"Decarbonization Risks Deindustrialization"... Lessons from the 'Spanish Blackout' for Europe

Joint Seminar by Private Power Generation Association and Korean Resource Economics Association
Soaring Electricity Prices in Renewable Energy-Centered European Countries
Side Effects: Supply Instability and Unstable Power Supply
Need for Investment in Transmission and Distribution and Compensation for Synchronous Generator Startup Costs

Professor Hongjong Cho of Dankook University (President of the Korean Resource Economics Association) is speaking at the seminar titled "Reform Measures for the Korean Electricity Market Seen Through the European Energy Transition Process" held on the 12th. Private Power Generation Association

Domestic energy experts have unanimously emphasized the need to pursue carbon neutrality and electricity market reform in South Korea in a realistic and practical manner. They pointed out that South Korea should learn from the experiences-both positive and negative-of European countries that have led the way in decarbonization and energy transition.

At the seminar titled "Reform Measures for the Korean Electricity Market Seen Through the European Energy Transition Process," jointly hosted by the Private Power Generation Association and the Korean Resource Economics Association on the 12th, Professor Hongjong Cho of Dankook University (President of the Korean Resource Economics Association) assessed that Europe, which has implemented aggressive decarbonization policies, is facing a triple challenge: soaring electricity prices, unstable power supply, and weakened industrial competitiveness due to a renewable energy-centered power structure.

Professor Cho argued that in Germany, high electricity prices and unstable power supply are accelerating the relocation of companies overseas, turning "decarbonization" into "deindustrialization." In Spain, the rapid expansion of renewable energy has even led to large-scale blackouts, raising concerns across Europe about the stability of power supply.

Professor Cho warned that South Korea could also face reduced power system stability and weakened industrial competitiveness as a result of rapid carbon neutrality efforts. He stressed the need to expand investment in transmission and distribution networks, ensure reasonable compensation for the startup and ancillary service costs of synchronous generators, rationalize electricity rates, and guarantee industrial sector access to electricity.

Professor Woo Young Jeon of Seoul National University of Science and Technology, who delivered the keynote presentation, cited the "Factual Report on the Spanish Blackout" recently released by the European Network of Transmission System Operators for Electricity (ENTSO-E). He pointed out that the blackout in Spain in April was primarily due to poor management by the system operator, but fundamentally, it stemmed from a lack of inertia and voltage instability in the power grid caused by the increasing share of inverter-based renewable energy sources such as solar and wind power.

According to the report, the Spanish blackout was triggered in the southern region when excessive renewable energy output (with renewables accounting for more than 70% of generation at the time) pushed the transmission network close to overvoltage conditions. As a result, inverter-based renewable generators sequentially disconnected from the grid due to their self-protection mechanisms, leading to a loss of 2.5 GW within one minute.

In this situation, there was an absolute shortage of traditional synchronous generators such as liquefied natural gas (LNG) power plants, which provide reactive power support (essential for grid stability). This shortage led to voltage collapse, a rapid drop in frequency, further generator disconnections, and ultimately a widespread blackout across the Iberian Peninsula.

Professor Jeon explained that although the utilization rate of LNG power generation is declining in Europe due to the expansion of renewables, the need to secure LNG capacity as backup resources for grid stability is actually increasing. He suggested that South Korea should also actively consider improving its "capacity market system" to enhance grid stability.

According to "Rational Compensation Measures for Resources Responding to Renewable Energy Variability," presented by Professor Yonggi Park of Youngsan University, as solar power generation increased from 13.5 TWh in 2019 to 34.6 TWh in 2023, the annual number of startups for LNG generators also surged from 7,380 to 14,291.

Professor Park pointed out that as renewable energy expands, the frequency of LNG power plant startups and shutdowns has risen sharply, resulting in significant direct and indirect costs. However, power generation companies are not receiving adequate compensation for these costs.

Professor Park also highlighted the need to unify the criteria for securing operating reserves, which are currently divided between day-ahead generation planning and reliability generation planning, to ensure adequate flexible resources in response to renewable energy expansion. He emphasized the necessity of improving compensation systems for "ancillary services" that contribute to grid stabilization, such as establishing a reserve market linked to the renewable energy bidding system.

Professor Seojin Lee of Hongik University, who participated as a panelist, commented, "In countries like the United Kingdom and the United States, the expansion of ancillary service markets and the strengthening of real-time price signals are encouraging investment in new flexible resources. However, in South Korea, the compensation system for providing flexibility is insufficient." He stressed, "To successfully transition to a renewable energy-centered power system, it is essential to establish a system that accurately reflects the value of flexibility in market prices."

Hoje Woo, Vice President of the Private Power Generation Association, which co-hosted the event, stated, "LNG power is not a competitor to renewable energy, but rather a 'partner power source' that helps address grid instability arising from the expansion of renewables. For the successful pursuit of carbon neutrality and energy transition, a reasonable compensation system for the startup costs and ancillary services of LNG power plants must be established as soon as possible so that LNG power can fully perform its role in mitigating renewable energy variability."