Korea's offshore wind power generation cost reaches three times that of major countries, but the root cause lies in structural bottlenecks: shortages of installation vessels and dedicated ports, delays in grid connection, and high financing costs stemming from permitting uncertainty. The diagnosis suggests that costs will only decline if these bottlenecks are resolved first, rather than simply lowering bidding prices from the outset.
The Korea Wind Energy Industry Association and the Energy Transition Forum jointly held a seminar on October 19 at the Diamond Hall of the Korea Chamber of Commerce and Industry in Yeouido, Seoul, titled "Is Korean Offshore Wind Really Expensive?"
Sung Jin-gi, vice chairman of the Korea Wind Energy Industry Association, said in his opening remarks: "The issue is not simply whether domestic offshore wind is expensive or cheap, but rather what is a reasonable cost level at which offshore wind projects can actually be pursued in our country."
Yoon Soon-jin, co-chair of the Energy Transition Forum, said in his welcoming remarks: "Every time offshore wind is discussed, people ask 'it's expensive, so why do we have to do it?' But the reason Korea is expensive is largely due to uncertainty in permitting and grid connection, insufficient ports and installation vessels, and an unpredictable market. A significant portion of these costs can be reduced through institutional and policy measures."
Institutional improvements could lower generation costs by 35 percent
Hong Jong-ho, professor at Seoul National University's Graduate School of Environmental Studies, presented a comparison of levelized cost of electricity (LCOE) for offshore wind between Korea and five major countries based on data from the International Renewable Energy Agency (IRENA). According to Professor Hong, Korea's generation cost stands at 179 dollars per MWh in 2025, approximately three times that of China (56 dollars), the Netherlands (66 dollars), the United Kingdom (59 dollars), Germany (69 dollars), and Denmark (53 dollars).
Professor Hong analyzed that the gap with China is largest in installation costs, while the gap with European countries is largest in capacity factor, the ratio of actual power generation to installed capacity. He noted that output curtailment significantly affects the capacity factor gap and is "an issue that must be resolved quickly at the government level." If financing costs are reduced by 1 percentage point, installation costs are improved to UK levels, and capacity factor is improved to Chinese levels, generation costs would drop to 116 dollars, a 35 percent reduction.
Based on in-depth interviews with companies and financial institutions, Seoul National University's research team identified five major issues that structurally drive up costs: site selection and basic design, ports and installation vessels, project development and permitting, grid connection and power sales, and supply chain and financing.
Professor Hong said: "If the public reduces controllable risks, we can to some extent reduce factors that raise generation costs, such as interest costs from financial risk. The government must set a clear direction and eliminate uncertainty, but must not weaken market participation itself through excessive constraints."
Industry cautions against lowering price caps before market reaches scale
Park Eo-jin, Korea representative of offshore wind technology consulting firm OWC, presented interim results of a study on offshore wind support systems commissioned by the Global Wind Energy Council (GWEC). Based on a hypothetical 495 MW project, he calculated the tariff that developers would need to receive to achieve their target rate of return.
For fixed-bottom installations, the figure is close to the current bidding reference price of approximately 370 to 400 won per kilowatt-hour, meaning that if cost increases or other risks emerge, developers have little room to absorb them. For floating installations, the gap from the reference price of approximately 500 won per kilowatt-hour is larger, requiring additional policy measures. He noted that this calculation excludes KEPCO grid reinforcement costs, port improvement costs, and compensation for fishermen and residents, so actual project costs could be higher.
Park said: "Korea cannot yet be considered a mature market. Before achieving a certain scale, lowering the price cap itself is a cautious matter."
The wind may pass if we do not act
Choi Deok-hwan, external cooperation director of the Korea Wind Energy Industry Association, disclosed that of 20 offshore wind projects (5.9 GW) awarded to date, only three have begun construction, and when accounting for projects that have withdrawn, actual implementation volume could shrink by more than 1 GW. Choi noted: "Just because a project was awarded at a specific cost does not mean it can proceed to completion." He pointed out that while steel plate and copper prices have risen and interest rates and exchange rates have all increased, only the bidding price cap continues to fall.
