Korea Offshore Wind (2nd Edition): A Turning Point

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Background

While Korea’s offshore wind industry is at its initial stage of development, the industry stands at a turning point with the election of President Moon Jae-in in 2017. By reducing the country’s reliance on coal and nuclear energy, Moon’s energy policy focuses on increasing renewable and other clean energy in order to bring Korea’s use of renewable energy to OECD standards. New offshore wind facilities with installed capacity of 12GW are targeted to be built in Korea between 2018 and 2030 in accordance with the “Renewable Energy 3020” implementation plan announced by the Government on 20 December 2017, which sets out the Government’s plan to increase the share of renewable energy from 7.0% in 2016 to 20% by the year 2030. This initiative has been reaffirmed in the “3rd Basic Energy Plan” released by the Government in June 2019 which sets out a more long-term target of increasing the share of energy generated from renewable sources to 30-35% by the year 2040 and ceasing the build of new coal-fired or nuclear power plants. A detailed plan on how this could be achieved will be addressed and implemented in the “9th Basic Plan for Long-term Electricity Supply and Demand” which is expected to be released by the end of 2019.

Growth Potential of Offshore Wind in Korea

Renewable Energy 3020 plan is providing growth momentum to offshore wind in Korea.

The Renewable Energy 3020 plan contemplates the new build of 12GW of offshore wind power by 2030.

As of October 2019, there is or are currently i) one offshore wind farm in commercial operation on Jeju Island (30MW), ii) three offshore wind turbines in operation in Jeju and Gunsan for research purposes (totalling 8MW), iii) one offshore wind farm under construction in Buan, North Jeolla Province (60MW, as part of the Southwest Offshore Wind Project), iv) four projects in Ulsan in development and v) 22 projects in preliminary development (totalling 4.8GW). A map showing these projects is set out below.

A notable progress reported recently is that certain large foreign investors have teamed up with Korean partners to develop floating offshore wind farms in Ulsan, one of which could potentially start construction in 2022 and operation in 2024. Ulsan has been an active supporter of the offshore wind sector and has signed a Memorandum of Understanding with several foreign and domestic investors to develop and implement floating offshore wind farms in Korea. Success of these front-running projects should attract more long-term investment from foreign and domestic sponsors, investors and financiers in the future.

Policy and Regulatory Overview

The key support mechanism for renewable energy projects is the Renewable Portfolio Standard (“RPS”) scheme which replaced the previous feed-in-tariff mechanism. The RPS scheme requires large generators (with 500MW or higher generating capacity) to produce a minimum proportion of their power using new and renewable energy sources or to satisfy this requirement by purchasing renewable energy certificates (“RECs”) from renewable energy generators.