[2020 National Audit] "Allow 'Direct' PPA, Not 'Third Party', for RE100"

Lee So-young "Ministry of Industry Acknowledges Korea Electric Power Corporation's Conflict of Interest in Brokerage Activities"

[Asia Economy Reporter Moon Chaeseok] Concerns have been raised that if Korea Electric Power Corporation (KEPCO) acts as an intermediary in third-party Power Purchase Agreements (PPAs) while establishing the RE100 system?where all required electricity is sourced 100% from renewable energy?there could be conflicts of interest due to KEPCO's status as a monopoly electricity seller.

On the 22nd, Lee Soyoung, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the Democratic Party, brought up this issue during a comprehensive audit of the Ministry of Trade, Industry and Energy.

Lee asked, "There is no disagreement that a system enabling RE100 should be established. The question is how to create such a system. If KEPCO holds both the monopoly seller status and the intermediary role, is there a possibility of a conflict of interest?" Deputy Minister of Trade, Industry and Energy Jeong Seung-il replied, "Yes, that is correct."

The 'third-party PPA' option included as a means to implement RE100 is a system that recognizes electricity consumers using renewable energy by having KEPCO mediate PPAs between renewable energy producers and electricity consumers.

Lee argued that since KEPCO is a monopoly seller, there is a potential conflict of interest. From KEPCO's perspective, acting as an intermediary in third-party PPAs could result in losing favorable contract terms during peak hours.

He explained, "KEPCO, as a monopoly seller, can adjust prices by selling electricity at higher prices during the day and lower prices at night. Renewable energy prices are low during the day and high at night, so if KEPCO acts as an intermediary in third-party PPAs, it could lose advantageous contract terms during peak hours."

Lee also claimed that because KEPCO is a monopoly seller, if it engages in mediation, it might ▲complicate the contract formation process to avoid active mediation and ▲use its control over nighttime reserve supply to set conditions favorable to itself.

In response, Deputy Minister Jeong answered in principle, stating, "This relates to whether a separate entity is recognized for the monopoly power sales business or whether competition is introduced, and it should be reviewed from the perspective of restructuring the power industry."

When Lee confirmed, "Is it true that there is a possibility of a conflict of interest with KEPCO?" Deputy Minister Jeong acknowledged, "That could be the case."