Wind Energy Business of Korea

(Focused to Offshore)

2010. 12. 6

Dr. Rimtaig Lee Korea Wind Energy Industry Association

Index

Status of Wind Energy Industry and Energy Supply/Demand

Remarkable Change of Korean Wind Energy Industry

Major Component

Overseas Off shore Wind Projects

Reference List

Status of Wind Energy Industry and Energy Supply/Demand

Innovative Paradigm Shift(Wind) in Energy Industry The First Wind(since history created up to 18 centries): Under developed and primitive life based upon Natural energy(woods). The Second Wind( from 1900s to 2000s): Well being life thanks to the fossil energy and nuclear energy, industrial innovation

Energy sited at mal-distributed location and incurred the war to secure the fossil energy. Better life of human being due to development of technology, automation, medical cares. Endanger the human life in the future causedby the global warming due to the access amission of carbon deoxide. More than 30% of export amount is used for importing energy in Korea Nuclear power plant is now exporting. Booming to export the plant projects which are used for fuel as well as raw materials of fossil energy Largest and monopoly business due to the economy of scale

The Third Wind(2050s thereafter): Sustainable well being life of human being based upon the renewable energy such as wind, solar, tidal and hydro system.

Renewable energy located at well distributed locations and eliminated any disputes to secure the energy. Korea can be a country to obtain the local energy at large scale. The renewable energy industries will be the export industries and will provide the opportunity of jobs and value added to GNP. The global warming will be managerial. Clean air by expanding battery cars and increase the demand of electricity. Distributed power source and widely applied.

Demand and Supply of Oil

The Growing Gap

0

10

20

30

40

50

60

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

GBarrels

Past

Discoveries

Future

Discoveries

Demand

Projected

Demand (IEA)

Projected

Supply

Global Energy Status and Forecast

Source: Global Energy Outlook 2009,GWEC Report 2009,COP 15

Wind Energy available at Earth

Energy Mix of EU Electricity Supply in 2050

300

1000

2300

0

500

1000

1500

2000

2500

1990 1995 2000 2005 2010 2015 2020 2025 2030

연도

용량

(GW )

Real Data 2005 Forecast

2008 Forecast 2009.11 Forecast

Up-trend

Accumulated wind power installed in the world

Actual and up-dated Forecast

Source: GWEC 2009

전세계 풍력 점유,탄소저감,투자비, 직장 증가 예상 표(Scenario 3 개중 중간, 1/2)

Source:GWEC2010

전세계 풍력 점유,탄소저감,투자비, 직장 증가 예상 표(Scenario 3 개중 중간, 2/2)

Source: GWEC2010

Plan to promote in the wind energy projects in China

Potential : 1,000GW

Off-shore : 750GW

On shore : 250GW

Installed: 25GW(2009)

Off shore under develping : 18 GW

2010.3 : 102MW(comleted)

2015 : 2.7GW

Chinese Scenario to develop the wind energy projects

Source:GWEC 2010

Reserved potential off-shore projects in EEZ of Japan EWEC2009 24 Jun 2009

Graduate School of Maritime Sciences, Kobe University, Japan

Fig. 6 Annual energy production per square kilometer (GWh/km2).

Blue lines show boundaries of Japan’s EEZ (including disputed areas).

• Japanese EEZ

(Incl.disputed area) :

4.47×106 km2

• Reserved potential

energy: 48,600 TWh/yr

(50 times of Japanese annual

production)

• Japanese annual

electricity production:

(2008): 971.87 TWh/yr

Remarkable Change of Korean Wind Energy Industry

Improvement of Business Environment

Tariff Grid Accessibility Will of Government National Acceptance Local Government Industry Credit of WTG supplier

Previous Regime

Current Regime Items

FIT,107w/KWh Negative Environment Protection Negative Pay no attention Medium and small firms oriented. Unable to provide credit.

RPS= SMP+ REC (130 + 40/80 won/KWh)

Pay a full attention and will take action.

Green Growth Positive Actively/Competitively Promoting Largest four ship builders oriented. Able to provide credit for their WTG supply.

Government Strategy on Wind Energy Industry (Summary) (2010. 10. 13)

1) The off shore wind industry will be developed as the 2nd ship building industry. The 3rd largest in the world.

