Change in Policy

Korea is expected to increase the ratio of domestic power generation based on new and renewable energy sources with the new government launched.
Korea is expected to increase the ratio of domestic power generation based on new and renewable energy sources with the new government launched.

 

Korea’s new President Moon Jae-in promised during his election campaign to increase the ratio of domestic power generation based on new and renewable energy sources, such as solar power and offshore wind power, to at least 20% by 2030. Under the circumstances, South Korean new and renewable energy companies are expecting that their market will be able to enjoy a substantial growth down the road. As of the end of last year, that type of power generation accounted for 3.6% of the country’s total power generation.

Facility expansion is indispensable for the goal to be achieved. According to Yuanta Securities, the total capacity of South Korea’s alternative power generation facilities is scheduled to be expanded from 7,499 MW to 32,890 MW between last year and 2029 based on the previous administration’s plan. The amount of expansion, however, is required to reach at least 47,826 MW for the new President to meet his goal. In this context, the sales of companies producing equipment for such facilities are expected to increase to a significant extent. In addition, a series of alternative power generation projects can be initiated ahead of schedule with the new President having promised to cancel new coal-fired power plant construction projects and shut down the 10 oldest coal-fired power plants in the country earlier than previously planned.

The new government is planning to adopt an increase in minimum required alternative energy supply in compliance with the Renewable Portfolio Standard (RPS) and temporarily run a feed-in tariff (FIT). The RPS is to compel each power generation company with a certain capacity to supply a certain amount of power by means of new and renewable sources. The FIT, which was abolished six years ago in South Korea, is for the government to make up for the difference in price when the price of electricity supplied by alternative means falls below the price announced by the government.

Skepticism does exist of course. The facility expansion requires a long period of time, but policy consistency cannot be guaranteed. In addition, the major market for manufacturers in the industry is not domestic but overseas, which means the change in policy in South Korea may have little effect on them. Besides, the new government’s measures are very costly. The FIT cost 402.1 billion won in 2016 alone.

 

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