Misappropriation of Labor Costs, Collusion with Suppliers to Embezzle Material Costs... Renewable Energy Research Funds Become 'Blind Money'

Ministry of Industry: 17 of 31 R&D Projects Suspended or Sanctioned Last Year Were Renewable Energy
Budget Rapidly Increased but Management Gaps Remain... Financial Support Budgets Also Left Unused
"Preemptive Budget Oversight Has Limits... Fragmented Renewable Energy Budgets Require 'Selection and Concentration'"

[Sejong=Asia Economy Reporter Kwon Haeyoung] #Company A, which is developing a floating offshore wind power pilot plant, was selected as the lead organization for the core renewable energy technology development project and received a total of 10 billion KRW in research and development (R&D) funding from the government. While carrying out the research project, Company A misappropriated labor costs and colluded with a supplier company to embezzle research funds. The Ministry of Trade, Industry and Energy launched an on-site investigation after receiving a corruption report and subsequently suspended the entire project. The ministry also filed a complaint with the prosecution regarding the collusion with the supplier company.

Although the government is increasing the budget to expand the renewable energy market, it has been revealed that there are loopholes in budget management. Some companies exploit gaps in the government’s ambitious energy transition policies to misuse government-supported research funds, while the government’s focus on rapid renewable energy deployment has sometimes resulted in surplus budgets. There are calls to improve the efficiency of renewable energy budget allocation and execution, and to strengthen oversight of 'R&D zombie companies' that target renewable energy research funds.

◆ Moon Administration, Increase in Renewable Energy Budget＝ According to the Ministry of Trade, Industry and Energy and the National Assembly Budget Office on the 11th, the Ministry’s renewable energy support project expenditures increased from 1.1153 trillion KRW in 2019 to 1.503 trillion KRW in 2020.

Among these, the budget for core renewable energy technology development, where cases of research fund misuse have recently increased, also rose. The related budget was 259.479 billion KRW last year and has increased annually. The budget for next year is expected to increase further. In the case of the renewable energy financial support project, market demand fell short of the government’s budget allocation, leaving 12 billion KRW unused last year. Previously, the government more than doubled the related budget from 257 billion KRW in 2019 to 468.5 billion KRW last year.

An energy industry official said, "Under the Moon administration, the expansion of energy transition policies has led to a rapid increase in renewable energy-related budgets, which has somewhat reduced the efficiency of budget execution," adding, "The increase in detected cases of misuse of core renewable energy technology development research funds means that although the budget has been increased, the management and supervision capabilities have not kept pace."

◆ Need to Strengthen Oversight of Renewable Energy Budgets＝ Regarding the increase in misuse of research funds in core renewable energy technology R&D projects, the Ministry of Trade, Industry and Energy explained that it is a result of strengthened management and supervision to enhance transparency in research fund usage. According to data from the Budget Office, out of 12 total cases of project fund misuse, 8 were detected through internal on-site investigations, 1 was reported by investigative agencies after confirming a crime, and 4 were uncovered following external reports and on-site verification.

Some point out that renewable energy sectors such as solar, wind, geothermal, hydro, and biomass are diverse and that the increasing number of market participants has led to excessive fragmentation of the budget. There are opinions that this is an opportunity to comprehensively review budgets for renewable energy technology development, deployment, and financial support to improve budget allocation and execution efficiency and strengthen oversight.

Professor Jeong Dongwook of the Department of Energy Systems Engineering at Chung-Ang University said, "It is necessary to concentrate renewable energy research funding on competitive companies in the mid to long term," adding, "Support for R&D zombie companies that sustain sales solely through research funds should be limited to the initial few years, and long-term program-based support should be explored for promising companies."

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