Korea

In response to the widespread deployment of small-scale solar panels for self-consumption purpose, the government introduced a net metering system in 2005. Through several amendments, surplus power from solar installations of 1 MW or less and other renewable generators of 10 kW or less can be sent to the distribute grid operated by KEPCO. In addition, since December 2018 it is allowed solar panel of 1 MW or less to trade surplus power with neighbours through aggregators.

High Barriers

The government had started to promote small-scale solar power for self-consumption since the end of the 1990s, meaning that self-consumption was allowed from the beginning of the deployment of renewable energy facilities in Korea. In addition, even after the sale of renewable energy power was allowed in 2002, the government has continued to promote small-scale solar power for self-consumption purposes. Facilities that have received government support of 30 to 50 per cent or more of the total cost of renewable energy facilities can only be used for private consumption.

Low Barriers

For net-metering, the electricity consumer who installs the renewable energy facility pays less for the final electricity bill by the amount of surplus renewable electricity. In the case of excess electricity trade, despite the success of some pilot projects, only KEPCO is allowed to sell electricity, and it is not possible to create a separate tariff plan, so the trade of excess electricity is not very common yet. Given the very low electricity tariff in South Korea, the net-metering scheme paying the electricity bills less is not enough to motivate electricity consumers to install small-scale renewable facilitates.

Low Barriers

There is no carbon tax in South Korea yet. This was further supplemented by Decision No. 01/2022/QD-TTg, which mandated a list of sectors and facilities to conduct greenhouse gas inventories.

High Barriers

Emissions trading: South Korea has been operating an emissions trading market since 2015, the first in East Asia. However, However, the total carbon emissions cap is not significantly different from the company's actual emissions, and 90 per cent of each company's emissions
allowances are allocated free of charge (only 10 per cent are paid for). For this reason, the carbon price on the emissions trading market is more or less about 10 euros. In the power sector, the 90 per cent free allowance means that the carbon price has not had a significant impact on coal and natural gas power costs, with coal-fired power still remaining the cheapest
source of electricity.

High Barriers

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The Korea Energy Agency conducts auctions twice a year, but the volumes are not provided in advance. Irregular bids are offered by the obligated utilities to need to fulfill the RPS mandate.

Medium Barriers

The Korea Energy Agency conducts auctions twice a year to help RPS obligated utilities easily find renewable energy projects and make long-
term contracts with them, but the auctioned volumes were less than 2 GW, which are not sufficient enough to lead the rapid deployment. Separately, an auction method is used to optimise payments for renewable electricity sales. Renewable energy developers that do not have PPA agreements with RPS obligated utilities receive one REC for every MWh of renewable electricity sold, with different weights to compensate for the different production costs of different technologies and scales. (For example, Solar PV above 3MW has a weighting of 0.8, earning 0.8 RECs for every MWh of electricity sold; solar PV below 100kW and onshore wind have a weighting of 1.2, earning 1.2 RECs for every MWh of electricity sold; and a wood
pellet plant has a weighting of 0.5, earning 0.5 RECs for every MWh of electricity sold.) Renewable energy developers can trade the RECs they receive after selling renewable electricity in the REC bidding market, but
prices fluctuate widely depending on the demand from obligated operators willing to purchase RECs, making renewable investment uncertain.
• Auctions offshore: Although there are many plans by the government and local governments to expand offshore wind power, it has not yet been developed due to lack of transmission networks and local acceptance from fishermen. For this reason, the Korea Energy Agency does not offer auctions for offshore wind power

Medium Barriers

Since October 2021, direct PPAs between renewable energy developers and electricity consumers have been possible. In January 2024, the PPA supply was around 3 GWh.

Low Barriers

In 2018, the South Korean government had implemented a FIT scheme for solar PV under 100kW to help small-scale solar power developers generate stable revenue and ease the process of selling electricity, but in July 2023 the government abolished the FIT scheme due to the uncontrolled increase in the number of developers, grid and supply problems, and various irregularities in the application of the FIT. As of May 2024, there is no FIT scheme in Korea.

High Barriers

Risk mitigation elements in the design of power purchase agreements

Related policy guide sections

• Power purchase agreements
• Direct power purchase agreements
• Off-taker risk mitigation

Since the introduction of the Renewable Portfolio Standard (RPS) system in 2012, power utilities with a generating capacity of 500MW or more (as of 2023, six KEPCO subsidiaries and 21 private power producers) have been required to achieve a statutory share of renewable energy generation by year (i.e. 13.5 per cent in 2024 and 15 per cent in 2026). To achieve this, the obligated utilities above need to either build their own renewable energy plants or buy renewable electricity from private renewable developers under a long-term contract (normally 20-year). However, the share of renewable energy obligations for utilities is low, which does not encourage the rapid deployment of renewable electricity. 

