green energy technologies in korea

GREEN ENERGYTECHNOLOGIES IN KOREA

May 2016

Market Overview

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Country Profile

Peninsular country located in Northeast Asia

Situated in a temperate zone, four distinct seasons

Population of 51.4 million

514 people/km2

9 births per 1,000 people (the world’s lowest birth rate)

Median age of 40.8 years

Republic of Korea (South Korea) in General

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Country Profile

Fully democratized by late 1980s

Presidential system: a single 5-year term

Three branches: executive, legislative, judiciary

8 provinces, 1 special self-governing province, 6

metropolitan cities, 1 special city, 1 special self-

governing city

Government

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Country Profile

Major Indicators

Economy

2015 Actual Historical Average 2011-2015 (%)

Population (million) 50.3 Population growth 0.5

GDP (USD, billion, market exchange rate) 1,369 Real GDP growth 3.0

GDP (USD, billion, purchasing power parity) 1,802 Real domestic

demand growth 1.9

GDP per capita (USD, market exchange rate) 27,220 Inflation 1.9

GDP per capita (USD, purchasing power parity) 35,834 Current account

balance (% of GDP) 5.2

Country Profile

Industrialized Economic Powerhouse Merchandise trade volume of over USD 1 trillion; service trade

volume of USD 219 billion (2014) Global FTA networks – especially, with the USA, the EU, and China Key industries: automobile, machinery, chemicals, electronics,

semiconductors, and shipbuilding

Challenges Concentrated economic power on conglomerates Ageing population Youth unemployment (9.2% in 2015)

Economy

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Energy & Environmental Market

Energy Consumption in Perspective High energy dependency: 97% of oil for energy consumption Dependent on fossil fuels (65.3%) and nuclear energy (31.1%) Energy-intensive economic structure based on heavy industries South Korea is ranked 6th in GHG emissions per capita; 7th in CO2

emissions; 16th in accumulated GHG emissions

Green Technologies Market in Korea Heavily subsidized and dependent on government National policies as key indicators and drivers

Energy Consumption Patterns in Korea

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Recent Focus on “Green Growth” Framework Act on Low Carbon and Green Growth (2010) The Basic Plan for Development, Use, Diffusion of NRE

Target Share by NRE Sources

Green Growth in Perspective

Category (%) 2014 2025 2035Solar thermal 0.5 3.7 7.9Solar photovoltaic 4.9 12.9 14.1Wind power 2.6 15.6 18.2Bio energy 13.3 19.0 18.0Hydropower 9.7 4.1 2.9Geothermal 0.9 4.4 8.5Ocean 1.1 1.6 1.3Waste 67.0 38.8 29.2

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Government’s Initiative for Green Growth Particular focus on wind power and solar photovoltaic energy Target of 37% reduction of GHGs from BAU by 2030 announced

Wide Gap between Goals and Reality In 2014, NRE to total energy supply ratio was 1% (lowest among

OECD members) NRE markets: many underdeveloped or at beginning stage Minor reduction target of fossil fuel based power generation:

65.3% 53.7% between 2014 and 2029

Uncertainties remain in government policies

Green Growth in Perspective

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Market Opportunities

Government’s active initiative for green growth

Gap between technological development and regulatory requirements

Increased R&D and funding opportunities

Opportunities in General

Sector Information

Wind Power

Modest Market Size 591MW from 75 wind farms (in 2014) 2.6% of total NRE sources

Promising Outlook Government’s active promotion: 18.2% of total NRE by 2035 The Southwest Offshore Wind Project to support local

companies to catch up with global competitors Deregulation

Market Situation

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Wind Power

Domestic Players

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Parts & Facilities• Advanced forging

technologies • Not price-competitive

Turbine• R&D stage • 3MW turbine tested• Unlikely to enter the

global market soon

Wind Power

EU companies have dominated the market Vestas is the most prominent player. Siemens, GE Power (Alstom), Enercon, as well as Chinese makers

entering the market Dominance of global turbine makers likely to continue

Korean conglomerates to join competition (22% of wind power deployment)

Opportunities Commercial wind power deployment in general Joint overseas market development Cooperation with Korean companies in domestic market

Key Players & Opportunities

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Aerothermal Energy

Underdeveloped market Gas and oil boilers are the major segment of the heating

space market Heat pump water heaters (HPWH) market: EUR 125

million (2012) Low-energy buildings have only gained attention lately.

