[C Tech Now] Global Companies Flock to Korea's Coastal Waters... "100 Trillion Won Offshore Wind Power Market Opens"

Global Companies Rush to Enter Korea
83 Approved Complexes
High Growth Potential and Guaranteed Profitability
Some Concerns Over Foreign Firms from China and Others
Calls for Revival of Localization Ratio Reflection System

Corio Generation, the offshore wind subsidiary of Australian asset management firm Macquarie, has announced plans to invest $50 billion (approximately 67.7 trillion KRW) in offshore wind energy. Recently, Jonathan Cole, the company's CEO, stated in an interview with Bloomberg that they will partner with TotalEnergies to develop offshore wind projects over the next seven years in locations including New York, New Jersey, Scotland, England, Taiwan, and Ireland.

Macquarie's move is also closely linked to South Korea. Corio established a branch in South Korea immediately after its founding in 2022, showing strong interest in the Korean market. Currently, Corio is developing eight offshore wind farms totaling 2.9GW in Busan, Ulsan, and Jeonnam. Last year, Corio signed a memorandum of understanding (MOU) with SK Ecoplant for offshore wind projects. SK Ecoplant and Corio plan to collaborate on offshore wind projects totaling 6.8GW across six domestic and international locations, including the UK, Australia, Taiwan, and Busan.

Global Companies Focusing on South Korea

Corio is not the only company eyeing the Korean market. Recently, the number of foreign companies entering the Korean offshore wind sector has surged. Denmark's Ørsted, the world's leading offshore wind company, received power generation permits from the Ministry of Trade, Industry and Energy in November last year for Incheon Offshore Wind Farms 1 and 2. This is Ørsted's first offshore wind project in Korea, located more than 70 km off the coast of Incheon, with a planned investment of 8 trillion KRW.

On the 4th of this month, Germany's RWE received power generation permits from the Ministry's Electricity Committee for its West Sea Offshore Wind Development Project in Taean, Chungnam. This is RWE's first power generation permit in Korea. RWE will develop a 495MW offshore wind farm near Gaeido, Taean. RWE is pursuing a total of 3GW of offshore wind farms in Korea.

Norwegian state-owned energy company Equinor is advancing offshore wind projects totaling 4 to 6GW in Korea. It is developing the 800MW floating offshore wind farm 'Firefly' and the 200MW floating offshore wind 'Donghae 1' project off the coast of Ulsan. Equinor is also working on the Dongchuja Offshore Wind Farm (1.5GW) and Seochuja Offshore Wind Farm (1.5GW) near Chuja Island, Jeju, and signed a business agreement with Korea Southern Power in December last year to support these projects.

Copenhagen Infrastructure Partners (CIP), a global green investment firm headquartered in Denmark, entered the Korean offshore wind market through Copenhagen Offshore Partners (COP). In 2020, CIP established a joint venture with SK E&S called Jeonnam Offshore Wind and obtained permits for a 900MW offshore wind project in the Shinan County waters. Additionally, CIP secured permits for a 1.5GW floating offshore wind farm called Haewool off the east coast of Ulsan and is actively developing the project.

Global asset management firm BlackRock applied for permits to build five 2GW offshore wind farms simultaneously in the waters around Shinan County, Jeonnam, with an investment of 10 trillion KRW, but was denied permission by the government in January.

"Korean Offshore Wind Is Just Beginning"

The reason global companies are rushing into the Korean offshore wind market is that the domestic market is still in its early stages with significant growth potential. According to research by Professor Kim Beom-seok of Jeju National University, the scale of offshore wind projects currently under development or planned for investment by foreign companies in Korea exceeds 16.56GW.

South Korea must significantly expand renewable energy to achieve carbon neutrality by 2050, and offshore wind power is expected to increase its share due to limited land availability compared to onshore development.

According to the 10th Basic Plan for Electricity Supply and Demand established by the government in January 2023, the share of renewable energy in power generation will increase from 21.6% in 2030 to 30.6% in 2036. The goal is to expand renewable energy facilities to 40GW by 2030, with offshore wind accounting for 14.3GW. Offshore wind will need to supply about 35% of the increasing renewable energy capacity.

