‘RE100’ emerges as new risk for Korean firms

The Korea Times - - FRONT PAGE - By Nam Hyun-woo namhw@ko­re­atimes.co.kr

The rapidly ex­pand­ing “RE100” cam­paign, mean­ing run­ning op­er­a­tions at fac­to­ries and of­fices, among oth­ers, on 100 per­cent re­new­able en­ergy, is throw­ing up new chal­lenges for Korean firms that are part of global sup­ply chains, with Ap­ple, Google, BMW and other big name clients de­mand­ing their sup­pli­ers join the move­ment.

Ac­cord­ing to the Cli­mate Group, an in­ter­na­tional en­vi­ron­men­tal or­ga­ni­za­tion lead­ing the RE100 cam­paign, Tai­wan’s TSMC an­nounced July 27 that it would use 100 per­cent re­new­able en­ergy for elec­tric­ity de­mand at its plants world­wide by the end of 2050.

“TSMC is tak­ing tan­gi­ble ac­tion to drive green man­u­fac­tur­ing, lower the im­pact of its op­er­a­tions on cli­mate, and has com­mit­ted to us­ing 100 per­cent re­new­able en­ergy by the end of 2050,” TSMC Chair­man Mark Liu said in a state­ment.

“As the world’s first semi­con­duc­tor com­pany to join RE100, TSMC hopes to call the in­dus­try to ac­tion and push sus­tain­abil­ity for­ward to­gether, an­swer­ing the United Na­tion’s Sus­tain­able De­vel­op­ment Goals and work­ing hand in hand to over­come the dif­fi­cult chal­lenges that hu­man­ity faces.”

TSMC is the largest semi­con­duc­tor com­pany in the world in terms of mar­ket cap­i­tal­iza­tion, lead­ing the global foundry busi­ness with a mar­ket share of 54.1 per­cent in the first quar­ter of the year. Sam­sung Elec­tron­ics,

the largest global mem­ory chip maker, lags be­hind with a 15.9 per­cent share.

To com­ply with its own prom­ise, ear­lier this month TSMC signed a power pur­chase agree­ment (PPA) for elec­tric­ity from the Greater Changhua off­shore wind farm be­ing de­vel­oped in the Tai­wan Strait. With the deal guar­an­tee­ing a fixed price for two decades, it is ex­pected to gen­er­ate an­nual car­bon sav­ings of over 2 mil­lion tons.

TSMC’s join­ing of RE100 came a week af­ter its ma­jor client Ap­ple an­nounced that it aims to have a car­bon neu­tral sup­ply chain by 2030. Ac­cord­ing to Ap­ple, it is al­ready pow­er­ing its op­er­a­tions in the U.S., China and 21 other coun­tries with 100 per­cent re­new­able en­ergy.

Amid Ap­ple’s move, its sup­pli­ers in­clud­ing Lens Tech­nol­ogy and Solvay Spe­cialty Poly­mers re­cently an­nounced their com­mit­ment to clean en­ergy, an ap­par­ent ef­fort to fol­low their client’s move.

The cam­paign is spread­ing fast across global in­dus­tries. Ac­cord­ing to the Cli­mate Group, 242 com­pa­nies have an­nounced their com­mit­ment to go 100 per­cent re­new­able within self-set time­frames. They in­clude Ap­ple, Google, IKEA, Gen­eral Mo­tors, BMW, Gold­man Sachs and a slew of oth­ers among the best known in the world.

Mar­ket watch­ers are al­ready ques­tion­ing whether TSMC’s RE100 par­tic­i­pa­tion will af­fect Sam­sung Elec­tron­ics.

“As TSMC be­come the first semi­con­duc­tor firm to join RE100, Sam­sung Elec­tron­ics is ex­pected to see grow­ing pres­sure to use re­new­able en­ergy,” said Kim Tae-han, a se­nior re­searcher at the Korea Sus­tain­abil­ity In­vest­ing Fo­rum. “With the gap in foundry mar­ket share be­tween TSMC and Sam­sung Elec­tron­ics re­main­ing wide, RE100 clients such as Ap­ple will pre­fer com­pa­nies that have joined the cam­paign such as TSMC over Sam­sung. This is a chal­lenge not only for Sam­sung but also for other Korean com­pa­nies in global sup­ply chains.”

De­spite the grow­ing pres­sure, in­dus­try of­fi­cials say the chances are slim for Sam­sung or other big name Korean com­pa­nies to im­me­di­ately set target dates for be­com­ing 100 per­cent re­new­able due to the cur­rent tough busi­ness con­di­tions.

Sam­sung Elec­tron­ics al­ready promised to source re­new­able elec­tric­ity at its plants in 2018, but ex­empted those in Korea. Sam­sung Elec­tron­ics’ Korean plants ac­count for ap­prox­i­mately 65 per­cent of the com­pany’s to­tal power use world­wide.

Also this year, semi­con­duc­tor gi­ant SK hynix said it would seek to go 100 per­cent re­new­able at its over­seas plants.

In­dus­try of­fi­cials said these are at­trib­ut­able to the ab­sence of a PPA sys­tem in the coun­try. PPA is a di­rect con­tract be­tween elec­tric­ity seller and buyer, en­abling the buyer to pur­chase elec­tric­ity gen­er­ated only from re­new­able sources.

In Korea, the state-run Korea Elec­tric Power Corp. (KEPCO) is the only power distributo­r, which col­lects elec­tric­ity gen­er­ated by its sub­sidiaries and in­de­pen­dent power com­pa­nies, and sells it as a single source provider. Due to this struc­ture, some form of PPA will be nec­es­sary to al­low com­pa­nies to in­de­pen­dently pur­chase power from so­lar farms or other re­new­able power pro­duc­ers.

“Since KEPCO is the single source dis­tribut­ing elec­tric­ity, com­pa­nies can­not pur­chase elec­tric­ity gen­er­ated only from re­new­able re­sources,” an in­dus­try of­fi­cial said. “RE100 will even­tu­ally be an in­di­ca­tor gaug­ing cor­po­rate com­pet­i­tive­ness. And in­tro­duc­ing a PPA scheme is the first step for Korean com­pa­nies to join the RE100 cam­paign.”

Due to this, recharge­able bat­tery firms are ex­pand­ing their over­seas plants to meet client de­mand.

LG Chem plans to ex­pand the to­tal yearly out­put of its bat­tery plant in Poland up to 60 gi­gawatt hours from the cur­rent 15 gi­gawatt hours. The plant it­self runs 100 per­cent on re­new­able en­ergy. LG Chem is sup­ply­ing bat­ter­ies for Volk­swa­gen’s elec­tric ve­hi­cles. Sim­i­larly, BMW, a Sam­sung SDI client, has de­manded bat­ter­ies be man­u­fac­tured at plants us­ing re­new­able power sources. Sam­sung

SDI re­sponded by ex­pand­ing its over­seas plant. Last month, LG Chem an­nounced it will re­duce an­nual car­bon emis­sions to 10 mil­lion tons by 2050, as well as “pur­su­ing RE100 across all busi­nesses.” Though the com­pany set 2050 as the target year for emis­sions re­duc­tion, it did not set a target year for RE100, due to the do­mes­tic PPA is­sues.

Courtesy of Sam­sung Elec­tron­ics

Sam­sung Elec­tron­ics’ plant in Pyeong­taek, Gyeonggi Prov­ince

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