Solar and Wind Power Electricity, Mandatory Supply Ratio Expanded to 25% in 5 Years... 'Trillion-Won' Eco-Friendly Bill

Ministry of Industry Raises Mandatory Annual Supply Ratios for Renewable Energy
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[Sejong=Asia Economy Reporter Kwon Haeyoung] The mandatory supply ratio of electricity generated from renewable energy sources such as solar and wind power by power generation companies will gradually increase from next year, reaching 25% by 2026. Currently, the mandatory supply ratio of renewable energy accounts for about 9% of total power generation, but in five years, it will grow to one-quarter of the total power generation. Although the intention is to accelerate the eco-friendly transition of energy, the financial burden on Korea Electric Power Corporation (KEPCO) to compensate for the renewable energy purchase costs of power companies is increasing, raising the possibility of a boomerang effect leading to electricity rate hikes.

The Ministry of Trade, Industry and Energy announced on the 6th that it will give legislative notice of a partial amendment to the Enforcement Decree of the "Act on the Development, Use, and Promotion of New and Renewable Energy (hereinafter the New and Renewable Energy Act)" to gradually raise the mandatory supply ratio under the Renewable Portfolio Standard (RPS) system to the legal maximum of 25%.

Earlier, the National Assembly passed the New and Renewable Energy Act in April, which includes raising the mandatory supply ratio of renewable energy. The current amendment to the Enforcement Decree contains specific follow-up measures. According to the amendment, the annual mandatory ratio will start by rising to 12.5% next year, then increase to 14.5% in 2023, and 20.5% in 2025. From 2026, it will expand to the upper limit of 25%. Accordingly, public and private power generation companies with power generation facilities of 500 MW or more, including six power subsidiaries under KEPCO, must increase the supply ratio of electricity generated from renewable energy starting next year.

An official from the Ministry of Trade, Industry and Energy said, "We will finalize the mandatory ratio plan within the year by reflecting legislative notice, opinions from related organizations, and trends in NDC discussions," adding, "We plan to apply the revised mandatory ratio from next year."

Some critics argue that the government's rapid solar power deployment policy has accelerated the timeline for raising the mandatory supply ratio of renewable energy. Solar power operators produce electricity and receive Renewable Energy Certificates (REC), which they sell to power companies to earn revenue. However, under the current government, the oversupply of solar power facilities caused REC prices to plummet, prompting a hurried increase in the mandatory supply ratio to boost subsidies. The Ministry of Trade, Industry and Energy also explained that "the situation of REC oversupply was comprehensively considered."

This structure inevitably leads to pressure for electricity rate increases. KEPCO has been compensating for the RPS compliance costs of major power companies, which surged from 1.612 trillion KRW in 2017 to 2.247 trillion KRW last year, and 1.6773 trillion KRW in the first half of this year. When the mandatory supply ratio rises to 25% in 2026, KEPCO's RPS compliance costs will increase astronomically. If the Carbon Neutrality Committee raises the NDC this month, the government plans to amend the law to raise the mandatory supply ratio ceiling beyond 25%.

Despite the rapid increase in the public's eco-friendly cost burden due to the accelerated deployment of renewable energy, policymakers are largely ignoring this issue. At a parliamentary audit yesterday, Yoon Soonjin, a private member of the Carbon Neutrality Committee, responded to a question from Yang Geumhee, a member of the People Power Party, about the extent of electricity rate hikes due to the expansion of renewable energy deployment by saying, "I have not thought about it specifically. You should ask the Ministry of Trade, Industry and Energy."

An official from the Ministry of Trade, Industry and Energy said in this regard, "Due to the decline in power generation costs from technological innovation in renewable energy, the impact of raising the mandatory supply ratio ceiling on power purchase costs will gradually decrease."

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