2) The wind energy generating facility will be expanded up to 7.7 GW by year of 2030.

3) RPS will become effective from 2012. The tariff will be consist of SMP and REC. Energy Price for on land wind anticipated for approx. 130 won/KWh + 40wonKWh for on land wind, and approx. 130 won/KWh + 80won/KWh for offshore wind. 4) Detail Study for easy access to the electric power grid is currently

being carried out: Offshore wind farm: To provide a nearest extra high voltage substation, On shore wind farm up to 20MW to be connected to the nearest 22.9KV network system. The expenses for access to power grid will be allocated to tariff and Kepco will carry out the construction of the transmission lines.

WTG Manufacturing Technology * Shift from Indigenous to International Tech.

1. Indigenous Technology Develop:

Hyosung:750KW and 2MW(Under test operation),5MW(Under developing)

Unison: 750KW and 2MW(Under test operation)

Doosan:3MW(Under test operation)

Hanjin:1.5MW(Under test operation)

2. International Technology Inducement:

Hyundai Heavy Industry(AMSC Wintec,USA): 1.65MW(under mass production, to supply domestic market and Pakistan ), 5MW(Under developing for offshore project)

Samsung Heavy Industry(UK): 2.5MW(under mass production for onshore project), 5MW(under development for offshore project)

Daewoo Shipbuilding and Marine(Dewind,USA): 750KW,1.5MW,2MW(under production in USA), Ship for offshore WTG erection(Client: RWE)

STX Heavy(Harakosan,Netherland): 2MW, 3MW(under production in Netherland)

Road Map of Korean Wind Energy Sector

The First Track: Government has set up to promote an offshore project 1st stage: 100MW / 2011 ~ 2013/ 60.36 Billion won / 2nd stage: 900MW / 2014 ~ 2016/ 3.25 Trillion won / 3rd stage: 1,500MW / 2017 ~ 2019/ 5.6 Trillion won / Implementation Org.: Promotion Committee chaired by CEO of KEPCO

The Second Track: Local government of Chonnamdo 1st stage: 100MW 2nd stage: 1,000MW 3rd stage: 2,900MW

The Third Track: Local government of Jeju 1st stage: 300MW 2nd stage: 700MW 3rd stage: 2,000MW

The Fourth Track: Local government of the other province Refer to the list of potential projects attached for the other province.

Factors affect to Viability of the Wind Project

Capacity Factor Capex Opex Financial Cost Developing Cost * Consent of Residential People * Site Availability Accessibility to Power Grid National Recognition and Acceptance by People Project Management Local Availability of WTG Supply, Engineering and Construction Capability Availability of Harbor Facility Availability of Erection Vessel Availability of Cable Laying Vessel

How to improve Project Economics?

Lower the Capex and Opex through a skillful management.

Lower the Financing Cost and Lower interest of Borrowing Money.

80% of Wind Energy generating cost is contributed from the financing and financial cost due to Capex while the remain 20% is contributed from Opex. Select a good site location for better CF and less Capex.

Minimizing the developing cost.

Risk Management

Lot of risks, raised in promoting the wind energy project should be shared with all parties involved. Equipment supplier E&C contractors Developers Lenders Government support Local government support and investment Insurance company

Project Financing

The credit should be raised based upon the project facility. The credit should be raised upon the anticipated balance sheet. The internationally prevail concept of PF should be applied to the Korean project by Korean lending institutes.

*

*

With a technical potential of 31.4 GW

South Korea is poised to begin a new era

involving the development of offshore wind

The Korea Electric Power Research

Institute are currently looking at the

feasibility of building a 100MW offshore

wind farm in the West Sea. The wind farm

is planned for 2012 and could be extended

to 1,000MW at a later date

West Sea

Jeju-do

Offshore wind resources potential

7.4

15.5

23

34.5

0

5

10

15

20

25

30

35

2010 2015 2020 2025 2030

연도

용량

(GW )

Reviced Forecast by MKE in 2008(Scenario1) Reviced Forecast by MOCIE in 2003

Dream1(Scenario2) Dream2(Scenario3)

Scenario1

Scenario2

Scenario3

Down-Track

Up-Dream

Installation Trend of wind power in Korea (Case Study)

29

Wind Energy Projects enlisted in the 3rd Basic National Plan of Power Supply and Demand. (2006~2020, 2006.12 issued)

Remarks: Wind projects are being delayed and suspended in Korea versus are being developed very rapidly in

the other parts of world.

