Smart Cities in South Korea

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Index

1 Introduction 4

2 Smart city projects in South-Korea and opportunities for Dutch business 5 2.1 Incheon Free Economic Zone 6 2.2 Saemangeum Development Project 8 2.3 Sejong City 9

3 Smart grid initiatives 10

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1 Introduction

The global financial crisis that sparked a worldwide slowdown in 2008 was feared to have a drastic effect not only on the livelihood of people in many nations but also on the targets that were set to battle global warming in the coming years. Since many economies were in dire need of money infusions in order to get back on track, investments in solutions that address climate change were put off. In some countries however, governments chose to use this situation as an opportunity to pledge billions of euros in stimulus packages to invest in clean energy projects. South-Korea has been at the forefront of this trend and has committed 80 percent of their €30.2 billion “Green New Deal” stimulus program towards “low carbon, green growth”, as they have coined this development. Furthermore, an additional 2 percent of its annual GDP will be spent over five years to stimulate the development of green technologies. The questions that many countries are starting to ask themselves is not only how much they are growing, but how they are growing. Making your economy more sustainable is more and more becoming a major point of attention since an aptitude in this approach will lead countries to gain competitive advantages in the long run in the challenging global economic environment. For South-Korea this push to go green and lower carbon emissions is coming from within. The need for energy security is mostly responsible for South-Korea’s commitment to “green growth” and the creation of green technologies, since the country imports 97 percent of its energy. South-Korea is looking for ways to minimize its dependence on foreign energy and is investing heavily in renewable energy sources. The concept of smart cities is directly related to this national policy of “green growth” and considering the projects that currently underway in South-Korea, it offers plenty of opportunity for foreign companies to take part in realizing these smart city goals. This report will address some of the leading projects that are currently underway in South-Korea, focusing on the development of New Songdo, Saemangeum, and Sejong City. Next to that we will address the potential for Dutch companies that can leverage the opportunities arising from these projects in South-Korea.

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2 Smart city projects in South-Korea and opportunities for Dutch business

Urban development plans in South-Korea in the 20th century were fueled by a global trend towards growing urban populations at the expense of rural communities and were solely managed by the state and the large private conglomerates called Chaebols. This policy route has led to many issues in the large cities such as congestion, environmental degradation and poor building standards being exacerbated by the rapid industrialization coupled with rather uncontrolled urban development. The past years have seen the start of the realization of the U-Korea Master Plan 2006, a strategy for ubiquitous development, which will help to solve many of the problems caused by the high urban density that characterizes South-Korea. Government on all levels has been taken in by these ideas. Both central and regional governments see U-cities (or e-cities) as a sustainable growth engine in the sectors of construction, e-city (ICT) infrastructure and service solutions. The plan has given some order to the urban planning process in Korea (particularly e-city planning) and also reflected the growing importance of ‘green cities’. In 2008 the Korean government enacted the ‘Act on Ubiquitous Construction’. The Act attempts to coordinate multiple industry sector convergence, e.g. construction and ICT; pan-government planning for large ucities, i.e. top down planning from central government to local government and IT business. In addition, the National Information Society Agency (NISA) developed a guideline for u-city infrastructure to help avoid costly duplication of technologies at the local level. Local authorities such as the Seoul Metropolitan Council have started to implement their own smart city projects across the country. One of the large projects that have recently been completed is the Digital Media City (DMC) in Seoul, which has the goal of becoming a global IT industrial hub. It is a high-tech complex focused on digital technologies such as broadcasting, movies, games, music, e-learning and related industries. The complex consists of networked offices, apartments, exhibitions, conference halls and cultural centers. It was built on the spot of a former landfill. The Korean government has also initiated and funded a number of what it calls value creator projects designed to develop essential understanding in u-city development via the Ministry of Land, Transport and Maritime Affairs (MLTMA), Korea institute of Construction and Transportation Technical Evaluation and Planning (KICTTEP), academia and other agencies. Examples of this are: The Mega Korean Construction Technology Project designed to raise the quality of

life (€79.2 million) The Korean Land Specialization Program (€96.7 million government funding,

€33.3million private funding)

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The establishment of a Center for Sustainable Housing, with the goal of reducing the carbon footprint by 40% through the use of technology.

