-
Does your jurisdiction have an established renewable energy industry? What are the main types and sizes of current and planned renewable energy projects? What are the current production levels?
The renewable energy industry in South Korea is experiencing steady growth. According to the Statistics of Electric Power in Korea (Korea Electric Power Corporation (KEPCO) 2022), renewable energy sources, including hydroelectric, waste, by-product gas, waste heat collectively yielded a total of 47,020 Gigawatt-hours (GWh) of electricity in 2021. This accounted for approximately 7.81% of total electricity production in that year, representing a significant rise of 2.98% in 2011.
In 2021, South Korea utilized several renewable energy sources, contributing to the nation’s energy mix as follows:
- Solar: 21,822,488 MWh, accounting for 3.63% of total electricity production
- Bioenergy: 6,918,557 MWh, accounting for 1.15% of total electricity production
- Hydro: 6,737,434 MWh, accounting for 1.12% of total electricity production
- Fuel Cell: 4,544,950 MWh, accounting for 0.76% of total electricity production
- Wind: 3,169,838 MWh, accounting for 0.53% of total electricity production
-
What are your country's net zero/carbon reduction targets? Are they law or an aspiration?
According to the Framework Act on Carbon Neutrality and Green Growth for the Climate Change, which came into effect in March 2022, the South Korean government is required to establish a comprehensive national roadmap to achieve carbon neutrality by 2050.
The legislation mandates that the government strives to achieve a mid- and long-term national greenhouse gas reduction target by 2030. This target involves reducing national greenhouse gas emissions by a percentage, expected to be set within the range of 35 percent or more, based on the 2018 levels of such emissions. The government has set a target of reducing greenhouse gas emissions by 40 percent (436.6 million tons) from 2018 levels (727.6 million tons) by 2030.
-
Is there a legal definition of 'renewable energy' in your jurisdiction?
The primary legislation governing the area of renewable energy is the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy (Renewable Energy Act). This statute establishes a framework of policies and incentives aimed at advancing the adoption of renewable energy. One of its most prominent components is the Renewable Portfolio Standard (RPS) scheme, which facilitates the granting of Renewable Energy Certificates (RECs) to renewable energy generators.
Under the Renewable Energy Act, the term “renewable energy” refers to energy converted from renewable energy sources such as sunlight, water, geothermal, precipitation, bio-organisms and includes the following types of energy:
- solar energy;
- wind power;
- water power;
- marine energy;
- geothermal energy;
- bio energy converted from biological resources (limited to the scope prescribed by presidential decree);
- energy from renewal waste materials (limited to the scope prescribed by presidential decree); and
- hydrothermal energy.
In addition, as defined under the Renewable Energy Act, the term “new energy” means any of the following types of energy that is either converted from existing fossil fuels or uses electricity or heat generated through chemical reaction of hydrogen, oxygen, etc.:
- hydrogen energy;
- fuel cells;
- energy from liquefied or gasified coal, and energy from gasified heavy residual oil (limited to the scope prescribed by presidential decree); and
- other energy prescribed by presidential decree other than petroleum, coal, nuclear power, or natural gas.
-
Who are the key political and regulatory influencers for renewables industry in your jurisdiction and who are the key private sector players that are driving the green renewable energy transition in your jurisdiction?
The Ministry of Trade, Industry, and Energy (MOTIE) assumes the principal regulatory role in the energy sector, overseeing policies pertaining to the renewables industry. Noteworthy regulatory bodies and authorities that operate alongside the MOTIE are listed below.
The Korea Power Exchange (KPX) functions as the operator of both the electricity market and the Renewable Energy Certificate (REC) trading market. The REC trading market serves as the exchange where renewable energy generators sell RECs to Obligated RPS Suppliers (defined below). Additionally, the KPX assumes the role of an independent system operator entrusted with the responsibility of operating the power system. It manages electricity transactions arising from direct power purchase agreements.
The New and Renewable Energy Center (NREC), operating under the Renewable Portfolio Standard (RPS) system, falls under the jurisdiction of the Korea Energy Agency. It is responsible for issuing RECs and managing the trading market within the K-RE100 scheme. This trading market involves renewable energy generators selling RECs to electricity consumers.
