Think of South Korea and two things will probably come to mind: its politically precarious shouting matches with the North and its rapid economic development. Unfortunately, during the past few months its been the unnervingly well-preserved cold war politics more than the robust modern economy that has made headlines. After all, just a stones throw away from the bustling shopping centers of cosmopolitan Seoul lies North Korea, doggedly clinging to the last remnants of an insular monarchal way of life that ended in the South just beyond the boundary of living memory.
But, ask a Korean about the issue and chances are he will appear unperturbed about the peninsulas ongoing hostilities. With the current mounting political tensions, what could be of more importance to the South? In truth, it is not the conflict, but the Souths booming high-tech manufacturing industries that have been the countrys major transformative force, recently earning the Republic the status of developed country as indicated by the indices at FTSE.
Solar cell and module manufacturing sit directly at the intersection of the ROKs economic interests, its hunt for otherwise scarce domestic energy resources and a drive to extend its well-established high tech manufacturing prowess. Over the last five years, the country has made significant investments in manufacturing, trade and renewable energy, including PV solar. In 2008, government subsidies and an attractive feed-in tariff (FIT) made it the worlds fourth largest solar market. Since then, the country has attempted to shift gears from an importer of solar energy and technology to a competitive cell manufacturer and ultimately a net exporter. South Koreas strategy is taking on a three-pronged shape: while the government actively opens trade relations and ploughs funds into green growth, the countrys solar production companies are rapidly expanding by leapfrogging on the backs of current domestic manufacturing strengths.
The first step in Koreas move to build a solar cell and module export economy was, ironically, to apply the brakes to imports of solar energy and technology. In late 2008, this came in the form of a significant and widely bemoaned reduction of the FIT and a restructuring of the annual cap, both of which had made the countrys solar market so fruitful. As a result, investment in the Korean solar industry shrank, casting a solemn shadow over Koreas 2010 Green Energy Expo in Daegu (see pv magazine, 05/2010). This year, the previous FIT was replaced with a Renewable Portfolio Standard (RPS), slated to take effect in 2012. The RPS establishes goals for an increasing reliance on clean energy in Korea: four percent by 2015 and ten percent by 2022. In concrete terms, this means adding 350 megawatts (MW) of extra renewable energy up to 2016 and 700 megawatts per year after that. But compared with the previous FIT, it does not support as much participation of foreign companies in Koreas solar market.
Many in the solar business community, both in South Korea and abroad, found it hard to adopt a sunny attitude to the governments change in energy policies. Currently the Korean market has a cap of a mere 120 MW in 2010, said Wonjin Lee, Manager of the solar energy sales department at Hyundai Heavy Industries. This cap made the Korean market comparably very small. When the RPS was introduced instead of the FIT in 2010, it made the Korean PV market hard to grow. However, he added, we expect the Korean PV market ideally to grow in the upcoming years, in compliance with the beneficiary pays principal. Another criticism of the RPS is that it adheres more closely to the interests of KEPCO (Korea Electric Power Corporation), Koreas overarching utility company, as well as to the interests of large manufacturers while doing less to encourage private or foreign investment.
According to Displaybank, a global solar market research provider, the RPS will require six power generation subsidiaries of KEPCO to invest a total of 338.2 billion South Korean Won (220 million euros) by 2012, rewarding the utility giant with control over 101.3 MW of new installed capacity. That adds up to about half of Koreas projected PV installment market for that year, as predicted under the new PV Market Creation Plan set out by the Ministry of Knowledge Economy (MKE). Looked at another way, the RPS directs KEPCO to fund about eight percent of the 1.3 gigawatts of cumulative installed capacity expected in Korea by 2012. On the other hand, KEPCOs investment will flow to the Korean solar manufacturers tasked with supplying the modules. Additionally, many of those companies are, in turn, signing contracts with foreign makers of PV-related materials. Its a smaller, less direct role for companies outside of Korea, but nevertheless a lucrative one for those that can win contracts with Koreas manufacturers.
However, investors in Asia still have good reason for interest in the Korean solar market. Despite the dismantling of the FIT, theres still generous government investment in green growth. Korea has led the way in viewing the recent economic turmoil as an opportunity to stimulate a recovery based on green growth, said Nobuo Tanaka, Executive Director of the International Energy Agency, speaking at the Korean Institute of Energy Technology Evaluation and Planning (KETEP) Energy Technology Leaders Forum in Seoul. In particular, Tanaka pointed to 2009s five-year Green Growth Plan as an exemplary case for innovative and proactive government policy towards sustainable development.
The five-year Green Growth Plan pledged over 100 trillion South Korean Won (KRW), around 70 billion euros, in government and private sector funding for growth in environmentally related projects. KRW 40 trillion (over 26 billion euros) will go directly to clean energy growth. Among the projects that will receive funding are green vehicles, thin film solar cells, and the development of a Korean smart grid system. One concrete outcome of the policy will be felt directly on the southern island of Jeju, which often serves as the living laboratory for Korean environmental policies. Jeju has been selected as a site for a large-scale test run of a smart grid system. Here, KRW 64.5 billion (42 million euros) will be going toward raising consumer awareness and also building a network of clean energy micro-grids with electric vehicle fueling stations.
As the old FIT is replaced with the RPS, other new avenues for trade with Korea may be opening up as well. In lieu of the FIT scheme, during which the government simply shoveled money into growing its solar market, Korea is now underscoring the significance for many industries of its recently signed Free Trade Agreement with the EU, its trilateral cooperation with China and Japan, as well as progress toward a formal FTA with the US. More than any other country, Korea is actively pursuing FTAs with our trading partners, said Minister Choi Kyunghwan of the MKE to the EU Chamber of Commerce in Korea earlier this year. This is great news for EU companies in Korea because you will have the upper-hand in approaching lucrative opportunities in these regions.
