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A New Year’s talk took place on Feb. 3 at a hotel in Seoul’s Gangnam District with Knowledge Economy Minister Choi Kyung-hwan and representatives of member companies in the Korea New and Renewable Energy Association (KNREA). During the talk, KNREA Chairman Chung Ji-taik said it would possible to record 2010 exports of $4.62 billion (approximately 5.2 trillion Won) in the areas of new and renewable energy industries such as solar power, wind power and fuel cells, a 90.2 percent increase over the $2.43 billion recorded for 2009.

Chairman Chung said, “To achieve this, we plan to invest 3.9 trillion Won in facilities expansion and research and development within 2010.” Choi subsequently promised, “We will provide the greatest amount of support possible so that this year becomes year one for fostering new and renewable energies and their transformation into an export industry.”

A government official said, “With the scale of the world renewable energy market growing 20 to 30 percent each year, it appears likely that it will soon form a market at the level of the semiconductor market in the ballpark of $260 billion.”

The official added, “Judging from the recent string of large-scale contracts, it looks like meeting that goal will not be difficult.” In view of the rapidly growing world new and renewable energy market, it is an opportunity that cannot be missed for businesses or the government.


However, a look at the reality facing the South Korean new and renewable energy industry shows growing concerns that the measures could lack substance. Even if there is an export boom, observers are arguing, the lack of original technology and facility capacities could result in the profits going overseas. Blame for this lies with a high level of import dependence for core parts in major export items, coupled with a very sluggish rate of domestication.

Beginning in August 2009, the Korea Institute for Industrial Economic and Trade (KIET) carried out a two-month study on 330 South Korean solar power, wind power and fuel cell equipment companies. The results show the poor level of technology at domestic companies. Only 0.9 percent of the companies surveyed answered that they possessed technology that was “developed independently for the first time in the world.” Some 74.3 percent of companies responded that they use technology universalized in advanced nations, while 14.8 percent said that they use globally universalized technology. According to a Ministry of Knowledge Economy study, the level of Korean solar power equipment technology in 2008 stood at 61 to 88 percent the level in advanced nations. For wind power equipment, the level was 68 to 79 percent, and for fuel cell equipment just 62 to 70 percent.


Based on these results, KIET calculated the industrialization level of domestic new and renewable energy equipment at 47.1 out of a total 100 points. Company capabilities for the three main new and renewable energies, judged in terms of technology development, planning and design, domestic and overseas marketing, and productive aspects, scored 45.6 out of 100 points. As for overseas expansion (export) capacities, for which the government wanted to make 2010 “Year One,” the score was 48.6 points. All grades were lower than failing.

The result of this is a dependency on foreign-produced goods. In the questionnaire, some 41.5 percent of respondents said that use of imported goods is increasing, while only 39.4 percent said they did not use imported goods. For this reason, 35.5 percent of respondents answered that the South Korean market share of important goods is “increasing.”

KIET said, “In order to achieve successful results with green growth policy, we absolutely need to secure competitiveness in the production base, including production and supply equipment for new and renewable energy.”

KIET added, “There are concerns that in a situation where the capacities of equipment industries are not high, expanded supply through a quota system could bring about increased installation of imported equipment.”

KIET also said, “If installation of foreign-produced equipment increases more than domestic production of related equipment, it could fail to lead to the expansion of a new growth engine.”

Export prospects are also a long way from the rosy expectations. An official with one solar power equipment company said, “You can easily see the real situation of new and renewable energy exports if you compare it with the situation of domestic plant companies.”

The official explained, “South Korean businesses are getting over 50 trillion Won a year in orders for overseas plants, but because they mostly depend on foreign products for the materials, they are simply fattening other people’s wallets.”

Indeed, domestic plant companies are purchasing around $25 billion (30 trillion Won) per year in materials, but due to the lack of original technology, the percentage of materials that can be obtained domestically amounts to just 20 percent, or around 6 trillion Won. This means that the situation in which South Korean companies provide the talent and foreign companies earn the money could replay itself in the area of new and renewable energies as well.

In a KIET study, new and renewable energy companies requested more support in strengthening technology innovation (27.1 percent) and increasing the domestic market (26.7 percent) than in the overseas expansion that the government is emphasizing (15.8 percent). In other words, substantive growth is only possible when there is technology and a domestic market.

Please direct questions or comments to [englishhani@hani.co.kr]