The Electricity Regulatory Commission (ERC) falls under the jurisdiction of the Ministry of Trade, Industry, and Energy (MOTIE). Its primary responsibilities include the deliberative function pertaining to the approval and revocation of electricity business licenses, authorization for the transfer of electricity businesses, approval of usage tariffs for transmission or distribution electrical facilities, measures against prohibited acts, and approval of power market operation rules.
The Korean Electric Power Corporation (KEPCO), being a state-owned entity, holds a monopoly over the transmission, distribution, and retail sale of electricity within South Korea.
Within the framework of the Renewable Energy Act, the Renewable Portfolio Standard (RPS) requires certain entities, referred to as “obligated parties,” to either generate a specific proportion of renewable energy electricity or acquire RECs from renewable energy generators. Obligated parties comprise power generators with facilities of 500,000 kW or greater (excluding renewable energy facilities), as well as the Korea Water Resources Corporation and the Korea District Heating Corporation. Major nuclear and fossil fuel power generators are also included among the obligated parties. They are required to annually supply a specific percentage of electricity derived from renewable energy, not exceeding 25% of their total power production. This percentage varies each year, with a target of 13% set for 2023, projected to steadily increase until 2030, when it is expected to reach 25%.
According to the announcement made by MOTIE on January 31, 2023, a total of 25 obligated parties, including GenCos which are subsidiaries of KEPCO, have been identified.
-
What are the approaches businesses are taking to access renewable energy? Are some solutions easier to implement than others?
Businesses primarily employ various strategies to incorporate renewable energy, which typically involve paying a green premium, procuring renewable energy certificates (RECs), and entering into corporate power purchase agreements (PPAs) (for specific details, refer to question 13).
Among these methods, the payment of a green premium has emerged as the prevailing method employed thus far. This preference stems from the advantage that companies only need to incur a modest premium when procuring electricity. However, in light of the expanding global adoption of Environmental, Social, and Governance (ESG) initiatives, an increasing number of enterprises are demonstrating a growing interest in pursuing corporate PPAs as an alternative approach (for specific details, refer to question 6).
-
Has the business approach noticeably changed in the last year in its engagement with renewable energy? If it has why is this (e.g. because of ESG, Paris Agreement, price spikes, political or regulatory change)?
Although there exists no legal mandate requiring corporate consumers to use renewable energy, there has been a notable surge in interest among Korean companies in utilizing renewable energy to satisfy their electricity consumption in recent years. This inclination is primarily driven by the widespread adoption of ESG initiatives, the necessity for RE100 membership when engaging in contracts with overseas customers, and the introduction of the Carbon Border Adjustment Mechanism (CBAM) in Europe.
However, owing to the comparatively challenging natural environment and site conditions for the generation of renewable energy, the extent and magnitude of renewable energy projects in South Korea remain relatively limited. Furthermore, the electricity tariff in Korea, which is subject to regulation, have been maintained at a stable level. Consequently, corporate consumers have so far not actively embraced renewable energy.
-
How visible and mature are discussions in business around reducing carbon emissions; and how much support is being given from a political and regulatory perspective to this area (including energy efficiency)?
In order to mitigate carbon emissions, many companies across multiple sectors are actively pursuing business prospects and associated technologies within the renewable energy sector. These prospects include generating and trading renewable electricity, the production, transportation, storage, distribution, and sales of hydrogen, clean hydrogen generation, energy storage systems (ESS), intelligent grids, virtual power plants, hydrogen-based direct reduction ironmaking, electric vehicles, hydrogen-powered vehicles, and carbon capture, utilization, and storage (CCUS), in addition to the construction of new nuclear power plants and efforts in energy efficiency improvement (refer to Question 19 for more details).
The government has enacted the Act on the Promotion of the Construction and Utilization of Intelligent Power Grids to facilitate the advancement of smart grid projects. However, due to the structural limitations within the Korean power industry, the widespread adoption of smart grids has been relatively limited.
Furthermore, the government is presently piloting the Energy Efficiency Resource Standard (EERS), which involves assigning annual energy-saving targets to energy suppliers and making it mandatory for them to undertake investment projects aimed at enhancing energy efficiency. Once the relevant legislation is amended, the EERS will be implemented on a broader scale.
For legislative trends concerning the hydrogen industry and CCUS, including clean hydrogen power generation, please refer to Question 8.