Unit:MW

2007 Plan Implemented Remarks

Milyang #1(Kyongnam) 50 Delayed /public objection

Hankyung, phse 2(KOSPO) 15 15 Success

Sungsan(KOSPO) 20 12 Delayed(2008)/Reduced(12)

Kangwon Chahang(unison) 22.5 Public objection

2008 Plan Implemented Remarks

Sangdo(Jeju Wind) 31.5 Public objection

Yanggu(KOMIPO) 20 Environment

Daegiri(Hyosung) 40 Under progress Delayed/partly implemented

Milyang #2(Kyungnam) 60 Public objection

Sammu off-shore 30 Delayed/not viable

Taebaeg(KOSPO) 20 Delayed

Pyongchang(KOSPO) 20 Delayed

Kyungju Yangnam(unison) 21 Public objection

Jeongsun(KEWPO) 25 Public objection

Sangmyung(unison) 16 Public objection

Samdal(Hanshin) 0 33 Under progress

2009 Plan Implemented Remarks

Duckpyong Jeju(KOMIPO) 40 Environment issue

Daehol Jeju(unison) 18 Public objection

30

Dreams of Korea Wind Energy Industry Association 1) Wind projects under consideration by private sector

developers Location Capacity (MW) Remarks

1.KNOC/HEC Chonnam Yusu 20MW Under design, to be completed by 2012,

Est.budget: 83 B won

2. Kwmho Industry Chonnam Yusu 100MW

3. KOSPO Busan off-shore 350MW(3.5MWx100기) Target: 2020.

390W/m2, 0~30m depth, 10Km away

4. KNHC/Doosan/NCE Jeju off-shore Hangkyung 30MW Gov.permit in 2006, Delayed due to lack of

viable ,review to start.

5. Dongkuk S&C/EWP/Yurus Chunnam Beegwkdo 200MW Target: 2013 / Est. budget:1.2T won

6. POSCO E&C Chonnam Off-shore West-South 600MW Target: 2015 / Est. budget:2.5 T won

7.POSCO E&C Chonbuk 100MW(5MWx20) Const. period: 2011 ~ 2015

Est. budget:0.5 T won

8. Hanwha Consortium Off-shore Incheon 100MW

(2.5MWx40기/3MWx33기)

333W/m2/7mdepth/20Km away.

Start:2012, Est.budget:500 B won

9. Hanshin Energy Jeju off-shore Gapa 50MW Target: 2012

10. Halla Consortium Jeju off-shore east-west 500MW Target: 2013

11. Hanshin Energy Samdal Ext. (onshore) 32 MW Target: 2011

12. Accioner Korea Kyongnam Yangyang(onshore) 500MW 60MW completed in 2009, Balance step by step

13.DMS/Enometal Ezrobot Off-shore Taean 100MW(3.6MWx27) Est. budget:400 B won

14. KMIPO Jeju Esidol(on shore) 20MW Under design

15. Korea Gov. Off-shore Saemangwm Dam 40MW 2MW track record build-up,

Open for the new model from

16. KARICO Consortium Chonnam Haenam 400MW Target:2016 / Est. budget:1.2 T won

Total 3,142MW

2) Wind projects under planning by Chonnam local government

Capacity

(MW)

On-shore

(MW)

Off-shore

(MW)

Est. budget:

B won for 1st stage

KOSEP 600 40 560 938.6

KOMIPO 300 100 200 250

KOSPO 500 100 400 460

EWP 200 50 150 181.3

KNHC 50 50 60

Fund Institute Consort. 1,000 200 800 4,400

POSCO PWR 600 200 400 2,300

LG E&S 1,000 1,000 3,000

Mitsui/Daewoo E&C 400 400 1,200

Dongkuk S&C 200 200 1,200

Acciona Korea 720 120 600 1,600

Total 5,570 2,210 3,360 15,589.9

Source: Chonnam Local Gov.

