[Interview] "Domestic Wind Power Value Chain May Collapse... Need to Find Activation Measures" Lee Sang-il, President of the Wind Energy Society [C Tech Now]

"Build Offshore Wind Power Complex Quickly
Give Domestic Companies Participation Opportunities"

Sang-il Lee, President of the Korean Wind Energy Society (Professor at Gunsan University)

"If overseas companies enter the domestic wind power industry, they can quickly activate various value chains, but some competing domestic wind power value chains are expected to wither."

Lee Sang-il, president of the Korean Wind Energy Society (professor at Gunsan University), expressed concerns in an interview with Asia Economy on the 12th that the domestic wind power industry could collapse due to the entry of European and Chinese companies into the domestic wind power sector.

Offshore wind power is recognized as an important means to achieve Korea's carbon neutrality goals. Surrounded by the sea on three sides, Korea is well-suited for the construction of large-scale offshore wind farms. Meanwhile, European and Chinese companies, whose wind power industries developed earlier than Korea’s, are participating in various domestic offshore wind projects to secure a foothold in the still leaderless domestic offshore wind market. In particular, Korea’s advanced shipbuilding and marine plant industries allow these companies to quickly enter the Korean market through collaboration.

Professor Lee pointed out that although overseas companies with capital and technological capabilities may initially utilize some domestic value chains, making the offshore wind power industry appear to be activated, it is questionable whether this will be sustainable in the long term. This is because once the domestic wind power industry base collapses, reliance on foreign companies becomes inevitable.

In this regard, he also raised the need to restore the Local Content Requirements (LCR) system, which the government abolished last year. Professor Lee said, "Some countries aiming to grow offshore wind power as a major industry still enforce localization regulations (LCR)," and emphasized, "It is necessary to restore LCR." He added, "To abolish LCR, measures to revitalize the domestic wind power industry must be found," and remarked, "It seems unreasonable to ask a child just learning to walk to compete with adults."

Experts evaluate that the competitiveness of the domestic offshore wind power industry lags behind overseas by about 3 to 5 years. For example, while foreign companies have commercialized turbines up to 15 MW capacity, domestic companies remain at around 8 MW.

Professor Lee emphasized that although the capacity of domestic wind power generation systems is smaller than overseas, it is not an insurmountable level. Due to extensive experience in developing wind power systems, if opportunities to participate in economies of scale through large-scale offshore wind farm construction arise, technological and price competitiveness can be quickly secured. He said, "The important thing is to build offshore wind power farms as soon as possible to provide participation opportunities." In fact, many domestic component companies have participated in developing domestic offshore wind power systems, but except for projects promoted by public enterprises, they have hardly been utilized.

Professor Lee stressed the urgent need to introduce a one-stop permitting system for large-scale offshore wind farm development. The permitting process is complicated and divided among several ministries, making rapid project advancement difficult. He explained, "For example, military operation zones contain information that general businesses find hard to obtain, and if the Ministry of National Defense deems a project ineligible during the permitting process, no consultation is possible, and the project cannot proceed."

Efforts by domestic companies themselves are also necessary. Professor Lee said, "Rather than responding individually, value chains should form consortia to build large-scale offshore wind power farms."

Ways to secure price competitiveness for domestic companies must also be explored. In offshore wind power generation, the Levelized Cost of Energy (LCOE) is an important variable. Until now, wind farm developers have tended to prefer foreign models with larger capacity over domestic wind systems, which have smaller capacity and higher LCOE.

LCOE consists of capital expenditure (CAPEX) and operating and maintenance costs (OPEX). Unlike CAPEX, OPEX is difficult to calculate accurately because there is no experience operating offshore wind farms for 20 to 30 years.

Professor Lee advised, "While overseas ultra-large wind power systems may have advantages in terms of CAPEX, foreign products also lack a track record, making OPEX predictions difficult," and suggested, "Considering this situation, it is necessary to establish specific response strategies for domestic companies."