DUE DILIGENCE - TELLING WHAT YOU NEED TO KNOW
Core Principles
ER-Marine’s due diligence is guided by:
Objectivity and Independence: Unbiased assessments in all areas.
Comprehensive Regulatory and Cultural Understanding: In-depth knowledge specific to South Korea.
Adaptability and responsiveness: Flexibility to adjust to changing environments and regulations.
Regulatory and Energy Policy - Due Diligence
ER-Marine’s regulatory and energy policy due diligence includes:
Monitoring ESG-Related Regulations: Tracking developments regulations in South Korea.
IFC Standards Compliance: Ensuring projects align with IFC Performance Standards, particularly in risk assessment and mitigation.
ER-Marine is specialised in Korean and EU energy policies
Technical Due Diligence
Technical due diligence for South Korean offshore wind projects is essential, particularly when evaluating the viability of innovative technologies. Given the unique environmental and supply chain challenges of the South Korean market, this process involves several key components.
South Korea's offshore wind sector is influenced by challenging weather conditions, such as typhoons, and deep waters, which necessitate specific technologies like floating wind turbines. Additionally, understanding energy demand patterns and grid integration challenges is crucial.
Supply Chain, Operational Due Diligence
ER-Marine’s operational due diligence involves:
ESG-Compliant Supplier Evaluation: Assessing suppliers based on ESG criteria, focusing on ethical practices and sustainability.
IFC Standards in Operations: Ensuring operational processes align with IFC requirements, particularly in labour and working conditions and pollution prevention.
Assessing suitability for Korean conditions: The primary focus is on how technologies perform under local weather conditions and their adaptability to deep water environments, which is critical due to South Korea's oceanic topography. The efficiency and reliability of these technologies in local sea conditions are also crucial factors.
Integration with domestic energy infrastructure: ensuring technology compatibility with South Korea's existing power grid and assessing capabilities and limitations are vital. This includes evaluating the technology's grid integration capabilities.
Environmental Impact Assessment: It’s important to consider the environmental footprint of the technology, including its impact on marine ecosystems.
Risk assessment and mitigation strategies: Identifying technical risks, such as the failure of key components, and operational risks, including T&I (Transport & Installation) and O&M (Operation & Maintenance) challenges, is a vital step. Developing contingency plans and alternative solutions forms part of the risk mitigation strategy.
New Technology: Collaborating with technology suppliers and industry associations. Continual review of technical assessments as new technologies and information become available are also key aspects of due diligence.
Enhancing due diligence in South Korea’s offshore wind sector
At ER-Marine, we recognise the significance of robust due diligence practices in developing the offshore wind supply chain in South Korea. While the Corporate Sustainability Due Diligence Directive (CSDDD) primarily applies within the European Union, we adopt its structured approach as a benchmark. This ensures that we not only align with international standards but are also strategically prepared for future regulatory evolutions.
Strategic adaptation of International Standards
International alignment with local adaptation: By aligning with the CSDDD framework, we set a high standard for due diligence that resonates with global practices while remaining adaptable to the South Korean regulatory landscape.
Anticipation of regulatory trends: The global trend towards stringent due diligence requirements is unmistakable. Our proactive approach prepares us for potential future legislations similar to CSDDD in Korea, ensuring we stay ahead in compliance and operational integrity.
Building a comprehensive due diligence framework
Tailored risk management: We implement a comprehensive risk assessment process specific to the offshore wind sector, focusing on environmental, social and governance (ESG) risks.
Inclusive stakeholder engagement: We believe in the power of collaboration. Engaging local communities, government bodies and environmental groups ensures transparency and fosters mutual trust and respect in project developments.
Supply chain excellence
Rigorous supplier assessment: Our supplier vetting process is rigorous, ensuring all partners adhere to our high standards concerning human rights, environmental impact, and ethical practices.
Ongoing monitoring and transparency: We commit to continuous monitoring and reporting, upholding the transparency standards akin to those encouraged by the Corporate Sustainability Reporting Directive (CSRD).
Competitive advantage through ethical practices
Building a reputation and trust: By voluntary adhering to high standards, ER-Marine is recognised as a responsible leader in the offshore wind industry.
At ER-MARINE, adopting a CSDDD-inspired approach to due diligence is more than a compliance measure; it is a strategic enhancement to our business model. This proactive stance not only minimises risks but also positions us as a pioneer in sustainable and ethical practices with South Korea’s offshore wind industry. Our rigorous due diligence framework ensures that ER-Marine is well-prepared to meet the evolving standards of global markets.
ER-MARINE’s Perspective:
Strategic auction designs for accelerating offshore wind deployment
The global shift towards renewable energy underscores the need for efficient, transparent, and adaptable auction designs. As a leader in the energy sector, ER-MARINE is committed to advancing auction strategies that accommodate the unique demands of different renewable technologies, ensuring equitable and competitive market access.
ER-MARINE’s advocacy for technology-specific auction designs
ER-MARINE advocates for auction designs tailored to each technology's specific needs, recognising their diverse characteristics and market readiness. This approach encourages more accurate and realistic project proposals, fostering a competitive and diverse market landscape.
The dual approach: pre-qualification requirements and non-price criteria
ER-MARINE proposes balancing the integration of Pre-qualification requirements (PQR) and Non- price criteria (NPC), calibrating both sets of criteria to enhance transparency, foster innovation, and maintain competitive fairness. With careful calibration of these criteria, the industry can efficiently achieve the 2030 renewable energy targets.
Engaging developers for design excellence
Involving developers in the design process is crucial for creating realistic and achievable auction criteria. ER-MARINE emphasises the importance of this engagement, advocating for a collaborative approach that aligns auction designs with industry capabilities and ambitions.
Criteria for fostering industry resilience
A phased introduction of NPCs tailored to each technology's maturity and specific needs can significantly enhance industry resilience. ER-MARINE supports setting ambitious yet achievable minimum standards, complemented by incentive mechanisms to promote above-standard performance.
Balancing timelines with flexibility: Penalties and incentives
Timely project completion is essential for meeting renewable energy goals. ER-MARINE suggests a balanced approach, employing a combination of reasonable penalties for delays and incentives for on-time or early completion, to ensure project delivery while encouraging participation.
The imperative of proper price indexation
To mitigate the impact of economic volatility on project viability, ER-MARINE recommends incorporating price indexation (PI) mechanisms. This approach ensures that project economics remain aligned with market realities from bid submission through operation.
Ensuring consistency and clarity in applying criteria
Harmonising auction criteria, making them transparent, and basing them on recognised methodologies is crucial for maintaining market confidence. ER-MARINE advocates for the development of criteria in consultation with industry stakeholders, ensuring they are realistic, achievable, and conducive to market growth.
ER-MARINE aims to lead the offshore wind energy sector towards a future marked by sustainable growth, innovation, and resilience. By implementing the strategic auction designs outlined in this ER-Marine Perspectives, stakeholders can collaboratively foster a competitive, diverse, and sustainable market.
Read more in the Blog post here: Non-price award criteria in Europe and South Korea
ER-MARINE, a leader in the offshore wind energy sector in South Korea, is committed to advancing renewable energy through strategic innovation and leadership. With a focus on sustainable practices and technological excellence, ER-MARINE strives to shape the future of energy, driving the transition to a more renewable, resilient, and equitable world.