Medium Barriers

Private sector and foreign ownership of power generation assets is allowed in Korea.

Low Barriers

PPAs are not indexed to other currencies. Payments are made in Korean won

Medium Barriers

The renewable PPAs are not indexed to inflation. The inflation rate in Korea was relatively stable over the past five years (between 0.5 and 3.6%) and therefore does not constitute a major risk

Low Barriers

KEPCO's six subsidiaries generate more than two-thirds of the country's electricity, so the main offtakers in long-term contracts are six power utilities in which KEPCO has a 100% stake. Although KEPCO's credit rating has recently been downgraded, it has not affected its renewable energy purchases.

Medium Barriers

Large-scale power generation facilities, including nuclear, coal, and natural gas power plants, as well as renewable energy generation facilities, are
constantly being added and generating power, while transmission lines are at the same level as 15 years ago. Therefore, curtailment of renewable energy power is expected to be a very serious problem in the future. For example, in Jeju Island, where the share of renewable energy facilities exceeds 40 per cent, 132 times (total 29 GWh) of curtailment occurred in 2022. However, there are no measurements to compensate for curtailment
as of 2023.

Medium Barriers

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There is no tax credit for investments in renewable energy. Grants of max. 1,000 USD per kW are available for the installation of PV on single houses (up to 2.0 kW) or apartment buildings (up to 30 KW). Grants vary depending on capacity and module technology/performance.

Medium Barriers

15-year low-interest loans of up to 30 billion Korean won (about 20 million USD) for the installation of renewable energy facilities such as PV or wind turbines only for self-sufficient purpose. The amount of loans varies depending on the financial condition of the applicant.

High Barriers

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Depending on the size of the power generation facility, the law specifies the permits required from the central government or local government. For example, a power generation business licence (central government for more than 3MW or local government for less than 3MW) and a small-scale environmental impact assessment (if the site area is more than 5,000 square metres).

Low Barriers

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Since 2019, the Korea Energy Agency has been operating a one-stop shop to expedite renewable energy permitting processes, but it is not considered to be very effective. In particular, offshore wind power has been the subject of significant complaints from project developers, and a special law for offshore wind power has been proposed to establish and operate a one-stop shop exclusively for offshore wind power, but not enacted yet.

High Barriers

For small-scale power generation facilities, a power generation business permit and a development activity permit by the local municipality are required, but the number of permits will also increase, as permits prescribed by relevant laws must be obtained in advance, depending on the size of the site area (5,000㎡ or more) or the type of site (agricultural land, grassland, forest, etc.). In particular, wind power projects require more complex processes, with around 14 permits and 10 approvals.

Medium Barriers

The increasing deployment of solar PV has led to complaints from nearby residents. In response, a total of 128 local governments have adopted restrictive regulations that require renewable energy plants, especially solar PV, to be built remotely from residential areas (for instance, more than 1 km from roads or 1 km from residential areas). These distancing restrictions represent a major hurdle for the swift expansion of renewable power generation in Korea.
• South Korea's laws state that the country should strive to increase the penetration of renewable energy, but there is no requirement to prioritise installation. Under the Distributed Energy Act, which will take effect in June 2024, local provinces with less than 100 per cent electricity self-sufficiency will be required to supply a certain percentage of their electricity consumption from distributed energy sources, including solar PV.

High Barriers

Since November 2020, the Renewable Energy Concentrated Complex Planning has been in effect, which provides up to 0.1 additional REC weighting for renewable energy complexes (more than 40MW) that are developed by local governments by identifying locations. However, as of the end of 2023, no new renewable energy projects have been developed through this planning, and it is being used to proactively limit the development of additional renewable energy projects in certain areas due to congestion in the transmission and distribution grid.

High Barriers

The siting process is laid out very clearly in the Electricity Business Act and related regulations. However, in order to obtain a development activity licence, which is the most important for the construction of a power plant, there must be no opposition from local residents, which needs to take long time, for instance that operators sometimes buy the consent of local residents. As the central and local governments do not make any effort to improve public acceptance on RES facilities, so there is a significant cost increase in obtaining local consent. Meanwhile, the government has strengthened regulations to revoke licences if a project is not completed within a certain period of time to prevent reckless pre-emption of renewable energy sites by private operators (two years for PV, four years for onshore wind and five years for offshore wind).

