Better Than Banks... "Four Times the Deposit Interest" Where Residents Profit Through Participation [Report]

Visiting Taebaek Gadoksan Wind Power Plant
Twelve Turbines Installed Along an 11-Kilometer Stretch
Developed as the First Large-Scale Resident Participation Wind Power Project
10-11% Interest Returns for Citizen Fund Participants

Aerial view of the Taebaek Gadeoksan Wind Power Generation Complex. A total of 17 wind turbines?12 in the first phase and 5 in the second phase?are installed along an 11 km stretch on the Gadeoksan plateau, which is located at an altitude of 1,078 meters above sea level. Taebaek Gadeoksan Wind Power Generation Complex

"From here, you can't go up by bus. You need to switch to a sport utility vehicle (SUV)."

To tour the Taebaek Gadeoksan Wind Power Generation Complex, you must first take a bus to the office building located midway up Gadeoksan, then transfer to an SUV. After driving about 15 more minutes along a bumpy forest road, the massive wind power towers, each 117 meters tall (measured from the ground to the center of the turbine), come into view.

The Taebaek Gadeoksan Wind Power Complex was developed in two phases on the Gadeoksan plateau at an altitude of 1,078 meters above sea level. The first phase, which began commercial operation in December 2020, consists of twelve 3.6-megawatt (MW) turbines manufactured by Vestas, with a total capacity of 43.2 MW. The second phase, completed in December 2022, features five 4.2 MW turbines made by Unison, totaling 21 MW of capacity. The combined length of the first and second phases stretches 11 kilometers.

Kim Sucheol, Plant Manager of Taebaek Gadeoksan Wind Power, explained, "The electricity produced here is supplied to the Seoul metropolitan area via the Shintaebaek substation and then the Shingapyeong substation." Next to the wind farm, a 765-kilovolt (kV) ultra-high voltage transmission line runs between Taebaek and the Shingapyeong substation.

Standing in front of turbine number 12 from the first phase, you can see several other wind power complexes in the area besides Taebaek Gadeoksan Wind Power. Near Taebaek City, wind farms such as Changjuk Wind Power (16 MW), Gowon Wind Power (18 MW), Hajang Wind Power (13.25 MW), and Samsu Wind Power (22.5 MW) are also in commercial operation. Taebaek, once a hub for coal mining, is now transforming into a center for renewable energy.

Kim Sucheol, Plant Manager of Taebaek Gadoksan Wind Power, is explaining the elevator and electrical equipment inside the 4.2-megawatt (MW) capacity Unison onshore wind turbine. Photo by Kang Heejong

Choi Myungseop, Director of Business Planning, who is currently on temporary assignment from Gangwon Special Self-Governing Province, explained, "The quality of wind here is so good that the average utilization rate of wind power exceeds 30%." The average annual wind speed at Taebaek Gadeoksan Wind Power is 7.5 meters per second. Generally, for onshore wind power to be economically viable, a wind speed of at least 6 meters per second is required.

The First Large-Scale Resident Participation Wind Power Project... Citizen Fund Model

The Taebaek Gadeoksan Wind Power Complex is also the first large-scale resident participation wind power model attempted in Korea.

The resident participation model is based on the "Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy." Under this system, if residents living near a renewable energy power plant invest in the facility, the government grants an additional weighting to their Renewable Energy Certificates (REC).

The power plant then returns the increased profits from this weighting to the residents. This helps to enhance local acceptance, which is one of the biggest obstacles to renewable energy development. For onshore wind projects with a capacity of 3 MW or more, if residents participate with at least a 4% stake, an REC weighting of 0.2 is granted.

There are two main ways for residents to participate in renewable energy projects: equity-based and bond-based. The bond-based model is further divided into cooperative and citizen fund types. At Taebaek Gadeoksan Wind Power, residents invest in a bond-type fund for the power plant and receive quarterly interest payments over a 20-year investment period. Residents of Taebaek participated with 4% of the total project cost.

For the first phase, Taebaek residents could invest up to 40 million won, and for the second phase, up to 5 million won. The size of the citizen fund in the first phase was originally 1.7 billion won, but it grew to 2.72 billion won. Residents participating in the fund receive annual interest returns of 10 to 11%. In practice, this is after deducting a 15.4% interest income tax. As of November, the average one-year fixed deposit rate at the five major commercial banks is in the low to mid-2% range, meaning the fund offers about four times the return of a bank deposit.

Yoon Taehwan, CEO of Root Energy, which operated the resident participation model at Taebaek Gadeoksan Wind Power, explained, "Residents invest in senior bonds rather than project financing (PF), so they can receive interest payments stably."

Taebaek Gadoksan Wind Power Plant Panorama. Photo by Hee-Jong Kang

Some local governments, such as Shinan County, operate their projects in a slightly different way than Taebaek Gadeoksan Wind Power. In Shinan County, residents pay a small cooperative membership fee, and then borrow the bond investment amount from a financial institution to participate in the renewable energy profit-sharing project. The loan interest is then repaid with bond interest paid by the special purpose company (SPC) operating the power plant to the cooperative. As a result, the cooperative bears no initial financial burden.

Regarding this, CEO Yoon explained, "The citizen fund model, where residents invest directly, increases understanding and interest in renewable energy compared to the cooperative loan model, and is operated transparently under the supervision of the Financial Supervisory Service."

The resident participation profit-sharing renewable energy project is a representative model of the "Sunlight Pension" and "Wind Pension (income)" policies pledged by President Lee Jaemyung. The goal is to increase local acceptance and accelerate the spread of renewable energy, while also helping to boost the income of farmers and fishermen.

However, some are concerned that if the renewable energy profit-sharing system spreads nationwide, it could lead to higher electricity rates. This is because the cost of purchasing RECs is ultimately covered by the climate and environment charges that make up part of the final electricity bill.

Third Phase Project Underway... Construction Targeted for 2027

Building on the success of the first and second phases, Taebaek Gadeoksan Wind Power is accelerating its third phase project.

The third phase, planned near Hasami-dong in Taebaek City, received its power generation business license in 2019, has completed a small-scale environmental impact assessment, and is currently in the process of obtaining a development permit. The goal is to begin construction in January 2027. Han Gideok, CEO of Taebaek Gadeoksan Wind Power, said, "Taebaek is the best location for wind power," adding, "We will push forward quickly with the third and fourth phases."

A representative of Taebaek Gadeoksan Wind Power explained, "Most of the resident consent procedures for the third phase have already been completed." Residents who have already experienced the results of the first and second phases reportedly hope the third phase will proceed quickly.

Some elderly residents, however, are said to be less enthusiastic, as the investment model distributes interest over 20 years. A power plant representative explained, "The investment product for residents is designed so that after one year, they can sell their bonds on the bond market."

<Glossary>

◆Renewable Energy Certificate (REC)=A certificate issued by the government to certify the production of electricity from renewable sources such as solar and wind power. Renewable energy power producers sell electricity on the wholesale market at the system marginal price (SMP), but can also earn additional revenue by selling RECs. Different weightings are applied to RECs depending on the type, location, and production method of the renewable energy.

◆Wind Power Utilization Rate=The ratio of actual power generated to the maximum theoretical output. It is a key indicator of the actual performance and efficiency of a wind turbine. The calculation formula is: annual actual generation (MWh) / rated output (MW) × 8,760 hours × 100.