"Held Back by High Initial and Operating Costs"...63% of Companies Have No Electrification Plans

KCCI surveys 307 companies for policy challenges report
57% cite cost burden
92% "Look to next year's regional electricity pricing system"

Electrification, a key task for securing industrial competitiveness and achieving carbon neutrality, remains at an early stage in South Korea's manufacturing sector, a survey showed.

The Korea Chamber of Commerce and Industry surveyed 307 companies among the top 1,000 domestic companies by sales on the “Status of Corporate Electrification and Policy Challenges” and announced the results on Nov. 8. The survey found that only 31.9% of the companies were currently “pursuing” electrification. By contrast, 62.9% said they had “no plans to pursue it,” while 5.2% said they planned to do so.

Electrification status of 307 companies among the top 1,000 domestic companies by sales, released by the Korea Chamber of Commerce and Industry on the 8th. Korea Chamber of Commerce and Industry

More than half (56.8%) of the companies pursuing electrification felt a substantial financial burden. Specifically, 42.0% said the burden was “somewhat high” and 14.8% said it was “very high.” The biggest burden was “high initial investment costs” (84.0%). This was followed by “high operating costs” (56.2%), “policy uncertainty” (18.5%), “concerns about a stable power supply” (16.4%), and “lack of technology” (12.1%).

As the top policy needed to promote electrification, companies cited “incentives to reduce the burden of electricity procurement costs” (66.1%). They also said that “improvements to electricity rates and market systems” (61.9%), “greater predictability in energy policy” (45.0%), and “technology development and workforce training” (23.1%) were needed.

Major advanced economies operate programs to reduce electricity costs to help companies pursue decarbonization and electrification. Texas offers discounted rates to companies that use renewable energy. California plans to introduce rate incentives for companies pursuing electrification. China exempts energy-intensive companies that meet high-efficiency standards from rate surcharges. Germany directly subsidizes the difference in electricity costs, subject to green investment. Poland is also preparing a similar electricity rate subsidy program. Japan reduces renewable energy surcharges for companies that meet energy efficiency standards.

Companies expressed high hopes for the regional electricity pricing system for industrial users, which is set to be introduced next year. A total of 91.8% of the respondents expected it to ease their cost burden and support electrification. When asked whether introducing the system would give them room to consider new investments or expansions outside the Seoul metropolitan area, 49.8% said it would.

Jeong Yeonje, a professor at Seoul National University of Science and Technology, said, “To accelerate electrification by replacing fossil fuels with electricity, the burden of electricity procurement costs on companies must be eased.” He added, “As in major countries, support programs should be established that use government funds to reduce companies’ electricity procurement costs and support electrification.”

Jo Hongjong, president of the Korea Resource Economics Association, said, “For corporate support to take concrete shape and be implemented on the ground following the announcement of K-GX last month, incentive programs that companies can feel the effects of must be well designed.” He added, “As electricity market rate systems are changing, policies should be linked to create synergies between electrification and green investment.”

Cho Youngjun, director of the Korea Chamber of Commerce and Industry’s Sustainable Management Institute, said, “Corporate electrification is still at an early stage, and the pace of its expansion will vary greatly depending on how the support system is established.” He added, “To ensure companies do not hesitate to electrify because of the cost burden, incentives to lower electricity procurement costs and a predictable rate system should be established together.”

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