'Confidence growing' South Korea can be world's first gigascale floating wind nation

South Korea is homing in on the right formula to catapult the country towards becoming the world’s first gigascale floating wind nation, some developers believe.

Details of the new procedures need to be fleshed out before a 3GW offtake auction scheduled for the final quarter of this year – and the offer could be even more attractive to investors if the country's legislature could swiftly approve a new permitting procedure – but South Korea's quest to build 14.3GW target of offshore wind capacity by 2030 suddenly looks more doable.

Part of the reason for this optimism is that a new government that has shown itself to be at least as committed to offshore wind as its predecessor,

Renewables research firm BloombergNEF is among those to have highlighted the bipartisan support for offshore wind in Korea, with regulatory reforms staying on course this year despite a change in government, and developers are encouraged too.

The glimpse of the volumes planned for upcoming offtake auctions was also encouraging, albeit visibility was limited to two years, totalling 7-8GW.

“Two years is quite a short time but before that they didn’t make any such forecasts at all, so this is a significant improvement and provides a good deal more predictability to the developers and investors,” Woojin adds.

Korean wind farm development is so far mainly focused on fixed-bottom turbines, but the country has already attracted enough floating wind investment to make fellow floating wind pacesetter Scotland look over its shoulder, helped by PPA multipliers that increase with water depth and greater distance from shores.

Korean plans are only likely to be confirmed in September, but holding a separate auction has been interpreted as a sign that the government wants to give floating wind an early boost toward competitiveness, probably in the form of a higher price ceiling, or another such incentive.

The Global Wind Energy Council estimated earlier this year that South Korea can attain a floating wind capacity of 5GW by 2031.

“The bifurcation between fixed and floating is really good. Floating projects kind of have a different set of drivers than the fixed bottom projects, and it's a signal that the government really wants to get the east coast area of Korea moving, even while they're also able to build fixed-bottom projects in the west and south of the country,” commented Aaron Smith, chief commercial officer of floating platform technology developer Principle Power

South Korea’s plans for offshore wind are not short of challenges – including regional grid bottlenecks, community consenting obstacles and permitting delays – but concerns about domestic supply chains have taken prominence in the political sphere.

In its roadmap, the South Korean government makes it clear that it is attempting to strike a policy balance between driving the levelised costs of energy down and providing a measure of protection for a Korean supply chain that needs to adapt or develop to the needs of a new industry.

Chinese competition sparks concerns

The background to these concerns was South Korea’s recent experience when the domestic supply chain felt a blast of Chinese competition.

This happened when South Korean government signals were highly focused on growth; a decision to expand the capacity on offer at its 2023 renewables auction resulted in nearly 1.5GW of offshore wind allocation.

To the surprise of many, Goldwind’s Vensys unit and Mingyang emerged as turbine suppliers to successful bidders, as did Hengtong Optic-Electric for cables.

In all, Chinese turbine and component sourcing for about a third of almost 1.5GW of the capacity that was taken up, setting alarm bells ringing among domestic industry leaders.

“Looking at the workings of the criteria, we knew that the price would ultimately be the sole determinant and last year’s auction resulted in awarding two projects planning to use the Chinese turbine and cables," says Analeigh Suh, Korea energy analyst with BNEF.

The BNEF diagnosis was that the qualitative criteria, responsible for 40% of the split, was too complex and ineffective, especially after a decision to weaken local content incentives deemed to result in double dipping.

“Awarding projects planning to use the Chinese suppliers sparked a debate about whether the government was really aware of what the consequences of would be to Korea-based manufacturers,” Suh recalls.

In her view, South Korea’s industry was still reacting to the perceived loss of a domestic solar industry to the ultra-competitive Chinese suppliers.

The new roadmap tries to address this by shifting to a 50-50 split between price and non-price criteria.

Within the qualitative half of the criteria, more than half the points are weighted toward impacts on Korean industry, and another eight points for long-term operations and maintenance.

The roadmap also made clear that the bidding criteria will also cover concerns the national security aspects of the offshore wind industry. In contrast, the former item of stakeholder acceptance has dropped to just four points.

In addition to the criteria, Korea has also introduced a new two-phase evaluation process.

Principle Power's Smith is enthusiastic about the implications. “This could point to more meaningful non-price criteria than we often see. They are often too broad and get squeezed into something like 30% of the bid weighting to become just an extra set of requirements that fail to differentiate between bidders," he says.

“By evaluating non-price and price criteria in two stages, it means non-price criteria such as developer and contractor experience, credibility of delivery model, and anticipated societal and environmental benefits could have much more influence because only qualified projects are considered for the price evaluation."

Value creation on the agenda

Shashi Barla, head of renewables research with Danish analyst firm Brinckman agrees. “This is something we are also seeing in other markets. After 10 years chasing price to secure capacity in the auctions, governments are realising that it's also about value creation across the different segments in the value chain. I think that is certainly a positive news, not just for the South Korean market,” he says.

Sensing an improvement in the auction design approach, Smith suggests that success in Korea “could provide a model for other governments looking for ways to prioritise non-price factors to ensure that they are awarding viable projects that can be delivered on time, on budget, and with the expected benefits”.

Korea is already known for its supply chain strengths in sectors such as steel manufacturing, metallic structures, shipbuilding and the offshore oil industry,

A recent proliferation of discussions and partnerships with international companies suggests that industry is aware of the kind of balancing act required.

Corio Generation has signed a cooperation agreement with Huyundai Heavy Industries, with an eye on a potential partner for industrial scale supply of floating wind structures, but the Macquarie Green Investment-owned company can see bigger things taking shape.

“We are contacting various local supply chain companies, and they are all in discussions with the foreign suppliers in Europe, China and Southeast Asia,” Woojin says.

“They want to have all benefits of experienced OEMs and competitive manufacturing, with efficiencies and knowledge transfers… I think Korean EPCI and supply chain companies will do well and the new two-stage auction is not going to be a hurdle for projects such as our own,” he said.

Korean industry is keen to do its part in a mission that is intended to turn the country into a major supplier to domestic and also regional offshore wind markets, such as Japan.

Doosan Enerbility – formerly known as Doosan Heavy Industries – said it will work with four of South Korea’s largest power groups and local engineering firms to develop the turbine in a move it claimed will “connect the domestic supply chain from parts to wind turbines to offshore wind power public complexes”.

All this translates into a tangible sense of excitement. “In South Korea, we are feeling that something big is coming for offshore wind,” Woojin says.

“I am pretty confident that Korea is going to be the first country which is building and running gigawatt-scale floating offshore wind.”