Large Power Generators to Supply Up to 25% of Total Electricity Production from Renewable Energy Sources

Promulgation of the Renewable Energy Act Amendment
Effective this October... Ministry of Industry to Set Annual RPS Mandatory Ratios through Enforcement Decree Revision

[Sejong=Asia Economy Reporter Kwon Haeyoung] From now on, large power producers must supply up to 25% of their total electricity production using renewable energy.

The Ministry of Trade, Industry and Energy announced on the 20th that the partial amendment to the "Act on the Development, Use, and Diffusion of New and Renewable Energy" raising the upper limit of the Renewable Portfolio Standard (RPS) from the current "within 10%" to "within 25%" has been promulgated.

The Renewable Portfolio Standard (RPS) system requires large power producers with generation facilities of 500㎿ or more to supply a certain percentage of their electricity generation using renewable energy. Through this amendment, the mandatory ratio cap (10%) set when the RPS system was introduced in 2012 has been raised for the first time in nine years. The Ministry of Trade, Industry and Energy will set the annual RPS mandatory ratio through enforcement ordinances, aiming to raise it to 25% by 2034.

An official from the ministry evaluated, "A foundation has been established to operate the RPS system considering the government's mid- to long-term renewable energy generation ratio targets." They added, "The realization of the RPS mandatory ratio will improve the supply and demand conditions of Renewable Energy Certificates (REC)," and "It is expected to have a positive impact on the stable business promotion of small and medium renewable energy power producers through price stabilization in the spot market."

RECs function as government subsidies for small and medium renewable energy power producers. Large power producers purchase RECs to meet the RPS ratio, and small and medium producers earn revenue by selling RECs. Recently, due to the expansion of solar power facilities, the spot price of RECs has plummeted, but an increase in the RPS mandatory ratio is expected to contribute to price stabilization.

This amendment will take effect in October, and the ministry plans to revise the enforcement ordinance in the second half of the year to determine the annual RPS mandatory ratios. Previously, the ministry set the RPS mandatory ratio at 9% for this year and 10% for next year, but it is highly likely to be further raised next year. The decision is expected to be made at a level that can achieve the annual renewable energy generation ratio targets set in the ministry's "9th Basic Plan for Electricity Supply and Demand" and "5th Basic Plan for New and Renewable Energy," announced in December last year.