The establishment of the Construction Waste Recycling Research Center

2.1 Incheon Free Economic Zone A cluster of developments with a similar focus has been undertaken around Seoul with the most ambitious one being the €101.5 billion development of the Incheon Free Economic Zone (IFEZ), located 1 hour to the south west of Seoul. This development includes the Songdo International Business City, the Cheongna Leisure City, and Yeongjong Global Logistics City. The development of Songdo International Business City is nearing its final stages, with most of the infrastructure in place. Around 27,000 people will have moved in by the end of the year, and with the completion of this project scheduled in 2016 the authorities expect the city to house 65,000 in this smart city with a further 300,000 commuting in daily. This is the largest private real estate venture ever and set to cost around €27.8 billion. It is built on a peninsula off the coast of Seoul and it hosts offices, homes, shops, hotels, and public spaces. Cisco, a large American IT firm, has been tasked with wiring up the city with fibre optics to connect the different systems that keep Songdo running. TelePresence will be installed in homes, offices, hospitals and shopping centers so that people can make video calls wherever they want. Sensors are embedded in streets and buildings to monitor everything from temperature to road conditions enabling the city to run efficiently and react to problems quickly. These sensors also monitor things such as fire and safety in the many towers, and control the water level and quality in the Central Park of Songdo. RFID tags on cars will ensure the easing of congestion by managing road traffic; traffic lights will be using LEDs that are very efficient. The power consumption of homes and their electric appliances will be monitored automatically to better understand how residents use energy and adapt the grid to make supply and demand come together efficiently. Moreover, around 40 percent of Songdo will be green space, including rooftop vegetation to help cool the city. Rainwater traps and the recycling of ‘grey water’ from sinks and dishwashers will further reduce the need for fresh water. Waste trucks will also be a thing of the past with a pneumatic waste collection system that sucks wet and dry rubbish straight to the dump through a network of pipes. Songdo – Opportunities for Dutch companies Even though this smart city project seems to be in its final stages and thus public procurement of new projects likely to be already pledged, consulting services concerning the management of the various city dimensions such as water management and landscaping can be still be a potentially interesting perspective for Dutch companies. Furthermore, it seems that in case this smart city design is successful, others will likely follow in a similar fashion; companies from the Dutch top sectors should leverage their positions to win contracts to work on building this new city. Such plans for a new city are already on the table in form of the Saemangeum development project, which is covered in the upcoming paragraph.

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Yeongjong Logistics City, a second segment of IFEZ, features an industrial and logistics complex offering various exhibition spaces, housing, lodging, business, and education. A large seaport and the large Incheon Airport (awarded best airport in the world title 6 times) are also located in the vicinity. Milano Design City in Yeongjong is one of the milestone projects and is set to become a cluster of culture, design and education facilities by 2017. Following the Protocol of Cooperation between Milano and Incheon, which was established in November 2008, Milano Design City project is expected to employ 35,000 people. The Medi-City, also located in Yeongjong will feature international hospitals, hotels and research complexes, enabling it to offer a wide range of medical treatments, new drug development, education, recreation and leisure. Yeongjong – Opportunities for Dutch companies The large concentration of logistical activity in Yeongjong can be interesting for consulting services of our experienced Top Sector Logistics. Dutch Design has developed into quite a famous term over the years and this Milano Design City in our opinion offers good prospects for Dutch companies to leverage this. By establishing a foothold here, Dutch designers can then expand the sales of their products in Korea. Western design is on the rise here and it would be great to put Dutch Design at the forefront of it. Medi-City is an excellent opportunity for innovative Dutch medical companies from the Top Sector Life Sciences & Health to expand into North-East Asia, providing consultancy services as well as equipment for medical centers. Crucell, now part of Johnson & Johnson, is already one of the Dutch companies active in Korea in this area, with their activities located in Incheon. Cheongna Leisure City is in an earlier stage of development. There are various initiatives being developed there, among them the international BIT Port project, GM-Daewoo R&D Center, a theme-park golf course project and the Incheon High- Tech Park Project. The international BIT Port project is a joint venture between Seoul National University (SNU) and Korea Advanced Institute of Science & Technology (KAIST), designed to create a Biology Technology and Information Technology education and research cluster. It will provide a strong foundation for IFEZ’s green growth, in addition to stimulating the development and investment allocation in Cheongna. Meanwhile, the GM-Daewoo R&D Center is a large-scale project that will contribute greatly to the economic growth not only of Incheon, but of Korea as a whole. In keeping with IFEZ’s strategic goal of becoming the world’s most innovative city through the use of ubiquitous and wireless technologies, Incheon High-Tech Park will further attract foreign businesses seeking to do business in Korea via one of the world’s most technologically advanced cities. Cheongna – Opportunities for Dutch companies The construction of new facilities can be a very interesting opportunity for the High-Tech Systems and Materials top sector in the Netherlands. Collaboration in the BIT Port and High-Tech Park on R&D projects can be interesting for HTSM as well as the Life Sciences Top Sector.

