There are many policies so we have only composed the most interesting ones. If you are requesting more detailed information on the different programs please visit the website of the Korean Ministry of Commerce, Industry and Energy (MOCIE).
Clean Development Mechanisms Coordination
The program was implemented by the Ministry of Commerce, Industry and Energy (MOCIE), earmarking approximately US$1 billion a year to finance energy saving and conservation projects. Additional technological and economic help with "Clean Development Mechanisms" (CDM) projects can be achieved where the energy projects are considered as a major policy goal.
Integrated Energy Policy
The "Integrated Energy Policy" (IEP) provides a new process for loans and ESCO (Energy Service Company) support based on an auditing report. The Korean ESCOs are supported by public loans which cover 50% of the project financing and thus the identified potential projects will be guided by the new IEP system. The government provision of low interest loans has produced a steady increase in ESCO investment. There are various forms of financial support for ESCOs such as the mortgage, credit loan and factoring program to lighten the debt burden of the companies. There is also a working capital loan available for small and medium-sized ESCOs. Furthermore, the Korean government provides tax credits for energy users who install energy saving facilities. ESCO's customers can qualify for tax credits according to the provisions of the "Exceptional Taxation Limitation Law".
Ten-Year Energy Technology Development Plan
The plan was introduced in 1997 and is aimed at fostering core technologies such as solar thermal to meet ambitious energy targets by 2006. Specific goals are the reduction of total expected energy consumption by 10% and the supply of 2% of total energy consumption from new and renewable energy including solar thermal energy. One part of the "Ten-Year Energy Plan" is the "Local Energy Plan" which is financed by KEMCO and is managed by local governments to facilitate the use of new and renewable energies. As part of the plan loans are available for the production and purchase of facilities using new and renewable energy at 4.75% interest with a three-year grace and five-year repayment period. Production incentives are available where electricity based on renewables is purchased by a government-owned utility at the rate equivalent to the average retail price set by the "Electricity Law". Tax incentives are offered in the form of income tax credits and compensate 10% of the total investment.
Fund for the Rational Use of Energy
The fund program consists of three categories: the rational use of energy; integrated energy supply; dissemination of new & renewable energy. The rational use of energy includes various types of projects such as the establishment of cogeneration facilities for industries and large buildings, production of high-efficiency products, operation of non-electrical cooling systems, installation of energy conservation facilities, regional energy development projects, and promotion of energy service companies (ESCOs). Types of Loan: The fund disburses an installation loan and a working capital loan. The installation loan is confined to the expenses needed for the purchase of facilities and incidental equipment, the installation, the design and superintendence (including expenses for the introduction of technology) and facility test runs (excepting VAT and expenses for the purchase of land and expenses for the erection of buildings that do not contain structures indispensable for the installation of the said facilities). In case of integrated energy supply projects executed by local governments and government-invested institutions, the expenses for the purchase of building sites for installing facilities are included though. In the case of regional energy development projects executed by local governments, the expenses for feasibility studies are also included. The working capital loan disburses expenses needed for the six-month operation of the facilities and is provided on the basis of the annual or estimated sales of the facilities. Terms of Loan: The loans for installing energy-saving facilities or equipment in most cases have three to five-year grace periods and five-year repayment periods with interest rates of 2.25% to 3.50% (in the fourth quarter), which are about half current market rates. The applicant can provide up to 100% of the investment amount. The maximum amounts of loan are $10 million per applicant for industrial energy-saving facilities, $10 million per project for ESCOs and regional energy developments, $10 million for energy-saving facilities in buildings and transportation and $15,000 per house for home insulation retrofits. Loans are available for both public and private sector companies. The government also provides tax incentives for energy efficiency investments. There is a tax credit of 7% of income tax credit available for the replacement of old industrial kilns, the installation of energy-saving facilities, alternative fuel-using facilities and other facilities that are judged to reduce energy consumption by more than 10%.
Special Accounts for Energy and Resources
Every fiscal year, loans are available to eligible applicants from the government fund “Special Accounts for Energy and Resources” which mostly originates from the "Business Petroleum Fund" that is being collected as a certain percentage of crude oil import price. The fund was set up in 1985 and includes funding of 5.3 trillion Won (US$6 Billion). Loans are provided mainly for research and development, installation of energy conservation facilities and district heat and CHP projects. Terms of the loans depend on the type of project, but typically a three- to five-year grace period and a five-to ten-year repayment period are offered at a 5-10% interest rate. This is about half the market or prime rates.
Mid- and Long-Term Goal of New and Renewable Energy Supply with Detailed Plan
This plan is comprised of both an RD&D and a market deployment component aiming to increase the percentage contribution of renewable energy in the energy mix to 5% in 2011. The RD&D component consists of a two-tiered strategy of selection and concentration. Technologies with comparative advantage are selected and government is concentrated on the these technologies. Solar thermal is included in the category of significant consideration for dissemination support. The plan was introduced in 2003 and plans a total investment of KRW 9.1 trillion (US$ 7.6 billion) between 2004 and 2011. Financial and tax support in form of low-interest loans offered to companies that employ renewable energy technologies, processes and equipment.