Market Overview

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Aerothermal Energy

Attention to Benefit of Heat Pumps No need for additional water heater: Aerothermal pumps

recycles heat to produce hot water. Ventilators could be used for heating and ventilation.

Passive Building Design Growing interest in “passive houses” and low-energy

buildings noticed.

In general, market opportunities are limited.

Potential Opportunities

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Solar Energy

Contrary to Global Trend, the Market Has Shrunk Popularity of electric heaters combined with cheap

residential electricity price Reduction in government support from 2009

Potential Opportunities Impact of Renewable Heat Obligation (RHO) to be seen Demand for hybrid devices (e.g. geothermal & solar

thermal technologies)

Solar Thermal Energy

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Solar Energy

Modest Domestic Market Power generation of 1,469 MW (2013)

Largest Target NRE Source 65% of NRE power generation in 2012 (KRW 4 trillion)

Strong Upstream Market & Underdeveloped Downstream Market Polysilicon: 53,000 tons Wafer: 2,400MW Solar cell: 1,580MW Module: 2,783

Solar Photovoltaic Energy (1)

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Solar Energy

Source: InvestKorea (KOTRA)

Solar Photovoltaic Energy (2)

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Solar Energy

Weak Domestic Market The domestic market is too small to achieve the economy

of scale.

Joint Development of Overseas Solar Power Projects Korean companies are actively cultivating overseas

projects Cooperation in the downstream market

Market Opportunities

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Geothermal Energy

Geothermal Pump Market (as of 2013) Parts & facilities (EUR 151.4m), boring & construction market

(EUR 105m) High start-up costs: Market development led by government

Geothermal Power Plant Market 20MW geothermal plant: a strategic NRE target by the

government Pohang EGS project: first pilot project for geothermal electricity

generation (to be complete in 2017)

Market Overview

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Geothermal Energy

A few young start-ups are visible in the local market (e.g. INNOGEO, Nexgeo).

Market at the Developmental Stage

Potential Opportunities Geothermal heat pumps for installation in “green buildings” Government projects (e.g. Pohang EGS) to gauge the market

development


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Hydropower

Minor Market 1.5% of total energy mix Total installed capacity of 65.4MW in 51 sites

A Few Visible Projects Using Tidal Power

Market & Opportunities

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Ocean Energy

National Strategy & Targets Due to environmental and community concerns, ocean energy target

has been lowered: 1.3% in NRE by 2035

Lack of Sea Test Facilities

Potential Opportunities Public funding programs: Ministry of Oceans & Fisheries; Ministry of

Trade, Industry and Energy Tidal and wave energy R&D OTEC and Salinity gradient R&D


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Biomass Energy

Market Size (2013) Production: 1.558m TOE (15.8% of total NRE) Potential utilization: 2.32m TOE (with current technology)

Short Supply of Biomass Resources: Weak Primary Industry More opportunities in waste solidification and biogas production

Due to a technological gap, refuse-derived fuel manufacturing, bio-gasification, and waste-to-energy technologies are sought out.


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Biofuel Technologies

Biodiesel-centred Market Highly Dependent on Government Policies Mandatory biodiesel portion in commercial diesel fuel (2.5%)

Weaknesses Import-dependence: 57% of resources from import Price issue: biodiesel > diesel (by EUR 0.4/litre) Local refineries sceptical about increase in mandatory biodiesel

portion

Market Opportunities Unclear 23 domestic producers (2010) 16 producers (2014) Base materials, price-competitiveness, tension with refineries, etc.


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Biogas: Landfill Gas (LFG)

Growing interest in LFG due to the increasing volume of organic waste in 300 landfill sites nationwide.

19 sites utilize LFG for electricity (16 sites) or boiler fuel (3 sites). Sudokwon landfill site: the world’s largest LFG generation

(50MW) Banchon-ri LFG plant, Daegu: Clean Development Mechanism

project by UNFCCC

Most landfills are managed by local governments Contract or Build-Transfer-Operate (BTO) model is applicable.


