The Era of AI Power Wars: An Unexpected Opportunity for Korea’s Solar Industry

Recently, news that domestic universities are engaging in an “electricity war” to secure power for AI research has become a hot topic. As one AI research professor from a private university in the Seoul metropolitan area stated, “AI research, which consumes a lot of electricity,” has become more prevalent, leading to a situation where even high-performance GPUs provided by NVIDIA cannot be used due to power issues. This phenomenon is not just a problem on university campuses but should be seen as the Korean prelude to the global AI power war.

If Korea were to build a data center with the 260,000 GPUs (based on GB200) secured from NVIDIA, it would require approximately 600 megawatts of power, including cooling facilities. This is an enormous scale, equivalent to half the generation capacity of a new large-scale nuclear power plant like the APR1400 (1,400 megawatts). Personally, seeing these numbers makes me realize that AI is not just a simple software technology but a core industry that influences national power infrastructure.

The response methods of various countries are intriguing. The United States is reactivating previously halted nuclear power plants and actively increasing natural gas power plants to secure power. The UK has begun constructing new nuclear power plants, and even Germany, which had pursued a nuclear phase-out policy, is reconsidering the necessity of nuclear power plant construction. As noted by Ham Wan-kyun, CEO of Solution Strategy Partners, the U.S. is “appropriately mixing energy sources, using solar and other renewable energies and ESS as auxiliary power sources, with natural gas power as the main source.”

In contrast, Korea is heavily focused on renewable energy, particularly solar and wind power. As President Lee Jae-myung mentioned in a press conference marking his 100th day in office last September, “Data centers and other facilities require enormous power immediately, and renewable energy is the energy system that can be supplied quickly.” The government views renewable energy as the solution to power demand in the AI era. According to the government’s 2035 NDC, greenhouse gas emissions in the power sector must be reduced by 68.8-75.3% by 2035 compared to 2018, and the current renewable energy facility capacity of 34GW is to be increased to 100GW by 2030.

A New Opportunity for the Solar Industry

In this situation, the domestic solar industry faces a complex mix of opportunities and challenges. On the opportunity side, the explosive power demand from AI data centers and the government’s renewable energy expansion policy are expected to significantly increase demand for solar power. The government’s adjustment of the target from 78GW to 100GW alone suggests that approximately 66GW of new solar facilities will be needed over the next six years.

Especially from the perspective of data center operators, the pressure of carbon neutrality goals and ESG management makes procuring renewable energy power essential. With global big tech companies declaring that they will supply 100% of their data center power with renewable energy, foreign data center companies entering Korea are likely to actively pursue power purchase agreements (PPAs) with solar power. This provides domestic solar power operators with the opportunity to secure stable long-term demand.

Additionally, due to the nature of AI data centers requiring continuous power supply 24/7, the importance of solar power linked with energy storage systems (ESS) is further highlighted. As systems that store solar power produced during the day in ESS and supply it at night become essential for data center operations, demand for integrated solar+ESS solutions is expected to increase significantly. This can provide new growth engines for companies with system integration capabilities beyond just supplying solar panels.

The Realistic Barrier of High Generation Costs

However, the reality is not so easy. The biggest issue remains the high generation costs. According to Bloomberg New Energy Finance (BNEF) data, as of last year, the levelized cost of electricity (LCOE) for solar power in Korea was $98 per megawatt-hour, more than twice the global average of $35. Compared to the LCOE of nuclear power at $53.3 per megawatt-hour, it’s almost double. Korea Electric Power Corporation (KEPCO) President Kim Dong-chul also acknowledged, “The generation cost of renewable energy is significantly higher than that of nuclear power, which inevitably becomes a factor for electricity rate hikes in the short term.”

Such high generation costs inevitably act as a direct burden on data center operators. As pointed out by Professor Jeong Beom-jin of Kyung Hee University’s Department of Nuclear Engineering, “If we insist on renewable energy generation instead of cheap and stable nuclear power, data centers may have no choice but to go abroad in search of cheaper electricity.” In fact, global data center companies consider power costs the most important factor in operating expenses, so Korea’s high electricity rates can be an obstacle to attracting investment.

Moreover, with the increase in the proportion of paid carbon emission permits allocated to power companies, it is expected that the additional costs power companies will have to bear by 2030 will increase to 4 trillion won. This cost burden is likely to lead to electricity rate hikes, further worsening the economic viability of solar power.

The delay in transmission infrastructure is also a serious issue. According to data from the office of Democratic Party lawmaker Park Jeong, 55% of the 54 transmission and substation facility construction projects included in the 11th Basic Plan for Electricity Supply and Demand are delayed or expected to be delayed. The East Coast-Metropolitan Area transmission line, which was supposed to be completed in 2019 to transfer power generated from nuclear and thermal power plants in the East Coast region to the metropolitan area, is now expected to be completed after the end of 2026. No matter how many solar power plants are built, they become useless if there is no transmission network to deliver power to demand areas.

Personally, I see this infrastructure delay as a potential opportunity for the solar industry. Instead of the traditional method of transmitting power over long distances from large centralized power plants, the paradigm could shift towards installing distributed solar power plants near power demand areas. Especially, the on-site PPA method of directly installing solar power facilities on the rooftops or nearby sites of data centers is likely to gain attention.

As suggested by Professor Yoo Seung-hoon of Seoul National University of Science and Technology’s Department of Future Energy Convergence, “Gas power generation takes only 2-3 years to build a power plant and can supply electricity stably 24/7 with flexible output control, so immediate power demand should be met through gas power generation.” However, his point that “new nuclear power plant construction should also be expedited for cheap and stable power production in the future” could act as a threat to the solar industry.

Ultimately, for the domestic solar industry to survive in the era of AI power wars, securing competitiveness in generation costs is absolutely crucial. Comprehensive support through technological innovation for efficiency improvement, cost reduction through economies of scale, and government policy support is necessary. Efforts to increase generation efficiency through the introduction of next-generation technologies such as perovskite tandem cells or bifacial solar panels and to reduce unit installation costs through the creation of large-scale solar complexes seem necessary.

As Professor Park Jong-bae of Konkuk University’s Department of Electrical Engineering mentioned, “Considering the development speed of AI, the first judgment result of the AI war will come out by 2030,” so the domestic solar industry also needs strategic preparation targeting this period. The explosive power demand in the AI era certainly provides new opportunities for the solar industry, but if fundamental issues of economic viability and stability are not resolved, it may lead to an even greater crisis.

It will be interesting to see how the domestic solar industry navigates these challenges and opportunities in the coming years. In the new rules of the game called the AI power war, it is a critical time to see if Korea’s solar industry can secure global competitiveness.

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

Disclaimer: This blog is not a news medium, and the content written 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.