South Korea overhauls renewable energy system with auctions

South Korea’s Ministry of Climate, Energy and Environment will shift its renewable energy system from a supply obligation model to a contract market based on competitive bidding, starting January 1, 2027.

The change follows the passage of an amended “Act on the Promotion of the Development, Utilization and Supply of Renewable Energy” on September 15.

The previous system, introduced in 2012, aimed to expand renewable energy use but faced challenges with fluctuating certification prices and a complex trading structure, limiting cost reduction and domestic industry growth. The new system will require new renewable energy facilities to compete for contracts within price limits set by the government. Winning facilities will then sign long-term fixed-price electricity purchase agreements with Korea Electric Power Corporation.

Officials expect this to guarantee stable profits for businesses, increasing their ability to secure financing and lower financial costs. Competitive bidding will also consider non-price factors like contributions to domestic industry, supply chains, and national security. The Ministry also plans to designate public institutions and private power companies as supply obligators to ensure planned expansion aligned with national goals. Existing renewable energy certificate contracts will continue, with certificates issued for up to 20 years.

To avoid disruption, the current certificate market will remain open for three years, and a separate market will operate for small facilities. The Ministry prepared for this change through extensive consultation with stakeholders, holding 82 meetings and forums over several years. They will hold a public hearing on September 30 to discuss details of the revised system and will finalize the lower-level regulations by the end of the year.