By Kim Yoo-chul
Staff Reporter
Korean conglomerates are gearing up for fierce competition in the huge, but still underdeveloped domestic solar-cell market.
Sustained economic growth and increasing urbanization in South Korea have resulted in soaring demand for a continuous and stable power supply. Urban areas with very high power consumption significantly pollute the environment.
By recognizing this, power generation through renewable energy sources are being aggressively promoted by some leading South Korean tech giants in the wake of soaring energy prices and heightened environmental awareness.
According to market research firm DisplaySearch, South Korea will deliver more than $8 billion in solar modules generating 2.67-gigawatts by 2013.
``I think South Korea will see a rush to commoditization faster than anything market watchers have seen in electronics previously as the nation's two leading display makers Samsung and LG Electronics are joining the global rush to make photovoltaic solar cells business,'' said Tak Tanaka, a senior director of the display group at Applied Materials which sells equipment to make solar cells.
Weeks ago, LG Electronics signed a preliminary deal on a solar cell production joint venture with German-based solar energy system maker Conergy. Under the deal, LG is aiming to make a joint investment with Conergy's solar cell unit.
In July, LG Solar Energy, an affiliate of LG Group, completed the nation's biggest solar energy plant in Taean, some 200 kilometers southwest of Seoul.
The facility, the result of some 110 billion won investment by teaming up with the local government on some 300,000 square meters of land, will have a 14-megawatt total output capacity, enough to meet the power needs of 8,000 households around the region, according to the company.
The first plant was built on 193,821 square meters of land with a nine-megawatt production size, while the second plant was constructed on a 108,154 square meter lot with five-megawatt capability. The project made LG the first South Korean firm to launch full-scale solar power generations.
Also in June, Hyundai Heavy Industries, the world's largest shipbuilder, ordered five solar cell production lines from Centrotherm, strengthening its activities in the lucrative sector.
Hyundai ordered five turnkey production lines for crystalline solar cells of 50-megawatts each from Germany's Centrotherm, to be delivered to here next year. In 2007, Hyundai completed a solar cell and module factory in South Korea, investing over $30 million.
``A sudden impetus to the solar energy industry in South Korea has attracted the entry of new participants in the manufacturing space to cater to the local market demand as well as to target exports to European countries,'' market research firm Frost & Sullivan wrote in an analysis to clients.
``There is a strong push for developing centralized solar photovoltaic power plants. The growth potential of the Building Integrated Photovoltaic (BIPV) market is forecast to be lucrative and strong in the next few years,'' it said.
BIPV systems is an emerging application of solar photovoltaic systems that facilitate the use of renewable energy in an urban setup.
This emerging application has created significant interest among system integrators, real estate companies, architects, urban planners, industries, and the public. Grid connected BIPV systems are gaining immense popularity both in residential and commercial buildings, industry watchers say.
Although Korean conglomerates are actively joining the global rush for solar cell-related business with the strong hope that the model will pave the way for them to foster the next cash-cows, the South Korean government needs to give more support.
``Unlike European governments, the incentives are small, here. Solar-related businesses here in South Korea are in a transition period. The government needs more,'' Park Seong-joon, division leader at Strategic Biz. Development Division of LG CNS said.
The government plans to cut a subsidy program to larger solar cell operators by 30 percent, urging companies to reduce costs, further.
Frost & Sullivan says overwhelming political support by the EU government is benefiting Europe-based solar cell-related manufacturers.
``Yes, Germany, Italy and Spain require power companies to buy electricity produced by solar power at a sizable fixed price. But the nation's dominant power supplier KEPCO's current offer for 677 won per kilowatt is too small as the solar business in South Korea is in its infancy,'' Park added.
The Lee Myung-bak government wishes to enhance economic efficiency in the solar energy sector by bringing down production cost of solar power from the current 677 won per kilowatt-hour to 150 won by 2020.
Such unsupportive policies are also hurting the rapidly growing BIPV market. Analysts say the goal of reducing European dependence on coal and nuclear energy is in reach with BIPI methods with the help of attractive EU subsidies and tax incentives.
``In South Korea, growth opportunities for BIPV installations were highly restricted to date due to a lack of incentives, subsidies and adequate policy framework. They were found only in very few homes of rich individuals,'' Brian Kanghee Rhee, consulting manager at the firm said.
On the industry side, securing more polysilicon and cell modules are two other key factors for the early commercialization of solar energy.
Polysilicon is an essential raw material in the production of solar cells. Increased production of solar or photovoltaic cells caused the contract price of polysilicon to triple in the past few years.
Despite being hampered by severe shortages of such material, makers of polysilicon have been slow in adding new capacity because companies are closely associated with the more cyclical semiconductor industry.
Semiconductor makers have been over invested and hit hard financially amid the continued industry woes coupled with macro-economic troubles in developed countries, making them more cautious in building new facilities.
``As growing companies are joining the fray in the polysilicon business, the material prices will be lower than now. But what concerns me is that even leading solar players haven't disclosed exact time and amount of investment, leaving doubt about their solar projects,'' said Kim Dong-jun, an analyst at Goodmorning Shinhan Securities.
``By tackling those issues, costs ― one of the major constraining factors limiting commercialization and widespread installations ― will be cut. But what's important is the growth of the solar-related market is highly dependent on policies such as subsidies and incentives from the government,'' said the research firm.