After the government, together with Samsung Group and SK Group, announced on the 29th the "three mega projects for Korea's great leap," unveiling plans to newly build a semiconductor cluster in Gwangju and South Jeolla and to establish 18.4 gigawatts (GW) of artificial intelligence (AI) data centers nationwide by 2035, the battery industry quietly welcomed the move. Because the region supplies a lot of power generated from renewables such as solar and wind, batteries are needed to stabilize the grid, and data centers, which must be powered 24 hours a day, also require batteries to serve as emergency power.
In the industry, analysis is emerging that, because Samsung Group and SK Group will lead the semiconductor cluster and SK Group will spearhead data center construction, Samsung SDI and SK On, the groups' battery subsidiaries, will benefit more than LG Energy Solution.
On the 30th, multiple battery industry officials said, "Gwangju and South Jeolla, candidates for the semiconductor cluster, have abundant solar and wind power, so energy storage systems (ESS) that can store power for grid stability are needed, and data centers require batteries," adding, "Unless new nuclear power plants are built or liquefied natural gas (LNG) power generation is pursued, the battery supply chain is likely to be utilized."
Samsung Electronics and SK hynix decided to newly create a semiconductor cluster in Gwangju and South Jeolla by investing 800 trillion won to build two memory fabs each, for a total of four. In this regard, Minister Kim Sung-hwan of the Ministry of Climate, Energy and Environment projected that about 6.3 GW of power would be needed. He said power would be procured using renewable energy and nuclear power in the Honam region.
Renewables often require ESS for grid stabilization, such as for peak shaving and buffering, to compensate for their inherent intermittency. According to the battery industry, backing up 1 GW of renewables for two hours requires a battery capacity of 2 GWh. Assuming lithium iron phosphate (LFP) batteries commonly used in ESS have a per-cell capacity of 200 ampere-hours (Ah) and a cell price of $55 per kilowatt-hour (kWh), building 2 GWh of battery capacity would cost about $110 million (about 170.3 billion won).
Solar power generation capacity in Gwangju and South Jeolla stands at 0.42 GW and 6.55 GW, respectively, for a total of 6.97 GW. For wind power, another pillar of renewables, there is none in Gwangju and 0.56 GW installed in South Jeolla. Solar plus wind totals 7.53 GW of capacity. A simple calculation puts the ESS battery installation cost attached to renewables at about $825 million (about 1.2773 trillion won).
◇ A 1 GW-class data center needs batteries equal to 3,750 electric vehicles
Data centers also must be equipped with batteries to prepare for power outages. SK Group, GS Group and Naver will build 18.4 GW of data centers by 2035. In phase one, 800 trillion won will be invested by 2029 to build 8.4 GW of data centers (SK 5 GW, GS 2.4 GW, Naver 1 GW). Phase two involves SK adding 10 GW of data centers. By 2035, total investment will exceed 1,000 trillion won based on 18.4 GW.
Batteries in data centers serve to bridge about 5 to 15 minutes until emergency generators start when a blackout occurs. According to the battery industry, the instantaneous output that batteries installed in a 1 GW-class data center must handle is around 1.1 to 1.2 GW. Assuming 1.2 GW of output is maintained for 15 minutes, a battery capacity of 300 MWh (0.3 GWh) is required. If an electric vehicle battery capacity is about 80 kWh, that equates to batteries for roughly 3,750 EVs.
Data centers generally use lithium iron phosphate (LFP) batteries. Including battery packs, battery management systems and containers, the cost to build data center batteries ranges from $250 to $350 per kWh depending on grade. Assuming construction at $250 per kWh, a 300 MWh battery installation would cost about $75 million (about 116.1 billion won). If built to the highest grade, installation would cost $105 million (about 162.6 billion won, 300 MWh* $350/kWh).
Calculations indicate that the 18.4 GW-class data centers announced by the government and corporations would require $1.38 billion to $1.932 billion (about 2.1376 trillion to 2.9927 trillion won) worth of batteries.
This is a scale that Korea's three battery makers may find difficult to meet with data center battery production alone. LG Energy Solution plans to produce 1 GW of ESS-use LFP batteries in Ochang, North Chungcheong, starting in 2027. SK On is converting part of the equipment at Seosan Plants 1 and 2, which have a combined production capacity of 7 GWh, to ESS-use LFP battery lines at Plant 2. The production capacity is 3 GWh. Samsung SDI is converting part of the EV battery production lines at its joint Plant 1 with Stellantis in Indiana, U.S., and at its Ulsan plant for ESS use, but has not disclosed the capacity.
A battery industry official said, "In the case of LG Energy Solution, its ESS production capacity is already known to be fully booked," adding, "Only when the government sets out plans for the scale of batteries to be used in renewable energy and data center construction can the battery industry move."