South Korea needs to open its state-run energy sector to private companies to bring in more investment and competition and to better achieve the nation’s renewable energy goal, according to a UK-based energy consulting firm.
Shortly after Moon Jae-in became president, the Korean government unveiled its power supply plan aiming for 20 percent of total electricity consumption to come from renewable energy sources by 2030.
Wood Mackenzie forecast Korea’s renewables would account for about 17 percent by that year, a little short of the goal.
“In order to achieve the renewable goal, Korea needs to open its power market by adopting corporate power purchase agreements,” said Zi Sheng Neoh, a managing consultant of Wood Mackenzie’s power and renewable consulting, in an interview with The Korea Herald.
WoodMac, founded in 1973, is a UK-based consultancy group specializing in energy, chemicals, renewables and metals, with over 25 offices worldwide. Neoh, based in Singapore, was visiting Seoul to host a seminar on Korea’s 2030 renewable energy goals.
Corporate power purchase agreements allow companies to purchase renewable energy directly from private energy generators at a fixed price over a number of years. Although the scheme is widely seen in other nations, it is not available in Korea, where state-run Korea Electric Power Corp. dominates the distribution of power.
Zi Sheng Neoh, a managing consultant of Wood Mackenzie (Wood Mackenzie)
“With open access to corporate PPAs, corporates can directly buy power from renewable generators, boosting investment and competition in the energy market and bringing down power prices,” he said.
The use of renewable energy by Korean companies is relatively low compared to other nations due largely to the state’s monopoly of the energy sector.
For instance, the use of renewable energy by the nation’s largest firm, Samsung Electronics, was 1 percent last year, far below the average of 12 percent in the global IT sector, according to the International Renewable Energy Agency.
Adoption of corporate PPAs would not be easy because it would affect Kepco’s revenue, but Neoh argued Korea should face such challenges to follow the global energy trend.
“Traditionally, utilities in all parts of the world opposed the idea of corporate PPAs. But given the global trend of renewable energy, more mature markets embarked (on) systems similar to corporate PPAs,” he added.
Korea, Mexico and Israel are currently the only countries among member nations of the Organization for Economic Cooperation and Development that have not introduced competition to the power market.
Globally, tech giants, including Google, Apple, Facebook and Amazon, have already signed PPAs with large wind and photovoltaic parks. Early this year, Google signed a long-term agreement with several Taiwanese energy players for the purchase of power generated at a 10-megawatt solar array, marking the firm’s first move to procure energy via a corporate PPA in Asia.
Meanwhile, Rep. Kim Sung-whan of the ruling Democratic Party of Korea plans to propose a bill related to corporate PPAs in the first half of the year, with the aim of expanding the use of renewable energy.
Despite the challenges, the consulting firm is beginning to see the effects of the Korean government’s commitment to greener energy sources. Wood Mackenzie expects the country’s renewables capacity to triple to 60.5 gigawatts by 2030 compared with 2019. Solar and wind capacity installations would make up a majority of this growth.
As for solar energy, the government has planned the Saemangeum solar project on reclaimed land to add 3 gigawatts of solar capacity into the grid by 2022. Although the project is undergoing scrutiny over economic feasibility and environmental concerns, WoodMac still expects at least 1 gigawatt of solar capacity to be grid connected by the planned date.
“By 2030, South Korea’s solar capacity will hit 37.5 gigawatts, four times (that) of 2019,” added Neoh.
As for wind energy, offshore wind capacity in Korea will also rise significantly, according to the consulting firm. It is expected to increase 64 times to 6.4 gigawatts by 2030 compared with 2019.
“The key to scaling up offshore wind capacity is national-level projects to encourage and leverage on Korea’s deep expertise in shipbuilding to establish a mature offshore wind power supply chain, including potential offshore floating technology,” he said.
Most recently, the local government of Ulsan City signed a memorandum of understanding with a development consortium that includes major foreign companies, such as Shell, Denmark’s Copenhagen Infrastructure Partners, Swedish technology company Hexicon, and California’s Principle Power, to explore large-scale floating offshore wind development.
By Shin Ji-hye (
shinjh@heraldcorp.com)