FiT forecasts: the impact of incentive cuts on South Korea’s PV market

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In a recent interview with Kyung Nam Kim, author of Korea’s PV market report, Solarplaza has uncovered how South Korea’s renewable future might shape up, looking at how the lowering of the FiT will affect the market as a whole. As a consequence of the expected FiT cut, Kim believes that the market in the country is set to shrink.

I have spoken about Korea’s FiT issues recently, noting that the tariff reviewed by the Korean Green Growth Committee has been placed on the chopping board for larger systems — the majority of the country’s commercial installations are lower than 3MW. This means that the FiT for any system over 3MW could be reduced by up to 10%, lowering it from €0.27/kWh to €0.24/kWh. Although this may not seem like much, in terms of getting a return on investment (ROI) every penny (or won in this case) really does count.

Kim says in terms of the future market in South Korea, “Not only will the FiT tariff be less, but an FiT quota has also been introduced; furthermore, we still have a financial crisis and the stress that goes with this (such as the opposition of environmentalists),” so things aren’t looking too bright in this respect.

One of the problems Korea faced last year was an unexpected flood of interest as the country sprang from 45MW in 2007 to a shocking 276MW in 2008 – this was mainly due to a lack of capping. In response to this, new government proposals in Korea have suggested the placing of a cap of 98MW for 2009, 132MW for 2010, and 162MW for 2011, well below expectations of 340MW, 400MW, and 500MW in 2009, ’10, and ’11, respectively. “From now on, we will be shifting toward a better-structured situation. We will see strong support programs (leaving FiT aside) and we will have a pilot practice for the planned RPS [Renewable Portfolio Standards] for those times when the PV system continues to go down; therefore, this is likely to produce strong market demand in 2009 and 2010,” said Kim.

Furthermore, in order to save all of the 3MW+ large-scale (utility) based PV power plants from the FiT chop, Kim hopes that interest will be improved once the planned RPS is taken into consideration.

Korea is now also shifting focus onto BIPV installations, as is Europe. By adopting this technology, Kim hopes to stimulate demand in the residential segment over the long term. In addition, electricity prices are at present cheaper in Korea than they are in Europe and Japan, yet these are likely to rise. In this event, a positive impact will be seen on PV rooftop applications in the residential segment, as renewables with an ROI will be favorable. Residential demand may also expand faster if net metering is applied to the surplus power produced compared to internal consumption. “I expect Korea to become an interesting market for the introduction of standardized PV packages dedicated to Korean rooftops,” explains Kim.

So, the implications of Korea’s large-scale FiT cuts don’t seem to be projecting detrimental effects on the market as a whole. In fact the FiT seems to be sidelined in place of the RPS, which is set to become the country’s most beneficial incentive scheme. However, it remains to be seen how the market will actually shape up in the coming years. Until these policies are officially outlined we will sit in great anticipation for the results.

“The Korean PV market” report, which goes into far more detail on how the renewable incentives in Korea will affect the market as a whole, is available to purchase here.

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