The Korean PV market will prove smaller in 2009 when compared with last year. Why do you think the market is set only to grow from now on?
Shrinkage of the market this year is a consequence of the new feed-in tariff (FIT). Not only will the FIT tariff be less, but a FIT quota has also been introduced; furthermore, we still have a financial crisis and the stress that goes with this (such as the opposition of environmentalists). Last year, Korea showed steep and exceptional growth (from 45MW in 2007 to 276MW in 2008). From now on, we will be shifting toward a better-structured situation. We will see strong support programs (leaving FIT aside) and we will have a pilot practice for the planned RPS for those times when the PV system continues to go down; therefore, this is likely to produce strong market demand in 2009 and 2010.
What do you see as the most important market segments in your country for the near future: residential, commercial, or utility scale projects?
In the short term, I believe the residential segment will be most important because of the “1 million green homes” program with its goal of 400,000 PV homes. Looking more toward the long term, large-scale (utility) based PV power plants might be of more interest when taking the planned RPS into consideration. On the other hand, the BIPV’s adoption of green building will also stimulate demand in the residential segment over the long term.
The Korean government has introduced several new incentives and support programs. Apart from the FIT, which one do you think will be the most successful?
First of all, I believe that the “1 million green homes” program will be a success. Korea’s electricity prices are cheaper than they are in Europe and Japan, but they are likely to rise. This will have a positive impact on PV rooftop applications in the residential segment. In addition to this, residential demand may expand faster if net metering can be applied to the surplus power produced compared to internal consumption. Furthermore, the mandatory PV program for new public buildings will become of increasing interest if module prices continue to decline. Therefore, I expect Korea to become an interesting market for the introduction of standardized PV packages dedicated to Korean rooftops.
Have the ongoing module price decreases had any impact on the rate of market growth in your country?
The market forecasts in my report “The Korean PV market” relate mainly to the available government budgets. The fall in module prices may lead to proportionally more PV installations, but these will continue to be limited by the budget that is available. More importantly, the fall in the cost of PV systems will have a positive impact on PV applications in the RPS obligations with effect from 2012 (with the pilot running until 2011). I anticipate a great leap forward for the Korean PV market when the RPS is introduced in the near future.
Is there a risk of feed-in tariffs being adjusted yet again if module prices continue to fall?
As explained in my report, the 2010 tariffs for FIT were disclosed as early as September 2009. The FIT tariffs are subject to annual readjustment based on the actual system cost. I do not anticipate a major change to the current FIT system. However, and more importantly, I expect the fall in prices to give out a positive signal to the preferred position of PV in the upcoming RPS system. Furthermore, PV’s other strong point in the RPS is that it makes large-scale installation possible on a short-term basis. Therefore, it might be that Korea’s PV industry will request the inclusion of large-scale PV plants under the new RPS program.
Will the RPS system be more sensitive to the price of modules?
The most important point is that the major customer group might change from small companies to large companies and energy utilities as a result of the RPS. The latter will prefer large-scale PV plants, and this segment is quite sensitive to the module price, because PV will have to compete with other renewable energy sources. The utilities will prefer large-scale PV plants due to their short-term project schedule. Therefore, I think that market growth will be quite sensitive to module prices in the immediate future, once the RPS is in place.
Chinese companies seem to lower their module prices substantially in order to gain market share. How do Korean customers view Chinese module brands?
In 2009, Korea’s commercial PV installations are mainly small and medium-sized (less than 1MW), and the main topic is project profitability. Therefore, China’s price-competitive modules have actually overwhelmed the Korean market. From now, however, Korean module production will become increasingly important. Encouraging the use of local PV products seems a natural and more international trend, because the market relies heavily on government support. In this respect, it may be advisable to follow a strategy of module production in Korea for sales to the local market. Solarworld’s joint venture is a good example of such a strategy.
Korean heavyweights, such as Hyundai and Samsung, have stepped into the manufacturing business recently. How will they compete with the major foreign brands (the Germans and the Chinese)?
Globally, Korea ranks among the top positions in respect of semi-conductor and display production, and the leading companies are Samsung and LG. Both have shown their potential in TFT-LCD production. In Samsung’s case, its value chain position is strongly linked to PV with polysilicon production (Samsung Petrochem), cell production (Samsung Electronics), module production (Samsung SDI), local EPC (Samsung Everland), and overseas EPC (Samsung C&T). Hyundai Heavy Industries, on the other hand, originally being a top shipbuilding company, has a strategy for achieving internal vertical integration. I think that in 2011-2013, once they start mass production, the Korean companies will prove strong competitors for the existing major PV manufacturers.
How will the Korean solar energy market look in 5 years from now?
I believe that once mass production by Korean companies has started, a major expansion of the Korean market will become possible and is, indeed, likely to follow. Price rises in what is currently cheap electric power, as well as the continuing decline in price of solar modules, may ignite a big demand. More specifically concerning PV preference under the new RPS and a broader adoption of green building. Furthermore, the Korean PV market might benefit from a change in Korea’s electricity industry landscape, such as a shift away from KOPEC’s current monopoly toward greater competition. A more broadly distributed generation of power, easily possible with solar PV, may stimulate the PV market based on new value-added business models.
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