The previous government and the ruling party (Democratic Party of Korea) prioritized renewable energy as a means of mitigating greenhouse gas emissions, while the current government and the ruling party (People’s Power) advocate for nuclear power as a means of reducing greenhouse gas emissions. Consequently, there has been a shift in policies pertaining to greenhouse gas reduction and renewable energy since the change of government last year.
-
How are rights to explore/set up or transfer renewable energy projects, such as solar or wind farms, granted? How do these differ based on the source of energy, i.e. solar, wind (on and offshore), nuclear, carbon capture, hydrogen, CHP, hydropower, geothermal and biomass?
To embark on a power generation project in South Korea, irrespective of the energy source, it is imperative to acquire a generation business license (GBL).
The issuance of the GBL falls under the purview of the MOTIE as per the Electricity Business Act, following a thorough examination by the ERC. However, for small-scale generation projects with a capacity of 3,000 kW or less, the local government possesses the authority to grant licenses.
Furthermore, the construction and operation of nuclear power reactors and associated facilities require obtaining the necessary construction and operation permits from the Nuclear Safety and Security Commission in accordance with the Nuclear Safety Act.
In the case of renewable energy sources such as solar, wind, hydropower, geothermal, and biomass, facilities must obtain confirmation of eligibility for the issuance of renewable energy certificates from the NREC to qualify for the application of the RPS scheme.
For combined heat and power (CHP) facilities that supply heat to multiple customers while simultaneously generating electricity, an integrated energy business permit is mandatory. This permit is obtained from the MOTIE under the Integrated Energy Business Act, rather than a GBL. However, akin to the process for obtaining a GBL, a deliberation by the ERC is required during the integrated energy business permit procedure.
To ensure the financial stability of businesses, the implementation of Clean Hydrogen Energy Portfolio Standards (CHPS) has been initiated for clean hydrogen generation. This enables businesses to enter into contract-for-difference agreements with KEPCO through a bidding process. However, specific details pertaining to the CHPS scheme and the certification process for clean hydrogen have not yet been finalized.
For offshore underground storage of carbon dioxide streams, permission from the Minister of Oceans and Fisheries must be obtained in accordance with the Act on the Management of Marine Debris and Marine Pollution Deposits. However, in February of this year, new comprehensive legislation concerning the regulation of CCUS processes was proposed in the National Assembly.
Furthermore, a development permit is required for the construction of power facilities. The requirements for development permits vary depending on the location and other relevant factors. Additionally, if the power plant is situated in regulated areas such as agricultural land or public water bodies, supplementary permits must be secured. Moreover, the construction of power facilities requires a building permit under the “Building Act” and a construction plan approval under the Electricity Business Act.
To effectuate the transfer of a power generation business or the transfer of shares resulting in a change of control in a power generator (excluding facilities with a capacity of less than 20,000 kW), the approval of the MOTIE is necessary. If the transfer involves a nuclear power plant, prior consultation with the Nuclear Safety and Security Commission is also required. However, in the case of solar power generation projects, absent justifiable reasons, the project or shares cannot be transferred prior to the commencement of commercial operation.
-
Is the government directly involved with the renewables industry? Is there a government-owned renewables company or are there plans for one?
The government does not directly operate any electricity enterprises, including those related to renewable energy projects.
Power generation companies, known as GenCos, which are subsidiaries of KEPCO, a state-owned company, are responsible for the supply of renewable energy under the RPS scheme. They fulfill their supply obligations directly or indirectly through special purpose companies (see Question 4).
-
What are the government’s plans and strategies in terms of the renewables industry? Please also provide a brief overview of key legislation and regulation in the renewable energy sector, including any anticipated legislative proposals?
The Renewable Energy Act and the Electricity Business Act constitute the most significant legal frameworks concerning renewable energy.
The Renewable Energy Act delineates the scope of renewable energy, introduces the RPS scheme, and assigns different weights to RECs based on the sources of renewable energy.
To expedite the rapid advancement of offshore wind power projects, which are projected to play a pivotal role in the ongoing energy transition, a bill proposing the introduction of site planning systems and streamlined licensing procedures has been put forward in the National Assembly.
