Insights

KoSIF’s Taehan Kim: “Renewable Energy Must Be Seen as
an Investment That Generates Returns”

ㅣTaehan Kim, COO of KoSIFㅣ

“Renewable energy expansion must be recognized as something that can generate financial returns. The extent to which companies accept this will determine how they act.”

Taehan Kim of the Korea Sustainability Investing Forum, or KoSIF, said that renewable energy is ultimately a business decision involving the allocation of costs to generate future returns.

As with decisions in other areas of corporate management, companies inevitably assess renewable energy investment by comparing expected costs and benefits.

Renewable energy has gained increasing attention as major Korean companies join RE100 and the transition toward a net-zero economy accelerates.

RE100 is a global corporate initiative through which participating companies commit to meeting 100% of their electricity needs with renewable sources such as wind and solar power by 2050. It was launched in 2014 by the Climate Group in partnership with CDP.

As of March 2023, 403 companies globally and 29 companies in Korea had joined RE100, according to Korea’s Ministry of Trade, Industry and Energy.

Renewable electricity generated from solar and wind is considered one of the most important tools for reducing greenhouse gas emissions. Calls to accelerate renewable energy deployment have grown stronger worldwide since the Russia–Ukraine war, while major global companies such as Apple are also requiring suppliers to increase their use of renewable electricity.

Korea, however, continues to generate only a relatively small share of its electricity from renewable sources. According to CDP data, renewable electricity accounted for just 7% of total electricity consumption among 64 Korean companies that reported using renewable energy.

Can Korean companies realistically achieve RE100 under these conditions?

Business Post interviewed Kim, who oversees CDP’s Korea program at KoSIF, the secretariat of the CDP Korea Committee. He also supports the adoption of global initiatives such as RE100 among Korean companies and contributes to KoSIF’s annual reports on CDP disclosure, ESG finance, and fossil fuel finance.

     Q. Interest in RE100 increased further after Samsung Electronics, Korea’s largest corporate electricity consumer, joined the initiative in September 2022. How realistic is RE100 for Korean companies?

Under current conditions, it is reasonable to conclude that achieving 100% renewable electricity use is not realistically possible.

Many other countries also faced difficulties during the early stages of renewable energy deployment because supply was limited and prices were high. Korea is currently in a similar position. Renewable energy deployment remains low, while procurement costs are high.

This means the question needs to be reframed. Rather than asking whether RE100 is immediately achievable, we should ask whether the transition is necessary.

Companies should regard it as something they must do and assign it an appropriate strategic priority.

Every strategy and policy has competing priorities. As renewable energy rises on the priority list, companies will have a stronger basis for making the necessary decisions.

Whether companies use renewable energy could eventually create a gap in international competitiveness.

Korea has many manufacturers of intermediate goods in advanced industries such as semiconductors and batteries. These companies face growing pressure to reduce greenhouse gas emissions and use renewable electricity throughout global supply chains.

Korean companies currently face procurement difficulties because renewable electricity is less cost-competitive domestically. Nevertheless, they need to increase renewable electricity use in preparation for a future in which the price gap narrows.

Even when Korean companies eventually regain price competitiveness, they may still struggle to win contracts from major global customers if their renewable electricity use remains substantially lower than that of competitors.

     Q. How do you assess the government’s renewable energy policy? Some argue that stronger financial support is needed.

In Korea, direct financial support or tax reductions for large corporations can be politically difficult because of public sentiment.

Companies will also naturally invest in areas that improve their own competitiveness. For this reason, I do not believe large-scale direct subsidies are necessarily required.

The more significant problem is that renewable energy deployment remains far below what companies can reasonably accommodate, while procurement costs remain excessively high. From this perspective, government support is still insufficient.

Renewable energy prices in Korea are high not because the raw materials needed to build renewable energy facilities are uniquely expensive, but because substantial indirect costs arise during project development. These include administrative delays and difficulties securing local community acceptance.

As a result, renewable energy supply responds to growing demand much more slowly than in other markets. This is a problem that the government must address.

The government frequently emphasizes industrial competitiveness. Increasing renewable electricity use will strengthen companies’ competitiveness over the long term, which will in turn strengthen national industrial competitiveness.

Renewable energy policy has often been treated as a political issue in Korea. Conservative administrations have generally been less supportive of renewable energy than progressive administrations.

However, because renewable energy expansion is directly linked to industrial competitiveness, a conservative government that prioritizes business and industry should have even stronger reasons to pursue an active renewable energy policy.

     Q. Many companies still argue that renewable energy use and other greenhouse gas reduction measures impose a substantial cost burden.

Companies exist to spend money in order to generate profit, so it is understandable that they perceive additional expenditure as a burden. Companies also need to communicate their difficulties in order for appropriate policy support to be developed.

However, they should place greater emphasis on the role of renewable energy in securing their long-term sustainability.

Global companies increasingly recognize that money spent today will ultimately generate returns, and that failing to make those investments may result in much higher regulatory and transition costs in the future.

Korean companies need to adopt a similar perspective.

Corporate action, combined with stronger policy support, must create conditions in which renewable energy expansion is understood as an investment that can generate returns. The strength of that perception will determine the level of corporate investment.

Ultimately, renewable energy is another business decision in which companies incur costs to create future value.

     Q. Even when renewable energy is treated as a business decision, it may not be an easy one for companies to make.

That is correct.

Most major Korean companies develop detailed business plans covering no more than approximately five years. Long-term net-zero strategies, including the transition to renewable electricity, cannot easily be driven by professional managers whose performance is often assessed over much shorter periods.

The issue must be established as a long-term corporate agenda by controlling shareholders or other leaders with the authority to set the company’s strategic direction. The organization must then continue implementing that strategy over time.

     Q. CF100, or 24/7 Carbon-Free Energy, has recently been discussed as an alternative to RE100. Some argue that it is environmentally more advanced, particularly in the way electricity is procured. How do you view it?

In principle, 24/7 CFE is more stringent than RE100 and can produce stronger environmental outcomes.

Because companies must match their electricity consumption with carbon-free generation on an hourly basis, it can also support the electricity market by creating demand for renewable electricity produced during time periods when supply is limited and prices are higher.

The concern is that the discussion in Korea has become closely connected to government policy on expanding nuclear power, with excessive emphasis placed on nuclear electricity.

In practice, major global companies participating in 24/7 CFE, including Google and Microsoft, do not appear to place nuclear power at the center of their strategies.

In Korea, apart from the Shin Hanul Units 3 and 4 projects for which construction has resumed, it is also unclear how much additional nuclear power capacity could realistically contribute.

We should be cautious about linking 24/7 CFE too closely with nuclear policy, because doing so could deepen political conflict over energy.

Achieving full 24/7 CFE would be a stronger strategy. However, if the information and infrastructure required to implement it are incomplete, introducing the framework could simply increase the cost burden on companies.