OMNI Features｜South Korea Releases 1.2 Trillion Climate Fund Focusing on Offshore Wind / EU Plans to Deploy Europe's First SMR by 2030 / U.S. Department of Energy Announces $18 Million for Flexible Innovative Transformer Technologies (FITT)

｜Offshore Wind Power Intensification Development: South Korea Releases 1.2 Trillion Climate Fund
According to the Korea Economic Daily, six domestic banks jointly invested in establishing a climate response fund worth approximately 1.2 trillion Korean won. The fund is primarily intended for investment in offshore wind power, excluding solar power, which had been a contentious issue during Mun Jae-In's administration.

The Investment Banking (IB) industry and financial authorities revealed on the 7th that major financial holding companies' commercial banks such as Shinhan Bank, KB Kookmin Bank, Woori Bank, KEB Hana Bank, NH Bank, and the Korea Development Bank, totaling six banks, will work together with financial authorities to establish a climate fund in February, focusing on green projects in offshore wind power and planning to sign a memorandum of understanding (MOU).

The purpose of establishing this joint fund is to expand corporate investments in new energy and renewable energy facilities, supporting enterprises in achieving carbon neutrality. Currently, the financial sector is working on the fund's structure, target return rate, selection of management companies, and investment guidelines, among other aspects. Notably, banks are considering utilizing financial holding asset management companies for investment plans. After the establishment and operation plan of the parent fund are determined, each bank will submit it for approval to the investment review committee. The investment targets are primarily long-term projects with an operational period of over seven years, reflecting the construction cycle of offshore wind power, which typically takes around 6 to 7 years.

Another internal investment committee is earnestly reviewing investment areas and considerations for achieving target returns, with key factors including cost considerations. Despite direct wind exposure factors affecting offshore wind power, in South Korea, a country with a small land area and surrounded by three seas, offshore wind power is assessed to have higher growth potential. Under the administration of Yun Seok-Yeol, the government is also focusing on offshore wind power, and coastal local governments are actively investing in comprehensive offshore wind power development projects.

According to the current government's basic plan for new energy and renewable energy, by 2034, wind power generation will account for 35.1% of new energy and renewable energy (27.5% offshore wind power and 7.6% onshore wind power).

In the 11th Basic Plan for Electricity Supply and Demand to be announced by the Ministry of Trade, Industry, and Energy, an increase in the proportion of wind power may be stipulated. According to the International Renewable Energy Agency (IRENA), the capacity installed for offshore wind power is expected to expand from 34 GW in 2020 to 228 GW in 2030, surpassing 1,000 GW by 2050. Cumulative investment in offshore wind power installation and development is expected to reach $2.75 trillion (approximately 3,500 trillion Korean won).

Due to ongoing controversies, including non-performing loans, the Mun Jae-In government has put solar energy development on hold. There are concerns in the industry that focusing solely on offshore wind power investments may overlook comprehensive considerations. Under this premise, the signing of the MOU first is also worrisome. The financial industry indicates that there are still issues that need further discussion.

Investment also burdens banks as it affects the Bank of International Settlement ratio (BIS ratio). Specific funds often differ from market return rates, posing a challenge to attracting private capital returns.

｜EU Plans to Deploy Europe's First Small Modular Reactors (SMR) by 2030
The energy sector is projected to achieve full decarbonisation shortly after 2040, based on all zero and low carbon energy solutions, including renewables, nuclear, energy efficiency, storage, CCS, CCU, carbon removals, geothermal and hydro.

On February 6th, the European Union launched "The Industrial Alliance on Small Modular Reactors" to enhance industrial competitiveness and ensure a strong EU supply chain. This initiative aims to reduce fossil fuel consumption in the EU by 80% from 2021 to 2040.

｜U.S. Department of Energy Announces $18 Million for Flexible Innovative Transformer Technologies (FITT)
The U.S. Department of Energy (DOE) announced on February 13th an $18 million funding opportunity for Flexible Innovative Transformer Technologies (FITT). Through this funding opportunity announcement (FOA), DOE will select up to nine awardees who are able to research, develop, and demonstrate advanced transformers across a range of distribution to transmission scale applications, improving grid reliability and easing transformer supply chain constraints.

Both distribution and transmission transformers can increase or decrease voltage, ensuring electricity is safely delivered from power sources to homes and businesses at the correct voltage level. Selected FITT FOA projects will develop technologies that can provide real-time monitoring of voltage, current, and temperature, ensuring a more reliable grid by enabling grid operators to immediately detect and address grid issues.

Reference: Korea Economic Daily（서울경제）｜Department of Energy｜European Commission