Under the Renewable Energy Act, the government formulates a comprehensive plan every five years to promote the development, utilization, and widespread adoption of new and renewable energy technologies. The 5th Basic Plan for the Development, Utilization, and Dissemination of New and Renewable Energy Technologies was announced by the government in December 2020. This plan aims to increase the proportion of renewable energy in total power generation to 25.8% by 2034. As per the 10th Basic Electricity Supply and Demand Plan, unveiled earlier this year, it is projected that renewable energy generation, including new energy, will constitute approximately 21.4% by 2030 and 30.3% by 2036. However, there are significant discussions regarding the achievability of these projections.
The Electricity Business Act includes regulations pertaining to the formulation of fundamental plans for power supply and demand, licensing of electricity businesses, approval of construction plans for electric facilities, power market and trading, and power systems. In the Korean electricity industry, while competition exists in the generation sector following the cessation of liberalization in the mid-2000s, the retail and transmission/distribution sectors remain under the monopoly of KEPCO. The Korean power market operates on a cost-based pool system, where bidding occurs based on the evaluated variable cost of power generators. However, the government has recently announced intentions to restructure the power market into a price bidding pool system. The implementation of price bidding in the power market is anticipated to significantly heighten the volatility of electricity trade prices, thus creating incentives for the establishment of corporate PPAs.
-
Are there any government incentive schemes promoting renewable energy (direct or indirect)? For example, are there any special tax deductions or subsidies offered? Equally, are there any disincentives?
The RPS scheme stands as the primary incentive employed by the government to promote renewable energy. For further details, please refer to Question 4.
There is currently no tax deduction scheme in place for renewable energy projects, and the feed-in-tariff system has not been applicable to new renewable energy projects since 2012.
-
Has your Government had to help with the basic cost of energy over the last year and has that led to any discussion about de-linking the gas price and renewables prices?
In order to protect electricity consumers from the escalating costs of fuel in the global energy market, the government has implemented measures to curb electricity tariff hikes, which has led to substantial financial losses for KEPCO. To address these losses, the government enacted regulations on electricity trade prices in the power market, imposing a price ceiling that took effect from December 2022. Consequently, under this regulatory framework, market prices have been shielded from fluctuations in international LNG prices. Unfortunately, renewable energy producers, who are also subject to the price ceiling regulation have been unable to benefit from the rise in electricity trade prices as they lack long-term fixed-price contracts. In response to this situation, certain renewable energy operators have initiated legal proceedings against the MOTIE, asserting the unconstitutionality and illegality of the price ceiling regulation.
-
If there was one emerging example of how businesses are engaging in renewable energy, what would that be? For example, purchasing green power from a supplier, direct corporate PPAs or use of assets like roofs to generate solar or wind?
To promote the K-RE100 program, the Korean government has implemented various measures to encourage businesses to adopt renewable energy. These options include green premium payment, procurement of RECs, execution of REC purchase agreements through equity participation in renewable energy projects, construction of self-consumption renewable energy facilities, and entering into corporate PPAs.
The green premium payment system involves electricity consumers paying an additional fee to KEPCO, apart from their regular electricity bills, to be recognized as having utilized renewable energy electricity. Businesses can gain recognition for their renewable energy usage by procuring RECs from renewable energy generators. Initially, under the RPS scheme, the obligation to purchase REC was limited to nuclear and fossil fuel power producers (Obligated RPS Suppliers), excluding electricity consumers. However, a separate REC trading market, operated by the NREC, has been established to facilitate the procurement of RECs specifically for corporate consumers.
Furthermore, to promote the adoption of corporate PPAs, the government has amended the Electricity Business Act to establish a framework allowing corporate consumers to procure renewable energy electricity, either directly or indirectly through KEPCO. Nevertheless, due to unfavorable conditions for renewable energy projects in Korea, both in terms of quantity and scale, as well as regulated electricity tariffs, the incidence of corporate consumers entering into corporate PPAs remains scarce. Nonetheless, driven by the global proliferation of ESG initiatives, an increasing number of companies are expressing interest in the corporate PPA option (for more details, refer to question 6).
-
What are the significant barriers that impede both the renewables industry and businesses' access to renewable energy? For example, permitting, grid delays, credit worthiness of counterparties, restrictions on foreign investment.
In renewable energy projects, substantial hurdles primarily pertain to permits, acceptance of relevant parties, and power grid connectivity.
