[Column] The Paradox of Renewable Energy Budget

[Sejong=Asia Economy Reporter Kwon Haeyoung] "The renewable energy budget is excessively large compared to other sectors. Since the budget is limited, execution efficiency is the most important, but the budget authorities seem to take this lightly."

A Ministry of Trade, Industry and Energy official recently expressed concerns about the rapid increase in the renewable energy budget. This reaction was completely different from the common belief that "the more budget, the better."

The renewable energy budget will increase again next year. For example, the budget for renewable energy financial support projects such as solar and wind power increased by 36%, from 534 billion KRW this year to 726 billion KRW next year. This project supports funds needed to expand distribution of rural, industrial complex, and urban solar power, wind power, and fuel cells at low interest rates of around 1%. The budget execution rate this year was also relatively high at 78.8% as of mid-August. It is understandable given that the president has directly instructed to promote the contribution of solar power generation.

However, when examining the impact of the budget expansion, the official’s concerns are persuasive. Under the current administration, focusing solely on expanding solar power distribution has actually worsened the profitability of businesses. Private operators started their projects by receiving low-interest loans based on solar power distribution policies, but due to oversupply in a short period, a structural problem has arisen making it difficult to generate profits. The price of Renewable Energy Certificates (REC), a certification for renewable energy supply, has dropped to about 30,000 KRW from approximately 95,000 KRW three years ago, a one-third decrease. During the same period, the budget for production and facility funds, which accounts for most of the renewable energy financial support projects, has increased more than threefold. Coincidentally, the budget increase and profit decrease were exactly inversely proportional.

It is now a crucial time to create a stable market environment rather than just increasing renewable energy distribution as if completing a task. The more solar power is recklessly expanded without securing power grid stability, the more unstable power supply and demand become, and the profitability of market participants deteriorates. The result of increasing solar power-related budgets just to align with the administration’s "code" will be obvious again next year.

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