"Lower Price Weighting"... Wind Power Industry Demands Revisions Ahead of Bidding [Domestic Offshore Wind Power Crisis]⑦

To strengthen the domestic offshore wind power market, the related industry has demanded revisions to the current competitive bidding system. They are asking for a foundation that allows domestic companies to compete more fairly by lowering the score weight of the price item and assigning higher scores to the domestic supply chain. As additional offshore wind power bids are expected in the fourth quarter of this year, calls for revisions to the system are likely to grow louder. The government has stated that it is "under review."

The wind power industry's attention is focused on whether the bidding method scheduled for the second half of this year will change. The government announced plans to supply 18.3GW of wind power facilities by 2030. Accordingly, project operator selections are expected to be made annually going forward. Last year, the bid was announced in October and results were released in December. This year, the bidding is expected to proceed on a similar schedule.

The volume of bids this year is expected to increase compared to last year. Last year, 2.1GW of bids were submitted for a 1.5GW scale bid, with 1.4GW awarded. This year, it is anticipated to expand up to 3GW. Recently, the government also expressed its intention to increase the share of offshore wind power in the 11th Basic Plan for Electricity Supply and Demand.

The industry is requesting that the current 60-point weight for electricity supply price be reduced to below 50 points, while increasing the 16-point domestic supply chain contribution and the 4-point domestic business performance items. The industry's position is that domestic companies use Chinese products because of "price," so reducing the weight of that factor will encourage more use of domestic products.

A wind power industry official said, "The high weight of electricity supply price and the shift to undisclosed bid caps have created a structure where companies have no choice but to use cheap products to lower their bid prices (costs). With the removal of preferential treatment for domestic materials and components, if the system itself is not revised, projects using Chinese products like Nakwol or Gochang will increase with every bid."

원본보기 아이콘

The industry also believes that measures to specify the industrial economic effect item are necessary. The domestic fixed-price competitive bidding for wind power is still in its early stages, and the evaluation method for industrial economic effects has not been detailed. They propose reflecting the localization of key parts and raw materials such as steel for wind power and substructures in the evaluation criteria to encourage the use of the domestic supply chain.

As the bidding scale grows larger, calls to change the guidelines before this year's bid announcement are increasing. An industry insider said, "We understand that the government plans to announce a roadmap for revising the fixed-price competitive bidding system for wind power around July. We expect the evaluation items to be revised by adding criteria favorable to domestic companies and reducing the price weight compared to last year."

Regarding this, the Ministry of Trade, Industry and Energy responded, "After reviewing the results of the last bid, we judged that there are areas to improve and are comprehensively considering how to handle price and non-price indicators. We are currently working to announce the volume, timing, and details related to the bid in July."

Along with improving the bidding system, the passage of a related special law is urgent. To start an offshore wind power project, domestic operators must obtain permits from both the central government and local authorities under 29 laws enforced by up to 10 ministries. Because individual operators must go through complex permit procedures themselves, it is difficult to speed up the process. The average time for operators to complete site discovery, preliminary surveys, and other stages of project permits is about six years.

In the 21st National Assembly, the Offshore Wind Power Special Act was proposed to address this issue. The act aims for the government to take the lead in discovering sites and establish administrative procedures to support projects, including various permits, in environmentally friendly development zones where residents and fishermen have accepted the projects. Notably, it includes provisions to shorten the complex permit process to an average of 34 months, raising industry expectations.

This law is modeled after Denmark's "Energy Agency," a wind power powerhouse. Denmark, which began full-scale offshore wind power development in the 1990s, created the so-called one-stop shop "Energy Agency" to resolve various regulations and resident compensation issues related to construction. For individual operators, this means they do not need to negotiate separately with every agency involved in permits, saving time. According to the Danish Energy Agency, the average time to obtain offshore wind permits through the one-stop shop is about 34 months, roughly half the time in South Korea.

Taiwan, which entered the offshore wind power market later than South Korea, is also growing at the fastest pace in Asia by choosing a government-led approach. The government selects developers according to plans and minimizes development time by establishing one-stop shops to shorten permit periods.

However, this bill was discarded with the end of the 21st National Assembly. The industry expresses considerable frustration over the wasted time, emphasizing the need to push it again in the newly launched 22nd National Assembly.

Another wind power industry official said, "If the Offshore Wind Power Special Act shortens the permit period, it would greatly benefit the wind power industry, but since it did not pass the 21st National Assembly, it is effectively too late to catch up with global standards. The current bidding method, which induces price competition, should be improved, and measures to protect the domestic offshore wind ecosystem, such as restricting the use of some equipment to promote localization, should be proactively implemented."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.