JEJU-DO < invest Korea

“The unique environment of Jeju, surrounded by the sea, holds significant implications for renewable energy. Historically, efforts were concentrated on establishing solar and wind power generation facilities, leading to challenges like "output restriction" due to difficulties in predicting generation volumes or supply imbalances. To overcome this, the power market system is undergoing a transformation into a real-time power trading market based on generation predictions. AVEL (Add Value to Energy Label), a specialized company in renewable energy aggregation, aims to expand its role from monitoring generation predictions to operating LG Energy Solution's energy storage systems (ESS). The global environmentally friendly renewable energy market aligns seamlessly with the ESG management of numerous companies in the future. LG Energy Solution's AVEL is meticulously preparing for global market expansion, starting from Jeju.”

Kim Hyuntae, CEO of LG Energy Solution's AVEL

AVEL, a Company In Company (CIC) of LG Energy Solution, initiated its operations in Jeju in October 2022, focusing on renewable energy aggregation. In the AVEL office with a panoramic view of the Hagwi Sea meeting the azure sky, CEO Kim Hyuntae shared his entrepreneurial experience and insights into AVEL's entry into the Jeju renewable energy market.

Q  AVEL, LG Energy Solution's CIC, is currently one of the most emerging companies in the field. Please introduce your company and its business scope.

AVEL is a CIC, combining the advantages of a large corporation with those of a venture company. As a CIC with autonomy and swift decision-making based on on-site feedback, AVEL accesses the parent company's system, leveraging top-notch technology and infrastructure despite being a startup. AVEL ventured into the renewable energy market by exploring new growth businesses within LG Energy Solution, which is known for its world-leading technological capabilities in the battery industry. Currently, AVEL focuses on the next phase of the renewable energy market and ESS after establishing an environment for generating green energy, such as solar and wind power. We are currently promoting a virtual power plant project, utilizing an ESS and a grid energy aggregation system to predict and enhance the efficiency of distributed renewable energy generation.

Q  What is AVEL's core business, "Renewable Energy Grid Energy Aggregation (EA)"?

The traditional energy market, previously dominated by fossil fuels and nuclear power enriching our daily lives, is transitioning to the global renewable energy market in alignment with environmental concerns like carbon neutrality and carbon emissions allowances. Jeju, in particular, aspires to be a pollution-free and clean island, declaring "Carbon-Free Island 2030." The island's renewable energy supply, surpassing 40%, leads to frequent power restrictions due to surplus power. Unpredictability in weather-dependent renewable energy sources like wind and solar power makes it challenging to forecast generation volumes, resulting in unstable demand and supply, causing voltage instability that damages electrical devices and equipment. To restore stability, the output of renewable energy generation facilities is temporarily halted, causing energy waste and economic impacts on power generators.

AVEL addresses the unpredictability of renewable energy fluctuations and suggests using LG Energy Solution's ESS to mitigate this issue. AVEL is researching the use of ESS not only for energy storage but also to create a "virtual power plant (VPP)" that can replace the unstable renewable energy transmission network. AVEL operates an energy aggregation (EA) system, leveraging the robust hardware of ESS. With this system, AVEL aims for power grid stabilization through Energy as a Service (EaaS), enhancing the efficiency of power grids by utilizing distributed renewable energy resources and ESS. Additionally, AVEL has signed several business agreements to stabilize the power grid in the Jeju region and explore new power businesses.

AVEL aims to enhance generation prediction and power grid EA, critical elements in the renewable energy market. Above all, AVEL is committed to reducing the generation error rate through a database of generation-related data and accurate predictions. AVEL is indispensable for amplifying the value of Jeju's renewable energy resources in the renewable energy EA market, like a gem gaining value through craftsmanship.

AVEL's monitoring status to accurately predict renewable energy generation in the region 

Q  I heard the news that AVEL recently passed the registration test to participate in the Renewable Energy Generation Prediction System conducted by the Korea Power Exchange. What is the "Generation Prediction System," and how will it impact AVEL's business in the future?

In the realm of renewable energy generation, weather is a two-edged sword. Unlike finite resources such as fossil fuels, infinite sunlight and wind serve as raw materials. However, the swiftly changing weather patterns, challenging to predict even with supercomputers and advanced forecasting, pose limitations. This is particularly crucial for the renewable energy market in Jeju due to its island characteristics, making generation prediction essential.

AVEL has successfully passed the registration test to participate in the Renewable Energy Generation Prediction System conducted by the Korea Power Exchange. The system demands a generation prediction error rate of less than 10% to qualify. Additionally, AVEL has become the first in Korea to secure final approval for registering for the Solar-Wind Mix Resources in Jeju. Since March 2023, AVEL has initiated the registration process as a power intermediary and is currently enhancing renewable energy generation predictions. AVEL aims to finalize the power grid stabilization system and power grid energy aggregation program through this initiative. We are also gearing up to enter the real-time bidding market for renewable energy in Jeju, scheduled to commence its pilot project in 2024.

Q  What is AVEL's "virtual power plant (VPP)," and can you describe the structure of this business?

Jeju is undoubtedly a battleground for renewable energy. The island boasts abundant resources for power generation facilities such as solar, wind, and marine energy. Currently, renewable energy accounts for 40% of the total generation capacity and 19% of the generation volume. There is a need to redefine the value of generated renewable energy, considering the rich resources for creating a "Carbon-Free Island, Jeju." The renewable energy bidding system, set to commence as a pilot project in February 2024, is expected to be expanded nationwide by the end of 2025, depending on the actual conditions in the power market. Anticipation is high regarding the changes the system will bring about in Jeju's renewable energy market. 

