New Renewable Energy South Korea Supply System Proposal
South Korea’s climate ministry has proposed a significant overhaul of the country’s renewable energy supply system, aiming to replace the existing Renewable Portfolio Standard (RPS) and Renewable Energy Certificate (REC)-based framework with a more competitive model. The proposed model will be built around long-term fixed-price bilateral contracts for difference (CfDs) with Korea Electric Power Corporation (KEPCO). If approved, this change is set to take effect on January 1, 2027.
Key changes in the proposed system include the following:
- Phasing Out RPS: The RPS, introduced in 2012, would be entirely phased out, marking the end of the current REC-driven framework after about 15 years.
- Competitive Bidding: The procurement of renewable capacity will be conducted through government-run tenders based on a five-year roadmap, with two to four auctions expected annually.
- Long-Term Contracts: Successful bidders will sign 20-year fixed-price contracts with KEPCO under a bilateral CfD structure.
- New Pricing Mechanism: A preferential price mechanism will replace the REC multiplier, which has been an integral component of profitability for renewable energy operators.
- Obligation Structure Transition: Current RPS-obligated suppliers will be reclassified as either mandatory suppliers or target-managed entities, with obligations now linked to installed capacity instead of generation volume.
- Transition Period: The spot REC market will remain operational until 2029.
The proposal aims to ensure the stability of existing renewable energy companies during the transition. Current participants in the renewable energy landscape may continue to receive or trade certificates for up to 20 years, although new certificate issuance would be limited beginning January 1, 2027.
Market Context and Implications for Renewable Energy South Korea
This overhaul comes as South Korea seeks to accelerate the adoption of renewable energy in response to international climate obligations and domestic demand for cleaner energy sources. By moving towards a competitive bidding system, the government aims to attract more investments into renewable energy projects while enhancing profitability for developers.
As part of the government’s broader strategy to transition towards a low-carbon energy system, existing renewable companies may find expanded opportunities through the proposed long-term contract framework while adapting to new non-price selection criteria outlined in the competitive bidding process.
Future Developments in Renewable Energy South Korea
The climate ministry is currently undertaking a review process, with discussions ongoing regarding the specifics of the proposal and its implications for both existing and future projects within South Korea’s renewable energy sector.
Sources for Renewable Energy South Korea
- Preferential Pricing and Bilateral CfDs: How the Renewable Energy System Will Change
- Korea Rural Community Corp faces potential W1.3tr fine as ministries clash over renewable energy mandate
- New obligations and preferential pricing introduced in renewable energy framework
- South Korea Meets 2025 Emissions Target Amid Slowing Reduction Pace
- The government launched the “Integration Preparation Committee for Development Public Enterprises” and started the integration of the five power generation companies
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