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    South Korea Renewables Key View


    August 11, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      South Korea Renewables Key View

      • 11 Aug 2022
      • South Korea
      • Renewables

      Key View: South Korea’s energy policies are being significantly reshaped under new President-elect Yoon Suk-yeol: he has laid out a new energy policy plan, where nuclear and renewables serve as a base for his decarbonisation plan, maintaining the share of nuclear power generation at about 30% of the power mix and reducing the share of fossil fuels power generation. While this presents upside risks to renewable power generation, we maintain that specific plans regarding renewables are not yet clear. For the time being, we maintain our forecasts for relatively strong growth rates in South Korea's non-hydro renewables sector over the coming decade, with non-hydro renewables capacity more than doubling between 2021 and 2031, representing some 13% of the total energy mix by 2031.

      Renewables Headline Forecasts (South Korea 2021-2026)
      Indicator 2021e 2022f 2023f 2024f 2025f 2026f
      Generation, Non-Hydropower Renewables, TWh 36.172 40.585 44.403 48.189 52.391 56.182
      Generation, Non-Hydropower Renewables, % y-o-y 16.7 12.2 9.4 8.5 8.7 7.2
      Capacity, Non-Hydroelectric Renewables, MW 21,569.1 23,525.8 26,041.4 27,590.9 29,635.2 31,400.3
      Capacity, Non-Hydroelectric Renewables, % y-o-y 21.3 9.1 10.7 6.0 7.4 6.0
      e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, national sources, Fitch Solutions

