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| Doosan Heavy Industry & Construction built Korea's first offshore wind power facilities adjacent to Jeju Island in 2017. / Courtesy of Doosan Heavy Industry & Construction |
By Kim Jae-heun
The government's Green New Deal initiative is picking up steam, with over 70 trillion won to be invested to nurture eco-friendly new growth engines and provide local companies more business opportunities in the renewable energy sector.
However, there is growing cause for concern as local firms are fairly new to the eco-friendly market and they will need to compete with global powerhouses in the bidding for government contracts. Foreign companies have for decades been developing state-of-the-art eco-friendly technologies, differentiating their products in addition to the massive leverage in price competitiveness.
Industry watchers believe that in a fair competition setting, foreign companies will have a massive advantage over local companies and could win most government-led projects in the coming years.
Recently, the government revealed a plan to invest 25 billion won ($20.85 million) in offshore wind farms as part of its effort to foster the renewable energy industry here. It expects to increase the scale of such facilities by a factor of 100 by 2030 to increase electrical generation capacity to 12 gigawatts.
However, domestic firms do not own technology of a level equal to that of global companies. That of local companies is said to barely approach 80 percent of the capability offered by foreign competitors. Moreover, building offshore wind facilities requires scores of imported materials.
Turbines made in Korea are on average 38 percent more expensive than those made outside the country, and the windmill blades are 14 percent pricier.
Thus, there are arguments that the government should amend the support and bidding systems in favor of domestic firms. However, this too can cause international trade disputes and the government is concerned about foreign governments retaliating against Korean firms when conducting bidding in their countries.
The United States and China are likely to retaliate against Korea.
"The U.S. can impose a tariff on Korean export goods under Section 232 of the Trade Expansion Act and China already gave Korean firms a hard time in 2016 when the previous administration deployed a U.S. THAAD defense missile system," a government official said. "Local companies are afraid of trade retaliation and they ask us to avoid the risk of fixing the system to be favorable to them."
Experts say domestic companies have to swiftly develop their technical skills in order to survive in the market and not get beaten out by foreign rivals.
The story is the same in the electric vehicle (EV) market.
In the first half of this year, EV sales increased by 2.7 percent year-on-year. However, sales of EVs made by Korean firms plunged by 43.1 percent. Meanwhile, U.S. company Tesla sold 7,080 EVs here, which is 17 times more than in 2019.
Tesla's significant sales growth is reportedly affected by the government and local governments' policies to subsidize eco-friendly cars. The U.S. carmaker took nearly 90 billion won of the total 209.2 billion won benefits given out for EV purchases.
Domestic carmakers lost their position in the market as the government did not discriminate in providing subsidies for foreign or Korean firms.
Chinese companies did well in the electric bus sector here. Their market share in the first half of this year rose by 7.8 percent points to show 38.7 percent. Chinese electric buses are about 100 million won cheaper than Korean ones. The government, again, paid subsidies to companies regardless of country, and Chinese firms received 5.9 billion won, which comprised 35.1 percent of the total paid.
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