Get Ready for the South Korean Smart Grid Firms

Back when I was a broadband reporter for Red Herring magazine, I took a trip to Seoul and did the classic story on how South Korea kick-started its economy with government investment into blazing-fast broadband pipes that created its world-leading mobile and web industries. South Korea’s broadband buildout may hold some interesting lessons for the U.S. smart grid rollout, as I’ve noted before. But the country could also take a leading role in the smart grid market, with South Korean smart grid firms competing directly against the companies in Silicon Valley that are developing the next-generation of smart grid tools. According to a report today in Reuters, South Korea has picked eight consortiums to build a smart grid test bed in the country and South Korea is vying for “30 percent share of the global smart grid industry.”

In the same way (albeit on a smaller scale) that the South Korean government pumped money into developing broadband infrastructure, the government plans to invest 37 billion won (about $32 million) initially into building out the smart grid test-bed. The companies that will start building the smart grid infrastructure include a who’s-who of South Korean IT companies including mobile leaders SK Telecom and KT, consumer electronics and cell phone heavyweight LG, power companies KEPCO and GS Caltex, and Hyundai Heavy Industries. Taking the same approach as the island nation of Malta — isolating the buildout to a geographical area — the South Korean government plans to build the smart grid test bed on the island of Jeju, which is south of Seoul (see map above).

While the investment from the South Korean government isn’t huge at this point, I wouldn’t discount its goal to acquire a 30 percent share of the global market as unreachable. KT, SK Telecom, and LG have long histories of mobile and broadband innovation, and they tend to spend a lot of money on R&D, taking risks and rolling out products and services that are at the bleeding edge. That means some of the companies’ risky products can be duds — see SK Telecom’s failed mobile joint venture Helio, which was sold off to Virgin Mobile. But the approach seems to be working for many of them: LG is the third largest cell phone maker in terms of marketshare, solidly beating out American phone maker Motorola (s MOT).

I haven’t researched the ins and outs of what types of smart grid products South Korean firms are working on, but the country’s leadership in the battery space could also give it a leg up in energy storage for the smart grid. Very few American firms have so far been able to compete with both South Korean and Japanese companies when it comes to battery technology.

Given the smart grid industry is just being developed, recently getting a boost from the $3.4 billion in U.S. stimulus funding, it’s not strictly about competition at this point. There’s some cooperative learning going on as well: Earlier this year the U.S. smart grid trade group the GridWise Alliance and the Korea Smart Grid Association (KGSA) teamed up to share intelligence about building out smart grid technology.