      Key Forecasts And Latest Updates

      • The non-hydro renewables sector will generate the largest number of opportunities within the South Korean power sector, given a strong focus and ambitious targets on the use of renewable energy sources by the government. We forecast relatively strong growth rates in South Korea's non-hydro renewables sector over the coming decade, with non-hydro renewables capacity more than doubling between 2021 and 2031 to total over 42GW, made up predominantly by solar and wind power.
      • Despite strong capacity growth, we believe that non-hydro renewables will only account for 13.0% of the total electricity mix by 2031, way below the government’s targets. We believe that the renewables sector will continue to face several challenges, which could limit its growth potential. We stress that renewable energy remains more expensive than nuclear and thermal generation in South Korea, and remain economically unviable without sufficient subsidies to support growth at present. This is particularly as South Korea’s electricity prices remain relatively low, and operate under a merit-order dispatch system driven by cost.
      • Newly-elected President Yoon, who took office in May 2022, has laid out a new energy policy plan, which seeks to maintain the share of nuclear power generation at about 30% of the power mix, and reduce the share of fossil fuels power generation. This is a reversal on the former administration's energy policy plans to reduce the share of nuclear.
      • However, it is unclear what the direction will be for non-hydropower renewables, with the plan highlighting that 'renewable energy supply goals must be re-established in consideration of rational and realistic supply conditions'. The policy will revise the previous administration's renewables energy targets, with an industry ministry source cited by Reuters noting that the share of renewables in the country's total power mix will be adjusted to below 30% by 2030, compared to the previous administration's targets of 61-71% by 2050.
      • This creates some upside risks to our forecasts. At present, we forecast relatively strong growth rates in South Korea's non-hydro renewables sector over the coming decade, with non-hydro renewables capacity more than doubling between 2021 and 2031 to total over 42GW, made up predominantly by solar and wind power, and generating 13.0% of the total power mix by 2031.This would be a doubling from its current standing of 6.5% of the power mix in 2021.
      • South Korean Energy Agency (KEA) has announced the results of its second major solar tender launched in 2021, with a capacity of 2.2 GW, and has allocated the 2203 MW on offer across 5,263 projects. The final average price was KRW143.120/kWh, which was higher by KRW7 compared to the previous tender. Winners were not announced publicly but projects are granted a 20-year PPA. There are currently no domestic content requirements embedded in the tender but, starting from 2022, projects relying on solar PV modules with a low carbon footprint are being prioritised.
      • The Government of South Korea has awarded electric business licence (EBL) to Korea Floating Wind, a joint venture (JV) between Ocean Winds (a JV between EDP Renewables and Engie, 66.7%) and Aker Offshore Wind (33.3%) granting exclusive rights to develop a 870MW floating wind project off the coast of Ulsan, South Korea. The JV has identified three sites off Ulsan's shore that can adjust some 1.2GW of floating wind power capacity. Korea Floating Wind expects to secure its second EBL for 450MW capacity. Financial close is expected in 2024. In March 2022, the firm secured a second EBL for a 1.2GW floating offshore wind project in Ulsan, South Korea. The second EBL comprises 450MW capacity. The pending required permits are expected to be approved during 2023, with financial close expected in 2024. The overall wind facility is due to complete by 2028, according to a press release from Aker Offshore Wind.
      • Vena Energy signed a joint development agreement (JDA) with Korea Midland Power (KOMIPO) to develop a 384MW offshore wind project near Yokji Island in South Korea. Under the agreement terms, the companies will partner to develop-operate-and-maintain the offshore wind project, which will come up off the western coast of Yokji Island.
      • Singapore-based developer G8 Subsea has signed a joint development agreement with Holim Tech to develop a 1.5GW offshore wind project in South Korea. The proposed wind park will feature an energy storage system with lithium-ion batteries from 3DOM. The facility will also include the installation of high-voltage subsea transmission cables, according to a press release from G8.
      • Orsted has signed a memorandum of understanding with Korea Southern Power (KOSPO) to jointly develop an 800MW offshore wind project near the coast of Ongjin country, South Korea. The project forms part of Orsted's 1.6GW Incheon offshore wind complex off the coast of Incheon City. As per the MoU, the firms have agreed to explore key areas of collaboration related to Incheon offshore wind projects, including applications for renewable energy certificates, joint operations and technology exchanges for operation and maintenance. Orsted plans to start commissioning of the wind farms from 2026
      • Scotra has completed construction on a 41MW floating solar array at the Hapcheon dam, in South Gyeongsang province. This is the largest floating PV plant in South Korea at present, and will be managed by Korea Water Resources Corp. The company is currently also developing a 72MW project at the Saemangeum sea wall on the Yellow Sea, for which it has also built a new 300 MW factory to produce floaters and frames.
      • Equinor has signed a memorandum of understanding with Korean East-West Power to cooperate on 3GW of offshore wind projects in South Korea, including developing the first commercial floating offshore wind farm in the country. Separately, RWE also signed an MOU with the Ulsan Metropolitan City to develop 1.5GW of offshore wind farms off the coast. Earlier in September 2021, Shell also formed a joint venture with CoensHexicon to develop the 1.4GW MunmuBaram floating offshore wind farm, off the coast of Ulsan, and secured the electricity business license in November 2021.
      • Korea Midland Power has awarded a 20-year service contract to Doosan Heavy Industries & Construction to operate and maintain the 100MW Jeju Hallim offshore wind farm in South Korea. The offshore wind facility, valued at KRW180.0bn (USD145.8mn), is owned by Jeju Hallim Offshore Wind Power and will feature 18-units of Doosan's 5.5MW turbines. Hyundai E&C, KEPCO E&C and Korea Leading Energy Management will deliver engineering, procurement and construction works. The overall facility is expected to be operational in 2024.
      • SDN Co Ltd has announced plans to build a new heterojunction solar module factory at its facility in Gwangju, producing 550W solar panels with a total capacity of up to 385 MW.
      • Korea Hydro & Nuclear Power has signed a memorandum of understanding with Hanwha E&C and Eco Green Wind Power Generation to build three wind farms in the Taebaek Mountains in Gangwon Province to power the region. The three plants will have a total capacity of 300MW.
      • The government has approved an electricity business license for the first phase of a 1.5GW floating offshore wind project in Ulsan (504MW). The project is developed by TotalEnergies and Macquarie, which have previously signed a cooperation agreement to develop five floating offshore wind projects, with a total combined capacity of 2GW, on the eastern and southern coasts of the country. This is the first floating wind license to be granted, and sets the stage for an emergence of the subsector. Following this approval, the firms will now conduct environmental impact assessments, and target for construction to begin in 2024.
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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