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The construction of new facilities can be readily supported by the innovative chemical sector in the Netherlands, supplying green solutions for smart materials that can be used in the construction of individual projects. Since the smart cities will want to be self-sustaining to a certain extent, there will be a need for energy efficient buildings, urban farming, agro projects, and park-related projects in which the expertise from the Dutch Agro Food Top Sector as well as the Horticultural Top Sector will be very welcome. Lighting the cities of the future is something that the Netherlands has been active in, with Philips recently lighting the London 2012 Olympics, this expertise can be used for new smart cities.

2.2 Saemangeum Development Project On 1 February 2010, the South Korean government presented a blue-print for the transformation of Saemangeum, a large-size reclaimed tidal flat located in Jeolla North Province, into North-East Asia’s economic hub. In 1991, the government had started the Saemangeum project with the original aim of creating farmland by reclaiming the tidal flat along the southwestern coast. The government changed the original farmland plan as the nation no longer needed additional farmland due to the oversupply of rice and shrinking agricultural sector. In 2008, the government reduced the ratio of farmland to be developed from the original 72% to 30%. Next to agriculture the focus will be put on industrial development, leisure, scientific projects, environment and sustainable energy, and the development of a new city. Eight different complexes will be constructed for this purpose: 1. Agricultural complex 2. Industrial complex 3. Tourism and leisure complex 4. International business complex 5. Science and research complex 6. New and renewable energy complex 7. Residential complex 8. Ecological and environmental complex In April 2010, the Dutch Ministry of Economic Affairs, Agriculture and Innovation signed a Memorandum of Understanding with the Korean Prime Minister’s Office, concerning the sustainable development of the Saemangeum area. The focus of this MoU is on cooperation and exchange of information and technology between both countries in the areas of water, sustainable agriculture, renewable energy, dredging, design & architecture, ecology and recreation. Yearly seminars are already being held concerning sustainable agriculture and opportunities are being actively pursued by Dutch companies and institutions, supported by the Netherlands Embassy in Seoul. Saemangeum – Opportunities for Dutch companies The bidding procedures for the development of the inner dikes have been finalized and have mostly been awarded to Korean conglomerates. These companies will in turn hire local SMEs and international corporations as sub-contractors to work on

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these projects. This poses many opportunities for Dutch companies. These opportunities mainly lie in the following areas: Participation in dredging works (Top Sector Water) Supply of dredging equipment and other inner sea construction-related equipment

(Top Sector Water) Participation in construction of new and renewable energy projects, supply

equipment (Top Sector Energy) Provide training and consultancy in the area of agricultural development (e.g.

agro parks) (Top Sector Afro Food and Top Sector Horticulture) Provide consultancy services for the tourism and leisure projects (e.g.

waterfronts, marinas) (Top Sector Water) Provide consultancy services regarding environmental issues (Top Sector Energy) Urban development/planning (architecture and design) (Top Sector Creative

Industry) Coordinate construction of new harbor (Top Sector Water) Provide training to engineers and managers on the Saemangeum project This entire project is very ambitious and has a long horizon for execution. The current plan has set the completion date at 2020 so there is ample opportunity to be on time for Dutch companies to get in on the contracts that will be tendered. The main question however remains whether the South-Korean government will manage to find enough funding and investment to support this project. So far the funding has been lacking and although the Chaebols have contributed to the project as well, there is still quite a large investment gap. So the future of this project depends on how well the South-Korean government will manage to sell the project and how the economy will develop in the coming years.