The wind power industry estimates that constructing 1GW of offshore wind capacity requires an investment of 5 to 7 trillion KRW. According to the Ministry of Trade, Industry and Energy, as of December 2023, a total of 83 wind projects with a cumulative capacity of 27.3GW have received power generation permits. If all these projects proceed, the domestic offshore wind market will exceed 100 trillion KRW.

South Korea is not unfavorable in terms of profitability. The government guarantees stable income for offshore wind operators for 20 years through long-term fixed-price contracts. The electricity price supplied by offshore wind farms, including the Renewable Energy Certificate (REC) weighting, is about 300 KRW per kilowatt-hour (kWh), roughly twice the average purchase price of 145 KRW per kWh paid by Korea Electric Power Corporation (KEPCO) last year.

Another advantage is the well-established ecosystem for offshore wind projects. Choi Deok-hwan, Head of External Cooperation at the Korea Wind Energy Industry Association, explained, "Compared to other Asian, African, and South American countries, Korea is politically stable, allowing projects to proceed reliably. The advanced heavy industry sector, with strong manufacturing and component supply capabilities for towers and foundations, is also a key reason foreign companies enter the Korean market."

However, as of 2024, the total capacity of commercially operating offshore wind farms in Korea is only 124.5MW across three sites: Southwest Jeonbuk (60MW), Yeonggwang (34.5MW), and Jeju Tamna (30MW). Complex permitting procedures and local community acceptance issues have hindered smooth project progress. The government is working to accelerate offshore wind development by improving regulations. Recently, the Ministry of Trade, Industry and Energy introduced 'Offshore Wind Site Map Consulting' to help developers quickly select sites.

"Risk of Chinese Encroachment... Need to Revive LCR System"

Concerns are rising that offshore wind might be dominated by foreign companies as their presence in Korea grows, especially with Chinese firms targeting the Korean market with low prices.

In the fixed-price contract bidding last December, five projects totaling 1.4GW were selected. Among them, Myeongwoon Industrial Development, the developer of the 364.8MW Yeonggwang Nakwol offshore wind project in Jeonnam, partnered with Thailand's B.Grimm Power and China Energy Engineering Corporation (CEEC). The Yeonggwang Nakwol project is reportedly planning to outsource external grid connections to Chinese cable company Hengtong Guangdian.

European and Chinese companies dominate key equipment supply. The Yeonggwang Nakwol project uses turbines from Vensys, a German company acquired by China's Goldwind, while the 76.2MW Gochang offshore wind farm reportedly uses turbines from China's Mingyang. The other three projects are known to use turbines from Denmark's Vestas.

The change in bidding rules played a significant role in enabling Chinese companies to enter the Korean offshore wind market. The Korea Energy Agency, which conducted last year's bidding, weighted price and non-price factors at 60:40, favoring projects using cheaper Chinese equipment.

The government's abolition of the Local Content Requirement (LCR) system also had an impact. LCR granted additional weighting if the use of domestic components exceeded a certain threshold. Taiwan also applies LCR in its offshore wind bidding. However, the Ministry of Trade, Industry and Energy abolished the system in April last year, citing potential trade issues.

The domestic wind industry is calling for the revival of the LCR system. Not only turbines and blades but also foundations, which have maintained price and quality competitiveness, are rapidly being challenged by emerging players from Taiwan, China, and Vietnam.

Choi Deok-hwan of the Korea Wind Energy Industry Association emphasized, "Domestic manufacturing and component industries, which have not yet grown in this early market, lack advantages in price and quality. Reviving LCR would send a positive signal to domestic manufacturers in many ways."

Kang Gyu-hyung, Director of the Renewable Energy Distribution Division at the Ministry of Trade, Industry and Energy, said, "Even global developers mostly use domestic foundations for offshore wind. We are seeking institutional measures to activate the wind industry and protect domestic industries."