Solar Power Operators on the Brink of Bankruptcy Due to Subsidy Collapse... Is an 'Eco-Friendly Bill' Coming?

'Revised Renewable Energy Act' Passage in National Assembly Imminent
Solar Industry Urges "Increase Large Power Producers' Purchase Quotas"... Ruling Party Also Demands Further RPS Ratio Raise This Year
Government Likely to Face Strong Pressure to Raise RPS Ratio from Next Year... Could Lead to Electricity Rate Hikes

[Sejong=Asia Economy Reporter Kwon Haeyoung] As the price of the 'Renewable Energy Certificate (REC)', a subsidy-type certificate, plummeted due to an oversupply of solar power generation, private operators facing the risk of mass bankruptcy have demanded that the government increase the renewable energy supply ratio. Currently, large power producers are required to purchase 9% of their total electricity production from renewable energy sources such as solar power, and they are pressuring to expand this to 15%. With the Renewable Energy Act amendment bill entering the final stages of parliamentary approval, it is expected that if the mandatory purchase ratio for power producers increases, additional costs will be inevitable, leading to higher electricity bills for consumers.

According to the solar power industry and the National Assembly on the 12th, power producers recently requested the Ministry of Trade, Industry and Energy to immediately raise the Renewable Portfolio Standard (RPS) ratio, currently at 9% this year, to 15%.

An industry official said, "As solar power facilities have sprung up rapidly, the profitability of renewable energy power producers has sharply declined," adding, "If the government does not increase the purchase volume of renewable energy by large power producers, mass bankruptcies will become a reality."

Large power producers with generation facilities of 500 MW or more meet the RPS ratio by purchasing RECs from renewable energy power producers who receive them from the government. However, the REC price has fallen every year, with the spot price standing at 38,000 KRW as of the 11th. This is only half of the 74,000 KRW price in early March 2019. This is due to the government’s excessive drive to expand solar power facilities over the past few years, which caused a surge in the supply of RECs in the market.

The ruling party and government are pushing to increase the volume of REC purchases through related law amendments. Democratic Party lawmaker Kim Seonghwan proposed an amendment to the Renewable Energy Act to raise the RPS ratio cap from the current 10% to 25% by 2034, but even if the bill passes, it is expected to be difficult to immediately raise the RPS ratio this year.

An official from the Ministry of Trade, Industry and Energy said, "After the bill is passed, we will establish a detailed plan including the annual RPS ratio," adding, "We are also considering raising it from 9% to 10% this year, but since the revision of the enforcement ordinance has already been completed, there are many aspects to review."

However, it is reported that the ruling party will demand the Ministry of Trade, Industry and Energy to raise the RPS ratio to 12-13% next year once the bill is passed. This is because a concrete implementation plan is necessary to increase the share of renewable energy to 20% by 2030 according to the government’s announced Basic Plan for Electricity Supply and Demand.

The power industry views that if the government steps on the "accelerator" regarding the RPS ratio increase, Korea Electric Power Corporation (KEPCO) will face greater cost burdens, which could become a factor pressuring electricity rate hikes. KEPCO must compensate large power producers for the costs of fulfilling the RPS. In 2019, when the RPS ratio was 7%, KEPCO’s related cost burden was 2 trillion KRW. By simple calculation, a 1 percentage point increase in the RPS ratio would increase KEPCO’s burden by around 300 billion KRW.

An energy industry official said, "If the RPS ratio rises, REC prices will jump, increasing KEPCO’s cost burden," adding, "While energy transition policies are necessary, rapid strengthening of RPS regulations due to excessive solar power expansion could result in increased electricity bills for the public."

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