Audit Committee Notifies 30 Issues in Seoul Solar Power Distribution Project Investigation: "Focused Only on Physical Expansion"

Cooperative Key Executives Actively Involved in City Policy as Advisors... "Pursuing Private Interests with Internal Information"
Unreasonable Demands on City Including Public Land Provision, Interest-Free Loans, and Expansion of Development Differential Support
Using SH Rental Apartments to Achieve Physical Targets... "SH Supports Distributor Sales Activities"

[Image source=Yonhap News]

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced the results of an investigation into its solar power dissemination project, revealing overall issues in fairness, efficiency, and sustainability from the project's inception through its progress and post-management.

According to Seoul City on the 14th, after deliberation by the Audit Committee on the 10th, a total of 30 points of concern, including warnings to the relevant department, company prosecutions, and fines, were notified on the 11th.

Despite the justification of expanding renewable energy, the solar power dissemination project has repeatedly been criticized by the media, the Seoul City Council, and the National Assembly for numerous problems in policy decision-making and execution processes. Therefore, Seoul City launched an investigation to ascertain the exact facts.

The main issues revealed by the investigation include ▲ key executives of the cooperative seeking private gains using insider information ▲ excessive support demands and enforcement by the solar power cooperative ▲ forced use of SH rental apartments to achieve physical targets for veranda-type solar power dissemination ▲ expansion of installations without considering power generation efficiency ▲ poor post-management and business closures by dissemination companies.

The Audit Committee first stated that key executives of the solar power cooperative not only actively participated in city policies as advisory committee members but also prepared the project in advance based on insider information obtained through these roles.

The selected dissemination company, ‘Cooperative A,’ was aware of Seoul’s solar power dissemination project plans in advance and received 7 billion KRW in subsidies from 2014 to 2020. The cooperative’s key executives, who are legally and administratively free from responsibility, had been serving as members of the ‘One Less Nuclear Power Plant Implementation Committee’ since the early introduction of Seoul’s solar power dissemination project in 2012. It was also confirmed that these committee members urged project officials to report future solar power dissemination plans through the responsible public officials at that time.

The Audit Committee judged that the ‘One Less Nuclear Power Plant Implementation Committee’ members, who performed functions equivalent to public officials, simultaneously acting as executives of solar power dissemination companies, constituted a conflict of interest between private and public interests. They concluded that at minimum, these individuals should have voluntarily refrained from participating in related committee activities, or Seoul City should have established disqualification regulations in advance.

"Excessive demands and enforcement on Seoul City such as public land provision, interest-free loans, and differential support"

It was also confirmed that excessive support systems were introduced early in the solar power project for solar power cooperatives. The Audit Committee viewed that Seoul City, despite the inherent lack of profitability of solar power projects in Seoul’s context, accepted demands from specific cooperatives and introduced systems that violated fairness and equity. In September 2013, seven solar power cooperatives in Seoul formed the ‘B Cooperative Federation (Provisional)’ and, through a 2014 meeting with the mayor, demanded support to improve cooperative profitability, including public land provision, interest-free installation loans, and expanded differential power generation support. All these demands were accepted.

The Audit Committee explained, "Unlike other fund projects, the solar power project allowed interest-free and unsecured loans, and while advanced countries that introduced solar power projects earlier are reducing direct cash support, Seoul City introduced and expanded a system providing cash support for power generation differentials."

Additionally, regarding site selection for solar power installations, the Audit Committee found that Seoul City conducted a comprehensive survey of public lands suitable for solar power installation and guided cooperatives accordingly. In some cases, public land bidding was restricted exclusively to cooperatives, blocking participation opportunities for SMEs and other companies. The public land lease rate was also drastically reduced to one-fifth.

"Use of SH rental apartments for installations... SH supports dissemination companies’ sales activities"

To achieve physical targets, veranda-type solar power was massively and intensively installed in SH rental apartments, disregarding citizen convenience. Seoul City and SH Corporation planned solar power dissemination targets for SH rental apartments at more than twice those for general apartments. As of September this year, 39.5% (47,660 households) of all veranda-type solar power installations (120,472 households) were installed in SH rental apartments.

Furthermore, it was confirmed that SH Corporation, while installing veranda-type solar power in rental apartments, allocated sales areas and installation volumes to dissemination companies by region and complex through the Construction Technology Advisory Committee composed of SH internal staff, meetings with dissemination companies, and consultations with Seoul City.

"Focus on physical expansion without considering installation standards... low efficiency and poor electricity bill reduction"

The Audit Committee’s inspection of veranda-type solar power installed in SH rental apartments revealed that physical expansion was prioritized without considering power generation efficiency or installation standards, resulting in low actual power generation efficiency. This was attributed to excessive target setting and aggressive sales activities by companies.

Among the 47,660 veranda-type solar power installations in SH rental apartments, 3,828 (8.0%) were installed on low floors (1st and 2nd floors) where power generation efficiency is poor. Solar panels installed facing east, west, or north, rather than south, accounted for 30% (14,877 installations).

During the investigation period, a sample analysis of power generation at 367 sites showed that the actual annual solar power generation was only 70.3% of the theoretical expected generation (generation capacity × average daily sunlight hours in Seoul of 3.2 hours × 365 days). Particularly, solar power installed on low floors (1st to 3rd floors) had an efficiency of only 46.4%, indicating that lower floors had poorer power generation efficiency.

Electricity bill reduction effects and installation cost recovery periods were also found to be lower than initially promoted. The Seoul Solar Support Center ‘Seoul Haetbit Maru’ website advertised a monthly electricity bill reduction of 6,610 KRW for a 325W installation, but applying the actual power generation efficiency (70.3%) results in a monthly reduction of 4,620 KRW, and for low floors (46.4%), only about 3,070 KRW. The payback period for veranda-type solar power installations also increased by about three years, from 8.9 years to 12.8 years (applying 70% efficiency).

"Poor post-management... 37% of installations over 6 years by companies that closed"

Issues with poor post-management by veranda-type solar power dissemination companies, including regular inspections and free defect repairs, were also revealed. Since 2014, the Seoul Climate and Environment Headquarters has spent 56 billion KRW to install veranda-type solar power in approximately 124,000 apartment households across Seoul. Dissemination companies are obligated to provide post-management and free repairs for five years.

However, according to a regular inspection status check conducted by Seoul Energy Corporation in September last year, among 73,671 installations from 2014 to 2019, 27,233 (37%) could not be inspected due to the closure of dissemination companies. Of the remaining 46,438 installations, 23,020 (49.6%) could not be inspected due to applicants being unreachable.

Although veranda-type solar power installations typically last 20 years, Seoul City’s review of removal data from 2020 to 2021 showed a total of 347 reported removals. Among these, 316 were removed within five years due to citizen inconveniences such as moving, sunlight and view obstruction, poor ventilation, and strong wind safety issues.

Kim Hyung-rae, Seoul City’s investigation officer, stated, “We launched the investigation to correct issues and waste of public funds pointed out during the project’s progress.” He added, “Taking this case as an opportunity, we have notified related departments to ensure the solar power dissemination project guarantees efficiency, fairness, and equity and undergo restructuring. After a one-month re-deliberation period, we will disclose the final investigation results in December.”

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