Market News

 December 27, 2009
Korea - Green Cities and Buildings



According to the Korea Institute of Construction Technology (KICT), energy consumed by buildings account for 25 percent of all energy consumed in Korea. Industry forecasts indicate that Korea will be consuming 250 percent more energy by 2020 compared to 1990. For a nation that is 97 percent dependent on imported sources of energy, these estimates and forecasts have resulted in the Korean government taking a series of preventative measures to avoid a major energy crisis in the future. Many of these measures involve energy management and energy efficiency investments in new and existing buildings. This research is designed to explain the impact of these efforts and the opportunities they will create for U.S. exporters of equipment and services.

Over the next decades, Korea has major plans to promote green and energy efficient citywide housing developments. Dubbed the Two Million Green Home Initiative, the current President Lee Myung-Bak administration plans to build one million and renovate an additional one million homes to meet stringent environmental and energy consumption standards by 2018. Under the same initiative, by 2025, it will be mandatory for all buildings to be energy self-sufficient by installing systems such as solar thermal, photovoltaic, geothermal, biomass, or wind power systems. The government estimates expenditures to amount to 7 trillion won (approx. USD 6.3 billion) between the years 2008 and 2012 alone to facilitate the initial steps of this process.

Considering the scale of the ultimate goal of supplying two million energy self-sufficient and environmentally friendly houses by 2018, there are numerous business prospects for U.S. companies to explore. The following figure published by the Ministry of Land, Transport and Maritime Affairs (MLTM) displays an example of a green home. The various components of a green home as it has been displayed in the figure demonstrate the potential business prospects to consider.

In addition to the Two Million Green Home Initiative, several ongoing new city development plans have incorporated green and environmentally friendly city developments. The New Songdo City project, which is a multi-billion dollar real-estate development 50 miles west of Seoul, will be designed to be completely LEEDND certified. Energy efficient buildings, recyclable building materials, pollution control, and waste reduction were all taken into careful consideration during the planning stages of the project.

Market Demand

According to guidelines published by the Ministry of Land, Transport & Maritime Affairs (MLTM), by 2012 newly constructed residential buildings are mandated to reduce levels of energy consumption by 30 percent compared to current consumption. This figure is to be increased to 60 percent by 2017. Ultimately, by 2025, all residential buildings will be required to achieve 100 percent self sufficiency in energy consumption. Due to these bold objectives and the emphasis placed on a self-sufficient supply of energy for the Two Million Green Home Initiative, new and renewable energy has emerged as a key phrase in the Korean housing construction industry. According to the Korea Energy Management Corporation, new and renewable energy currently accounts for only one percent of total energy cnsumed in Korea. With a separate goal of having new and renewable energy account for a double digit percentage of energy consumed in Korea by 2030, the government is making major strides to develop the new and renewable energy industry as a major catalyst for economic progress into the future and this aspect has been especially incorporated in housing projects such as the Two Million Green Home Initiative.

Sector developments

A number of construction related research centers and institutions have been focused on trends in the construction industry concerning the environment. The Construction & Economy Research Institute of Korea (CERIK), an affiliate of the Construction Association of Korea, is an example of such an institution. In a report published by CERIK in April 2009 entitled 'Market Trends and Prospects for Low Energy Sustainable Housing', CERIK categorized and provided an analysis of several different sectors related to environment friendly sustainable construction. Sectors that have been analyzed in the report include, roof-top landscaping, water-permeable pavements, wastewater recycling systems, water-saving toilets, paints, thermal insulation materials, flooring materials, soundproof materials between floors, balcony windows, heat recovery ventilations, geothermal heat systems, and solar heat systems.

According to the report, with the exception of water-saving toilets, competition is generally high across all sectors and is especially high in the flooring material, heat recovery ventilation, geothermal heat, solar heat, and water permeable pavement sectors. This is due to cross-sectoral competition as is the case of the geothermal heat and solar heat sectors. In the case of " heat recovery ventilation systems," a smaller number of potential clients have resulted in high competition. Conversely, a diverse range of competing products has also resulted in high competition in the flooring materials sector. The CERIK report also states that, on average, the products offered by Korean manufacturers are at 80 percent the level of technical advancement when compared to imported products from developed countries. The following graph published by CERIK demonstrates the level of technical advancement across these sectors. It is interesting to note that Korea's level of technical advancement regarding heat recovery ventilation systems, paints, and renewable energy systems is relatively high while the level of technical advancement regarding landscaping, flooring materials, and windows are relatively low. When considering that all sectors will invariably experience growth due to the launch of the Two Million Green Home Initiative, sectors with relatively lower technical sophistication are deemed to be
positive points of entry into Korea.

Best Prospects

  • New and renewable energy technologies (waste, biomass, wind, hydro and solar energy technologies)
  • Sustainable architectural design
  • Energy efficient & energy conservation products (energy efficient LEDs, energy conserving windows & fenestration systems)
  • Sustainable city planning consulting services
  • Green building certification services
  • Timber (radiated pine log, hardwood log, hardwood sawn timber, hardwood woodchip, softwood sawn timber) and timber-related products (MDF, particle board)
  • High-end eco-friendly home remodeling products 

 Market Entry Strategy

The Korean Government is currently in the process of soliciting major Korean engineering and construction firms to expand into renewable energy technologies as well as environmentally friendly building materials. Considering the competitiveness and level of technology of Korean firms engaged in alternative energy technologies, environmental friendly architectural design and energy conserving building materials, many U.S. firms may find opportunities by partnering with major Korean engineering and construction and architectural design firms to supplement their efforts regarding the Two Million Green Home Initiative.

There are four main components for entering the building and construction market in Korea:

  • Understand Korea's product standards, pricing, and build customer references.
  • Have a clear price and quality advantage over competitors in Korea.
  • Focus on building long-term relationships with potential customers as this is a relationship-based market.
  • Appoint capable agents and work with them to modify products if needed to meet local standards.

Also, distribution in construction industry is generally made from overseas supplier to distributor, who then sells directly to end users in the construction trade, including builders and construction companies. For example, a brick importer (distributor) imports pavers from the U.S. and then sells them directly to a builder. Therefore, successful marketing of products and services requires a reliable and well-connected distributor.

Trade exhibitions are also a good way to gauge market acceptance. To market effectively you need to consider: Producing brochures in Korean language, Designing product to meet Korean standards. Bringing buyers to the U.S. periodically, Examining alliances with manufacturers in Korea Advertising in industry news, Meeting specific buyer requirements, Having a regular presence in the market to support your agent

Extracts from Korea - Green Cities and Buildings US Commercial Service, December 2009