Implications of North Korea’s Solar Revolution on the Domestic Renewable Energy Market

An intriguing report released by the Korea Institute for National Unification has caught my eye. It details how North Korea’s active use of solar power has significantly brightened the nights in border areas compared to the past. Researcher Eun Jeong’s report, titled “Pyongyang! Surviving with Sunlight on the Roof,” analyzes the “Night Light Revolution” over the past 15 years along the North Korea-China border as a result of the spread of solar power. In major border cities like Sinuiju, Manpo, and Hyesan, streetlights with solar panels extend to the outskirts, and air conditioning units are visibly installed on buildings, as confirmed by satellite images.

It’s quite surprising that North Korea’s use of solar power has spread to this extent. Despite strengthened sanctions since 2016 reducing imports of solar panels and related items from China, satellite images confirm the installation of solar panels in public facilities, military bases, and industrial sites. Particularly, aside from energy-intensive heavy industries like steel, shipbuilding, and chemicals, solar power is being diversely utilized in light industries such as cosmetics, beverages, and footwear, as well as in high-value-added industries like lighting and pharmaceuticals.

Observing North Korea’s case has led to many thoughts about the domestic solar industry. Even North Korea is actively adopting solar power to address power shortages, so in what direction should our country’s transition to renewable energy proceed? From a business perspective, I’m curious about what opportunities these changes might present for domestic companies.

First, looking at the current state of the domestic solar market, as of 2023, the installed solar capacity in the country amounts to approximately 25GW, and the government has set a goal to increase the share of renewable energy generation to 20% by 2030. Major domestic companies like Hanwha Q CELLS (based in Thalheim, Germany), Hyundai Energy Solutions (based in Seoul), and LG Energy Solution (based in Seoul) are competing in the solar module and ESS (Energy Storage System) markets. Notably, Hanwha Q CELLS ranked among the top 10 in global solar module shipments in 2023, supplying about 8.2GW of modules.

A notable point from the North Korean case is that solar power is expanding beyond a mere self-help measure for residents to become part of the authorities’ energy strategy. This provides significant implications for the domestic solar industry, showing the potential for expansion beyond individual household installations to large-scale industrial and public projects. In fact, large-scale solar power plant construction has been active in the country in recent years. Korea Electric Power Corporation announced plans to invest a total of 3 trillion won by 2024 to build 8GW of offshore wind and solar power plants, and SK Energy (based in Seoul) is proceeding with plans to establish a 1.2GW solar power complex in Ulsan.

From a business perspective, the spread of solar power in North Korea suggests several interesting business models. First is the potential for decentralized energy systems. In a situation like North Korea’s, where the centralized power grid is unstable, solar power serves as an independent power source in each region and industrial site. There is a high possibility of this decentralized model spreading domestically as well. Particularly, there is an increasing trend of industrial complexes and large commercial facilities trying to reduce electricity costs through their own solar power generation.

Secondly, there is a growing need for energy independence. Just as North Korea is trying to solve energy problems through solar power despite sanctions, domestic companies are increasingly interested in renewable energy due to rising electricity costs and concerns about energy security. Samsung Electronics (based in Suwon) aims to use 100% renewable energy at all its business sites by 2050, achieving about 18% renewable energy use at its domestic sites as of 2023. SK Hynix (based in Icheon) also aims to achieve RE100 by 2030.

Expansion Strategies and Opportunities in the Domestic Solar Industry

Examining the expansion potential of the domestic solar industry through the North Korean case reveals several key areas for business opportunities. First, rapid growth in the industrial solar market is expected. The increasing use of solar power in light industries like cosmetics, beverages, and footwear in North Korea has significant implications for domestic manufacturers. With the continuous increase in electricity costs for domestic manufacturers, the cost-saving effect through self-generated solar power is expected to be substantial.

According to data from the Korea Industrial Complex Corporation, the installed solar capacity in industrial complexes nationwide was about 2.1GW in 2023, a 28% increase from the previous year. The increase is particularly notable in industrial complexes in Gyeonggi and Chungcheong provinces. POSCO (based in Pohang) plans to begin the phased installation of 100MW solar power facilities at Gwangyang Steelworks starting in 2024, and LG Display (based in Seoul) completed a 20MW solar facility at its Paju site, expecting an annual electricity cost reduction of about 5 billion won.

