One Year Since 'K-RE100' Implementation... "Renewable Energy Prices Still High"

LG Chem and 74 Companies Participate
Most Use 'Green Premium'
No Direct PPA Contracts with KEPCO

40% More Expensive Than Regular Electricity Rates

Yeongdeok Wind Power Complex, the first large-scale wind power complex in Korea./Gyeongbuk Uljin=Photo by Dongju Yoon doso7@

[Asia Economy Reporter Oh Hyung-gil] It has been one year since the introduction of the "Korean-style RE100 (K-RE100)" initiative, which aims for companies to use 100% renewable energy, but participation from companies remains low due to high costs. With changes to carbon neutrality policies expected under the new government, experts point out that increasing benefits for participating companies is necessary for K-RE100 to stabilize.

According to POSCO Research Institute on the 18th, as of the end of last year, 74 companies including LG Chem, LG Display, SK Telecom, SK Materials, and Hanwha Solutions participated in K-RE100 implementation, with a total of 76 cases.

K-RE100 recognizes various methods for directly or indirectly procuring renewable energy, such as green premiums, REC (Renewable Energy Certificate) purchases, PPA (Power Purchase Agreements), equity investments, and self-construction.

The problem is that most participating companies rely heavily on the green premium. By implementation method, 59 cases (78%) are green premiums. REC purchases account for 15 cases (19%), self-construction for 2 cases, and there are no actual results for PPA.

The green premium is a method where companies pay a green premium separately from their electricity bill to Korea Electric Power Corporation (KEPCO) to purchase renewable energy power, making it the cheapest and easiest way to buy renewable energy.

However, since it is not linked to greenhouse gas reduction performance, its effectiveness is limited, and more than 90% of the bidding volume remains unsold. In two rounds of bidding last year, 17,827 GWh and 12,319 GWh were offered respectively, but only 1,252 GWh (7.0%) and 203 GWh (1.6%) were awarded. The green premium price is mostly contracted at the bidding floor price of 10 KRW per kWh. This means companies are spending money on purchasing renewable energy but are not achieving actual greenhouse gas reduction effects.

REC trading has been conducted about 30 times since the market opened in August last year, but this accounts for only 0.3% of the green premium sales volume. As REC prices have risen, they are traded at about five times the price of the green premium. On the 4th, a total of 8 REC trades amounting to 1,634 MWh were made in the REC market, with an average price reaching 54,600 KRW per MWh. This is a 37.5% increase compared to last year's average price of 39,700 KRW.

There have been no PPA contract cases. PPAs, which involve trading power directly or indirectly with renewable energy producers or KEPCO without going through the power market, are gaining global attention. However, domestically, they are neglected because the price is about 40% higher than general electricity rates.

In contrast, in the United States, REC accounts for 51% of RE100 implementation methods, PPA 27%, and green premiums 20%. The additional cost of PPA compared to general electricity rates is only about 3-5%, making it less burdensome for companies.

Jo Yoon-taek, senior researcher at POSCO Research Institute, said, "It is necessary to provide reasonable incentives for the use of renewable energy," adding, "We should discuss measures such as exempting participating companies from reporting and reducing indirect greenhouse gas emissions or reducing climate environment charges on electricity bills."

Meanwhile, LG Energy Solution has been selected as the first Korean company to serve as an advisory member of the RE100 board. Alongside companies like Apple, Unilever, Meta, Sony, and Pepsi, LG Energy Solution will evaluate and review expertise, experience related to renewable energy, and future plans to achieve RE100, serving as a policy advisory role on the RE100 board.

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