High Barriers

Due to factors such as small land parcels in private hands, steep increases in land prices, and stringent regulations on agricultural land leasing, leasing of land has proven challenging. Consequently, renewable energy developers tend to purchase the relevant sites before proceeding with their projects.

High Barriers

in May 2021, a special law for offshore wind promotion, including a planned siting scheme, was proposed, but as of May 2024, it has not been passed in the National Assembly Korea, meaning that the marine space for offshore wind installations has not yet been classified.

High Barriers

Renewable power had been given unconditional priority over other generators. However, in recent years, curtailments due to transmission and distribution congestion have become more frequent, and renewable power producers have filed lawsuits against KEPCO or the government, prompting the government to amend the Electricity Market Operation Rules to mandate renewable electricity to participate in a bidding system to determine dispatch orders as like other conventional power. The new system will be operated on a pilot basis in Jeju Island in 2024, and depending on the results, it will be applied nationwide from the end of 2025.

High Barriers

Economic dispatch had been previously in operation based on fuel costs. However, in order to reflect environmental considerations such as greenhouse gases and fine dust problems, the economic dispatch rule has been improved to include environmental costs of carbon price from January 2022. However, the fuel cost for electricity generation such as coal and natural gas has risen sharply due to the energy crisis, while the carbon price is very low due to the 90% free allocation of emission allowances, so the inclusion of environmental costs has no effect on changing the dispatch order of coal and natural gas.

High Barriers

South Korea's dispatch rules are based solely on each generator's fuel and environmental costs, and there are no "take or pay" contracts for fossil power plants. However, in recent years, the country has been facing increasingly severe fine particulate matter problems, and since 2019, it has implemented shutdowns or capacity limits on older coal-fired power plants during the winter months.

Low Barriers

Korea's current wholesale power market is operated only by the day-ahead market. However, as the expansion of renewable energy has led to congestion in the transmission and distribution grid and frequent curtailments, KEPCO is revising its power market operating rules to introduce a real-time market and an ancillary services market, which are implemented as a pilot project on Jeju Island from 2024. Based on the results, KEPCO plans to expand new market schemes nationwide after 2025.

Medium Barriers

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no incentives for virtual power plants

High Barriers

Since 2016, South Korea has provided additional REC weighting for ESS installed in conjunction with renewable facilities in order to overcome intermittency and develop the battery industry. In 2021, ESS installations reached 9863 MWh. However, as some operators attempted excessive ESS charging/discharging to increase REC revenue, resulting in fires and other incidents, the government has not supported new ESS installations since 2021.

Medium Barriers

To reduce greenhouse gas emissions and address against fine dust problems, the Korea government plans to convert 30-year-old coal-fired power plants to dispatchable natural gas-fired power plants.

Medium Barriers

no incentives for flexibility via dispatchable renewables.

High Barriers

There are incentives and price signals for charging electric vehicles (EVs) during off-peak periods in South Korea, primarily through time-of-use (ToU) electricity pricing. This system offers lower prices for EV charging during off-peak hours (e.g., night hours) to encourage shifting demand away from peak periods.

Medium Barriers

Since November 2014, South Korea has been offering financial incentives for demand side flexibility under the name of Demand Response. The potential for DR at the national level is huge (500GW targeted for 2030), but low incentives due to low electricity prices have not translated into actual reductions in electricity consumption.

Medium Barriers

In South Korea, individual renewable energy operators are being utilised for more accurate forecasting of renewable energy output. In order to cope with output volatility due to the expansion of renewable energy, a pilot project of renewable energy output forecasting has been in place since 2020. Operators of solar or wind power plants of 20MW or more will be able to forecast the output of their renewable energy facilities one day in advance and submit it to the KPX (Korea Power Exchange), and will be compensated if the actual output is within a certain error rate.

High Barriers

not applicable in Korea

Medium Barriers

Although the law was recently amended to allow aggregators to operate, the role of aggregators is very limited due to the single wholesale electricity market in Korea, especially when it comes to forecasting electricity output.

Medium Barriers

With only a single wholesale electricity market and a very small share of renewable generation (less than 10%), output forecasting is not yet an important topic in South Korea. The subject of output forecasting is not specified in the rules.