Another area of expansion is the combination with energy storage systems (ESS). The increase in nighttime lighting in North Korea implies the establishment of a system that stores solar-generated electricity for nighttime use. The domestic ESS market is also growing rapidly, with the Korea Power Exchange reporting that the cumulative installed capacity of domestic ESS was about 2.8GW in 2023, a 35% increase from the previous year. LG Energy Solution announced plans to increase ESS battery shipments by 40% in 2024 compared to the previous year, and Samsung SDI (based in Suwon) is considering additional investments to expand its ESS business.

Particularly noteworthy is the growth potential of the microgrid market. In situations like North Korea’s, where reliance on the existing power grid is challenging, independent power systems combining solar power and ESS are operating effectively, suggesting increased utilization in emergency power supply or in island and mountainous areas domestically. Korea Electric Power Corporation plans to promote microgrid pilot projects in 30 regions nationwide by 2025, expecting an annual reduction of about 120 billion won in power infrastructure investment costs.

From the perspective of overseas market entry, the North Korean case provides intriguing implications. There is likely to be an increasing demand for solar-based decentralized power systems in developing countries with insufficient power infrastructure. Hanwha Q CELLS is already supplying about 3GW of solar modules annually in Asian markets such as India, Vietnam, and Malaysia, and completed the expansion of a 1.7GW solar module factory in Georgia, USA, in 2024. Doosan Enerbility (based in Changwon) is also expanding solar power plant construction projects in the Middle East and Africa.

Policy Support and Market Outlook

Considering that the spread of solar power in North Korea is part of the authorities’ energy strategy, the importance of policy support domestically is reaffirmed. The Korean government announced plans to increase the share of renewable energy generation to 30.6% by 2038 through the 10th Basic Plan for Electricity Supply and Demand in 2024. To achieve this, the plan is to expand solar capacity from the current 25GW to 57.4GW. This means an annual expansion of about 2.3GW, which is expected to provide significant growth opportunities for related industries.

Particularly noteworthy is the growth potential in the agricultural and floating solar sectors. The Ministry of Agriculture, Food and Rural Affairs is set to launch a support project for agrivoltaic installations from 2024, aiming for an annual installation of about 500MW. The Korea Water Resources Corporation announced plans to install a total of 2.1GW of floating solar on dams and reservoirs nationwide by 2030. Such policy support is expected to provide a stable demand base for domestic solar companies.

However, there are also challenges to consider. Aggressive price competition from Chinese solar companies is a prime example. Major Chinese companies like LONGi Solar (based in Xi’an), JA Solar (based in Shanghai), and Trina Solar (based in Changzhou) hold over 70% of the global solar module market in 2023, showing significant price competitiveness. Domestic companies need to secure competitiveness through technological and quality differentiation.

Additionally, the issue of power grid stability is an important challenge. In situations like North Korea’s, where the existing power grid is unstable, the intermittency of solar power is not a major issue, but in a country like ours with a stable power grid, managing the variability of renewable energy is crucial. The Korea Power Exchange is set to enhance the renewable energy forecasting system from 2024 and expand the use of ESS for real-time power supply and demand adjustment.

Ultimately, the biggest implication of North Korea’s solar revolution for us seems to be the urgency of energy independence and the importance of a practical approach. North Korea’s efforts to solve power issues through solar energy, even under extreme sanctions, show that the adoption of renewable energy for energy cost reduction and stable supply is becoming a necessity rather than a choice for domestic companies. Over the next few years, the domestic solar market is expected to continue growing, centered on large-scale industrial projects, with companies that secure both technological prowess and economic viability likely to lead the market.

This article was written after reading a Yonhap News article, adding personal opinions and analysis.

Disclaimer: This blog is not a news outlet, and the content is the author’s personal opinion. The responsibility for investment decisions lies with the investor, and no responsibility is taken for investment losses based on the content of this article.