Note: this article first appeared in Renewable Energy Focus September/October 2012. Click here for a free signup.
IT IS a spirited resolve to excel that lifted South Korea from abject poverty in the 1960s to become the 12th most powerful economy in the world today, with GDP now at $1.57 trillion, or $32,100 per capita.
With a population totaling 50 million, Korea has become an industrial powerhouse known for its vibrant consumer electronics, shipbuilding, automobiles, telecommunications, computers, steel, petrochemicals and semiconductors. Today, it is striving to become a growing force in the renewable energy market too.
It has some way to go, however, as Maggie Kuang, a research analyst at Bloomberg New Energy Finance (BNEF), notes. By August, South Korea had just 455MW of installed wind power capacity and 614MW of solar. “So the Korean market is really small,” she says, noting it accounted for just 1.08% of the global wind market in 2011 (global wind capacity reach 42GW at the end of 2011).
“Project developers have been beset with expensive capex and cheap power prices in Korea, while the issues of mountainous sites [South Korea is considered to be 70% mountainous] and land acquisition have been slowing development in the wind sector,” she explains. “For manufacturers, the difficulty has been the small size of the Korean market.”
But driven by President Lee Myung-bak's August 2008 pronouncement that “green growth” is the new growth engine for South Korea's national economy, its domestic use of renewables is now growing and its leading companies are bidding to become major global players in renewable energy project development and equipment supply.
Specifically, the country is aiming for 4.3% of its total energy needs to be met by renewable sources by 2015, 6.1% by 2020 and 11% by 2030, up from 2.61% today. These have all been formally set under its Renewable Portfolio Standard (RPS). South Korea's government wants to create a renewable energy market worth KRW54 trillion ($47.94 billion) by 2022, up from a targeted market worth of KRW4.1 trillion ($3.64bn) at end 2012. Its industry, meanwhile, has been set the challenge of cornering 10% of the global renewable energy technologies market by 2020.
The country's government has been trying to create demand through all sorts of programmes and incentives to develop the industry, Kuang continues, with the current market incentive mechanism being the RPS and a Renewable Energy Credit (REC) trading mechanism (see box).
Success “will depend on a number of factors”, says Kuang. “The key is the reduction rate of cost of renewable electricity over the next decade. If this cost decreases over the years to reach retail grid parity, then it's very likely to meet the [RPS] target, assuming the grid connection problem in Korea is minimum by then. The decrease in renewable energy electricity cost will, however, largely depend on how quickly Korea can grow its domestic manufacturing capacity of renewable energy equipment.”
She continues: “Looking at the current project pipeline in Korea, which totals 9GW, almost half of the estimated new capacity installation [required] to meet its RPS target, I think the RPS target is challenging but achievable.”
The need to go green
That is something South Korea's leaders will be pleased to hear. The 2008 green growth announcement was the first time a Korean administration combined domestic economic growth policies with environmental considerations. It was a significant shift.
The country is heavily reliant on fossil fuel imports (96.5%) and is the ninth biggest energy consumer in the world – its total primary energy consumption soared from 43.9 tonnes of oil equivalent (TOE) in 1980 to 262.6mn TOE in 2010. Per capita energy consumption has similarly increased from 1.1TOE to 5.4TOE in the same period.
Its energy import bill in 2010 was in fact a staggering $121.7bn. With its domestic (non-renewable) energy resources limited to low-quality anthracite, Korea remains the world's fifth biggest importer of crude and the second largest buyer of LNG and coal. Meantime, it is the ninth largest emitter of greenhouse gases (GHG) in the world.
So for President Lee, adopting green technologies is an “unavoidable choice” and going forward “South Korea's future depends on its performance in this sector.” The National Assembly (or Gukhoe) passed the Framework Act on Low-Carbon Green Growth in January 2010, codifying a 50-year plan to address climate change and attain greater self-reliance in energy without compromising the country's economy.
Significantly, 80% of the Government's $38bn post-economic crisis stimulus package and 2% of its annual budget over five years has been earmarked to advance green growth. As the United Nations Environment Programme (UNEP) notes, this is the highest proportion of a fiscal stimulus package dedicated to green projects among comparable member-countries of the G-20. Korea has also set aside twice that of most other G-20 states as a percentage of GNP. The US has dedicated 11.6% of its $972.1bn stimulus package to green technology, while Japan allocated 2% of $485.9 bn.
Moreover, while not bound by mandatory emissions targets (classified as it is under the Kyoto Protocol as a non-Annex I party, or a developing economy) South Korea has voluntarily undertaken to cut emissions by 30% by 2020 to take them 4% below 2005 levels. Clearly, as with many other Asian countries, implementing renewable energy will be a major offensive in this strategy.
Part 2 here - Renewables ramp up in South Korea
About: Sarosh Bana is India correspondent for Renewable Energy Focus magazine.