4. Key issues and Suggestions

4. Key issues and Suggestions

While the European market, the once industry’s leader for global demand shrinks and the domestic market in the USA, China and Japan remains bullish, Korea’s renewable energy industry is unlikely to be competitive enough to enter a new market in the United States, China or Japan. China’s largest companies, supported by the government, not only are securing economy of scale and cost competitiveness, but also dominate the nation’s domestic market.
Even though Japan’s renewable energy industry is expanding its market after the Fukushima nuclear power plant accident, merely a few Korean companies successfully entered Japanese market. As to the American market, the lack of financing and global management capacities of Korean companies is still a barrier to the market entry. Worse yet, Korea’s renewable energy industry is still in the planning stage of seeking to develop a market in Northeast Asia and South and Central America, which are expanding their renewable energy businesses. Therefore, Korea’s renewable energy industry is most likely to need a strong support on technology development to radically improve its cost competitiveness of existing technologies. Against this backdrop, it is worth noting that at the beginning of 2014, the Ministry of Trade, Industry and Energy announced its plan and guidelines to support the energy R&D, amounting 806 300 million wons, including the development of a photovoltaic system generating unique cost of 180 wons/kWh.      

The government’s actual support policy on the demand of renewable energy is in a transitional phase. Korea is yet in the adaptation phase, following the transition of the framework policy from the feed-in tariff (FIT), used until the end of 2012, to the renewable portfolio standards (RPS), being used since 2013. The government has been revising and streamlining the RPS mechanism in a flexible manner, which was already mentioned in an earlier chapter. Yet, the question about how to expand the domestic market, which is definitely still weak, needs much attention. What the industry needs is to create a new market by integrating the Energy Storage System (ESS) to the photovoltaic system. The good news is that the development and empirical research of a large-scale Energy Storage System is also part of the government’s plans and guidelines to support the energy R&D.   

Nevertheless, what is more important is that the industry must actively lead the search for a sustainable business model, and that the government supports the sector focusing on this aspect. It is worth observing that leasing solar equipment can mitigate the burdens of the end consumers and expand the market, since there has been a pattern shift, focusing the end user, from large scale installations to small scale and family use installations. All these are particularly interesting points for Korea, where the number of residents living in apartment complexes and other multi-unit buildings is considerably higher than any other countries in the world. Creation of a business model of hybrid renewable energy system by utilizing the ESS in spare spaces, such as the roof or the basement, is therefore not a question of choice, but rather a question of necessity. The government’s institutional support such as leasing products and financial infrastructures is needed to establish a successful business model where large companies and SMEs can collaborate together. Along these lines, there is also a need for government’s initiatives to reinforce the renewable energy regulatory framework. 20150924

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