AVEL integrates, operates, and manages various resources to serve as a renewable energy control tower, aiming to enhance the power system's stability, reliability, and economic viability. AVEL's VPP collects information from various renewable energy generation facilities distributed across Jeju, integrating them into a single software. The surplus or insufficient renewable energy produced in this process is resolved through the ESS, alleviating power supply uncertainties. It is optimized for preventing renewable energy waste through accurate generation predictions and increasing efficiency through ESS. The VPP operated by AVEL will act as a bidding agent to generate revenue from commissioned contracts with renewable energy power plant operators.

AVEL collects various information on offshore wind farms and operates a VPP 

Q  Can you describe AVEL's business utilizing LG Energy Solution's ESS?

AVEL has recently won the bid for the central contract market project for Jeju's long-duration battery energy storage system (BESS) to address the renewable energy power system issues. In collaboration with LG Energy Solution, which supplies ESS batteries, AVEL partnered with the Jeju Energy Corporation, Korea East-West Power, and Equis Consortium. The plan is to create an ESS farm on the east side of Jeju to stabilize the island's renewable energy generation and supply balance.

In fact, the investment recovery period for the ESS in the Jeju pilot project is expected to exceed 30 years, indicating low marketability. However, the initiative can be viewed as part of corporate ESG practices, and the ESS investment primarily serves as a contribution to social responsibility. With the support of the parent company LG Energy Solution, AVEL aims to increase the value of renewable energy actively. Our plan includes resolving frequent output control issues and developing a responsive business model for fluctuating renewable energy using ESS. This will enable the efficient consumption of Jeju's clean, renewable energy, leading to profitable power generation.

Long-term BESS facility using ESS of LG Energy Solution 

Q  What are AVEL's short-term, long-term plans, and future goals?

AVEL has made significant strides in a short time. We will not stop here. We aim to become a definitive leader in the renewable energy market by maximizing the utilization of Jeju's renewable energy resources. The renewable energy bidding system for power supply management stability provides incentives or penalties based on the predicted results by operating a VPP, acting as an intermediary. This market presents both opportunities and risks. Asthe pilot project kicksoff in Jeju, there is relatively low awareness among renewable power plant operators and market participants. AVEL is actively explaining the business details to encourage operators' participation through mostly 1:1 consultations. Particularly in the case of solar power, as unquantified solar projects constitute 72% of the total, predicting demand and managing supply becomes challenging. In the short term, our focus is on securing solar business operators in Jeju to enhance the monitoring of generation predictions. 

AVEL plans to develop ensemble prediction algorithms that integrate Jeju's renewable energy models, including solar and wind, to increase the accuracy of generation predictions. In the long term, we aim to enhance energy output stability and utilization through ESS. Building on the achievements in Jeju, we are also planning to expand into the mainland and tap into international markets by 2027.

Q  What prompted the decision to start the business in Jeju rather than Seoul?

For over a decade, I dedicated myself to battery engineering. The idea of providing energy as a service led to the creation of AVEL. We are a CIC, but the startup journey wasn't much different from others. Our founding members personally searched for office space, conducted business meetings with relevant departments in Jeju, and convinced owners of renewable energy power plants. 

Our main responsibilitiesextend beyond developing programs using data at the computer but also, more importantly, communicating with those in the renewable energy generation sites. The operational and management teams, requiring mobility, are stationed in Jeju, while developers and researchers collaborate in Seoul with the parent company. The decision to start in Jeju was not a choice but a necessity, especially for the operation and management of ESS.

AVEL Jeju Office with a Flexible Work Environment 

Q  How are relationships and collaborations with companies and residents in Jeju being established?

For renewable energy businesses, the ability to gather information is more critical than in any other industry. It's essential to quickly grasp the policy direction of the central government and the autonomous province, adapting flexibly to evolving environments. Collaboration with local energy companies in Jeju is also crucial. The forthcoming renewable energy market is, simply put, a "data war." 

To increase prediction accuracy, it's necessary to expand the monitoring scope and improve the efficiency of renewable energy utilization to reduce surplus power. Consequently, communication with each power plant operator and Jeju energy market stakeholders, related to ESS farm development, is also vital. This is why AVEL’steam, comprised of experts in various fields, isalways busy attending forums on renewable energy, providing insights into the industry’s status, and conducting business briefings for operators.

Q  What is AVEL's operational policy, talent acquisition strategy, and infrastructure for employees working in Jeju, aiming to expand the business on the island?

Operating a company is undeniably driven by profit. Yet, the renewable energy sector holds a profound sense of mission and commitment to contributing to the creation of an environment for the next generation. Establishing and running a company in Jeju at the forefront of the renewable energy industry also places a priority on recruiting local talent to benefit the island. AVEL is particularly interested in communication specialists and field engineers for VPP and ESS projects, with future plans to concentrate on practical talent development through collaborations with local universities. Internally, within LG Energy Solution, we have plans to attract exceptional talent to Jeju as part of our business expansion. 

Even today, developers from Seoul have come down to the Jeju headquarters for on-site monitoring of renewable energy generation volumes. The Jeju office serves not only employees residing on the island but also those visiting for business purposes, functioning as a workation office. Employees receive support for housing, as well as allowances for meals, transportation, and accommodation. On a personal note, I am fully dedicated to achieving significant results, as my move to Jeju provided me with a new life, leaving behind the hectic and stifling city. I am enjoying the work-life balance and workcation in Jeju, an experience every worker dreams of. With the safety net provided to a CIC, my goal is to grow the business successfully and achieve a spinoff in the future. We would appreciate your interest and attention to AVEL's growth stories and the successful expansion of the Jeju renewable energy market.

 CEO Kim Hyun-tae and Choi Kyung-mook, who are leading AVEL, are responsible