The foremost challenge in renewable energy project development lies in the acquisition of permits. The construction of solar power plants in mountainous regions encounters significant limitations imposed by mountainous terrain regulations. Given that a substantial portion of available land in Korea consists of mountainous areas, the possibilities for constructing solar power plants are severely constrained. Moreover, the construction of solar power plants on agricultural land faces stringent regulations governed by agricultural land-related laws. Additionally, solar power generation is subject to distance restrictions from specific areas or facilities designated by local governments, including residential areas, roads, rivers, and reservoirs, further narrowing suitable locations for solar power plant development.
For onshore wind farms, the most favorable construction sites are in the mountainous regions adjacent to the East Coast. However, due to mountainous terrain regulations, the development of onshore wind projects in mountainous areas poses challenges. Moreover, wind power regulations stipulate that the installation of a wind measurement takes precedence within a designated effective zone for power generation project permits for both onshore and offshore wind projects. Similar to the “rule of capture” principle observed in the oil and gas sector, this permitting criterion can lead to conflicts and disputes among wind power project developers when overlapping or adjacent effective zones are involved, particularly in offshore wind projects.
The acceptance of renewable energy projects often face significant obstacles due to concerns raised by various stakeholders. In the case of solar power generation, neighbouring residents often express concerns such as light reflection and landscape disturbances. Similarly, onshore wind power projects encounter challenges related to noise, vibration, and landscape impacts, while offshore wind power projects face potential infringements on fishing rights, including concerns over reduced fish stocks. Addressing the concerns of relevant parties requires careful deliberation and persuasion, as their dissatisfaction is often not easily resolved through economic compensation alone.
Power grid constraints have recently emerged as a notable limitation for renewable energy projects. Large-scale renewable energy projects are often situated far from major demand areas, such as the metropolitan region, resulting in insufficient power grid capacity to transmit electricity to these areas. Consequently, measures to control output are being implemented for renewable energy sources. However, the construction of transmission lines also encounter acceptance issues from relevant stakeholders, thus posing a long-term challenge in overcoming power grid limitations.
Under the RPS scheme, the majority of REC off-takers are prominent power generation companies, particularly subsidiaries of KEPCO. Therefore, their creditworthiness is not a significant concern. Nevertheless, as corporate PPAs gain traction in the future, the creditworthiness of counterparties may become a pertinent consideration.
There are no restrictions on foreign investment in renewable energy projects.
To expedite the development of offshore wind power projects, which are anticipated to play a pivotal role in the ongoing energy transition, the introduction of a site planning system and streamlined permit procedures are being proposed in the National Assembly.
-
What are the key contracts you typically expect to see in a new-build renewable energy project?
Within the framework of the RPS scheme, the pivotal agreement that serves as the cornerstone for renewable energy projects is the REC off-take agreement. This agreement assumes utmost importance as it bestows bankability upon renewable energy projects, ensuring a reliable income stream for renewable energy operators. Notably, the primary purchasers of RECs consist of nuclear and fossil fuel power generators.
In Korea, electricity transactions are exclusively facilitated through the KPX, with bilateral contracts being generally prohibited. Consequently, renewable energy operators have been exposed to the volatility inherent in electricity trade prices and REC prices. To mitigate this risk, both renewable energy operators and buyers adopt a fixed-price approach, wherein the combined value of electricity trade price and REC price is predetermined as a fixed amount. The NREC operates a fixed-price bidding system specifically tailored for solar and wind power generation. This system enables competitively selected renewable energy developers to enter into contracts, spanning a 20-year duration, to supply RECs to Obligated RPS Suppliers at a fixed price. Notwithstanding, renewable energy developers and Obligated RPS Suppliers are not precluded from voluntarily entering into fixed-price contracts outside the purview of the fixed-price bidding system.
Conversely, the advent of corporate PPAs between renewable energy developers and corporate buyers, as well as tripartite PPA systems involving the participation of KEPCO, is expected to position PPAs as pivotal agreements in future renewable energy projects. Moreover, discussions are currently underway regarding virtual PPAs that amalgamate REC off-take with contract-for-difference mechanisms.
Apart from these developments, the contractual framework governing the development of renewable energy projects exhibits similarities with practices observed in other jurisdictions. Typically, this framework encompasses the execution of shareholders agreements, engineering, procurement, and construction (EPC) agreements, operations and maintenance (O&M) agreements, transmission and distribution facilities utilization agreements, as well as project financing documents.