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Biogas: Sewage Treatment Plant

Increase in Biogas Production 248.8 million m3 in 2014 (21.1% increase) Electricity generation from biogas: 30% year-on-year

increase in 2014

Business operation is at the beginning stage. Under-systemized waste collection Technological lag in anaerobic digestion method More government support expected


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Power Generation

Dominated by the state-run Korea Electric Power Corporation (KEPCO) and its affiliates 90% of generation and nearly 100% of distribution

Still, conventional power plants are the main category

Construction of power plants Carried out by consortia Key parts are often provided by global companies such as

Siemens Energy, Westinghouse Electric Company, GE Energy, and ABB Group.


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Management & Control Systems

Low penetration of Energy Management System (2.9% in 2012) Building EMS: several universities and hospitals Home EMS: early stage; part of home network service Remote Energy Management: LG Electronics and KEMCO

provide services Factory EMS: not developed yet

Led by Korea Energy Agency (KEA) Energy Service Companies (ESCO) program Energy audits

Market Overview

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Key Players

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Expected Market Growth Introduction of environmental regulations EMS considered as an alternative to compliance with

strict regulatory obligations


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Energy Efficiency & Carbon Services

Government regulations are at the centre of efficiency management.

Energy Efficiency Management Programs Implementation by KEA under the direction of Ministry of

Trade, Industry, and Energy Energy Standards & Labelling program High-efficiency Equipment Certification program e-Standby program

Market: Regulatory Requirements

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Carbon Market: 2nd largest in the world

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Energy Saving Consulting

Inspection & Certification


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Energy Conservation & CO2 Reduction

Governmental Policies To improve national energy efficiency by 46% until 2030 To cut down greenhouse gases (GHGs) by 37% by 2030

Industry Policies Cap and No-Trade scheme to manage 58.2% of total 620m

GHG emission Zero-energy buildings by 2025 Average Fuel Economy program to include heavy-duty

vehicles from 2015

Market Conditions

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Carbon Capture & Storage (CSS)

Market has not been developed. Pilot or demonstration projects are driven by government targets.

KRW 800 billion to be invested for technological improvements

Carbon capturing: 84% of technological maturity R&D to reduce cost from USD 40 tCO2 to less than USD

30tCO2

Transport & Storage Underdeveloped: 30 bn tCO2 storage to be prepared by 2030

Market Overview

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Cogeneration: Combined Heat & Power

Combined Heat & Power (CHP) as a share of total electricity generation: 7% in 2013

Domestic power market does not fully recognize the value of cogeneration as yet.

22 areas/districts are distributing CHP and district heating & cooling system by 2012.

The state-run Korea District Heating Corporation (KDHC) is the major player.

State-owned or local companies dominate the market with a number of foreign partnerships (e.g. Siemens AG).


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Off-Grid Solutions

Niche Market Solar PV off-grid based. Capacity ranges vary.

“Green Island” Projects (Independent Energy Island) First pilot project in Gapado Gasado: the first true energy-independent island with ESS In October 2014, MoU with Ulleung Island with 7,900

households Solar PV, wind, and small hydropower installation by 2017 ESS systems by 2020

Market Overview

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Off-Grid Solutions

“Green Island” projects in Korea Cooperation for energy storage technologies and micro-

grid

Overseas off-grid systems Green Climate Fund supports a project that provides

electricity in the Amazon Basin region using solar energy Gasado as a base model for the project


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Regulations

National Policy Support

Framework Act on Low Carbon Green Growth The foundation of the government’s mid- and long-term GHG

emission reduction targets cap-and-trade, carbon labelling, carbon tax, NRE promotion

Energy Use Rationalization Act Energy efficiency and GHG mitigation policy

The Act on the Promotion of the Development, Use, and Diffusion of New & Renewable Energy Defines 11 NRE sources

Framework Regulations

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National Policy Support

The 2nd Energy Master Plan (2014-2035) Aims at 13% reduction of energy demand Aims at 15% reduction of electricity demand

The 5th Energy Use Rationalization Plan (2013-2017) Short-term plan to reduce final energy consumption by

4.1% and enhance energy intensity by 3.8%

Demand Side Management

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