The state of the Korean market

South Korea should be a solar and wind leader, given that the nation imports 96% of its energy. Yet renewables account for less than 2% of its electricity.

The country had installed 492MW of wind by the end of February, and 982MW of PV to the end of 2012. By comparison, Japan had installed roughly 2.6GW of wind and 7.4GW of PV by the end of last year. So why is Korea lagging so far behind?

The short answer is government policy.

Although former president Lee Myung-Bak championed an $83.6bn “green growth” programme, the emphasis was on R&D spending to increase South Korea’s global market share in renewables. “Lee mainly focused on exporting renewable energy,” argues Lee Sanghoon, director of the Korean Society for New and Renewable Energy. “But he wasn’t as interested in deploying it at home.”

President Lee set national targets for renewables to account for 11% of energy by 2030, with wind reaching 7.3GW and PV 4.3GW.

But in 2010, he scrapped the feed-in tariff (FIT) system introduced in 2002, after the 500MW solar installation cap was reached. “It was a financial burden for the government,” says Seo Jae Hong, senior manager of the Korea Photovoltaic Industry Association (Kopia).

Two years later, Lee introduced a renewable portfolio standard (RPS) that requires 13 utilities, representing about 98% of the country’s generating capacity, to derive 2% of their electricity from renewables this year, 3.5% by 2015 and 10% by 2022. In addition, new PV targets have been set for the entire utility industry, with 450MW planned for this year up to 1.2GW in 2016.

Seo says the RPS system has been less successful than the FIT, but installations have still jumped since its introduction, with 307.2MW of PV added in 2012. A further 313MW will be installed this year, according to Kopia. A significant portion of this will consist of rooftop installations.

The effectiveness of the RPS in driving wind development is less certain.

“The RPS is fairly aggressive and penalties are high for companies that fail to meet it,” says Justin Wu, wind energy analyst at Bloomberg New Energy Finance. But wind developers face the double whammy of a shortage of available land and an extremely costly and time-consuming planning process that requires permits from three ministries and the relevant provincial authority.

Foreign turbine makers such as Vestas and Acciona have dominated the Korean market, as domestic players such as Samsung and Hyundai have focused on overseas markets.

Offshore wind is needed to meet the RPS targets, says Wu, and several large projects are in development, including the 200MW Daejong and 100MW Hallim, both off Jeju Island.

The government is also planning a 2.5GW three-phase offshore project off the southwest coast, but the construction date for the 100MW first phase has been repeatedly delayed.

The biggest problem for the renewables industry at present is, perhaps, uncertainty.

Since Park Geun-hye succeeded Lee as both president and Saenuri party leader in February, she has been silent on wind and solar.

However, she is due to unveil a national energy plan in September and a renewables road map in December.