Technology Competitiveness Lagging 5 Years Behind in China... Avoiding the Solar Power Trap [Domestic Offshore Wind Power Crisis]⑥

China Encroaches on Han Solar Industry
Many Domestic Companies Withdraw from Business

Offshore Wind More Serious than Solar
Clear Gap in Turbine Technology... Han at Beginner Level

Domestic offshore wind power cannot rule out the possibility of following the same path as the solar power industry. The domestic solar power industry is cited as a representative case of being encroached upon by China. If China dominates the market, domestic companies are likely to lose opportunities to accumulate the technology and experience necessary for ecosystem development.

Just two years ago, the technological levels of South Korea and China in solar power were similar, but now, according to industry assessments, China leads South Korea in everything from raw material technology to cell and module technology.

China is considered the absolute leader in the solar power sector. According to the U.S. National Renewable Energy Laboratory (NREL), eight of the top ten solar power companies worldwide are Chinese, with all companies from 1st place Tongwei to 5th place Jinko being Chinese firms.

China is pouring money into research and development (R&D). Longi Solar, the world's 4th largest solar module manufacturer, spends 1.3 trillion KRW annually on R&D. This is more than four times the budget of the Korean government's Renewable Energy Core Technology Development Project (321.7 billion KRW).

Many domestic solar power companies have already withdrawn from or downsized their solar power businesses. SKC discontinued its ethylene vinyl acetate (EVA) sheet business, which protects solar modules, in 2020. OCI, a leading polysilicon company, stopped domestic polysilicon production in 2020. Hanwha Solutions also ceased polysilicon production in its chemical division the same year. Woongjin Energy, the only domestic producer of ingots and wafers, was finally declared bankrupt in July 2022. LG Electronics, which was involved in cell and module businesses, also exited the business in 2022.

However, the offshore wind power industry is assessed to be in an even more serious situation than solar power. According to the Industrial Skills Council (ISC) organized by the Ministry of Employment and Labor, South Korea's wind power technology level is only 74% compared to advanced countries. The localization rate of blades, generators, and converters is 34%. The technology and price levels are 60% compared to advanced countries.

The ISC analyzed, "Since the mid-2000s, steady localization development of major components has been underway, but due to the narrow domestic market and the resulting difficulty in securing price competitiveness, many components are struggling to enter the market."

The area where domestic companies still maintain competitiveness is offshore wind power structures that support wind turbines. Decades of maintaining a strong position in shipbuilding and accumulating experience in marine plant manufacturing have been helpful. The ability to immediately produce large structures without structural changes or large-scale facility investments at shipyards also acts as a competitive advantage. Not only shipbuilders but also steel companies have achieved results in developing special steel materials, which are key materials for offshore wind power generation.

The biggest problem is the turbine, the core component that generates electricity. Like other renewable energies, offshore wind power also suffers from high generation costs. Since turbines account for the largest portion of equipment costs, scaling up turbines is key to reducing costs. For example, installing ten 10MW turbines is much better than installing fifty 2MW turbines to produce 100MW.

However, domestic turbines are unable to catch up with the technological gap. It is known that South Korea's turbine technology level lags behind overseas by at least 4 to 5 years. Currently, global companies including the world’s number one Vestas have ultra-large wind turbine technology at the 15MW (megawatt) level. In contrast, domestic companies have only just begun developing 10MW turbines. The government-led project to develop wind turbine technology over 15MW was attempted in 2022, but at that time, the share of wind power generation was so low that companies did not respond positively, citing difficulties in monetization.

According to Korea Electric Power Corporation (KEPCO) data, South Korea can produce about 60 turbines and 135 substructures annually. However, there are currently no ships or ports capable of installing offshore wind turbines. Even if 15MW turbines are installed, 160 turbines would need to be installed annually.

The situation is similar for offshore wind turbine installation vessels (WTIVs). The only WTIV operated domestically is an 8MW-class vessel owned by Hyundai Steel Industry, and if a WTIV capable of installing turbines over 10MW is needed, it must be chartered from nearby China.

The gap between South Korea and China in offshore wind power is starkly evident in installation capacity. As of 2022, the cumulative installed capacity of domestic offshore wind farms is 124.5 MW (0.1245 GW), which is only 0.4% of China’s 30.5 GW. China’s growth is very steep. In 2021, the newly installed offshore wind turbine capacity in China was 16.9 GW, five times more than Europe’s 3.3 GW.

An industry insider said, "Just like in electric vehicles, semiconductors, and solar power, Chinese wind power is explosively growing under the support of the domestic market and government backing," adding, "It will take a very long time for domestic companies to narrow the technological gap with Chinese companies and secure independent technology."