[NEWS ANALYSIS] Korean solar focuses on US market as it feels the heat at home


Solar panels installed in Sinan County, South Jeolla [JOONGANG PHOTO]

Solar energy companies will likely enjoy significant tax benefits and increased demand for solar energy products and services with the enactment of a US climate law. At home, the renewable energy industry is facing headwinds due to the new government’s policy shift and controversies over the financing of solar projects.

On August 16, President Biden signed into law the Inflation Reduction Act (IRA) with the aim of accelerating the green transition, curbing inflation and reducing the country’s dependence on the foreign sourcing of key components and materials, especially from China. While the IRA is expected to affect Korean exports of electric vehicles and batteries to the United States, clean energy companies operating in the country are expected to receive significant tax incentives.

Hanwha Solutions, which emerged as the biggest beneficiary of the newly passed bill, said it expects to get a tax cut of $200 million a year for the next 10 years starting in 2023. according to an Aug. 23 Bloomberg report.

The company is eager to ride the wave, reallocating resources from other companies to solar projects.

Hanwha Solutions on Friday announced a plan to streamline its business portfolio to increase investment in the U.S. solar energy sector. As the retail business and part of the advanced materials unit will be separated from the existing company, only three divisions will remain under Hanwha. Solutions: the Q Cells solar energy unit, the chemical unit and the local solar energy business development unit specializing in domestic projects.

Stakes in the new advanced materials subsidiary will be put up for sale to raise capital, according to Hanwha Solutions. The company hopes to invest the money in expanding the production capacity of its solar module factory in the United States.

Hanwha Q Cells, the U.S. solar power arm of Hanwha Solutions, runs a 1.7 gigawatt solar module factory in Georgia and plans to pay 200 billion won ($142 million) next year to expand capacity of generation from 1.4 gigawatts to a combined capacity of 3.1 gigawatts, which would be the largest for a solar OEM operating in the United States.

Hanwha Solutions released an electric statement on Sept. 7 saying it would scrap the 160 billion won investment plan in the chemical business, citing weak profitability. Instead, a 760 billion won investment in local solar projects was announced that day.

Even companies that don’t have manufacturing facilities in the United States — like OCI, a supplier of polysilicon for solar panels — also expect sales to rise to some degree. The increase in demand for solar panels in European regions is also a favorable factor.

As Chinese solar companies aggressively expand their presence in the world outside of the US, backed by strong government support and cost competitiveness, the US market is a place where Korean companies can outperform their Chinese rivals.

“As the performance of major domestic solar energy companies improved in the first half of 2022 compared to the previous year, the gap between local and Chinese companies is widening,” said Kang Jung-hwa, senior researcher. to a research institute of the Export-Import Bank of Korea, in a report published on September 8.

Korea sold $616 million worth of solar cells and modules overseas from January to July this year, down 10.6 percent year on year, according to the Korea International Trade Association. And the United States took 83.6% of Korea’s solar cell and module exports.

China’s export volume of solar cells and modules in the first half reached $23.8 billion, up 96.7 percent year on year, according to data compiled by BloomberNEF. Europe, facing an energy crisis caused by the war in Ukraine, absorbed $11.5 billion from Chinese exports of solar cells and modules, up 150% year on year.

“For local solar companies to survive, improving their position in the US market is the only option left,” Kang said.

But in the long term, it could undermine the domestic market and its solar supply chain, some experts argued.

Han Byung-hwa, an analyst at Eugene Investment & Securities, told KBS1 radio Aug. 17 that expanding overseas investment “may not be a good thing in terms of national interest.”

“That’s because it can lead to job drain to the United States and Europe,” Han said. ¡°Local production is bound to decline rapidly.”

The local solar energy industry is already on the decline back home, with Chinese companies rapidly increasing their presence and the new Yoon Suk-yeol government cutting renewables from Korea’s energy mix.

The proportion of locally produced solar modules fell 5 percentage points to 68 percent from 2017 to June this year, according to a report by People Power Party lawmaker Lee In-seon. During the same period, the market share of solar modules from China increased by 5 percentage points, from 27% to 32%.

Recent findings of irregularities in renewable energy projects are also hampering the business climate of local industry.

On September 12, the Government Policy Coordination Office found that at least 261.6 billion won, or about 12.5% ​​of the 2.1 trillion won earmarked for renewable energy projects, had been mismanaged on five years.

Mismanaged funds related to solar power projects alone amounted to 210.8 billion won, and included cases of fake mushroom cultivation and insect breeding facilities, built specifically to obtain loans earmarked for solar panel farms. There have been cases of bogus tax invoices, poor accounting, inflated construction costs, contracts with unregistered companies and falsified documents.

“It is truly deplorable that taxpayers’ money from their blood, sweat and tears, which should be spent to support the welfare of those who are struggling, has been used for acts of corruption by cartels with vested interests,” Yoon told reporters Sept. 15 at Yongsan’s presidential office.

The Financial Monitoring Service reviews loans and private funds invested in the solar sectors, in terms of investment volume, financial soundness and integrity of the approval process.

The industry is feeling the heat.

“The industry is going through a really tough time,” said a solar energy industry insider who wished to remain anonymous, noting that funding will now be next to impossible.

“Commercial banks will be reluctant to lend money to solar-related businesses, and even if they do provide loans, the funding approval process will be more difficult and complex than it is now,” said the initiate. “Who would give loans to new solar companies when the government said it would investigate loans already made?”

The Yoon government has resolutely reversed the energy policy of the previous administration, promoting nuclear energy while lowering the target for the proportion of renewable energy in Korea’s energy mix. In a long-term energy supply policy released in August, Yoon’s renewable energy target was 21.5% of the total, down from Moon’s 30% target. Nuclear power will account for 32.8%, up from the government’s previous target of 23.9%.

Next year’s budget for financing support and installation subsidies for solar energy has been cut from this year’s 980 billion won to 660 billion won.

The 4.6 trillion won Saemangeum offshore solar power plant project – which was touted by the previous Moon Jae-in as the world’s largest offshore solar power plant project – also faces uncertainties following the change in Politics.

In its original plan drawn up in 2018, the Moon government aimed to build a 2.1 gigawatt solar power plant floating on the sea, but the schedule has been delayed for the past three years due to myriad problems during the process. operator selection.

“Renewables such as solar power cannot meet the massive demand for electricity,” Yoon, then a presidential candidate, said during his interview with the local press in January, discussing the Saemangeum project. Yoon promised to “supply a massive amount of power produced by nuclear power plants to the Saemangeum site to attract businesses to the area.”

The Saemangeum Development and Investment Agency said that “the project is progressing as planned and no discussion has been made about plan changes at this stage.”

As the RE100 initiative continues to gain traction in Korea, the outlook for the solar power industry is expected to improve over time, analysts said.

“Without achieving the RE100 target, domestic enterprises will gradually lose their sales channel to overseas markets,” Han said in a report released on Sept. 16, following Samsung Electronics’ announcement to join the RE100 initiative. “He is free to choose between a failing national economy and the expansion of renewable energy – but the answer is crystal clear.”

BY SHIN HA-NEE [[email protected]]


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