'Surprising' results in Korean offshore wind tender see CIP walk away empty-handed

Public-led projects dominated South Korea’s latest offshore wind tender, with almost 700MW of capacity snapped up, while private sector developers including Copenhagen Infrastructure Partners (CIP) and Thailand’s B.Grimm group failed to secure anything.

The tender was the first to be staged in South Korea since a wide-ranging review of terms and conditions which resulted in new bidding criteria — including a new "national security" category — and an increased weighting for local content.

Bids were called for a total 1.25GW, of which 750MW was to be led by bidders in the regular auction, and the remainder for bids led by publicly owned companies.

One of the main losers was CIP, which was looking to add another 504MW to the 1GW of capacity already under development off the west coast of Shinan, Jeonnam, through its Haesong projects.

Similarly, the 340MW Hanbit project pursued by Thai conglomerate B.Grimm and Korea's Myungwoon Industrial Development, failed to secure terms.

Details of the four successful publicly-led bidders, which mopped up a total 689MW of capacity, have not yet been published.

Bids in the running included one from Korea Electric Power Corporation (Kepco), based on the 400MW Southwest Offshore phase two demonstration area project.

Research by market intelligence firm Aegir Insights suggested that the public-led projects can obtain a boost of up to 45% in strike prices compared with those in the regular auction.

Projects led by publicly owned developers will be granted a renewable energy certificate (REC) multiplier of KRW3.66/kWh and a preferential premium of KRW27.84/kWh.

“The debate about energy security and critical infrastructure as well as a strong domestic supply chain has been building in South Korea," said Simon Engfred, regional lead analyst (APAC) at Aegir Insights, who noted that Korea's Ministry of Trade, Industry and Energy stressed the importance of these factors when announcing the overall outcome in the two categories.

“The outcome is still a bit of a surprise – and it clearly indicates that the South Korean government seems to prioritise public ownership and localisation with readiness to pay a premium in selecting the public-led projects," Engfred said.

He predicted that both CIP and Hanbit will "try their luck again" in next year's bottom-fixed round, which will has no capacity reserved for public-led bids.

“Moreover, it will be very interesting to see the market’s reaction and whether localisation and security criteria will become an increasing topic in the next rounds," Engfred said.

Some analysts criticise what they say is a lack of transparency in the Korean system, with little information about how the bidding criteria is being applied.

The "auction's scoring methodology is highly opaque. Korea Energy Agency never explains why certain bids succeed and others fail. Nor does it disclose auction clearing prices, unlike other markets such as the UK," commented Analeigh Suh, an analyst at market intelligence firm BloombergNEF, in a LinkedIn post.

Suh suggested that the" inherently subjective nature," of Korea's non-price criteria leaves scope for ambiguity in how proposals and, she said, "the absence of transparency heightens concerns that political objectives, rather than competitiveness, drive outcomes".

Another auction including onshore wind power and floating offshore wind power has been scheduled for the second half of the year.

Korea has set the ceiling price for both floating and fixed projects at KRW176.6/kWh ($128.4/MWh) on the mainland and KRW177.6/kWh on Jeju Island.

However, funding for floating wind projects can receive a boost through REC multipliers which rise as distance from the shore increases.

The auctions operate in a two-stage system, with 50% of evaluation weighting for non-price factors and 50% for price factors, staged sequentially.

Korea's current energy roadmap sets a cumulative capacity target for solar, wind and other renewables at 78GW by 2030 and 121.9GW by 2038.

In the offshore wind sector, South Korea’s cumulative capacity is supposed to reach 14.3GW by 2030, but many analysts see this target slipping out of sight.

South Korea’s President Lee Jae-myung won the country's presidential election in June promising to back the expansion of renewables and promote an “energy expressway” to bring power from offshore wind to industrial hubs.

These plans include subsea links to transmit power from 20GW of offshore wind farms off South Korea’s southwest to the rest of the country.