1. Korea's Policy Direction for R&D and Dissemination of New & Renewable Energy November, 2002 Korea Energy Management Corporation

2. 2 Contents I. Facts about Rep.of Korea II. Major Energy Statistics III. Status of New & Renewable Energy IV. History of NRE Policies V. Investments for NRE R&D and Dissemination VI. R&D and Dissemination Policy Directions VII. R&D Strategies VIII. Establishment of Infrastructure IX. Measures for Technology Dissemination

3.    Facts about Rep. of Korea  Population : Approx. 46 Mil. Population : Approx. 46 Mil. Area : 99,600 km 2 Area : 99,600 km 2 Primary Energy Consumption (’01) : Primary Energy Consumption (’01) : 198 Mil toe 198 Mil toe GDP : $411 Bil. (’01) GDP : $411 Bil. (’01) Economic Growth Rate(’01) : 3.5% Economic Growth Rate(’01) : 3.5%

4. 4 Major Energy Statistics ’96’97’98’99’00’01 (*) 6.85.0-6.710.98.83.5 9.85.9-8.19.36.44.03 1.441.861.210.850.720.68 Overseas Dependency (%) 97.397.697.197.297.397.4 GDP Growth (%) Primary Energy Consumption Growth (%) Energy/GDP Elasticity Overseas Dependency (%) ’96’97 ’98’99’00’01

5. 5 Status of New & Renewable Energy - Consumption of NRE by Year - ’98’99’00’01* 165,932181,363192,887198,2855.8 1,7161,9012,1312,45711.5 Share (%) 1.031.051.111.24- (Unit : 1,000 TOE) Primary Energy Consumption NRE Consumption Share (%) ’98’01’99’00 Annual Growth Rate (%)

6. 6 History of NRE Policies  P  P romulgation of the Promotion Act for the New and Renewable Energy(NRE) Development (1987)  10  10 -year National Plan for Energy Technology Development (1997)  B  B asic Plan for NRE Technology Development and Dissemination (2001)  A  A mendment of the Promotion Act for NRE Development, Utilization & Dissemination (2002)

7. 7 Definition of NRE  R  R enewable Energy Solar Thermal Photovoltaics Biomass Wind Small Hydropower Geo Thermal Ocean Energy Waste  N  N ew Energy Fuel Cell Coal Liquefaction & Gasification Hydrogen Energy

8. 8 Investments for NRE R&D and Dissemination ’88 ∼ ’98 ’99’00’01’02(**)Total R&D137,83218,20118,19229,125 32,745 236,095 Demon- stration(*) 10,8175,5689,13023,23123,53972,285 Loans247,74114,32211,7078,49823,400305,668 Total396,39038,09139,02960,85479,684614,048 Estimates for the Year 2002 ’88 ∼ ’98 ’99’00 ’01 Total ’02 R&D Demonstration Loans Total (Unit : Million Won)

9. 9 Dissemination Record of NRE by Sources AREADissemination Supply Ratio(%) Solar Thermal Approx. 190,000 Solar Hot Water System1.6 PV 5,540 ㎾ of 12,000 Units, in Hawa and Mara Island, etc 0.3 Wind 7,700 ㎾ of 22 units, in Cheju Island 0.1 Biomass90 unit of Alcohol and Food Industry, etc3.3 Waste 437 Incinerators, in Seoul, etc93.9 Small Hydro 39 MW of 27 Units, in Kangwon Kyeongbuk Province, etc 0.8

10. 10  D  D iversification of Energy Sources by Increase of New and Renewable Energy Supply  P  P romotion of Technology R&D for Coping with UNFCCC Designation of Priority R&D Areas and Concentrated Support for the Target of 2.0% of Supply by 2003 Active Assistance for Market Deployment of Developed Technologies R&D and Dissemination Policy Directions

11. 11 R&D Strategies  G  G oal : Maximization of R&D Investment Effect by Priority Selection and Concentration 3 High-Priority Areas : Photovoltaics, Wind Power, Fuel Cell  R  R &D Plan of 3 High-Priority Areas by 2004 Photovoltaics : To Develop 3 ㎾ Generation System for Residential Houses Wind Power : To Develop 750 ㎾ Wind Power System Fuel Cell : To Develop 250 ㎾ MCFC (by 2006) and 3 ㎾ PEMFC System

12. 12 Establishment of Infrastructure  W  W ays to Secure Reliability of Developed Technologies before Dissemination Performance Evaluation Standardization of Technologies Establishment of New & Renewable Energy Evaluation Center Introduction of Technology Accreditation and Certification System Demonstration Projects Demonstration Complexes (Wind Power, Solar) Monitoring of Products and Technologies

13. 13 Measures for Technology Dissemination  E  E conomic and Financial Support Compensation for the Difference between Generation cost and Selling Prices (Preferential Prices) Subsidies and Low-interest Loans Tax Reduction and Deduction  E  E nhancement of Public Awareness Establishment of 5 Demonstration Town "Green Village" by 2003 Obligatory Installation and Utilization in Public Organizations Regional Energy Program

14. 14 Compensation for Cost Difference of NRE Power Generation  T  T he government compensates cost difference between the buying price of electricity company and the standard price of NRE power generation to support NRE power generation. (From 2002, 3.5 billion won)  O  O bject : PV, Wind, Small Hydro, LFG, Waste, Fuel Cell

15. 15 Loan Program for NRE Equipment  P  P roviding low-interest loans to installers of NRE equipments by the government (2002 : 23.4 Billion Won) Interest Rate : Annual Rate of 4.75%, Floating Rate The term of Repayment : Repayment in 5-year monthly equal installment with 3-year grace period

16. 16 Model Dissemination Program  T  T o secure the marketability of NRE after technology development, 70% of installation costs subsidized (2002 : 1.2 billion won).  T  T otal 7.2 billion won of subsidies from 1993 to 2001 PV Power Generation System : 25 Units Solar Thermal Hot Water System : 86 Units Bio-Methane Generation System : 2 Units

17. 17 Regional Energy Program  T  T he government subsidizes 70% of installation costs through the regional energy program to local governments. (2002 : 17 billion won)  T  T otal 33.2 billion won of subsidies by the government from 1998 to 2001

18. 18 Improvement of Legal System  R  R evision of the “New and Renewable Energy Development & Promotion Act" Preferential Purchasing System for Electricity Generated by NRE Obligatory Installation and Utilization in Public Organizations New & Renewable Energy Accreditation and Certification System  E  E stablishment of Korea Alternative Energy Association (Sep., 2001)