Though distant from leading European solar markets, trade in Korea could benefit from the countrys geography. Koreas neighbors, China, Japan and Taiwan, are already major PV manufacturers. Many investors have their eyes on the explosive growth of Asia, said Choi. EU businesses in Korea will be able to get two birds with one stone; capturing the promising niches of the Korean market while also using this experience to step into new ventures in other countries.
Koreas rising stars
Several factors make South Korea an attractive trading partner for investors in the countrys PV production industry. On top of the Korean governments active solicitation of trade deals, the ROK has a well-established track record in high-tech manufacturing. In particular, South Korea is already a globally dominant manufacturer of technologies relevant to PV, like semiconductors and LCDs.
Korea has several strengths in her favor. We have a solid industrial base, sophisticated consumers and very convenient distribution and IT infrastructure, said Choi. It will be an exciting time for EU entrepreneurs to hitch onto Korean rising stars since the FTA will eliminate trade barriers and enhance price competitiveness. By and large, Koreas most prominent rising stars in the solar industry are the same business giants that cast the first bright light on the Korean economy decades ago: Samsung, Hyundai and LG. Other well established companies are also branching into solar with the help of foreign business partners, like longtime steel-maker KISCO, which partnered up with 3S Swiss Solar Systems to produce crystalline solar modules under the Korean brand Getwatt. Yet its not only the old boys who are emerging as solar cell producers. The Korean Photovoltaic Industry Association (KOPIA) lists 49 Korean companies in the solar industry. Among them are Millinet Solar, established in 2005, Symphony Energy, founded in 2004 and Kyungdong Photovoltaic Energy (KPE), which traces its birth to 2000. Numerous newly founded companies that are not currently KOPIA members include ES System, maker of high concentrator photovoltaics (HCPV), and Solar Tech, which specializes in building integrated photovoltaics (BIPV).
The common thread among Koreas new growth engines is that they are based on our traditional strengths, acknowledged Choi during a meeting this year hosted by the American Chamber of Commerce in Korea. Whereas newer solar companies are often building assembly systems from the ground up, the older companies are building onto existing manufacturing abilities. To fill in the gaps between Koreas traditional strengths and its burgeoning solar manufacturing industry, Korean solar producers are looking for partnerships with foreign companies that have established themselves in compatible industries.
Hyundai Heavy Industries (HHI), for example, found a business partner in Frances Saint Gobain, a top maker of glass and construction materials. Saint Gobains Korean unit, HanGlas, will supply the glass needed for HHI to move into developing copper indium gallium selenide (CIGS) thin film solar cells.
By expanding into the high-efficiency CIGS PV market, under joint venture with Saint-Gobain, HHI is on track of its plan to become a global supplier in the renewable energy sector, said Keh-Sik Min, Chairman of HHI. The companys CIGS thin film plant is scheduled to open in 2012 with a production capacity of 100 MW a year. Currently, Hyundai produces an annual 270 MW in multi and mono crystalline solar modules. Another Korean giant, Samsung, has built up its solar module production line from 30 MW per year in 2007 to an annual capacity of 150 MW.
Like others, Samsung got started with solar by putting a new spin on its existing manufacturing expertise. Samsung is already a top global producer of semiconductors, and since the technology needed to make solar cells is similar to that needed in semiconductor manufacturing, the company is using its existing production technology to cross the bridge into solar cell manufacturing, currently with a focus mainly on monocrystalline silicon cells.
In the same way, Samsung hopes to use its experience as a leading LCD maker to branch into thin film solar due to a similar overlap in the two manufacturing technologies. Like HHI and other large Korean cell makers, Samsung is also signing contracts with companies worldwide to produce and distribute solar technologies. For instance, one recent contract with California-based Nanosys will bolster its foothold in thin film solar panel development.
Korean solar market forecast
Its easy to be led into reading the Korean solar market outlook as uncertain. 2009 was a shaky transition year, when South Korea accounted for just about two percent of the worlds solar market, down from its banner year in 2008. However, judging by the amount of the countrys government funding available to clean energy development and by the rapid growth of its industrys solar production capacities, at this point the forecast seems rather bright. Looking ahead, KOPIA and the European Photovoltaic Industry Association (EPIA) envision Koreas 2012 installed PV to be 1.3 GW, or about a five percent share of what the former group believes will be the worlds solar market at that time. KOPIA can further foresee Korea controlling ten percent of the world market by 2020 and as much as 20 percent by 2030. Such a 2012 share of the world solar market alone would net Korea a return on exports of about KRW 10 trillion (6.5 billion euros) by KOPIAs estimates. In other words, solar exports from Korea two years hence could account for about two percent of the countrys total export income, based on 2009 export earnings reported by the MKE. Moreover, according to the organization, these figures could hypothetically support the creation of 30,000 jobs in the Korean solar industry over the next two years and 200,000 jobs by 2020.
Several years may pass before Korea moves into a top position as a global cell and module manufacturer, but all lights for ramping up solar production in the ROK are green. South Korean solar module makers are running their plants at full capacity, up from about 50 percent early last year when the global recession hit the market, said Lee Seongho, Executive Vice President of KOPIA, last year.
This advance sends a clear message about the strong prospects for Koreas solar market. In a few years time, people may think of Korea not just in politics or economic development, but as a country that found a path through hard times to lead the way on clean energy growth.
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