-
Are there any restrictions on the export of renewable energy, local content obligations or domestic supply obligations?
There are no explicit restrictions imposed on the export of renewable energy, nor are there any mandated local content or domestic supply obligations in South Korea.
Nevertheless, according to the Rules on Issuance and Trading Market Operation of Renewable Energy Certificates established by the NREC, wind projects are required to employ facilities that have obtained KS (Korean Industrial Standards) certification.
Furthermore, there was a provision in such rules for supplementary weighting of RECs for offshore wind projects exceeding a domestic component utilization rate of 50%. However, due to concerns of potential discrimination against domestic and foreign companies arising from the requirement for domestic component usage, the NREC has chosen not to apply this incentivized weighting to the selected developers participating in the fixed-price bidding system for wind projects. Consequently, this incentive is no longer available to wind projects partaking in the fixed-price bidding system since April 2023.
The evaluation criteria formulated by the NREC for the selection of wind project developers in fixed-price bidding system include an assessment of their contribution to the industrial ecosystem, efforts to enhance innovation capabilities, as well as a comprehensive evaluation of domestic investment and job creation.
There is no direct restriction on the export of renewable energy, local content obligations or domestic supply obligations in South Korea.
However, according to the Rules on Issuance and Trading Market Operation of Renewable Energy Certificates of NREC, wind projects are required to use facilities that have received KS (Korean Industrial Standards) certification.
-
Has deployment of renewables been impacted in the last year by any non-country specific factors: For example, financing costs, supply chain or Covid 19?
Recent reports indicate that numerous projects aimed at the development of renewable energy are encountering challenges in securing funding, attributed to a contraction within the financial market and an abrupt surge in interest rates.
In contrast, it is evident that concerns pertaining to supply chain disruptions or the ramifications of the Covid-19 pandemic on renewable energy development initiatives within South Korea are relatively negligible.
-
Could you provide a brief overview of the major projects that are currently happening in your jurisdiction?
Recently, the predominant focus in South Korea has been on offshore wind power projects, which have gained significant momentum. As of December 2022, a total of 69 projects have obtained power generation permits, collectively accounting for a capacity of 20.8GW. Notable operational projects include the Southwest Sea Demonstration Site in Buan and Gochang, Jeonbuk (60MW), the Yeonggwang Offshore Wind Farm in Jeonnam (34.5MW), and the Tamra Offshore Wind Farm in Jeju (30MW).
Also, ongoing offshore wind power initiatives are underway in the Shinan region, including Shinan Ui (396.8MW), Imja Offshore Wind Farm (200MW), Jeonnam 1, 2, 3 stages (combined 894MW), and Jeonnam Shinan (300MW). The Yeosu area also hosts projects such as Gwangpyeong (808.5MW), Dado 1 and 3 (combined 944MW), Yeosu Mundo (400MW), and Samsan (400MW). In the Yeonggwang area, projects like Yeonggwang Nakwol (354.5MW) and Yeonggwang Anma 1 and 2 (combined 528MW) are being pursued. The Ulsan region focuses on floating offshore wind power projects, including Banditbul (804MW), Greywhale (three projects combined 1,512MW), Munmu Baram (three projects combined 1,260MW), Korea Floating Offshore Wind Power (870MW), Haewooli (two projects combined 1,038MW), and Donghae 1 Floating Offshore Wind Power (200MW).
However, given the challenges commonly encountered by most offshore wind projects including the permitting process, acceptance issues from relevant stakeholders, and power grid integration (refer to Question 14), maintaining an optimistic outlook for seamless progress of current or proposed offshore wind projects proves to be challenging.
-
How confident are you that your jurisdiction can become a leader in newer areas like offshore wind or hydrogen?
The potential for Korea to assume a leadership role in the realm of carbon-neutral energy is contingent upon the selection of energy sources employed to achieve carbon neutrality.
As a maritime nation surrounded by vast seas, Korea possesses significant potential in the offshore wind sector. However, overcoming the aforementioned obstacles associated with offshore wind projects becomes a prerequisite for progress.
