[2024 Budget Proposal] Significant Cuts to Renewable Energy Subsidies and Shared R&D Funding

Ministry of Industry Allocates 11.2 Trillion Won... 1.3% Increase from This Year
R&D Reduced by 13.8% to 4.68 Trillion Won

The government has decided to significantly cut subsidies for renewable energy and the "sharing-style" research and development (R&D) budget for next year.

According to the 2024 budget plan announced by the Ministry of Trade, Industry and Energy on the 29th, the R&D budget will be 4.6838 trillion won, a decrease of 748.6 billion won (13.8%) from this year's 5.4324 trillion won.

An official from the Ministry of Trade, Industry and Energy explained, "In line with the government's sound fiscal policy, we have boldly restructured habitual support projects, similar or overlapping or underperforming projects, improperly executed subsidies such as those for renewable energy, and sharing-style R&D. On the other hand, investments have been expanded in essential areas such as fostering advanced industries, maximizing export growth, and energy welfare."

The Ministry's 2024 budget proposal increased by 147.7 billion won (1.3%) compared to the 2023 main budget of 11.0737 trillion won. Although the R&D budget was reduced by nearly 14%, the non-R&D budget increased by 896.3 billion won (15.9%) from 5.6413 trillion won this year to 6.5376 trillion won next year.

By sector, the budget is allocated as 5.1432 trillion won for industry, 4.7969 trillion won for energy, and 1.1114 trillion won for trade and commerce.

New Low-Interest R&D Funding Support for SMEs and Mid-Sized Companies

The Ministry of Trade, Industry and Energy will expand the project budget to secure global super-gap competitiveness in advanced strategic industries such as semiconductors, secondary batteries, and displays, which are the mainstays of our economy, from 1.9388 trillion won in 2023 to 2.1603 trillion won in 2024. To encourage private investment in advanced industries, a new loan program (100 billion won) will be established to provide low-interest R&D funds to SMEs and mid-sized companies in advanced industries, focusing on commercializing core technologies with high business potential. Additionally, 15.4 billion won will be allocated to build water facilities for the Pohang secondary battery specialized complex, which recently received new designation as an advanced strategic industrial complex and has infrastructure support demand in 2024.

To expand foreign investment in advanced strategic industries, following the April increase in the cash support limit for foreign investment in advanced strategic technology fields (maximum 40% → 50%) and the increase in national funding shares (40% → 50% in the metropolitan area, 70% → 80% in non-metropolitan areas), the total cash support scale will be expanded to 200 billion won next year, a 300% increase from this year.

The project budget to increase domestic production share of materials and components, reduce dependence on specific countries, and expand global competitiveness will be increased from 1.3267 trillion won in 2023 to 1.3476 trillion won in 2024. Support for materials and components technology development will be significantly expanded, and support for diversifying import sources for companies will be strengthened.

New Loan Support for SMEs and Mid-Sized Companies to Accelerate Nuclear Power Ecosystem Restoration

The Ministry will strengthen budget support for the nuclear power sector to accelerate the restoration of the nuclear power ecosystem. A new loan support program worth 100 billion won will be established to provide low-interest loans for facility investment and working capital to nuclear power SMEs and mid-sized companies that have faced difficulties due to past nuclear phase-out policies, work stoppages, and sustained high interest rates. Additionally, fees for advance payment guarantee insurance required for advance payment applications when nuclear power SMEs and mid-sized companies sign equipment supply contracts will be newly supported. Education support to enhance workforce capabilities and promote reemployment will also be strengthened.

To promote nuclear power exports, the budget for order acquisition support will increase by 9.3% from 7.745 billion won this year to 8.463 billion won next year. A new budget will also be allocated to support nuclear export guarantee insurance specialized for nuclear power SMEs and mid-sized companies that have difficulty obtaining existing export guarantees due to weak financial conditions.

To ensure stable energy and resource supply, the budget related to resource supply chains, including stockpiling, import, localization, and recycling, will increase from 677.8 billion won in 2023 to 855.4 billion won in 2024. Stockpiling of national key minerals such as lithium and rare earths will be significantly expanded to prepare for supply chain risks, and oil stockpiling will continue with a target of 100 million barrels by 2025.

Overview of Unit 4 at Barakah Nuclear Power Plant, UAE. (File photo)

Additional 20,000 Won Energy Voucher Support for Heating and Cooling Vulnerable Households

The government will significantly expand the budget to support energy costs and efficiency improvements for vulnerable groups and to enhance energy efficiency across industries from 1.0259 trillion won in 2023 to 1.622 trillion won in 2024. Energy vouchers, which provide heating and cooling costs to low-income households, will be supported for 1.15 million climate-sensitive households among basic livelihood security recipients in 2024, with the average support amount increased by 20,000 won to a total of 367,000 won, including 53,000 won for summer and 314,000 won for winter.

The program supporting the replacement of old heating and cooling equipment for small business owners, newly launched this summer, will increase the replacement scale from about 19,000 units this year to about 45,000 units next year. Additionally, the budget for long-term, low-interest loans to install energy-saving facilities to promote energy efficiency in the industrial sector will increase by 11.9% to a total of 294.6 billion won.

Full Support for Exports and Expansion of ODA

The Ministry's export support budget will increase from 607.7 billion won in 2023 to 685.3 billion won in 2024 to resolve difficulties faced by export companies and actively support large project exports such as nuclear power and defense industries.

To strengthen support for overseas marketing and acquisition of overseas certifications, which are the biggest challenges for export companies, 1.86 billion won has been newly allocated. The unit cost for participation in overseas exhibitions to develop export channels will be increased, and the scale of export voucher support and agency export support by specialized trading companies will be expanded. A new support project will also be established to resolve difficulties in obtaining overseas certifications.

To support large-scale project exports, funds will be contributed to the Trade Insurance Fund for advance payment refund guarantees (RG) special guarantees and for orders of plant and infrastructure projects. Export support budgets for plants and defense industries will also be expanded.

The Ministry will also expand bilateral cooperation and official development assistance (ODA) to match its status as a global pivotal country. To support responses to increasing trade issues with the European Union (EU), a new project for building a Korea-EU trade issue response foundation will be established within the bilateral industrial cooperation support project, and industrial cooperation among Korea, the U.S., and Japan will be strengthened. The total scale of ODA projects (6 projects) including industrial and energy ODA conducted by the Ministry will increase from 70.6 billion won in 2023 to 97.9 billion won in 2024.

The Ministry of Trade, Industry and Energy's 2024 budget plan and fund operation plan will be submitted to the National Assembly early next month and finalized in early December after review by standing committees and the Budget and Accounts Committee and approval by the plenary session.

Ministry of Trade, Industry and Energy Budget by Sector (Based on the Original Budget, 100 Million KRW)

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