Major Component

Component Producing Industry 1)Dongkuk S&C: Tower(Client:Vestas)

2) CS Wind:Tower(Client:Siemens,Vestas,GE)

3) Taewoong:Main shaft,Flange,Forged or molded materials(Client:Vestas,Siemens,GE)

4) PMS Pyongsan:Flange, Gear ring,distance plate, lock plate, rotor shaft, gear box for 1.5MW(Client:Vestas,Siemens,GE,Gamesa)

5) KM: Blades for 2MW, 3MW

6)Hyunjin Source Material:Main shaft, tower flange,Forged materials.

7) Korea Tech.: Rotor hub,Bed Plate

33

Brochure(V-90, 3 MW)

3 D Model of WTG (V-90, 3MW)

Hub: Hydraulic system mounted.

Opening for 3 blades:Pitching system mounted

Gear box

Breaker

Generator Transformer

Opening for tower: Yawing system mounted

Cooling system

Number of Parts: about 100,0000 piece major parts: approx. 3,000 piece

Hydraulic Pitching Control Solution

Gearbox (Hansen Factory)

Generator and Transformer

Electrical Single Line with Generator/Transformer

SCADA System of Wind Farm

26s/25x under producing by Samsung

HQ5000 under developing by HHI

Overseas Off shore Wind Projects

Plant projects including off-shore, overseas contract by Korean Firms

Consortium between reputed WTG supplier and Korean E&C for EU offshore wind projects including those of Scottland.

The Off-shore wind project involves lots of risks as much as the overseas plant project

It is desirable that Korean EPC contractors may contribute for the promotion of the off-shore projects in UK, North and Baltic sea area along with European WTG suppliers.

The major equipment and materials such as power cable under sea, sub structure for the foundation, transformer, switchgears can be supplied during construction. Good case of SandBank offshore project in Germany.

Scottland authority has requested Korean contractor to participate in the offshore projects including the financing facility. Korean ship builders have already made the contract for building the construction vessels, 2 sets by Deawoo and 1 set by Samsung.

Off-shore wind project of German (Invested

by Korean Business Firm and under promotion)

Wind Initiatives in Ontario

• Government policies and environmental priorities - driving for change

• Renewable Energy Supply (RES) Projects

• Renewable Energy Standard Offer Program (RESOP)

• Feed-in Tariff (FIT) and Green Energy and Green Economy Act (GEGEA) 2009

• Ontario’s Feed-in Tariff (FIT program)

• FIT Projects – Renewables including onshore & off shore wind

• Wind capacity expected to again double by end of 2011

• Korean Consortium (2500 MW renewable generation)

Samsung Corp.,Kepco: 1st phase 600MW: Awarded to

Siemens for WTG supply, CS Wind for tower supply

Arklow Banks Wind Farm - The Irish Sea

Photos: R.

Thresher

- GE 3.6 MW x 7 units

- Installed in June 2004 - 1st offshore windfarm in Ireland

NordE.ON 1 Project (Case of Germany)

1)Scale: 5MW x 12units(Repower:6,Multibrid:6) 2) Location:Borkum island N 45Km EEZ 3) Wind data:10m/s(annul. av.), Capacity Factor:43.37% remarks: CF range 25 ~ 28.5% in onland 4)Wave:10m(high), 6~8m/s(Average) 5) Life time: 20 years 6) Status: * 1999/2001: Application for construction * 2001: Permit obtained from Harbor Authority * 2005. FDN license to PROKON Nord * 2006.6:DOTI Joint Company (SPC: E.ON, EWE,AG ,Vattenfall Europ) * 2007.6: Contract with Areva Multibrid for 5MWx6 WTG supply * 2007.7: Award to Areva for Transformer, Consortium for Offshore Substation * 2008.11:Contract with Repower for another 5MWx6 * 2009.11: Completion of erection and now under test operation * Capex: 250 Million Euros. 7) Note: All gearbox and appurtetnant parts for 6 units supplied by Multibrid have been replaced during test operation.

The First Off shore Project in Germany: Alpha-Ventus Project

The First Offshore Wind Project in China

Location: Shanghai Donghai Bridge

Capacity: 102MW(3MWx34units)

Supplier: Sinovel Wind

Completion: 2010.3.

Developer: Shanghai Donghai Wind Power Co.,Ltd.(Invested by China Power International Development Ltd.,Guandong Nuclear Power Group, Shanghai Green Energy)

Contractor: Investors above.

