Second Half RPS Fixed Bidding 1410MW 'Record High'... 500kW Medium-Scale Segment Subdivided

500kW 'Medium-scale Business Operator' Segment Subdivision
Priority Selection Capacity for Small-scale Operators Under 100kW
600MW→493.5MW↓... "Considering Korean-style FIT Implementation"
First Time Bonus Points Awarded for Verified Carbon Emission Products

A solar power plant site in Cheonan, Chungcheongnam-do. (Photo by Moon Chae-seok)

[Asia Economy Reporter Moon Chaeseok] The second half of the year’s Renewable Portfolio Standard (RPS) 20-year fixed-price contract bidding for new and renewable energy has been expanded to a record high volume of 1410MW. The mid-scale business category, previously ranging from 100kW to less than 1MW, has been further subdivided with 500kW as the benchmark. For the first time, additional points will be awarded to businesses using carbon emission-verified products.

On the 1st, the Korea Energy Agency announced the "2020 Second Half Renewable Energy Supply Obligation (RPS) Fixed-Price Contract Competitive Bidding" containing these details. The RPS system is implemented to reduce the volatility of the System Marginal Price (SMP, wholesale electricity price) and create a stable investment environment for solar power producers.

Record High 1410MW Project Promotion

Source=Korea Energy Agency

The agency is selecting long-term contract business operators for 20-year REC (Renewable Energy Certificate) transactions between supply obligors and power producers, based on requests from 22 new and renewable energy supply obligors including Korea Hydro & Nuclear Power.

In this bidding, six supply obligors?Korea Hydro & Nuclear Power, Korea South-East Power, Korea Southern Power, Korea East-West Power, Korea Western Power, and Korea Midland Power?will each select power producers for 235MW, totaling 1410MW. This is an increase to an all-time high from 500MW in the second half of last year and 1200MW in the first half of this year.

The contract price between solar power producers and supply obligors such as Korea Hydro & Nuclear Power is the sum of the SMP and the REC price. Power producers can choose between a "variable contract," where total revenue changes with SMP fluctuations, or a "fixed contract," where total revenue remains fixed regardless of SMP changes.

Subdivision of 500kW Mid-Scale Business Category

Source=Korea Energy Agency

From the business operators’ perspective, key profit indicators such as SMP and REC prices are steadily declining. On the 1st, the REC spot price closed at 47,200 KRW, down 63.7% from the closing price of 130,000 KRW on May 11, 2017, when the Moon Jae-in administration began. According to the Korea Power Exchange, the average SMP last month remained in the low 60 KRW per kWh range.

Accordingly, voices have grown calling for increased benefits for mid-scale business operators around 500kW and opportunities for small-scale business operators under 100kW to secure RPS 20-year fixed-price contracts to hedge against the risk of REC price collapse.

Starting from the second half bidding, the agency has increased the RPS fixed contract bidding business categories for mid-scale business operators around 500kW to four segments. This reflects acceptance of criticism that the mid-scale business category around 500kW was too broad.

Previously, there were three categories: "under 100kW," "100kW or more to less than 1MW," and "1MW or more." The mid-scale business category of "100kW or more to less than 1MW" is now subdivided into "100kW or more to less than 500kW" and "500kW or more to less than 1MW," making a total of four categories.

Continued Dissatisfaction Among Small-Scale Businesses Under 100kW

Photo by Yonhap News

In the second half, the priority selection capacity for small-scale business operators under 100kW will be 35% of the total (493.5MW), down from 50% (600MW) in the first half.

The agency stated, "For those under 100kW, considering the implementation of the Korean-style Feed-in Tariff (FIT), 35% of the total selection capacity will be allocated, and the remaining categories will be distributed based on the application capacity results to maintain similar competition rates."

Currently, the Korean-style FIR applies to business operators under 30kW (and under 100kW for cooperatives, farmers, livestock farmers, and fishermen).

General small-scale business operators under 100kW who are not cooperatives, farmers, livestock farmers, or fishermen express concerns that ▲ RPS bidding competition is too fierce (because bidding is advantageous when using lower REC prices, leading to intense strategic competition), ▲ they took loans from financial institutions for investments over 10 years but do not receive benefits because they are not cooperatives or farmers/livestock farmers/fishermen, which is hard to understand, and ▲ with the serious impacts of COVID-19 and floods causing landslides, if they fail again in the second half RPS bidding, they will be busy repaying principal and interest.

Additional Points Awarded for Using Carbon Emission-Verified Products for the First Time

In the second half bidding, for the first time, business operators using carbon emission-verified products will receive additional points up to 10 points. This is to expand the use of low-carbon solar products.

Lee Sang-hoon, Director of the New and Renewable Energy Center at the Korea Energy Agency, said, "We hope that the significant expansion of fixed-price contract competitive bidding volumes will create a stable environment for solar power businesses. Through the evaluation index for carbon emission-verified products newly introduced in this competitive bidding, we will strive to contribute to the realization of the Green New Deal policy, including the expansion of low-carbon eco-friendly product use."

The application period is from the 7th to the 29th of this month, and the final selection results will be announced on November 13. Sales contracts are expected to be signed in December. Detailed information can be found on the Energy Agency’s New and Renewable Energy Center website.

Source=Korea Energy Agency

This content was produced with the assistance of AI translation services.