"100GW Renewable Energy Target Unattainable Under Current System... Transition to Locally Driven Electricity Market Needed"

Climatic Solution: "Limitations of Transmission-Centered Approach
Local Communities Must Lead in Electricity Production, Consumption, and Trading"

Solar panels installed at LS Electric Cheonan DC Factory in Chungnam. 2025.11.20 Photo by Kang Jinhyung

There are concerns that achieving the government's target of "100GW of renewable energy by 2030" will be difficult under the current centrally designed electricity market structure. Some argue that the electricity market should be transformed to allow electricity produced in local areas to be consumed and traded locally.

Climatic Solution, a private think tank specializing in climate and energy, stated in its report "Power Market Improvement Plan for the Expansion of Locally Driven Renewable Energy," released on January 12, that to resolve bottlenecks in the expansion of renewable energy, it is urgent to move away from the traditional transmission network-centered approach and transition to a locally driven electricity market where local entities directly participate in electricity production, consumption, and trading.

According to the report, in order to achieve the government's 100GW renewable energy target by 2030, the installed capacity, which stood at around 30GW as of 2023, must be expanded more than threefold.

However, the expansion of renewable energy has not progressed as quickly as hoped due to bottlenecks in the power grid.

In 2024, Korea Electric Power Corporation (KEPCO) designated 205 substations nationwide as "grid management substations" due to grid saturation. In the Honam and Jeju regions, all substations were included. In these regions, the connection of new renewable energy generation facilities to the grid is, in principle, restricted until the completion of transmission and substation facilities in 2031.

The government and electricity authorities are presenting the expansion of ultra-high voltage transmission networks as the key solution to grid saturation. Plans have also been announced to shorten the procedures for building transmission lines through the Special Act on National Power Grid Expansion.

The report evaluates that this approach faces both time and social limitations. It takes an average of nine years to build a single 345-kilovolt (kV) transmission line, and more than half of the already planned transmission and substation projects are delayed due to local opposition and permitting issues. Therefore, relying solely on transmission network expansion is unlikely to secure sufficient capacity to accommodate renewable energy in line with the 2030 target.

The report pointed out, "If we rely only on sending electricity produced in local areas back to the metropolitan area, it will not only take a long time to resolve grid issues, but also inevitably increase social conflicts and cost burdens."

As an alternative, the report suggested local power purchase agreements (PPAs) and local flexibility markets as key solutions.

Currently, 99% of the renewable energy generation facilities installed in Korea are small-scale facilities of less than 10 megawatts (MW), most of which are connected to the distribution network. The report highlighted that by establishing a market that enables local use of electricity through the distribution grid, it is possible to expand the capacity to accommodate renewable energy without large-scale transmission network expansion.

In fact, Paju City is supplying renewable energy to small and medium-sized enterprises at prices lower than private PPAs or KEPCO rates through a local PPA led by the local government.

The report also pointed out that the current direct PPA system sets strict minimum facility capacity and contract power standards, which blocks participation from small and medium-sized enterprises and small-scale power producers.

As an alternative, the report recommended allowing aggregated PPA structures in which multiple generators and multiple consumers can participate, and applying differentiated network charges for electricity produced and consumed in nearby areas to reduce burdens.

Furthermore, the report evaluated that if local governments and regional energy corporations are allowed to participate as renewable energy power suppliers or virtual power plant (VPP) operators, it would be possible to simultaneously achieve the expansion of renewable energy, strengthen the competitiveness of local industries, and ease the burden of electricity bills.

Kim Geonyoung, attorney at Climatic Solution, said, "The debate over the power grid is not simply a technical issue, but a structural issue of who will be the main agent of the energy transition." He added, "It is difficult to achieve both renewable energy targets and balanced regional development by tying up local areas due to grid saturation and simply expanding transmission networks." He further emphasized, "We must transform the electricity market structure so that local areas can directly produce, consume, and trade electricity, thereby achieving renewable energy expansion, alleviating grid burdens, and revitalizing the local economy at the same time."

Image source=Climate Solutions

In line with the enforcement of the Distributed Energy Act, KEPCO will begin in earnest to play the role of a distribution system operator (DSO) from November 2024, promoting a transition to a system in which local power grids are directly managed and operated. To this end, KEPCO is establishing principles for distribution network management and mid- to long-term expansion plans, and is also preparing to introduce "local flexibility services" to address congestion and voltage issues in regional power grids.

The local flexibility market is a structure in which virtual power plant (VPP) operators, who aggregate distributed energy resources such as solar power, energy storage systems (ESS), and demand response (DR), provide "flexibility" as a service by adjusting electricity usage or generation. By utilizing this, it is possible to alleviate power congestion in specific areas without building new transmission lines or substations, making it an alternative or a means to delay large-scale power grid construction.

However, Climatic Solution pointed out that KEPCO, which owns power generation subsidiaries and can directly act as a market operator in the local flexibility market, undermines market fairness and activation. If KEPCO sets market rules and determines trading conditions and counterparties, there are concerns that entry by other operators could be discouraged.

The report emphasized that, for the local flexibility market to function as a practical alternative, institutional improvements are needed to ensure transparency in market operations and to resolve conflicts of interest.