Expansion of New and Renewable Energy Generation Share to 26% by 2034... Demand Growth and Profitability Enhancement

The 5th Basic Plan for New and Renewable Energy Confirmed... Applicable Until 2034

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Moon Chae-seok] The government has decided to expand the share of power generation from new and renewable energy sources such as solar power to 25.8% by 2034, establishing it as a main energy source. To effectively expand the distribution of new and renewable energy, regulations on permits will be eased, and the Renewable Portfolio Standard (RPS) market will be restructured to enhance the profitability of project operators.

On the 29th, the Ministry of Trade, Industry and Energy held a New and Renewable Energy Policy Deliberation Committee meeting and reviewed and finalized the "5th Basic Plan for New and Renewable Energy (5th New Basic Plan)." This plan contains a concrete management plan up to 2034, following the announcement of the "9th Basic Plan for Electricity Supply and Demand (9th Basic Electricity Plan)" the previous day, which stated that 25.8% of South Korea's total power generation would come from new and renewable energy.

The 5th New Basic Plan includes the "2034 New and Renewable Energy Distribution Achievement Tasks" and the "Four Principles for Achieving Carbon Neutrality (zero carbon emissions) by 2050." The five major achievement tasks are distribution innovation, market innovation, demand innovation, industrial innovation, and infrastructure innovation. The four principles for achieving carbon neutrality are ▲expanding the potential of new and renewable energy ▲breaking through technological limits ▲major transformation of the power system ▲expanding green hydrogen and integrating the energy market.

By 2034, the installed capacity of new and renewable energy (commercial + self-use) is projected to be 82.2 GW. To expand the distribution of new and renewable energy, the government plans to introduce a "Wind Power One-Stop Shop," an integrated permit organization for wind power, and extend land lease periods in line with increased equipment lifespan. Additionally, regulations related to permit distances will be improved, and incentives for excellent local governments will be strengthened to encourage region-led expansion of new and renewable energy.

A platform providing information on suitable idle national land for new and renewable energy will also be established, and various financial supports such as customized loans, green guarantees, and new renewable ecosystem funds will be implemented. Next year, an integrated safety management system for facilities linked to the renewable energy permit integration system will be established nationwide to strengthen safety management.

The RPS market will be restructured to focus on competitive bidding long-term contracts to improve project operators' profitability, and market separation by energy source will be considered. The RPS obligation ratio will be raised to 40% by 2034, and the power generation facility standard will be lowered from the current 500 MW to 300 MW, increasing the number of supply obligors from 23 to 30 by next year.

The RPS system applies to 23 operators generating 500 MW or more of power and mandates that 9% of total electricity (as of next year) be produced from new and renewable energy.

Additionally, plans to introduce a renewable heat distribution system (RHI or RHO) and diversify the targets for mandatory renewable fuel blending (RFS) will be pursued. The current 3% biodiesel blending ratio will be gradually increased to around 5% by 2030.

On the demand side, various implementation methods will be activated to enable companies and public institutions to fulfill RE100 commitments. RE100 is a voluntary campaign where companies pledge to cover 100% of their electricity consumption with renewable energy.

Incentives will be strengthened for participation, including recognition of greenhouse gas reductions, support for green guarantees, and RE100 labeling. The scope of RE100 participants will be expanded in the future to include industrial complexes, regions, and citizens (residential electricity consumers).

Incentives will be provided to allow companies or individuals other than power generation operators with installed capacity of 500 MW or more to directly trade new and renewable energy. If RE100 expands to the private sector, Renewable Energy Certificates (RECs) can be bought and sold from new and renewable energy produced by operators other than the 23 companies subject to RPS. An increase in trading volume and demand is expected.

Incentives for self-consumption type RECs will be reviewed and promoted. REC weighting, previously granted mainly to Korea Electric Power Corporation (KEPCO) subsidiaries and private companies, will also be extended to residential power operators. The more RECs issued, the higher the profitability for operators.

Next year, the storage mix plan will be applied to Jeju Island. When solar power generated during peak hours from 11 a.m. to 2 p.m. exceeds demand, it will be converted into heat or gas to be used around 7 to 8 p.m. Jeju Island experienced an excess of renewable energy to the extent that wind power plants were stopped 44 times from January to October this year.

In the infrastructure innovation sector, the introduction of a "Flexible Connection Method (Non-Firm)" stands out. According to KEPCO's "Regulations on the Use of Transmission and Distribution Electrical Facilities," the standard capacity for solar power grid connection on general distribution lines (power lines on utility poles) is 12 MW.

This means that just 240 houses with 50 kW (1000 kW = 1 MW) capacity each would fill the distribution line. A sudden surge in supply could cause safety accidents. Within a few years, data on renewable energy production and consumption by neighborhood will be extracted to adjust connection capacity differentially by distribution line.

An official from the Ministry of Trade, Industry and Energy said, "The non-firm method can be applied within a few years after KEPCO creates a nationwide renewable energy database (DB)."

The purpose of the four principles for carbon neutrality is to create an "integrated energy system" centered on renewable energy and green hydrogen, which have abundant carbon reduction potential. Until green hydrogen is commercialized by 2030, green hydrogen developed or imported during the demonstration phase will be mandatorily applied to power generation, transportation, and industrial processes.

This will activate sector coupling (P2X) among energy sources centered on green hydrogen. P2X involves producing synthetic methanol, gasoline, etc., from renewable energy such as solar and wind power and green hydrogen to induce carbon neutrality.

Carbon neutrality includes not only energy that emits no carbon at all but also energy with net zero carbon emissions (carbon emissions plus carbon absorption equals zero). The government's strategy is to increase the latter.

Joo Young-jun, Director of the Energy Resources Office at the Ministry of Trade, Industry and Energy, said, "With the establishment of this 5th New Basic Plan, we will meticulously support new and renewable energy to grow into a genuine main energy source and systematically prepare for 2050 carbon neutrality centered on renewable energy and green hydrogen."

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