Offshore Wind Power Expansion Accelerates... Concerns Over Market Encroachment by China

Ministry of Industry Announces Competitive Bidding Results for Wind and Solar Facilities
Offshore Wind Award Volume Increases 14-Fold Compared to Last Year
2 out of 5 Offshore Wind Sites Likely to Have Related Operators

Following last year, the second competitive bidding for offshore wind power facilities this year showed that the awarded capacity increased more than 14 times. As offshore wind power project development is activated, the supply is expected to expand significantly in the future. However, among the five offshore wind power projects awarded this time, two are likely to introduce Chinese-made turbines or receive Chinese capital, raising concerns that the domestic offshore wind power market might be encroached upon by China, similar to the solar power sector.

The Ministry of Trade, Industry and Energy announced on the 20th that for the '2023 Wind Power Facility Competitive Bidding,' offshore wind power saw bids totaling 2,067 MW (8 projects) for a public offering of 1,500 MW, with 1,431 MW (5 projects) awarded. Last year's first bidding was only 99 MW (1 project), but this year it expanded more than 14 times.

For solar power, although 1,000 MW was announced, only 66 MW was bid, falling short, and onshore wind power also saw bids of only 379 MW, less than the announced volume of 400 MW. Ultimately, 60 MW (175 projects) of solar power and 152 MW (4 projects) of onshore wind power were awarded.

An official from the Ministry explained, "In the case of offshore wind power, the investment cost for a typical 1 GW facility is 5 trillion KRW, and most of the project cost is financed through project financing (PF). This bidding involves signing a 20-year long-term fixed price contract, making revenue predictable, which attracted many project developers seeking to raise funds through PF." He added, "For solar and onshore wind power, the available installation sites are limited, and especially for solar power, the scale is small, so PF is unnecessary, leading developers to choose the spot market instead of the bidding market."

Perspective view of the Shinan Ui Offshore Wind Power Project, awarded through the 2023 competitive bidding for wind power generation facilities. (Reference photo)

This offshore wind power competitive bidding did not disclose the bidding ceiling price to maximize price competition. Last year, when the ceiling price was disclosed in advance, most bids were near the ceiling price, limiting price competition. As a result, in this bidding, whether the bid exceeded the ceiling price determined the award, and price competition became more active.

In the wind power competitive bidding, the price indicator accounted for 60 points, and non-price indicators such as industrial economic effects and local acceptance accounted for 30 points, but the awards were mainly influenced by the price indicator. Because of this, among the five awarded offshore wind power projects, two were selected as likely to introduce Chinese-made turbines or finance their resources with Chinese capital. A Ministry official said, "We balanced price and non-price indicators, but ultimately price seemed to have a greater influence on the award decision. However, the status of Chinese turbines and capital is not yet clear, and we plan to verify this through documents submitted by bidders during the bidding process."

Considering the controversy over China's market encroachment, the Ministry plans to re-examine the criteria for determining the ceiling price so that various factors beyond price can be evaluated more balancedly in future bids. Additionally, for some items where domestic companies' participation may be limited due to technical and price competitiveness factors, the Ministry plans to review future response measures, taking into account the importance of large-scale power generation projects for national energy security.

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