[Exclusive] Government Bets 300 Billion Won in China-Dominated Market... To Use National Growth Fund

Final Decision on Support to Be Made at July Investment Review
300 Billion Won in Loans and Equity Investments Under Consideration

First Commercial Use of Doosan’s 8 MW Turbine
Full-scale Development of Domestic Wind Power Ecosystem Begins

The government will invest in the Yeonggwang Yawol offshore wind power project in South Jeolla Province, which is the largest domestically-produced wind power project in Korea, through the National Growth Fund. The investment is expected to be around 300 billion won. The plan is to foster the domestic wind power ecosystem by expanding the use of Korean-made turbines and equipment in the offshore wind market, which is currently highly dependent on European and Chinese imports, and to support entry into the global supply chain in the long term.

According to the financial sector and financial authorities on June 10, the Financial Services Commission is actively considering the Yawol offshore wind power project, which has a total project cost of 774.9 billion won, as an investment target for the National Growth Fund. This is expected to be the second renewable energy investment project for the National Growth Fund, following the Shinan Ui offshore wind power project, which was its first investment destination.

The Financial Services Commission plans to convene an investment review committee as early as July to finalize the National Growth Fund's support and the investment amount. The investment is expected to be approximately 300 billion won, with both loans and equity investment methods under consideration.

The Yawol offshore wind power project aims to establish an offshore wind farm with a total capacity of 104 MW by installing thirteen 8 MW-class wind turbines off the coast of Yeomsan-myeon, Yeonggwang-gun, South Jeolla Province. The project is led by Doosan Geosolution, a subsidiary of Doosan Enerbility, and will use domestically developed 8 MW-class offshore wind turbines from Doosan Enerbility. This will be the first time this model is installed in a commercial offshore wind power complex. Construction is scheduled to begin next month, with commercial operation to begin after completion in 2029 and continuing for 25 years until 2054.

The project’s equity structure consists of Korea Southern Power with 40%, Doosan Geosolution with 40%, and financial investors with 20%. Korea Southern Power and Doosan Geosolution each plan to contribute about 62 billion won. The remaining project cost of about 650 billion won will be financed through project financing (PF). Hana Bank and IBK Industrial Bank of Korea are serving as lead arrangers and have confirmed loan support.

The government's main reason for focusing on the Yawol offshore wind power project is its potential to foster the domestic wind power industry ecosystem. Currently, the global offshore wind power market is dominated by European and Chinese companies. As a result, Korea has had to rely on imported core equipment for offshore wind power during the expansion of domestic renewable energy, which has been pointed out as a limitation in nurturing the domestic supply chain. The Yawol offshore wind power project will utilize Korean-made turbines and key equipment. The government expects this project to help Korean companies accumulate experience in supplying wind power equipment, thereby contributing to the development of the domestic wind power industry ecosystem.

The Yawol offshore wind power project is also evaluated as having secured a future revenue base by signing a renewable energy certificate (REC) trading contract with Korea Southern Power. However, offshore wind power projects require large-scale, long-term investment, and even after permits are granted, construction and grid connection issues can cause project delays. In fact, the Yawol offshore wind power project took about 10 years from obtaining its power generation business permit in 2016 to receiving construction plan approval at the end of last year. The National Growth Fund is expected to help share the long-term project risks that private capital alone would find difficult to bear, thereby increasing incentives for private investment.

The high growth potential of the wind power market is also a positive factor. The global offshore wind market is projected to expand more than fivefold, from 83 GW in cumulative installed capacity in 2024 to 441 GW in 2034. However, according to the Korea Institute of Energy Technology Evaluation and Planning, domestic wind power technology remains at about 72.5% to 85% of the level of leading European countries. If the Yawol offshore wind power project accumulates a track record of supplying domestic equipment, it is expected to help narrow the technology gap and expand exports.

Lee Sangil, professor of wind engineering at Kunsan National University, said, "Even just over a decade ago, China did not have strong competitiveness in wind power equipment, but through large-scale deployment, it secured price and technology competitiveness. Korea should also increase the use of domestically produced turbines, blades, towers, and power cables in offshore wind complexes to achieve economies of scale and foster the supply chain." He added, "Reducing dependence on imported equipment will strengthen energy security in the long term and is expected to have import substitution effects."

This content was produced with the assistance of AI translation services.