[Energy-topia] Expanding Renewable Energy: Gaining Public Support Comes First

KEPCO's Growing Burden Worsens Finances,
Raising Concerns for Korea's Financial Markets
Electricity Rate Hikes Are the Solution
Transparent Communication with the Public Is Essential

Under the Lee Jaemyung administration, South Korea's energy policy is expected to undergo a major transformation. During the presidential campaign, President Lee Jaemyung strongly expressed his commitment to achieving a carbon-neutral society by expanding renewable energy. To implement this vision, the government is currently undergoing organizational restructuring, including the establishment of a Ministry of Climate and Energy.

What differentiates this approach from the previous Democratic Party administration under President Moon Jaein is the emphasis on a rational energy mix of renewables and nuclear power. The new administration recognizes the role of nuclear power as a baseload energy source in order to expand renewables. There is also significant focus on securing a power grid that can reliably supply renewable energy. This is to avoid repeating past mistakes, when a rapid increase in renewables without the necessary power infrastructure led to side effects such as output control.

It is true that, globally, momentum for carbon neutrality has weakened since U.S. President Donald Trump withdrew from the Paris Climate Agreement upon taking office in January. However, experts commonly agree that while the pace may have slowed, the overall trend toward carbon neutrality remains unchanged. Until now, South Korea has been relatively slow in deploying renewable energy. The Lee Jaemyung administration's focus on expanding renewables is therefore considered timely.

However, it is important not to overlook the fact that renewable energy is not free. While the sun and wind are gifts of nature, utilizing them requires large-scale infrastructure. Ultimately, whether the funds come from the national treasury or from the pockets of citizens, someone has to pay for it.

Although the cost of solar and wind power has rapidly declined globally, making it cheaper than fossil fuels in some regions, this is not the case in South Korea.

The most commonly used indicator for evaluating the economic viability of power generation methods is the Levelized Cost of Electricity (LCOE), which represents the average cost of producing electricity over the lifetime of a power plant.

According to a study by the Korea Energy Economics Institute, as of 2023, the LCOE of solar power in South Korea was $111 per megawatt-hour (MWh), more than two to three times higher than in India, China, and Australia ($34?49/MWh). The LCOE of offshore wind in South Korea was $233/MWh, 3.7 times higher than in China ($63/MWh).

In addition, to reliably supply highly variable renewables such as solar and wind, additional flexible resources such as energy storage systems (ESS) must also be secured.

Under the current Renewable Portfolio Standard (RPS), the cost of renewable energy generation that exceeds electricity rates ultimately falls on Korea Electric Power Corporation (KEPCO). Furthermore, investments in power grids to ensure a stable supply of renewables are also the responsibility of KEPCO.

The fundamental solution is to raise electricity rates to an appropriate level. During the Moon Jaein administration, concerns about public backlash against renewable energy expansion led to artificially suppressed electricity rates, which only worsened the situation.

As of the end of 2024, KEPCO's cumulative debt reached 205 trillion won. As KEPCO's financial structure deteriorates, it is forced to increase corporate bond issuance. KEPCO's debt is a ticking time bomb for the Korean financial market.

Politicians speak only of the grand vision of expanding renewables, while remaining silent about the uncomfortable flow of money hidden behind it.

In a recent public opinion survey conducted by Climate Solution, 9 out of 10 respondents said they support the expansion of renewables. However, only half said they would accept a potential increase in electricity rates resulting from this expansion.

To effectively implement policies to expand renewable energy, it is essential to communicate transparently and honestly with the public and to persuade them first.