Sudden Surge in Subsidies and Rapid Expansion? ... Solar Panel Rental Projects Disappearing After 8 Years

Ministry of Industry to Abolish 'Solar Panel Rental Business' Starting Next Year

[Sejong=Asia Economy Reporter Kwon Haeyoung] The 'solar power equipment rental business' is facing the risk of collapse because the speed of solar power dissemination has outpaced demand. Since the Moon Jae-in administration increased subsidies from the government, local governments, and public institutions to expand solar power dissemination, private sector leadership has become difficult, and the profitability of these business operators has also deteriorated. For the activation of renewable energy, precise market design and the formation of a stable power grid are important, so there are calls for the need to 'adjust the speed' of supply.

◆ Renewable energy speed adjustment needed for private sector leadership = The solar power rental business is a system where private operators selected by the Korea Energy Agency rent solar power generation equipment to houses, install it, and maintain and manage the equipment for 7 to 15 years. Homeowners can significantly reduce their electricity bills by paying rental fees for the solar power equipment, while rental operators can earn rental fee revenue and sell renewable energy certificates (REPs) received from renewable energy production to power companies. For this reason, when the Park Geun-hye administration launched in 2013, it recognized the need to expand the share of renewable energy and officially implemented the system. It was judged to be more efficient to expand solar power dissemination by creating a market-driven business model rather than directly investing government budgets.

However, as the government and local governments indiscriminately supported subsidies for installing renewable energy generation equipment such as solar power, the solar power rental business failed to expand. For example, the budget for the housing support project, which provides subsidies for installing residential solar power equipment, increased from 20.4 billion KRW in 2016 to 24.4 billion KRW in 2017 and 68.3 billion KRW in 2018. The building support project budget increased from 21.4 billion KRW in 2017 to 33.9 billion KRW in 2018 and 66.4 billion KRW in 2019. The budget for the convergence support project increased from 57.5 billion KRW in 2018 to 299.7 billion KRW in 2020.

Some argue that due to the oversupply of renewable energy such as solar power, incentives for market participants weaken and side effects such as power grid instability may occur, so speed adjustment is necessary.

◆ Solar power certificate prices 'plummeting'... "Power grid issues and precise market forecasting needed" = Especially under the current administration, the price of renewable energy production certificates has noticeably declined. According to the Ministry of Trade, Industry and Energy and the Korea Energy Agency, the price of renewable energy production certificates (REPs) sold by solar power rental operators to power companies fell from 211?258 KRW per 1 kWh in 2018 to 146?166 KRW/kWh in 2021.

The Ministry of Industry limited the upper limit of rental fees that rental operators can charge consumers and instead allowed them to cover profits by selling eco-friendly power certificates to power companies. However, recently, as the mandatory renewable energy volume that power companies must purchase in the market has not kept up with supply, certificate prices have fallen.

The government's consideration of abolishing the solar power rental business system also appears to be related to this situation. Due to the oversupply of solar power, the volume of renewable energy purchased by power companies has decreased, causing the price of renewable energy certificates (RECs) to plummet from 174,267 KRW per 1 MWh in October 2016 to the 30,000 KRW range currently. In effect, rental operators who participate in solar power generation by leasing land from homeowners lose the incentive to enter the business.

Professor Jeong Dongwook of Chung-Ang University said, "The current administration has focused only on renewable energy supply performance such as solar power, resulting in unstable power grid connections and failed market forecasting, which has also worsened the profitability of business operators," adding, "Since renewable energy dissemination is a long-term project requiring predictions over 20 years, stable dissemination is more important than rushing."

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