By: An Sang-Min, September 5, 2024
The Korea Offshore Wind Grid Industry Association held a seminar on September 5 in the National Assembly to discuss ways to revitalize the industry. The seminar, attended by over 100 domestic offshore wind industry professionals, focused on solutions for promoting local supply chains while avoiding trade issues in offshore wind projects.
Offshore wind is a capital-intensive industry with high entry barriers, and weaker companies tend to fall behind. To nurture the domestic supply chain, government support is essential. However, countries that have previously implemented Local Content Requirement (LCR) policies, which prioritize domestic supply, have withdrawn due to trade friction concerns. The UK, India, and Taiwan, which maintained LCR until recently, are facing pressure from the EU to abolish such policies.
In South Korea, an LCR policy that offered higher renewable energy certificates (RECs) for projects with over 50% domestic parts was introduced in 2022 but was repealed in April 2023 due to trade pressures from the EU. Despite this, there is a growing consensus in the industry that fostering the domestic supply chain is essential to prepare for the expanding domestic and international offshore wind markets. South Korea’s strong manufacturing capabilities make it possible to localize the supply chain with government support.
Key Points from Industry Leaders:
- Park Seong-Min, Member of Parliament, emphasized that South Korea’s offshore wind industry has huge potential but is being disrupted by low-priced foreign equipment. He called for more government support to strengthen the local industry and improve energy security.
- Koo Ja-Geun, Member of Parliament, pointed out that foreign companies with better price competitiveness are dominating the domestic market, as evidenced by the recent long-term fixed-price contract bid for 1.4 GW of offshore wind, which was entirely filled by foreign turbines. He highlighted the national security risks associated with relying on foreign equipment, which impacts military and communications infrastructure.
How to Encourage Domestic Parts Without LCR
Lee Seul-Ki, a researcher at the Korea Institute for Industrial Economics & Trade (KIET), presented on the importance of fostering the domestic supply chain for offshore wind, suggesting that the government should offer support without violating international trade agreements. Lee proposed that policies should be framed from the perspective of resource security and industrial health to encourage local parts without directly enforcing LCR.
Lee also recommended public R&D projects that connect research outcomes to commercialization, helping domestic turbine manufacturers develop track records. Although the Ministry of Trade, Industry, and Energy (MOTIE) has provided large-scale R&D support for local turbine companies, these efforts need to be connected to commercialization to drive growth. Additionally, Lee suggested strengthening resource security and industrial health evaluations to protect local industries by favoring equipment suited to domestic wind conditions and requiring fast procurement of key components during operational failures.
Countries like Japan use non-price scoring in bids to assess domestic manufacturing and procurement capabilities, while the UK evaluates health and safety standards to limit foreign competition.
Lee Seul-Ki stressed that while LCR may not be feasible, alternative measures to protect and promote the domestic supply chain should be explored.
The Need for Industry Growth and Government Support
During the panel discussion, experts including Kim Beom-Seok, Professor at Jeju University, and Kim Jong-Hwa, Chairman of the Wind Energy Industry Development Strategy Committee at the Korean Wind Energy Association, agreed that South Korea must intensify its institutional and policy support to activate the offshore wind market. While some countries have surpassed South Korea, the global market still views South Korea’s supply chain and human resources as having high potential.
Kim Beom-Seok noted that the government’s plan to avoid low-price bidding and focus on projects that benefit national interests is a positive move. However, efforts to build a balanced supply chain are needed, encouraging foreign companies to invest in Korea, create jobs, and foster collaboration through joint ventures.
Kim Jong-Hwa also emphasized that while full domestic supply chain localization is difficult, targeted support through selective focus is essential for industry growth.
Park Ji-Woong, a team leader at Doosan Enerbility, commented on the importance of market forecasts, price, and evaluation criteria in the offshore wind bidding process. He expressed hope that the new bidding roadmaps will contribute to the activation of domestic supply chains.
Kim Hyun-Do, CEO of GeoView, raised concerns about the dominance of foreign companies in South Korea’s offshore wind market and stressed the need for the government to identify and nurture local suppliers, especially small and medium-sized enterprises, to develop the domestic industry.
Ministry of Trade’s Position
Nam Myeong-Woo, Director of the Renewable Energy Policy Division at the Ministry of Trade, Industry and Energy, acknowledged the difficulty of balancing domestic industry promotion with international trade considerations. However, he assured that the ministry recognizes the importance of offshore wind and is actively seeking ways to foster the industry. Reflecting on the issues in the 2022 and 2023 bidding rounds, he emphasized the need for better communication with the industry and urged the public to be patient as the government continues to refine its policies.