2.3 Sejong City Another ambitious project that is worth mentioning that has been almost completed is the construction of the brand new city of Sejong. This city is meant to become the new administrative capital of South-Korea, housing 36 ministries and government agencies and more than 10,000 civil servants. The idea is to create a more efficient government center. The construction of this city nearing its final stages, but the city is still more or less empty with barely activity to be detected on its streets. Hopefully this is going to change in the coming months; it seems that the creation of a new city is quite often accompanied by an initially slow population increase. Government incentives should improve that but the danger is still there that people will only work in this city during weekdays and return to Seoul to their family in the weekends. Sejong – Opportunities for Dutch companies The Netherlands has a lot of experience when it comes to new cities. Almere is a city that was built from scratch on a piece of land regained from the sea. Companies and governmental bodies involved in this process can have very valuable expertise that can help make this city a success. It seems that mainly through consulting services Dutch companies could be attracted to this project. The commitment from the Korean government is there, since making this city a success will be an important accomplishment in terms of prestige.

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3 Smart grid initiatives

South-Korea has been at the forefront of developing smart grid systems and it is very ambitious in its goals for it. The push for smart grids comes from a broader focus on CO2 reduction targets that the South-Korean government has set for itself. They have the goal of reducing the CO2 level by 30% from business as usual (BAU) by 2020. This can be considered a quite ambitious goal since the industry, which is very energy consuming (steel, semiconductors, cement) has been growing at a breakneck pace in the past decades. The green growth initiative described in the introduction further accentuates the push towards sustainable development of which smart grids will be an important part. South-Korea has launched the Smart Grid national project, through which the government hopes to implement smart grids across the country. This initiative can help Korea address climate change and reach reduction targets concerning greenhouse gas emissions. The smart grid initiative is thus a national policy that will help Korea achieve the vision of low carbon, green growth. The content of this initiative is specified in the “Building an Advanced Green Country” vision. This, together with the collected views of experts from industry, academia, and research institutes has led to a national roadmap concerning Smart Grids. The roadmap focuses on five different sectors: 1. Smart Power Grid Innovating in interconnections between consumption and supply sources is the goal here. This will allow for new business models to arise and improve power grid malfunction and automatic recovery systems to ensure a reliable and high quality power supply. 2. Smart Consumer Having real-time information available for consumers will encourage them to save energy, and producing smart home appliances that will adjust their operating powers in line with energy prices will contribute to efficiency. 3. Smart Transportation The aim is to build a nationwide charging infrastructure that will allow electric vehicles to be charged anywhere. A Vehicle to Grid system is also planned that will charge batteries of electric vehicles during off-peak times and resell surplus electricity during peak times. 4. Smart Renewable Energy self-sufficiency of houses, buildings, and villages is the ultimate goal here. The aim is to build smart renewable energy power generation complexes across the nation by rolling out micro grids and deploying small-scale renewable energy generation units for every end-user.

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5. Smart Electricity Service Improving the consumers’ right-to-choose is the aim here, by improving upon the variety of energy-saving electricity rate plans. Bringing ICT and electricity closer together will also benefit consumers through the addition of new electricity services. Real-time electricity trading systems for the transaction of electricity and derivatives are also planned. In order to make concrete progress on this vision, South-Korea has started a smart grid pilot project on Jeju Island to make investigate the potential and effects of a smart grid network. So far 6,000 homes have been hooked up to the smart grid pilot that is set to change the way electricity is supplied to our homes. This pilot project is the first stage of implementation of this roadmap (technical validation). The second stage that is planned to span 2012-2020 is aimed at the expansion of this system to metropolitan areas (intelligent consumers). The final stage, planned to be executed in period of 2021-2030, is aimed at the completion of a nationwide power grid (intelligent power grid). Each of these stages entails certain opportunities for international companies. Smart grids – Opportunities for Dutch companies For Dutch companies the opportunities mainly seem to lie in smart power grid, smart consumer, and smart renewable. The experience that the Netherlands has with energy efficiency can greatly benefit this project, especially the smart consumer part of the plan. The expertise in terms of renewable energy is of course also present in the Netherlands, and supplying smart renewable energy solutions to individual end-consumers can be an opportunity for Dutch companies, contributing to the smart renewable part of Korea’s Smart Grid plan. Next to that we see possibilities for Dutch companies to help Korea improve the energy efficiency of their buildings. Finally, the smart power grid will demand new materials and new ways of designing the power grid to be more efficient and reliable. Leveraging the HTSM sector’s innovative power will put Dutch companies at an advantage in helping to make this happen.

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