Korean enterprises exhibit a relatively strong competitive edge in the hydrogen sector. Diligent efforts are being made to secure hydrogen technologies through research and development efforts covering various aspects such as electrolysis and hydrogen turbines. Additionally, investments are being channeled into overseas hydrogen technology companies. Furthermore, initiatives aimed at fostering the hydrogen ecosystem are underway, involving the expansion of hydrogen refueling stations, establishment of production facilities and pipeline networks, and the establishment of hydrogen exchanges. However, the production of cost-effective hydrogen utilizing renewable energy within Korea presents challenges, while the importation of liquefied hydrogen from abroad incurs substantial costs. As a result, there has been recent consideration of a business model that involves the importation of ammonia from overseas and subsequently decomposing it into hydrogen.
Given the limitations associated with renewable energy and hydrogen, both the Korean government and domestic enterprises have displayed interest in nuclear power. However, the realization of new large-scale nuclear power plant projects faces feasibility challenges due to issues with local acceptance and transmission constraints. As an alternative, Small Modular Reactor (SMR) technology has emerged as a viable option.
-
How are renewables projects commonly financed in your jurisdiction?
In order to fulfill the renewable energy production obligations mandated by the RPS scheme, power generators occasionally seek corporate financing. However, the majority of renewable energy projects in Korea predominantly rely on project financing to secure necessary capital. To establish the bankability of such projects, the execution of multiple agreements becomes imperative to ensure a consistent revenue stream. These agreements typically include sales contracts, specifically REC off-take agreements. Furthermore, it is customary to include provisions for performance guarantees from engineering, procurement, and construction (EPC) contractors, minimum generation guarantees from operations and maintenance (O&M) contractors, and credit enhancement from project sponsors.
South Korea: Renewable Energy
This country-specific Q&A provides an overview of Renewable Energy laws and regulations applicable in South Korea.
-
Does your jurisdiction have an established renewable energy industry? What are the main types and sizes of current and planned renewable energy projects? What are the current production levels?
-
What are your country's net zero/carbon reduction targets? Are they law or an aspiration?
-
Is there a legal definition of 'renewable energy' in your jurisdiction?
-
Who are the key political and regulatory influencers for renewables industry in your jurisdiction and who are the key private sector players that are driving the green renewable energy transition in your jurisdiction?
-
What are the approaches businesses are taking to access renewable energy? Are some solutions easier to implement than others?
-
Has the business approach noticeably changed in the last year in its engagement with renewable energy? If it has why is this (e.g. because of ESG, Paris Agreement, price spikes, political or regulatory change)?
-
How visible and mature are discussions in business around reducing carbon emissions; and how much support is being given from a political and regulatory perspective to this area (including energy efficiency)?
-
How are rights to explore/set up or transfer renewable energy projects, such as solar or wind farms, granted? How do these differ based on the source of energy, i.e. solar, wind (on and offshore), nuclear, carbon capture, hydrogen, CHP, hydropower, geothermal and biomass?
-
Is the government directly involved with the renewables industry? Is there a government-owned renewables company or are there plans for one?
-
What are the government’s plans and strategies in terms of the renewables industry? Please also provide a brief overview of key legislation and regulation in the renewable energy sector, including any anticipated legislative proposals?
-
Are there any government incentive schemes promoting renewable energy (direct or indirect)? For example, are there any special tax deductions or subsidies offered? Equally, are there any disincentives?
-
Has your Government had to help with the basic cost of energy over the last year and has that led to any discussion about de-linking the gas price and renewables prices?
-
If there was one emerging example of how businesses are engaging in renewable energy, what would that be? For example, purchasing green power from a supplier, direct corporate PPAs or use of assets like roofs to generate solar or wind?
-
What are the significant barriers that impede both the renewables industry and businesses' access to renewable energy? For example, permitting, grid delays, credit worthiness of counterparties, restrictions on foreign investment.
-
What are the key contracts you typically expect to see in a new-build renewable energy project?
-
Are there any restrictions on the export of renewable energy, local content obligations or domestic supply obligations?
-
Has deployment of renewables been impacted in the last year by any non-country specific factors: For example, financing costs, supply chain or Covid 19?
-
Could you provide a brief overview of the major projects that are currently happening in your jurisdiction?
-
How confident are you that your jurisdiction can become a leader in newer areas like offshore wind or hydrogen?
-
How are renewables projects commonly financed in your jurisdiction?