Renewable Energy to Account for 25.8% of Power Generation by 2034
The author is an analyst of NH Investment & Securities. He can be reached at ys.jung@nhqv.com -- Ed.
Korea’s 5th Renewable Energy Basic Plan has been confirmed. The government plans to create 65.1GW of renewable energy facilities by 2034. It is also meaningful that the target for mid-term supply (by 2025) has been revised up. Reinforcement and implementation of renewable energy policies should continue going forward.
Renewable energy portion of total power generation to reach 25.8% by 2034
The Ministry of Trade, Industry, and Energy (MOTIE) has passed the 5th Renewable Energy Basic Plan, which sets out policy for renewable energy development and supply through 2034.
The main content of the policy includes: 1) raising the portion of renewable energy out of total power generation by 4.2%p (up from 21.6% by 2030 to 25.8% by 2034); and 2) creating 65.1GW of renewable energy facilities by 2034. Institutional changes include: 1) the diversification of participants to include local governments and residents; 2) licensing and regulatory improvements (eg, land lease extension and wind licensing integration); 3) the reorganization of the Renewable Energy Portfolio Standard (RPS) market; 4) the expansion of distributed renewable energy and private renewable energy generation; and 5) an R&D boost for more efficient solar, wind, and hydrogen power products.
In 2021, follow-up policies are expected, including: 1) the introduction of a Hydrogen Energy Portfolio Standard (HPS) to build up and strengthen the hydrogen ecosystem; 2) the revision of the Electricity Enterprises Act to allow direct power purchase agreements (PPAs) between renewable energy generators and electricity consumers, 3) a hike in the Renewable Energy Portfolio Standard (RPS) quota and an increase in the number of firms subject to the RPS quota; and 4) an adjustment to Renewable Energy Certificate (REC) weight by energy source.
2025 supply target increased; policy reinforcement necessary to achieve carbon neutrality
With this policy, the direction of renewable energy supply has been confirmed. It is meaningful that the 2025 supply target has been revised up from 29.9GW to 42.7GW. To achieve carbon neutrality by 2050, an improvement in renewable energy efficiency/technical capability, enhancement of grid infrastructure, and expansion of hydrogen energy will be needed. From a mid/long-term perspective, we believe that policy reinforcement is inevitable, which should support mid/long-term valuation growth at Korean renewable energy players.