create a sound ecosystem for the offshore wind power industry. To this end, the government will work toward swiftly enacting a special act on offshore wind power and facilitate orderly development by finding suitable locations and ensuring environmental soundness and acceptability. The government also aims to revitalize the semi-planned offshore wind farm system to strengthen the collaboration of local and central governments and redesign incentives to drive participation. In addition, the government will improve the operation and evaluation of competitive bidding markets to strengthen the competitiveness of the offshore wind ecosystem as a whole, with a focus on strengthening supply chain competitiveness. It will also work to support the construction of related infrastructure such as ports and ships in preparation for full-scale deployment.

Second, new facilities will be deployed by considering location characteristics and power grid conditions to deploy solar power in an orderly manner. The purpose is to prevent the clustering of solar facilities and promote efficient deployment. By promoting the orderly introduction of new facilities in consideration of grid conditions, the government will reduce the burden on the power system and prevent protests from local communities.

Third, the government will reform the renewable portfolio standard (RPS) to make it more adequate for the new market, promote power purchase agreements (PPAs), and induce the voluntary creation of the renewable energy market. These efforts will fulfill the market demand of the private sector and ensure the stability of renewable energy supply. More specifically, the government's targeted number of new facilities will be tendered annually for each source. Facilities will be selected within the bidding capacity by evaluating them with price and non-price indicators. The winners will be awarded long-term (20-year) fixed price (/kWh) contracts at the bid price, and a separate pathway will be established for facilities below a certain size so that they can also enter the market.

Fourth, a one-stop support system will be established to support businesses to explore the global market, and ministries will cooperate to provide step-by-step customized support. These efforts will strengthen the global competitiveness of Korean renewable energy businesses and expand their presence in overseas markets. The government will establish the Renewable Energy Export Promotion Council to comprehensively support businesses looking to expand overseas and promote global market entry by providing customized step-by-step support. Through these policy directions, the government aims to systematically expand the deployment of renewable energy and strengthen supply chain competitiveness to ultimately achieve carbon neutrality and energy security at the same time.

Foreign Investment in Korea's Wind and Solar Power Projects1)

German energy company RWE has won a license for building a 495 MW-class offshore wind farm in the west sea off the coast of Taean, Chungnam Province. RWE has a joint offshore wind partnership with Hyundai E&C and operates a domestic offshore wind pipeline with a capacity of 3 GW. Thailand's B.Grimm Power has invested in two offshore wind farms in Yeonggwang, Jeonnam Province. Its investments in the Yeonggwang Nagweol and Yeonggwang Hanbit projects will have an installed capacity of 365 MW and 375 MW, respectively. Denmark's Orsted was awarded a project of building a 1.6 GW offshore wind power in Incheon. Orsted plans to invest KRW 8 trillion to build the offshore wind farm by 2030. Norway's Equinor is working to develop a 4-6 GW offshore wind farm in Korea, with projects off the coast of Ulsan and Chujado Island. Its main projects are Banditburi and Donghae 1, with the Banditburi project targeted to launch operataion in 2030. Denmark's CIP has obtained licenses for Jeonnam Offshore Wind Power, Haeuri Offshore Wind Power, Haesong Offshore Wind Power, and Haegeum Offshore Wind Power projects. CIP is working with SK E&S to develop the Jeonnam offshore wind farm. Macquarie Green Investment Group (GIG)'s Corio Generation is developing 2.9 GW of offshore wind farms in Busan, Ulsan, and Jeonnam Province with Korea’s Total Energies. BP is also investing in offshore wind farms off the south coast.

British investor Actis has entered the Korean solar market by investing up to USD 100 million in Argo Energy, a Korean renewable energy platform focused on small-scale and rooftop solar power systems. Argo Energy currently operates 110 MW of solar projects and plans to upscale to more than 400 MW. Macquarie Asia Infrastructure Fund 3 (MAIF 3) has established Summit Energy Alliance, an investment platform for solar developers. Blackrock invested KRW 170 billion in solar platform Bright Energy Partners (BEP). BEP has raised approximately KRW 330 billion in funding over the past three years and operates small and medium-sized solar power plants across the country. Blackrock previously acquired a 100% stake in Kredo Holdings, an investment group specializing in renewable energy. Kredo Holdings specializes in offshore wind, large-scale solar, and fuel cell projects. Singaporean energy company Gurin Energy is also expanding its business in Korea, investing in large-scale solar power plants in Jeonnam Province.

At the COP28 held in late 2023, Korea pledged to join the global effort to triple the use of renewable energy. To find a breakthrough in dramatically increasing the use of renewable energy under unfavorable conditions, such as high population density, mountainous terrains, and a climate with four distinct seasons, the Korean government is focusing on revitalizing the bidding system and supporting RE100 as a way to increase the country’s use of renewable energy. The country is expected to experience a rapid increase in the supply of renewable energy as the Korean government is showing a strong commitment to renewable energy, including strengthening policy support.

By Hyunyoung Oh, Associate Research Fellow(
Korea Energy Economics Institute (KEEI)

1) Korea's Offshore Wind and Solar Markets to Attract Foreign Capital, April 8, 2024, DealBook News.

< The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA >

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