The Era of Distributed Energy Approaches... SK, Hanwha, and HD Hyundai Target Power Brokerage Business

Enactment of the Special Act on Distributed Energy Activation, Effective July Next Year

As the government takes steps to establish a foundation for new business creation through the activation of distributed energy, major domestic companies such as SK and HD Hyundai are increasingly entering the renewable energy power brokerage market. Distributed energy refers to an energy system where power is produced and consumed by installing power generation facilities of 40 MW or less near demand sites or self-use power generation facilities of 500 MW or less. It is a concept opposite to centralized large-scale power supply and demand.

HD Hyundai Energy Solutions, a solar power subsidiary of HD Hyundai, has entered the renewable energy power brokerage business starting this month. Since launching the solar power business in 2004 as the first major domestic company to do so, HD Hyundai Energy Solutions currently holds big data on solar power plants exceeding 1.6 GW and about 8,000 sites. Based on the system ‘Hi Smart 3.0,’ which enables real-time remote monitoring of solar power plants distributed nationwide, they build a virtual power plant (VPP) that aggregates power generation data to predict power output.

Power generation using renewable energy such as solar and wind is carried out by small-scale power producers scattered across the country. Due to weather conditions, power production varies, inevitably causing output curtailment issues. Output curtailment refers to government-mandated reductions in renewable energy generation when excess power is produced. Power brokerage, which predicts power output, can resolve this issue.

Brokerage operators aggregate individual power generation facilities of 1 MW or less into groups of 20 MW or more and trade them in the power market. The brokerage operator predicts and submits the renewable energy generation volume a day in advance, and if the actual output on the day is within an 8% error margin, a settlement payment of 3 to 4 KRW per kWh is provided. The brokerage operator shares the settlement payments with the power producers.

Hanwha Solutions Q CELLS, the country’s top solar power company, started power brokerage business in March this year. In April, it received predicted settlement payments and distributed them to resource holders. They are also reviewing linked businesses utilizing power generation resources participating in the prediction system.

SK Group’s construction and eco-friendly energy company SK Ecoplant has also entered the power brokerage business. It has signed agreements with 91 renewable energy power plants on Jeju Island and operates power trading agency services for renewable energy generation resources totaling 50 MW. They plan to launch the bidding platform ‘PowerGen,’ based on renewable energy generation prediction, within the third quarter of this year.

The ‘Special Act on the Activation of Distributed Energy,’ which includes grounds for differentiated electricity rates by region, was enacted on the 13th of last month and is set to be implemented in June next year. The industry expects that with the enactment of this special act, renewable energy electricity supply business, small-scale power brokerage business, and demand management business among distributed energy projects will grow rapidly.

Earlier, the renewable energy generation prediction system, implemented in October 2021, had 37 participants (as of the end of last year), including brokerage operators and individual operators, with participating resources totaling 3.4 GW and annual settlement payments of about 6.4 billion KRW. Settlement payments for demand resource trading increased by 255%, from 95 billion KRW in 2015 to 242.8 billion KRW in 2022.