The Korean energy market and policies

South Korea is renowned for its aggressive policy and market incentives for energy transition, and cements its place in the top 10 countries in the world with the most deployment of renewables. Last year (2022), over 2,540 MW of solar PVs was newly added, which translates to over 17,000 individual solar power plant operators. Cumulatively, South Korea has over 120,000 solar PV plants in operations with a net capacity of approximately 1,970 MW.

With recent adjustments proposed by the Korean Ministry of Trade, Industry and Energy (MOTIE), the renewable energy target ratio by 2023 has been adjusted to 21.6%, which is 8% lower than the previous target of 30%. The share of wind power in the ratio of solar to wind power, among different renewable technologies is expected to increase significantly. In the supply side, private sectors have accelerated mass pledge to the RE100 initiative, as various packages of incentives can be obtained, from tax credit for investment in renewable energy, to preferential interest rates and insurance premiums, and recognition and certification for greenhouse gas reduction. Renewable energy industry is expected to further strengthen itself, supported by a series of large scale movements, including the promotion of RE100, expansion of private-led supply, and improvements in efficiency through market expansion.

One limiting factor specific to the Korean energy market is that electricity consumers in Korea are currently not allowed to purchase power directly from independent power producers but instead must contract with the public utility Korea Electric Power Corporation (KEPCO). But recently, the government passed an amendment to allow Direct PPA, enabling companies to enter into power purchasing agreements for electricity generated from renewable energy projects. Prior to the recent legislation changes, “third-party PPA” methods were available, where IPPs and electricity consumers can enter into back-to-back PPAs with KEPCO. Although relatively slow compared to other developed countries, South Korea is committed to policy reforms to allow more individuals to enter the energy trading market, and allowing renewable resources to be traded by multiple actors other than state-owned utilities.