High Barriers

From 2012 to 2016, the Korean government implemented a support project for smart grid deployment, deploying about 50,000 AMI (Advanced Metering Infrastructure - bi-directional meters) and 54 MWh of ESS. Since then, the government has continued to promote support policies to expand the deployment of smart grids, but the results have been marginal.

Medium Barriers

In accordance with the Ministry of Trade, Industry and Energy's Notice on 'Standards for Maintaining Power System Reliability and Electricity Quality', renewable energy power generators shall provide power generation facility characteristics, output information, forecasting information, power plant weather information, and any other necessary information for output monitoring, forecasting, evaluation and control of renewable power generators to power exchanges and transmission and distribution companies.

Low Barriers

Since 2010, KEPCO has been supporting AMI rollout, reaching approximately 22.5 million households by the end of 2023, out of a total of approximately 33.8 million households.

Low Barriers

In accordance with the Ministry of Industry's Notice "Standards for Maintaining Power Grid Reliability and Electricity Quality" and related rules, power grid operators are required to implement measures to ensure the stable operation of the power grid through output monitoring, forecasting, evaluation and control of renewable power generators such as wind and solar power.

Low Barriers

The KPX (Korea Power Exchange) has been acting as the control centre for grid integration of renewables and it romotely controls output of renewable generation.

Low Barriers

Grid connection is allowed on a first-come, first-served basis, and if the grid is insufficient, renewable project developers will have to wait until the grid is expanded. KEPCO is not responsible for compensation for delays in the expansion of the grid network.

Medium Barriers

KEPCO implements the 'Regulations for the Use of Electricity Facilities for Transmission and Distribution', which contains rules and costs for using the existing transmission and distribution grid depending on renewable energy technology and capacity.

Medium Barriers

Because small renewable energy facilities, such as rooftop PV, must be connected to the distribution grid, the regulations and procedures are relatively straightforward compared to larger power plants that require connections to the transmission grid.

Low Barriers

KEPCO has always borne the costs of connecting renewable energy facilities of 1MW or less to the grid, but from November 2024, renewable energy operators will have to bear all costs if there is a shortage of available capacity.

High Barriers

Every two years, KEPCO announces a 15-year long-term transmission and distribution facility plan that includes plans for transmission and distribution network construction. Based on the electricity demand forecast of the Basic Electricity Supply and Demand Plan, the plan divides the country into six regions and 42 sub-regions, and presents the construction plan for the planning period (15 years) based on a comprehensive comparison of technical, constructability, and economic factors.

Low Barriers

The overall grid expansion plan is aligned with national renewable energy targets. However, the government's grid construction plans have been delayed by 14 months to a maximum of about 10 years due to complaints against construction, difficulties in securing sites, and delays in approvals. According to KEPCO statistics, from 2018 to August 2023, only 30 GW of the total 48 GW of renewable energy projects have been connected to the transmission and distribution grid and started commercial operation. Another 18GW of approved projects, or 37.2 per cent of the applied capacity, have not started construction due to inadequate transmission and distribution networks.

High Barriers

Every two years, KEPCO announces a 15-year long-term transmission and distribution facility plan that includes plans for transmission and distribution network construction.

Low Barriers

As KEPCO is the sole transmission and distribution grid operator, it is considering cross-country grid integration between regions through a long-term transmission and distribution grid plan.

Medium Barriers

The transmission and distribution grid usage fee is 12.9 won (about 1 cent USD) per kWh, accounting for 11% of the electricity bill, but KEPCO does not charge this fee to power generators. However, with the rapid expansion of renewable energy facilities, it is necessary to expand transmission and distribution grid facilities, so it is pointed out that the transmission and distribution grid usage fee should be realised and charged to power generators.
• Payment for using the electricity grid (wheeling): not introduced in Korea, yet.

Medium Barriers

Although non-discriminatory access is guaranteed in principle, the rapid deployment of small-scale renewable energy facilities especially in rural areas that are not well served by transmission and distribution networks has led to a number of corruption issues surrounding the order of transmission line access. According to KEPCO statistics, from 2018 to August 2023, only 30 GW of the total 48 GW of renewable energy projects have been connected to the transmission and distribution grid and started commercial operation. Another 18 GW, or 37.2 per cent of the applied capacity, is unable to generate power due to inadequate transmission and distribution networks.

High Barriers

Since 2003, private individuals have been allowed to trade directly electricity without going through KEPCO. However, because KEPCO has a well-developed nationwide distribution network, it is very rare for private individuals to build their own grid and sell electricity.

