ENERGY INNOVATION PARTNERS

“Some in the domestic industry saw the implementation of the Inflation Reduction Act (IRA) as a crisis for Korean companies, but it is an opportunity, not a crisis. Approximately 481.5 trillion won in funds were secured to promote investment in renewable energy facilities in the United States, and this will be an opportunity for domestic companies to enter the US market,”

said Park Heejun, CEO of EIP Asset Management (pictured), in a recent interview with Maeil Business Newspaper. EIP Asset Management, which he leads, successfully won a 600 billion won US solar power project last month in partnership with SK Ecoplant, Hyundai Engineering & Construction, Korea Overseas Infrastructure and Urban Development Corporation (KIND), and PIS Fund. EIP will create a fund to invest in the project, and other partners will invest the funds. The solar power plant being built in Concho, Texas, USA through the fund will be six times the size of Yeouido in Seoul (11.73 million m2), and will be able to supply electricity to 240,000 households of four people annually.

The profits from this project will be generated in various ways. One is that domestic large corporations, SME companies enjoy the effect of receiving orders in the process of establishing solar power plants, and once the power plant is completed, they sell electricity by signing long-term power purchase agreements (PPAs) with big tech companies in the U.S. “American companies are focusing on securing eco-friendly electricity PPAs in order to achieve the RE100 (100% renewable energy use) goal by 2025,” said CEO Park. “Some of them are securing PPAs for their partners instead, focusing on achieving RE100 throughout the entire supply chain.” The production tax credit (PTC) paid for renewable energy facilities is also one of the profit models for this project. In the past, the U.S. provided PTCs to wind power, geothermal heat, and landfill gas facilities excluding solar power, but after the implementation of the IRA, PTCs will be paid for the next 10 years for solar power generation facilities that begin construction before January 1, 2025.

Park said, "The PTC that can be received when all conditions are met is 40%," and "since this project is worth a total of 600 billion won, we will receive up to 240 billion won worth of PTC." He continued, "Since PTC can be traded in the market, we plan to sell it to major financial institutions in the U.S.," adding, "our fund is targeting an annualized internal rate of return (IRR) in the late 10% range."

Park emphasized that now is the opportunity to promote Korea's renewable energy generation capabilities overseas. He emphasized, "The U.S. government has prepared 481.5 trillion won in funds to promote investment in renewable energy facilities," and "the path has opened for domestic companies to establish a position in the global renewable energy market, including the U.S.." He added, "we need to take the lead in entering the U.S. market within the first 1-2 years of the IRA implementation," and "in the future, other overseas competitors will also quickly enter the U.S. market, and the U.S. will also strengthen its entry barriers to provide more opportunities for domestic companies."