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South Korean focus on floating wind intensifies

04 June 2021 Keiron Greenhalgh

South Korean companies and leaders are beginning to hone opportunities in floating offshore wind generation, a sector in which IHS Markit analysts and other observers believe the country can lead the world.

May saw plans for South Korea's biggest floating wind project yet unveiled, with support coming from the highest level of government.

This followed a February announcement for what at the time was the largest offshore wind project unveiled globally—an 8-GW fixed-bottom behemoth off its southwest coast.

The commitment to offshore wind is part of South Korea's Green New Deal, announced in July 2020, which seeks to move the country on a path to net-zero emissions by 2050.

South Korea wants to install 12 GW of offshore wind capacity by 2030. But offshore wind capacity is only currently about 125 MW, and total offshore and onshore capacity is 2 GW, or about 0.5% of the nation's current power capacity, IHS Markit data show.

And to get the ball rolling on floating wind, on 6 May, a group of companies and entities from the city of Ulsan teamed up with President Moon Jae-in to unveil plans for a 100-MW demonstration facility that is expected to turn into 6 GW of capacity by 2030.

"On the very spot where the flames of the East Sea gas field are dying down, the world's largest floating offshore wind farm will be built by 2030. A public-private joint investment totaling 36 trillion won ($32.2 billion) will be injected, and some 210,000 jobs will be created. Ulsan will vigorously take off as an industrial capital in the era of clean energy," said Moon in a statement at the unveiling of the plan.

The coalition tasked with this effort, as well as with building and operating a 1.2-GW green hydrogen plant by 2025 powered by the floating wind facility, is led by Hyundai Heavy Industries.

Hydrogen is just as important to the clean energy picture drawn by Moon because the government aims to produce 6.2 million hydrogen-fueled cars and build up to 1,200 hydrogen refilling stations by 2040.

Ulsan hub

The mega-project isn't the only development underway.

SK Engineering & Construction and South Korean steelmaker POSCO signed a memorandum of understanding in April to jointly develop a new floating offshore wind foundation. The partners plan to begin testing in waters off Ulsan in 2023. Prior to that, in November, SK signed a technical cooperation agreement with turbine manufacturer Doosan Heavy Industries & Construction to work on floating offshore wind projects.

Parent company SK Group is a conglomerate, or chaebol, with investments in several renewable energy sectors. In February, it spent $1.6 billion to acquire a stake in US-based hydrogen fuel cell manufacturer Plug Power to boost its transition and e-mobility strategy.

"The partnership is part of a long-term, multi-billion-dollar plan by SK to help lead the global transition to a hydrogen economy and make meaningful progress toward a more sustainable energy system," it said in the statement announcing the deal.

Another part of that e-mobility strategy is electric vehicle battery technology. The company's SK Innovation unit settled a long-running intellectual property dispute with rival chaebol subsidiary LG Energy Solution domestically and in the US in April and now can work on ramping up production.

A spin-off of another South Korean chaebol, Daewoo Group, is also eyeing the floating wind sector for opportunities. Daewoo Shipbuilding and Marine Engineering (DSME) signed an MOU with Korea Electric Power Technology to jointly develop floating offshore wind substations that can be installed either on land or deep seas.

Daewoo Group went bankrupt in 1999 following the 1997 Asian financial crisis, but the offspring of the conglomerate remain. DSME has built offshore vessels, fixed platforms, and floating LNG tankers. Its main construction facility is located in Okpo Bay, south of Ulsan on South Korea's east coast.

A continental shelf with water depths of 100 to 200 meters off Ulsan will provide "optimal conditions" for floating wind projects, including the 6-GW project unveiled last month, said Moon, adding that winds exceeding 8 meters/second made "commercial viability highly likely."

The project represents a "significant opportunity for domestic and international developers, manufacturers and other parts of the supply chain in the offshore windfarm sector," said James Harris, a Singapore-based partner with law firm Pinsent Masons.

"It comes after other regional markets in Asia opened up a little earlier, namely Taiwan and Japan, and will hopefully benefit from lessons learned there," he added.

Ulsan is a hub for South Korea's shipbuilding industry, which is key for providing installation vessels and expertise for offshore wind projects. Moon believes 90% of the existing supply chain for the offshore wind industry is already located in Ulsan.

Current offshore wind leaders are part of Moon's ambitions for Ulsan, the country's leader said, noting that companies including Equinor, Total, and Shell were already working on plans for the technology in South Korea.

"Sea winds are like carbon-free oil reserves for the 21st century. Large offshore wind farms on the vast ocean will overcome current geographical limitations and become not only a shortcut to energy transition and carbon neutrality but also a future growth engine to revive the local economy," said Moon.

Future prospects

IHS Markit now expects about 3.6 GW of floating offshore wind capacity to be installed in South Korea by 2030, which will make it one of the largest markets globally, Principal Research Analyst Andrei Utkin said 2 June.

Domestic power prices, renewable energy certificate prices, and cost will be the key drivers of South Korea's offshore wind industry, IHS Markit analysts Vince Heo, Indra Mukhurjee, and Utkin wrote in an August 2020 report about the country's potential for bottom-fixed and floating projects.

