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The Path to Becoming A Solar Power Broker in Korea

SunEdison said Friday it has signed a memorandum of understanding with a provincial government in South Korea to install 400 megawatts of solar panels. That’s a sizable project considering the country’s market shrank dramatically following a cut in incentives.

The plan is for SunEdison to carry out the work in Gyeongsangnam-do in southeastern Korea as a stimulus project. The regional government wants to create 1,500 jobs and the 400-megawatt deal, which isn’t finalized yet, will likely expect SunEdison to reinvest some of the project’s profit locally. SunEdison will install solar panels on rooftops and complete the project by the end of 2013, and the provincial government has a goal to get 15 percent of its electricity from renewable sources by 2030.

Korea has always been a fascinating country to watch for tech observers, not the least because it’s risen to be a major global players in information technology and consumer electronics, thanks partly to strong government support. The national government has been trying to do the same with greentech sectors, though not always with stellar results.

Korea has a feed-in tariff policy, which requires utilities to buy solar electricity at premium prices, and the policy propelled the country to become the fourth largest solar market in 2008, with 276 megawatts. Solar panel makers such as SunPower and SolarWorld all have benefited from the policy. SolarWorld opened a factory with a Korean partner in 2008. SunPower has developed projects in Korea as well, and has a joint venture with a Korean company to make silicon ingots, which are then used to make solar cells. The joint venture, Woongjin Energy, went public in Korea in June this year, though SunPower didn’t sell its shares through the IPO, SunPower said in its quarterly financial report.

But the government cut the domestic solar tariff by as much as 30 percent, causing a collapse of the market. In fact, new installations in Korea plummeted from 276 megawatts in 2008 to 98 megawatts in 2009, according to GTM Research.

The government apparently cut the tariffs because it couldn’t afford it. Instead of spreading the costs among its people, like what other countries with feed-in tariff s did, the Korea government used its own budget to cover the expenses.

While the tariffs have fallen, the government has carried out other initiatives to boost its homegrown solar industry and bring in foreign investments and technology transfer deals, according to this RenewableEnergyWorld story. The country has relied on imported solar panels for its projects. Back in 2008, domestic manufacturers contributed 60 megawatts of the 274 megawatts installed, according to Displaybank.

Will SunEdison use Korean-made solar panels for its project? The company isn’t saying. But if the provincial government’s goal is to stimulate the economy, then the answer is likely a “yes.”

South Korean consumer electronics heavyweights Samsung and LG have ambitious plans to become major solar panel suppliers. Samsung opened a 30-megawatt solar cell factory last fall and plans to increase the manufacturing capacity to 130 megawatts next year. That number is small compared with the hundreds of megawatts that many of its competitors already have. Companies such as Suntech Power (s STP) and First Solar (s FSLR) have more than 1 gigawatt of capacity each.

Samsung also is keen on the project development business. It formed a joint venture with ENCO Utility Services to develop 130 megawatts of solar power plants in the U.S. It also has inked a deal to develop 500 megawatts in Ontario, Canada. LG, meanwhile, is reportedly taking part in a $1 billion project in the U.S.

Image courtesy of NREL.

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