Government Officially Moves to Abolish RPS... "Renewable Energy to Be Distributed Mainly Through Government Procurement"

The government has officially announced its plan to abolish the 'Renewable Portfolio Standard (RPS)', a system that mandates supplying a certain percentage of total power generation from renewable energy sources. The government views the mandatory RPS market as hindering price competition in renewable energy and intends to promote the deployment of new facilities through government tenders.

On the 16th, the Ministry of Trade, Industry and Energy held a policy meeting chaired by Minister An Deok-geun at the Korea Chamber of Commerce and Industry in Seoul with renewable energy power generation, manufacturing, and demand companies, and announced the 'Strategy to Expand Renewable Energy Deployment and Strengthen Supply Chains' containing these details.

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Until now, the government has supported the expansion of renewable energy by creating mandatory demand through RPS, which was implemented in January 2012. However, as private voluntary demand such as power purchase agreements (PPA) with relatively higher economic feasibility increased, excess demand occurred in the renewable energy market. The spot market price for Renewable Energy Certificates (REC) rose more than twofold from 35,000 KRW in March 2021 to 79,000 KRW in March this year due to a shortage of REC supply. A Ministry of Trade, Industry and Energy official explained, "Power producers purchase RECs to meet RPS requirements, and Korea Electric Power Corporation (KEPCO) compensates for these costs, which KEPCO then recovers through climate and environmental charges included in electricity bills," adding, "Ultimately, this increases the burden on the public, making it necessary to transition the renewable energy system."

Accordingly, the ministry plans to promote the deployment of new facilities primarily through government tenders rather than RPS. The government intends to conduct annual tenders by energy source for new facility deployment targets. Facilities will be selected within the tendered capacity based on price and non-price criteria, and winning bidders will enter into long-term (20-year) fixed-price contracts at their bid prices. A ministry official stated, "We plan to improve the current RPS system by strengthening the government's role in supplying renewable energy while reducing the public burden through broad discussions with the National Assembly, industry, and experts in the second half of this year," and added, "By providing direct market signals from the government, it will be easier to achieve stable deployment targets and procure renewable energy at stable costs, which is expected to alleviate the public's electricity bill burden."

The ministry has decided to strengthen the government's leading role in deployment to actively expand the renewable energy market in a more orderly manner. Through this, it plans to deploy approximately 6GW of renewable energy annually.

For offshore wind power, the government is pushing for the prompt enactment of the Offshore Wind Power Special Act, which includes a planned site designation system supporting site discovery, resident consultations, and permit assistance. Additionally, to strengthen supply chain competitiveness across the offshore wind ecosystem, the government will evaluate the competitive bidding market and announce a roadmap in July this year detailing bidding volumes, timing, and evaluation methods for the next two years.

For solar power, the government will focus on discovering sites and improving regulations through public pilot projects centered on industrial complexes and agrivoltaics with favorable power grid conditions and community acceptance. It will also promote grid-friendly site inducement in areas with grid capacity and flexible grid connection measures considering power system impacts.

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The industrial base will also be proactively strengthened in preparation for domestic deployment expansion. The government will check supply chain and security factors through the expansion and strengthening of competitive bidding for solar and wind power facilities, while also aiming to secure early next-generation technologies to capture future markets. In particular, support will be enhanced for resolving technical development challenges and shared infrastructure for next-generation solar tandem cells, targeting early commercialization by 2026 and achieving 35% efficiency by 2030.

After announcing this strategy, the Ministry of Trade, Industry and Energy plans to sequentially establish follow-up policies for major detailed tasks in cooperation with related ministries. Through this, it will continuously seek balanced development plans for other carbon-free energy sources such as nuclear power and hydrogen alongside renewable energy.

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