And the government is trying to make things easier. It is setting up a "wind power development committee" under the Prime Minister's Office and will establish a secretariat in the Ministry of Trade, Industry and Energy. The new committee will take charge of all the complex permits for both onshore wind and offshore wind projects, according to Heo. An offshore wind project needs 25 permits from nine different agencies, he said.

The analysts at IHS Markit aren't alone in their positive floating wind expectations for South Korea. The country has a chance to become the first to industrialize the sector at scale, including bringing costs down, said Rhodri James, lead business developer at Norwegian floating wind pioneer Equinor, providing an opportunity to become a springboard for the rest of the region, and perhaps globally.

South Korea has a framework that creates an opportunity to take commercial-scale projects forward quicker than in other markets, James told a Recharge digital roundtable on Asian floating wind prospects 18 May. Projects in South Korea will be online in the next four to five years, ahead of other markets, he added.

"If you want to be a major player in offshore wind you need to play in the biggest markets, and Asia is certainly going to be a big market, and the biggest certainly in the medium- to long-term," he said. "I'm talking hundreds of gigawatts. … There's a lot at stake."

Investment generates jobs, according to a Global Wind Energy Council study. The Asia-Pacific region (excluding China) will install 39.2 GW of capacity over the next five years, requiring more than 31,000 people to be trained. In addition, an estimated 12.2 GW of offshore capacity will be installed, requiring a further 32,000-plus people to be trained. Globally, the wind industry will need to train a total of 480,000 workers over the next five years, GWEC said.

Much of that training will come as established wind industry players ramp up their investments and partnerships in South Korea.

International interest

Equinor is already planning two South Korean floating wind projects bigger than anything else built in the sector globally yet — the 200-MW Donghae facility in partnership with Korean National Oil Company and East West Power, and its 800-MW Firefly project off Ulsan.

Equinor operates the 30-MW Hywind Scotland wind farm in the UK, the first full-scale floating facility, and is currently working on Hywind Tampen in waters off its homeland, which would be the biggest yet built. The company also plans to bid into the 10-GW ScotWind tender, seen as the first lease sale to offer both fixed-bottom and floating locations concurrently.

Another offshore wind front-runner, Denmark's Ørsted, is also eyeing the Scotwind tender, floating wind, and opportunities in South Korea.

Floating wind, Ørsted CEO Mads Nipper said 29 April, was "something where we will play a role. We are choosing to lean into that and be part of the journey."

And in response to an analyst's question during the company's first-quarter 2021 earnings call on its ambitions in the floating wind sector, he said: "We are gearing up. We will also in the upcoming ScotWind have floating as part of that."

At the end of May, Ørsted inked a deal to expand its relationship with steelmaker POSCO to green hydrogen with a feasibility study. The two are also working together on the steel for Ørsted's plan to build a 1.6-GW offshore wind farm in waters off Incheon, which was announced in November 2020.

This week, at an investor conference, Ørsted announced plans to spend $57 billion through 2027 to "become the world's leading green energy major by 2030," according to an investor presentation document. Its target is 50 GW of renewable capacity by 2030.

But there is still some skepticism in certain corners about the prospects for South Korea's ambitions.

"It was good news that the … president of South Korea announced support for floating wind development, but I still see a quite a discrepancy between what the political will in favor of offshore wind is and the 'academic' readiness and supply chain readiness and the desire from the utilities and the developers. It seems that those three major powers are still not fully aligned, which is the reason why Scotland and France are being successful," World Offshore Wind Forum floating wind committee chairman Bruno Geschier said during the roundtable.

Floating wind supply chain issues are not unique to South Korea, especially as a standardization of the concept — including whether there is one turbine or multiple turbines attached to a central structure — and the tethering for turbines has still to take place.

In contrast, bottom-fixed turbines have been settled on a common concept of the blades and a tower for some time and continue to increase in size, so much so that some are becoming too large for much of the wind turbine installation vessel fleet.

One of the biggest bottom-fixed turbines unveiled so far is GE Renewable Energy's Haliade-X model. GE Renewable Energy and Japan's Toshiba Energy Systems and Solutions on 11 May inked a deal to manufacture parts of the Haliade-X turbines and assemble them in Japan.

Japan has outlined a 30-45 GW offshore wind ambition by 2040 and plans to execute offshore wind auctions every year. Japan's west coast is expected to host up to 5 GW of offshore wind by 2030, and 9 GW by 2040. Japan plans to develop 10 GW of offshore wind power by 2030.

While Japan has favorable wind conditions, it also has challenging subsoils, which can be a mixture of sand and rocks, Belgian dredging specialist DEME Offshore said when announcing an offshore wind focused Japanese joint venture with Penta-Ocean Construction. Such elements bolster the prospects for floating wind.

Next-generation turbines such as the Haliade-X model could be converted for floating wind projects to expedite such targets and prospects. GE Renewable Energy said 24 May it had been working with design company Glosten, developer of a tension-leg floating wind platform foundation, on a 12-MW turbine.

It was a tricky project, the US-based conglomerate's unit said. "Designing a floating turbine is like putting a bus on a tall pole, making it float, and then stabilizing it while it interacts with wind and waves. Doing this well is both a design and controls challenge," Rogier Blom, senior principal engineer, said in a statement revealing the venture.

Posted 04 June 2021 by Keiron Greenhalgh, Editor, Climate & Sustainability Group, IHS Markit

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