Chinese Products Dominating 100 Trillion Won South Korean Offshore Wind Power Market - BusinessKorea
Chinese Products Dominating 100 Trillion Won South Korean Offshore Wind Power Market - Businesskorea
Chinese companies are gradually dominating the domestic offshore wind power generation market, which is expected to reach a size of 100 trillion won (approximately US$73.77 billion) by 2030. Due to the government allocating 60 percent of the selection criteria for operators to “electricity supply prices,” operators have decided to include Chinese turbines and submarine cables, which are 15 to 40 percent cheaper than domestic ones.
According to the industry on May 19, the Ministry of Trade, Industry and Energy and the Korea Energy Agency selected five operators in the “Offshore Wind Fixed Price Contract Bid” project in December last year. These operators include Shinan Ui, which amounts to 390 MW; Yeonggwang Nakwol, totaling 364.8 MW; Wando Geumil 1 and 2, with a combined capacity of 600 MW; and Jeonbuk Gochang, with a capacity of 76.2 MW.
The fixed price contract bidding system involves offshore wind power generation operators supplying electricity to Korea Hydro & Nuclear Power and others at a fixed price for 20 years. This system guarantees stable income for operators and has been introduced to increase the domestic offshore wind power generation capacity, which currently stands at 0.1 gigawatts (GW), to 14.2 GW by 2030. The investment cost for this capacity, equivalent to the capacity of 15 nuclear power plants, is estimated at a total of 100 trillion won.
The industry argues that the fixed price bidding system will disrupt the domestic wind power generation ecosystem. While 60 percent of the selection criteria for operators are based on electricity supply prices, only 20 percent is allocated for the use of Korean products. As a result, the operator for the Yeonggwang Nakwol project has opted to source wind turbines from Vensys, a German gearless wind turbine manufacturer which is majority-owned by Chinese turbine manufacturer Goldwind, and submarine cables from China’s Hengtong Optic Electric. Gochang has selected China’s second-largest supplier, Ming Yang Smart Energy, as the turbine supplier.
The industry not only expresses concerns that the government is overly focused on suppressing electricity price hikes, potentially sacrificing promising future industries to China, but also emphasizes the need for industrial protection and nurturing policies to enable domestic companies to seize the rapidly growing offshore wind power generation market as outlined in the “Renewable Energy 100 Percent (RE100)” plan. Moreover, there are concerns raised about the possibility of leakage of sensitive information about domestic underwater terrain and naval operations due to the nature of projects that involve laying cables underwater.
Koo Bon-kyu, chairman of the Korea Offshore Grid Industry Association (KOGIA) and CEO of LS Cable & System, stated, “Not only the United States but also the EU are blocking the penetration of Chinese wind power generation equipment to promote their own industries. Now that China is sweeping the newly emerging domestic offshore wind-related market, domestic companies are shocked.”
pr@businesskorea.co.kr
Related Knowledge Center: ENERGY BASICS: hydropower
Hydropower — electricity generated by turbines capturing energy from moving water — was for many years the primary contributor of renewable energy to the U.S. electricity grid. Its growth was rapid into the 1970s, and since then has offered a stable supply of power, while a declining share of all generation. For many years, hydropower was seen as clean energy and an unalloyed good, but a greater understanding of the impact of dams on ecosystems and wildlife has led to the removal of some dams. As of 2019, hydropower trails wind as a renewable source of power generation.