Revealed Weaknesses in Moon Administration's Solar Power... Numerous Illegal and Improper Executions of the Electricity Industry Infrastructure Fund Detected

[Asia Economy Sejong=Reporter Kim Hyewon] The government has uncovered numerous illegal and improper cases in the execution process of the Electricity Industry Infrastructure Fund aimed at promoting renewable energy such as solar power.

The Government Joint Anti-Corruption Promotion Team under the Office for Government Policy Coordination announced on the 13th that, as a result of a sample survey conducted from September last year to August this year together with the Ministry of Trade, Industry and Energy on 12 out of 226 local governments nationwide, as well as Korea Electric Power Corporation and Korea Energy Agency, approximately 2,616 billion KRW out of about 21 trillion KRW in project expenses under review were used inappropriately in a total of 2,267 cases.

During the five years of the Moon Jae-in administration, about 12 trillion KRW was invested in the Electricity Industry Infrastructure Fund projects to support the spread of renewable energy, support for areas surrounding power plants, and electricity research and development (R&D) projects. However, there have been many criticisms regarding insufficient checks on fund management and detailed execution.

In the first actual condition survey, the government conducted a full document review of the financial support project (11 trillion KRW) heavily focused on solar power. There were a total of 6,509 cases from 2019 to 2021. As a result, 1,129 cases, accounting for 17% of the inspected targets, were found to have contracted with unregistered companies or violated subcontracting regulations. For example, an unregistered electrical construction company, A Tech, illegally contracted with B Power Project and C Solar Power Plant, applied for financial support from the Energy Agency, obtained qualification, and then received an improper loan of 500 million KRW from a financial institution.

Inflating Construction Costs with False Documents, Violating Laws, and Illegal Loans

There were many cases of inflating construction costs with false documents or illegal loans violating laws such as the Farmland Act. When examining 395 projects (64.2 billion KRW) from four local governments separately, it was confirmed that in 99 projects, accounting for 25% of the total, false tax invoices worth about 20.1 billion KRW were issued, resulting in improper loans amounting to 14.1 billion KRW. Among these 99 cases, 43 cases (7.1 billion KRW) involved inflating construction costs to receive excessive loans. The remaining 56 cases (7 billion KRW) received loans after submitting paper tax invoices instead of electronic tax invoices as required by regulations.

Although current law prohibits building solar facilities on farmland, some exploited the loophole that it is allowed if combined with mushroom cultivation or insect breeding facilities. In four local governments, a total of 20 places illegally received loans worth about 3.4 billion KRW. Many of these places showed no actual traces of mushroom or insect farming and had no related sales.

Among the financial support projects, 158 cases were found to have violated regulations, resulting in loans amounting to 22.6 billion KRW. These cases confirmed construction cost details only with estimates from construction companies, which correspond to poor or excessive loans. Electrical construction cost statements must be prepared by electrical engineers or similar professionals, and failure to do so violates the Electricity Technology Management Act.

Split Private Contracts, Building Village Halls with Subsidies... Moral Hazard

In addition, there was a serious overall moral hazard in the accounting process of the Electricity Industry Infrastructure Fund projects. Cases of illegal and improper subsidy execution due to poor fund management by KEPCO’s Electricity Fund Project Group and local governments, including split unfair private contracts, false settlement statements, and failure to recover long-term carryover funds (balances), totaled 845 cases amounting to 58.3 billion KRW.

Four local governments including City D are suspected of wasting about 400 million KRW in budget and providing preferential treatment to specific companies by splitting road and water facility maintenance projects (about 3 billion KRW) into 203 contracts and awarding them privately.

City E violated the Subsidy Act by arbitrarily changing subsidies (about 1.7 billion KRW) without approval from the Ministry of Trade, Industry and Energy, improperly preparing settlement statements, and using 400 million KRW to build village halls in other regions not eligible for subsidy support. It was also found that among 827.8 billion KRW granted to 407 supported businesses from 2017 to 2020, 23.3 billion KRW in carryover funds over two years old were left uncollected and neglected.

Inspection of convergence projects (2019?2022, about 1.0427 trillion KRW, 379 cases) also revealed that 25.6 billion KRW of budget was lost over the past four years due to failure to settle expenses such as the four major social insurance premiums. Convergence projects refer to projects that install two or more types of renewable energy facilities at the same location or install one or more types in mixed residential, public, and commercial areas using the Electricity Industry Infrastructure Fund.

Bid Collusion and Suspicions of Preferential Treatment to Specific Companies

Many cases of bid collusion among participating companies and suspicions of preferential treatment by local governments purchasing equipment from specific companies were also uncovered. Two companies participating in the bid for purchasing electrical safety inspection equipment ordered by the Korea Electrical Safety Corporation colluded on prices in 14 cases (about 4 billion KRW), violating the Fair Trade Act. The colluding company did not submit proposals and bid higher than the expected price, and the two companies later merged.

The Korea Smart Grid Business Group detected a case where 7.7 billion KRW was improperly overestimated out of the private sector’s share (50%, 14.2 billion KRW) in a 28 billion KRW home smart power platform project.

Bang Moon-gyu, head of the Office for Government Policy Coordination, said, "Depending on the case, we will request investigations from law enforcement agencies, and related institutions will take thorough measures to recover improper support funds," adding, "We plan to expand the investigation targets nationwide."

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