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South Korea – the engine of offshore wind in APAC
Date: 2024-09-25
Several common challenges rise to the forefront when considering how offshore wind will gain momentum in emerging markets. The main considerations often revolve around four key issues (the foundation stones) needed to support the green economy:
- Route to market ( i.e. a subsidy regime )
- Grid policy and the supporting infrastructure
- A clear consenting route concerning environmental considerations and finally
- A robust supply chain capable of delivering the required capacity.
In recent years, we've seen a trend for offshore wind targets to be driven by political ambition which is impressive but needs to be matched by concrete efforts to address these four enabling actions.
My country, South Korea is rapidly emerging as one of the most promising markets in Southeast Asia for offshore wind, with a strong commitment to renewable energy and a coastline that is ideal for both fixed and floating offshore wind. Recognising this potential, Venterra Group has recently established a South Korean entity and appointed me as country manager. It was important to appoint someone with a proven track record in offshore wind development in Korea.
In August, a significant milestone was reached with the launch of the offshore wind auction roadmap by The Ministry of Trade, Industry and Energy (MOTIE), which specifies up to 8GW of offtake potential to be auctioned before 2026, further boosting confidence in the industry. To achieve this target, we need to focus on the four key issues that facilitate emerging markets moving to a mature industry. The release of the auction roadmap provides confidence on auction volumes, a draft schedule, and updates on award criteria, including 7-8 GW expected to be auctioned pre-2026 with a clear emphasis on non-price criteria.
One of the major advantages of the Korean market is the impressive supply chain that already supports the ship-building industry, exporting floating vessels around the world. The shipyards and heavy manufacturing industries are well suited to the needs of offshore wind ( both fixed and floating ), which places South Korea at a major advantage compared to many emerging markets which lack the basic infrastructure to accommodate offshore wind delivery. The availability of ports and heavy manufacturing adjacent to strengthened quaysides places South Korea in an enviable position on the world stage.
With this strong supply chain foundation already in place, we need to focus on understanding the route to market via the support mechanisms that are being proposed – specifically the Renewable Energy Certificate (REC) System. RECs provide the financial support for developers, guaranteeing the business case on the basis of a multiplier for offshore wind. This system is crucial as it quantifies RECs by adopting a site-specific multiplier that accounts for distance to shore and water depth. Careful consideration is needed to ensure that any project entering a PPA auction takes due consideration of the specific terms and structure of the auction to accurately quantify the value of the proposed REC support mechanism.
In relation to site selection, there is a wide range of projects identified around the coastline (typical of a developer-led regime that lacks the controls needed to focus projects on areas that offer maximum value with the least environmental/consenting risk). A key technical challenge of many projects is the viability of the wind regime when quantifying the energy output ( given the relatively low wind speeds). However, these costs may be offset by other factors including the close proximity to shore and the potential for cheap construction costs using local expertise.
The consenting pathway for the Korean market is steadily evolving; in recent weeks, we've already seen projects receive EIA approval which total over 6.1GW of floating project capacity. These include a number of projects that have been in the system for some time, including:
- 750MW Firefly floating project - Equinor
- 1.5 GW Grey Whale - Bada Energy
- 1.5 GW Haeworri floating project - CIP
This progress instils confidence in the future of offshore wind projects in South Korea.
Despite the strong supply chain, route to market, and progress on consenting, the availability of physical Grid infrastructure able to accommodate offshore wind remains the last key bottleneck / hurdle and should be a core focus area for future project transactions.
The South Korea offshore wind market is thriving with positive developments, and Venterra’s Advisory team—specialists in early-stage project support—would be delighted to explore how we can assist you. Our core team of experts, dedicated to emerging markets, is ready to address any local market challenges and identify key opportunities. Please feel free to reach out to me directly for more information or to arrange a discussion.