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| A floating solar farm in Gapyeong County, Gyeonggi Province. / Korea Times file |
By Nam Hyun-woo
A bill allowing the Korea Electric Power Corp. (KEPCO) to directly operate power plants running on renewable energy resources has been tabled in the National Assembly, offering the state-run power distributor the chance to generate electricity for the first time in nearly 20 years.
However, small and medium private power generation companies are concerned that the proposal could cause the renewable energy certificate (REC) price, an important revenue source for them, to collapse. There is also the possible threat of KEPCO becoming a monopoly in the Korean renewable resources power generation market.
According to the National Assembly, Friday, Rep. Song Gab-seok of the ruling Democratic Party of Korea (DPK) recently tabled a revision of the Electric Utility Act that enables "a private-type public corporation to engage in more than two types of electricity businesses." The private-type public corporation means KEPCO.
Since 2001, KEPCO has been prohibited from engaging in the power generation and distribution businesses simultaneously. The state-run company only operates power distribution, while its subsidiaries, such as Korea Hydro & Nuclear Power, are in charge of power generation.
In terms of renewable energy, KEPCO is doing business indirectly, by investing in special-purpose companies.
Song's proposal comes amid the Moon Jae-in government's Korean New Deal investment initiative. Under this, the administration will foster the renewable energy industry as one of the country's main economic drivers by investing more than 73 trillion won ($61.56 billion). In line with the policy, the government aims to produce 20 percent of the country's energy demand from renewable resources by 2030.
As a mid-term goal, the government plans to raise the country's solar and wind-power generation capacity to 42.7 gigawatts by 2025, 3.4 times the level of last year.
The proposal aims to address the current renewable power generation capacity of private power companies and KEPCO subsidiaries, which is deemed insufficient to accomplish the government's targets.
"For the transition to renewable energy, large-scale renewable energy projects are necessary, but they require massive initial investments which are burdensome for private companies," Song said.
While officials at the Ministry of Trade, Industry and Energy said there were many procedural steps before KEPCO could start generating power, private power companies are expressing concerns, citing the expected drop in the REC price.
The REC is a marketable certificate that proves the bearer has generated and distributed electricity from renewable energy sources. One REC means the bearer has produced 1 megawatt-hour of renewable power.
Since 2012, Korea has applied the Renewable Energy Portfolio Standard (RPS) to 21 power companies whose capacity exceeds 500 megawatts. The companies are required to generate a certain proportion of their total power from renewable energy ― 7 percent this year and 10 percent in 2023.
To meet this standard, the companies purchase RECs from private renewable power companies and this has encouraged more to engage in the business. But private power firm officials say KEPCO's entry into power generation would see the REC price decline further due to oversupply.
The country's REC price is already in sharp decline due to oversupply. According to the Korea Power Exchange, one REC was traded at 45,304 won, Thursday, down nearly 40 percent from January last year, when the price hovered over 75,000 won.
"The country's renewable energy ecosystem can create an economic outcome with the growth of private power companies," an energy industry official said. "KEPCO's entry into power production, however, will likely drag down REC prices, taking away the growth momentum of private power firms."