High Barriers

In 2017, the South Korean government announced plans to phase out coal-fired power plants over 30 years old. As a result, 28 of the country's 59 coal-fired power plants will be phased out by 2036. However, new natural gas-fired power plants will be built to replace them.

Medium Barriers

Since 2015 the Korea Emission Trading System is in place, but the carbon price is not high enough to make coal-fired power plants uneconomic. The fuel tax system has been reformed in 2018 to improve the economics of natural gas-fired power plants, but coal-fired power plants are still much more economical.

High Barriers

No new coal-fired power plants have been permitted since 2017, but new natural gas plants have been allowed to replace older coal-fired plants.

High Barriers

In 2020, South Korea declared a goal of carbon neutrality by 2050. However, its 2030 GHG reduction target is very lax, falling short of meeting the Paris Agreement objectives.

Medium Barriers

Despite declaring a goal of carbon neutrality by 2050, the energy sector's GHG reduction pathway falls far short of meeting the Paris Agreement's objectivies. In particular, the 2030 renewable electricity supply target was significantly reduced (from 30.2 per cent in the NDC plan announced in 2020 to 21.6 per cent in the new electricity supply plan announced in 2023). 

High Barriers

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South Korea's national target is to generate 21.6 per cent of its electricity from renewable sources by 2030. Targets for local governments will be announced in 2024, but are not legally binding.

Medium Barriers

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65 GW of PV and 34 GW of wind by 2036

Medium Barriers

South Korea's national target is to generate 21.6 per cent of its electricity from renewable sources by 2030.

High Barriers

South Korea's renewable energy penetration targets only exist for the power sector, with no specific targets for heating, cooling, transport or industry.

High Barriers

Every two years, the Korean government publishes an electricity supply plan for the next 15 years (the National Electricity Supply and Demand Plan), which revises the long-term renewable energy penetration targets, i.e., they are adjusted to an achievable level as the target year approaches. In other words, the mid- to long-term penetration targets are more or less indicative.Overarching target for renewables in the energy sector

High Barriers

The biennial Electricity Supply and Demand Plan includes renewable energy penetration targets for the next 15 years. According to the latest plan, released in January 2023, renewable energy is expected to reach 134.1 TWh (21.6 per cent) in 2030 and 204.4 TWh (30.6 per cent) in 2036, up from 35.6 TWh (6.2 per cent) in 2018.

High Barriers

South Korea has had an RPS system in place since 2010, requiring utilities with power plants of 500MW or more to supply a certain percentage of their electricity from renewable sources. The previous government raised the RPS penetration target to 25 per cent by 2026, but the current government has lowered the target to 25 per cent by 2030

High Barriers

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There is no specific institution tracking the progress of the energy transition. The Ministry of Trade, Industry and Energy (MOTIE) is responsible for the energy sector.
The Korea Energy and Economic Institute (KEEI) is periodically publishing general statistics on the energy sector.

High Barriers

In response to growing local opposition to renewable energy projects, the government has given additional REC weighting to community-led generation projects since 2016.

Low Barriers

To be eligible for additional REC weighting, a project must raise more than 10% or 20% of its equity capital or more than 2% or 4% of its total project expenses as community investment, with a weighting of 0.1 or 0.2, respectively, but only for PV of 500KW or more or wind power of 3,000KW or more.

Low Barriers

Trade unions and civil society organisations have been calling for this, but it is not yet institutionalised.

High Barriers

Socio-economic effects are not considered when contracting renewable energy generation facilities and selling electricity. However, in order to promote the domestic production of solar modules, the greenhouse gas emissions of the entire production process of solar module products are taken into account when selecting products for the government's support project.

High Barriers

In 2022 and 2023, the Green Energy Strategy Institute (GESI), an independent energy policy think tank, studied the socio-economic impacts of offshore wind, onshore wind, and small-scale solar power

Medium Barriers

Public participation is not mandatory at the planning stage. Public participation is first possible at the implementation stage, during public hearings on the results of an EIA, but the government has recently amended the law to allow public hearings to be cancelled due to public opposition. local communities are not involved in the decision-making process. They often protest after the project has negatively affected them and has little power to influence the changes.

High Barriers

Trade unions and civil society organisations have been calling for this, but it is not yet institutionalised.

High Barriers

Trade unions and civil society organisations have been calling for this, but it is not yet institutionalised.

High Barriers