Project Cost: 3 Billion RMB Power Generation:258.5GWh annually

Case of USA: Cape Offshore Wind Project

1)Capacity:468MW(3.6MWx130units)

2) Location: Massachusetts State of USA

3) Progress:

* Start: 2001

* G-permit:2010.4 (Massachusetts local Gov.)

* Completion Est.:2013

4) PPA:20.7 cents/KWh for 15 years with annual

inflation adjustment of 3.5% over 15 years,

34.7cents/KWh at the end of the contract.

5) Price break down: Energy price:12.5, REC:6.7,

Hedge value(CRA):1.5, total:20.7cents/KWh

6) Tariff Increase: about 2% added up

(1.59 $/month/customer)

Overseas Market of Off-shore Wind (1) Round 2 in UK

Overseas Market of Offshore Wind (2) Round 3 in UK

Scottish Territorial Waters (STW) and Round 3 Sites

Source: Crown Estate 2010

11

12

Key STW Site Name Developer MW

1 Wigtown Bay DONG Energy 280

2 Solway Firth E.ON 300

3 Kintyre SSE Renewables 378

4 Islay SSE Renewables 680

5 Argyll Array Scottish Power Renewables 1,500

6 Beatrice SSE Renewables & SeaEnergy 920

7 Inch Cape RWE Npower & SeaEnergy 905

8 Bell Rock SSE Renewables & Fluor 700

9 Neart na Gaoithe

Mainstream 360

10 Forth Array Fred Olsen 415

Round 3 Site11 Moray Firth EDP Renewables & SeaEnergy 1,300

12 Firth of Forth SSE Renewables and Fluor 3,500

Total 11,238

Overseas Market of Off-shore Wind (3) in Germany

Overseas Market of Offshore Wind (4) in EU

Overseas Market of Off-shore Wind (5) in EU

Reference List

Sample of Off-shore Wind Farm in EU Onshore Assembly Foundation Installation Substructure Load-out and Installation Spar Buoy Floating Wind Turbine: Hywind Barge for off-shore wind turbine installation Offshore Wind Turbine Foundations – U.S. Example Offshore Wind Environment and its challenging NREL Simulation of Floating Barge Turbine System Power Network in off-shore wind project (Case of ABB) Power grid system for off-shore wind project (Case of Scottish) Cable Installation under the sea and its equipment DC Cable application (ABB ) O & M of off shore wind farm

Off-shore wind farm, Examples

Sample of Off-shore Wind Farm in EU

Construction Methodology

Onshore Assembly

Foundation Installation

Substructure Load-out and Installation

Photo Credit: Talisman Energy Offshore Demonstration, 2007 5 MW 126m Repower Turbine 45 m water depth, North Sea Aberdeen, Scotland

National Renewable Energy Laboratory Innovation for Our Energy Future

Image Credit: www.greenlaunches.com

• R&D project by StatoilHydro, and Siemens, expected to produce power in July 2010

• 12 km southeast of Karmøy in Norway

• SWT - 2.3 MW architecture

82 meter diameter

65 meter tower

• Spar buoy technology

100 meter draft

202 meter water depth

Reference: w1.siemens.com

Spar Buoy Floating Wind Turbine: Hywind

World’s first large-scale floating wind turbine Siemens SWT-2.3 MW Hywind

Barge for off-shore wind turbine installation

Shallow Water

Transitional Depth

Deepwater Floating

0m-30m 430-GW

30m-60m 541-GW

60m-900m 1533-GW

Land-based

No exclusions assumed for resource estimates

Commercially Proven

Technology

Estimated US Resource

Demonstration Phase

Offshore Wind Turbine Foundations – U.S. Example

National Renewable Energy Laboratory Innovation for Our Energy Future

Offshore Wind Environment and its Challenging

NREL Simulation of Floating Barge Turbine System

National Renewable Energy Laboratory Innovation for Our Energy Future

ADAMS mov.wmv

Power Network in off-shore wind project (Case of ABB)

Power grid system for off-shore wind project (Case of Scottish)

Cable Installation under the sea and its equipment

DC Cable application (ABB )

O & M of off shore wind farm

Thanks for your kind attention

Korea Wind Energy Industry Association Web-site:www.kweia.or.kr

(822-553-6260)