Blueprinting the future of clean energy: an interview with Kim Sang-woo

As energy businesses take on the growing responsibility to pursue decarbonization, there has been a greater demand for a strategic blueprint that can guide their rapid transition from centralized fossil fuels extraction to decentralized renewable systems. One such entity strategically planning future energy businesses is SK SUPEX Council, SK Group’s highest consultative and decision-making body. In this interview, Kim Sang-woo from SK SUPEX elaborated on how the group settles on investment decisions and the challenges of pursuing green energy transition due to the mismatch between the rapid speed of business expansion and the slow pace of regulations made in Korea.

First, could you introduce the work you’re currently involved in?

At the SK Group level, we’re essentially laying the groundwork for future energy businesses. For example, in the past—and some people still do this today—if you simply said “generating electricity,” you might have just talked about power plants. But now, we’re looking at how to efficiently use eco-friendly energy, how to store it, and how to efficiently deliver it where it’s needed. When we talk about storage, that becomes ESS (Energy Storage System), and when we talk about delivery, that becomes the smart grid.  

Because the market is constantly changing, there are many things people want—and by “people,” I mean customers from a corporate perspective. My job is to quickly explain and design business models tailored to customer needs in this evolving market, and to help the organization responsible for execution carry out those plans.

You mentioned businesses like eco-friendly power generation and smart grids. What criteria do you use to evaluate these new industrial ventures?

Generally speaking, the overarching term here is “suitability.” Technical suitability is the most important factor. By technical suitability, I don’t just mean whether it’s possible with current technology available on the market—I also mean whether it’s possible with the technology our company currently possesses. For example, Hyundai Motor Company has the technology to manufacture cars, and while there are many car manufacturers in the world, SK doesn’t make cars, so we don’t have that technology. So, can we carry out this business with the technology we currently possess, or do we need to make a separate investment to acquire that technology? 

If so, that would require additional time and effort, and we assess economic feasibility by factoring all of that in. We ask questions like, is this a stand-alone business that can operate independently and generate profits? Can it turn a profit immediately upon launch? Or, even if we’re likely to experience losses now, is it the right decision to invest because it seems poised for explosive growth in a few years? Or, especially regarding environmental issues these days, can this business succeed even without subsidies? Assessing these factors constitutes economic feasibility. 

Finally, we look at environmental suitability—often referred to as ESG these days. So, to put it in official terms, this looks like, how much can we reduce carbon emissions? In the energy sector, the principle behind all power generation is the same. You boil water, and the steam produced from that boiling water turns a turbine. In the past, thermal power plants burned coal to boil water; LNG power plants burn LNG to boil water; and nuclear power plants use the heat from nuclear fission to boil water and turn the turbine. They’re all the same. So, when considering this, you might say LNG is better because it emits less carbon than coal, or that nuclear power is better because it emits less carbon than LNG. 

Or, in the event of an accident, with coal or LNG, you can simply shut down the plant immediately, whereas with nuclear power, even if you shut it down, it takes about two to three days. But once a nuclear power plant is started, you can’t just shut it down. And as you’ve seen from past cases, an accident has an enormous impact. So, we have to look at all these factors comprehensively. If you plot all this on a graph, you get a “golden zone,” right? That point is where we make our decision.  

I’m curious if, while planning and pursuing new business ventures and encountering many of these challenges, you felt there was a need for more policy support.

That’s very simple. It comes down to speed and regulation. I mean, a company is an organization that needs to make money, right? Making money comes before the greater good for the public. Or from a national perspective, it’s better to bring in a lot of dollars. From our country’s perspective, we want to rush things—we want to do everything quickly—but when we do that, we run into regulations. That’s because the administration and the law can’t move ahead of reality.

They can’t stop something from starting, but they try to stop it after it’s already started, or they rely on existing laws. These laws were created before such businesses even existed, so there are no legal provisions for the new business. As a result, we often end up applying old laws, and when we try to fit the new reality into those outdated frameworks, it just doesn’t fit. The standards for reality, the speed at which companies want to move forward, and the regulations are all out of sync. For example, have you ever heard of terms like “distributed energy” or “direct power trading?" Those terms didn’t even exist just 10 years ago. Yet in Korea, we’re still operating under the Electricity Business Act, a law that’s over 50 years old. While we’re constantly making changes and amendments, when you look at the specific provisions regarding distributed energy or direct power trading, there are still many outdated laws that can’t keep up with market changes.

You’re probably familiar with terms like “regulatory sandbox” and “smart grid.” We also need to simplify licensing procedures to ensure that demand can keep pace with the rapid growth in renewable energy supply. While many efforts are underway, the world is changing at an ever-increasing pace, so it will be difficult to create legal regulations that perfectly match the market so quickly.