Young Il Choung and Jun Hyuk Yoo, Ernst and Young
December 27, 2011 | 0 Comments
Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.
Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.
Here is the firm’s assessment of South Korea.
In a bid to reduce carbon emissions and boost investment in renewable energy, the South Korean Government expects, by December, to pass its proposed emission trading scheme (ETS) bill, which it claims has the backing of both the ruling and opposition parties. South Korea has pledged a 30% reduction in emissions from expected levels by 2020 and, if the legislation is passed, will become the third Asia Pacific country to tax polluters after Australia and New Zealand.
Thus far, incentives have primarily been offered through tax breaks and a FIT scheme, though the latter is due to be replaced by an RPS in March 2012. The RPS will require power producers with capacity greater than 500MW to generate 2% of total power from RES in 2012, increasing to 10% by 2022.
The ETS legislation has inevitably been opposed by manufacturers, who say it will increase costs and make exports less competitive globally. Data from state-owned Korea Energy Management Corp. indicates companies could face an additional KRW5.6t (€3.6b) of costs as a result of ETS legislation. After intense industry lobbing earlier this year, South Korea has delay p yed implementation of the mandatory ETS by two years to1 January 2015, increased free carbon allowances and softened penalties for non-compliance, resulting in a slightly watered-down bill.
Separate from the ETS, South Korea is also introducing what it calls a greenhouse gas and energy target management system (TMS) next year, under which firms will be given emission reduction targets. However, in a bid to ease the burden, the Ministry of Knowledge Economy also announced in May a “domestic offset mechanism” allowing large firms to fund thedeployment of clean technologies in smaller companies and use the resulting credits to meet their goals in the TMS. It is hoped this mechanism will make it cheaper for big emitters to reach their domestic targets.
2011 has continued to be an exciting year for South Korea’s offshore wind sector, as it edges ever closer to its ambitiousgoal of becoming the world’s third-largest offshore wind powergenerator. In May, the Government announced that the YoungKwang area, located off the southwest coast of the Korean peninsula, has been selected as the offshore wind turbine test bed through which it will test and monitor offshore wind turbine performance.
Meanwhile, in August, Dutch wind turbine developer, STX Windpower commissioned its flagship 2MW direct-drive wind turbine at a demonstration offshore wind park around 1km off Jeju island, the first to become operational in the country.
Jeju Island, the largest island of the country, is regarded to be one of the optimal places to install off-shore wind turbines. In early September, Doosan Heavy Industries and Construction Co. and Posco ICT signed a memorandum of understanding to build a 60-MW offshore wind farm off the island’s coast at a cost of KRW250b (€0.2b). The project is scheduled to be completed by June 2014.
The jewel in the country’s offshore crown; however, remains the 2.5-GW wind farm project, due to be constructed off the southwest coast and comprising 500 5MW turbines. The Government expects this public-private partnership (PPP) project to attract investments from both sectors totalingUS$8.2b (€6.0b). Based on the current schedule, around 100MW of capacity is to become operational by 2013, a further 900 MW by 2016 and the final 1.5 GW by 2019.
Tenders for the manufacture and installation of turbines are expected next year, and it is hoped that this will help domestic shipbuilders challenge Siemens AG and Vestas Wind Systems A/S in the global turbine market. 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 oil sector infrastructure including the laying of underwater , 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.
Indeed, there are already signs that South Korea's shipbuilders are venturing deeper into the wind market — according to data from the Korean Intellectual Property Office, patent applications for wind power systems surged from 71 in 2002 to 669 in 2010, indicating an average annual growth of 104%. Hyundai, for example, is reportedly developing a 5.5-MW turbine and will showcase the prototype of the turbine before the year-end.
Wave and tidal
After seven years under construction, South Korea’s first tidalpower plant began full operations in August at the artificial seawater Lake Shihwa. With a total power output capacity of 254 MW, it is now the world's largest tidal power installation, surpassing the 240-MW Usine de la Rance tidal power plant in France, after 45 years.
The southern and western coasts of South Korea are well known for high tides and strong tidal currents. Long-term feasibility studies have been completed on even larger tidal power plants at two other sites — Garolim, with a planned 480-MW capacity and Incheon Bay with a proposed 1-GW capacity.
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