Seven Korean companies, including LG Electronics, Lotte Chemical and Samsung Fire & Marine, have joined RE100 this year, bringing the total number of Korean companies to 34, according to the U.K.-based Climactic Group on Nov. 3.
This means that Korea has the fourth-most number of companies after the United States, the United Kingdom and Japan. When taking into consideration business and corporations in countries around the world, Korean companies showed strong enthusiasm compared to those of other countries. In fact, not only have all four major Korean business groups -- Samsung, SK, Hyundai and LG -- declared their commitment to RE100, but some Lotte affiliates, KT, Kakao, Naver and Amorepacific promised to follow the RE100 initiative.
Including a Korean version of RE100, which has opened the door to small and medium-sized enterprises (SMEs), the number of companies that have pledged to switch to 100 percent renewable electricity currently stands at 380. This means that Korean companies have a strong willingness to switch to green energy.
In response to this proactive move, Korean companies are competitively raising their renewable electricity utilization rates.
Samsung Electronics’ rate of conversion to renewable energy sources was 31 percent in 2022, up 11 percentage points from the previous year, and SK hynix increased the share of renewable electric power nearly sixfold, from 4 percent in 2021 to 29.6 percent in 2022. The renewable electricity procurement rate of LG’s seven major affiliates, including LG Electronics and LG Display, also jumped to about 15.4 percent at the end of last year, tripling the rate from 2021 (5.1 percent).
This was due to Korean companies’ strong commitment to renewable electricity as a key task to achieve net zero. They are increasing their use of renewable electricity by building solar, geothermal, and other power generation facilities on their own places of business, purchasing renewable energy certificates (RECs), and signing direct power purchase agreements (PPAs) with external renewable electric power generators.
Korea sees active renewable electricity procurement through purchases of green premiums. The Green Premium System recognizes the use of renewable electricity instead of paying premiums when buying electric power from KEPCO.
However, Korea still has a long way to go. While Korean companies have been increasing procurement of renewable electricity by focusing on overseas business operations, they now need to ramp up the use of renewable electricity in Korea. Due to Korea’s small land area and climate and environmental characteristics, the share of renewable electric power generation is the lowest among 38 member countries of the Organization for Economic Cooperation and Development (OECD).
In fact, most Korean companies’ conversion to renewable electric power is being carried out at their overseas sites. Samsung Electronics has achieved the 100 percent use of renewable electric power in the United States, Europe, China, Vietnam, India, and Brazil. SK hynix has finalized its transition to renewable electric power at all of its overseas plants. In the case of Hyundai Motor, the Indonesian and Czech production plants have completed 100 percent conversions to renewable electric power. Its plants in Türkiye and India have a high renewable electric power utilization rate of around 50 percent.
By contrast, their business sites in Korea have a relatively low renewable electricity utilization rate. According to the 2022 Carbon Disclosure Project (CDP) Report, 64 Korean companies’ use of renewable electricity accounted for about 7 percent of their total electricity use. Moreover, most of them were filled with green premiums, which may disable them from meeting customer needs. In the global market, green premiums are not recognized as conversion to renewable energy in a large number of cases.
In the midst of a shortage of renewable electricity supply in Korea, corporate Korea is faced with even bigger challenges in switching to renewable electric power, as major Korean companies are engaging in businesses that consume a lot of electricity, such as semiconductors, batteries, automobiles, steel, and petrochemicals.
“The supply of renewable electric power is so small due to Korea’s poor geographical conditions that it is difficult for Korean companies to procure as much renewable electricity as they want even by purchasing RECs or signing PPAs,” said an official in the Korean business community. Earlier, Kang Kyung-sung, second vice minister of trade, industry and energy, also pointed out in a forum, “The more RE100 is emphasized around the world, the more vulnerable Korea companies becomes in terms of price competitiveness due to land prices in Korea.”
“The overall cost of electricity production is on the uptick and the cost of building renewable electric power generation and purchasing green premium RECs is also significantly higher than expected,” said another official. “Many experts have become skeptical about whether grid parity, which the world is originally expected to reach in 2030, will take place. Grid parity occurs when an alternative energy source can generate power at a levelized cost of electricity (LCOE) that is less than or equal to the price of power from the electricity grid.”
A recent Korean government-led push for CF100 has been gaining strong momentum. CF100 is a global carbon-free movement that uses only carbon-free energy 24 hours a day, seven days a week -- the concept of 24/7 CFE. This initiative encompasses not only renewable electricity from solar and wind power generation, among others, but nuclear power and clean hydrogen free from carbon emissions as well, and is drawing much attention as a realistic complement to RE100 for countries including Korea and companies in an environment where it is difficult for them to meet their electricity needs with renewable electricity alone.
In order for CF100 to become an alternative to RE100, CF100 must gain support from the international community, as RE100 has already been established as a global standard. Experts say that a lack of support for CF100 will only slow down the world’s progress towards RE100.
However, a consensus among those in the energy industry is that RE100 and CF100 are not completely disconnected. They are both tools for the decarbonization of the energy sector. “RE100 and CF100 do not have to be a selection between one or the other,” said one industry insider, “They share the same goal of reducing carbon and responding to climate change.”
Industry insiders are hopeful that the Korean government’s proactive move to expand the use of CFE will ultimately help accelerate carbon neutrality. The spread of CFE to the international community is also expected to boost Korean companies’ competitiveness.
The CF Alliance, a joint government-business organization to promote the use of CFE, was recently launched. The CF Alliance proposed by Korean President Yoon Suk-yeol in his keynote address to the U.N. General Assembly will work to spread an international consensus on CFE initiatives and develop CFE norms with the international community.
“To attain decarbonization, we need to embrace all available technologies,” said Lee Hoe-sung, inaugural chairman of the CF Alliance. “We can solve the problem of global warming at the lowest possible cost by utilizing the full portfolio of technologies, including renewable energy, nuclear power, hydrogen, ammonia, and carbon capture, utilization, and storage.”