By Cho Jin-seo
Staff Reporter
Although commercially unproven, the charm of solar power generation is luring investment from local governments and firms of various industries, helped by soaring oil prices and concerns about greenhouse gas emissions from fossil-fuel power plants.
A number of companies including big conglomerates such as LG, Samsung, Hyosung and STX have joined the solar generation field from last year, whether it is the manufacturing of solar panels or building and operating of solar farms. But concerns are arising about the profitability of the business, as the cost of operating a solar plant for the same amount of energy is expected to remain much higher than the cost of running fossil-fuel power plants for years, or even decades.
On Tuesday, LG CNS, one of the largest IT service and consulting firms, said that it started building a solar farm in Boryeong, South Chungcheong Province, which is its ninth solar project in South Korea since last year. The project is to cost 52 billion won and the facility will produce 7 megawatts of electricity per hour from late next year, it said.
The company first joined the sun energy market last year in an effort to diversify its portfolio, as the IT service sector has been almost saturated in Korea. Though the two sectors have little in common, the prospect for the solar business is quite bright, the firm said.
``We were looking for a new business item. And we thought that we could do it very well, though many questioned the decision at the time,'' said a company spokesman. ``We have know-how in launching, financing and managing IT projects, and that has helped us do the solar plant projects as well.''
Once the construction is finished, the Boryeong solar farm will be operated by LG Solar Energy, a newly established arm of LG Group, the official said.
One of the latest entrants to the solar generation league is STX, a shipbuilding company. Two weeks ago, the firm said it will establish a solar energy subsidiary STX Solar by investing 60 billion won. The company said the new arm will provide a ``total solar solution,'' from producing solar cells and panels to building and operating power plants. The total production capacity will be 1,000 megawatts and make 1.6 trillion won in sales by 2014, the firm said.
Solar generation is the fastest growing sector of renewable energy. According to Samsung Economic Research Institute, the global solar power market has grown at 38.4 percent on average between 2000 and 2005 while soaring oil prices have raised concerns about fossil-fuel power generation.
Still, however, the electricity produced by solar generators is much more expensive than the power generated by burning oil, natural gas and coal. In order to protect and nurture the industry, the Korean government is buying back electricity from private solar plant operators at about nine times the market price.
Investment from the private sector has been heating up since the turn of this year. Many of the solar farm projects initiated by local governments are financed by private funds on renewable energies. Stock prices of related companies have also risen sharply this year, with some of them being suspected for unscrupulous speculation.
Beside the government subsidy, another reason that many firms are trying in the solar power sector is the relatively low entry barrier of the business.
``Building a solar farm is not as complicated as building a gas power plant. Basically, it is just planting solar modules on the ground,'' the LG CNS official said.
The Samsung think tank expects that it will be no earlier than 2015 for the solar power generation market to grow to have a critical mass _ a point that it can survive without government subsidies.