Choi cited the example of Japan, where after low-price bidding, all project rights were returned and supply halted for four years, eventually forcing the government to raise the reference price from 18 yen per kilowatt-hour to the 30 yen range. He said: "When prices cannot keep pace with costs, developers will not participate in bidding. If bidding fails, not only will supply be delayed, but government credibility will inevitably suffer." He also noted that the domestic supply chain is weak, with turbine manufacturers unable to find tower suppliers domestically and having to develop new ones, and that only one of three wind manufacturing companies survives four years after entry.
Choi requested: "The industry wants the price cap frozen in the second half of the year. If it continues to fall, it will drop to around 1 won per kilowatt-hour; if not, we ask that the support period be extended from 20 to 25 years at minimum." He said: "The sea may remain, but if the wind of renewable energy expansion passes, it is difficult for it to return."
Lowering costs without infrastructure is questionable in effectiveness
The panel discussion was moderated by Yoon Soon-jin, co-chair, and included Kim Ju-man, Korea representative of GWEC; Han Won-seok, team leader at the Korea Development Bank; Bang Jo-hyuk, director at Unison; Jung Tae-gyun, CEO of The Green Partners; and Lim Jae-min, secretary general of the Energy Transition Forum. Yoon opened the discussion by noting that while the government has projected expanding offshore wind from 0.4 GW in 2025 to 3 GW in 2030, 25 GW in 2035, and 45 GW in 2040, many challenges must be overcome to realize these targets.
Han Won-seok, team leader at the Korea Development Bank overseeing Sinan Ui offshore wind financing, said: "The National Growth Fund served as seed money to encourage active participation by private financial institutions such as commercial banks and insurance companies, and the Future Energy Fund reduced the financial burden on project developers and increased the repayment capacity of senior lenders. These two policy finance measures played a major role in successful financial completion." He also noted: "Offshore wind may have interest rates 0.5 to 1.0 percentage points higher than solar projects due to uncertainties beyond developer control, including permitting, community acceptance, and military operational review."
Jung Tae-gyun, CEO of The Green Partners, pointed out that Korea lacks vessels capable of installing large 15 MW turbines, and obtaining approval to bring in foreign vessels is difficult. He said: "If installation vessels cannot be used on schedule, it is not just that charter costs rise by hundreds of millions of won; the entire project can be stranded." He predicted that dedicated and support ports designated by the government will take at least six years to complete. He also noted that the power transmission use agreement with KEPCO contains no compensation clause even if grid connection timing is missed, and projects connecting to new substations will "likely face difficulties in financial institution and financing agreement negotiations."
Bang Jo-hyuk, director at Unison, said that consolidating permitting windows and shortening timelines would reduce accumulated interest costs and lower installation costs. He evaluated the decision to differentiate between technology transfer, licensed production, and OEM production in the second half bidding as "a desirable direction." Regarding the financing credibility of domestic turbines, he said: "Guaranteeing unverified products ultimately means both parties bear the risk. The most certain approach is to provide demonstration opportunities and allow companies to build a track record."
Kim Ju-man, Korea representative of GWEC, said that according to results of ongoing Post RPS auction design research, the RPS system is not optimal for the Korean offshore wind market, and that a contract for difference (CfD) system would be far more suitable for Korea's market. He also emphasized that bidding completion does not immediately allow construction to begin, so the government must actively support permitting, project financing, and grid issues after bidding is awarded.
Lim Jae-min, secretary general of the Energy Transition Forum, identified the background of the price cap debate as differing perspectives between government, which views business risks optimistically, and the private sector, which views them conservatively. He said: "Rather than lowering the price cap, it is a priority to jointly identify bottleneck points where policy can create cost reductions and resolve them first."
Yoon Soon-jin said: "There is a real question whether it is truly effective to demand lower costs without infrastructure in place. What companies struggle with most is uncertainty." He also emphasized: "We must raise the priority of infrastructure investment needed for energy transition, such as ports and grid systems." Yoon concluded the discussion by saying: "Let government, industry, financial institutions, and civil society divide roles, cooperate, and continue dialogue to solve problems together."
Original Korean article: Energy Daily
English brief by Korea Wind Intelligence, koreawindintel.com
