Starting next year, new renewable energy facilities in South Korea will transition to long-term fixed-price power purchase agreements with Korea Electric Power Corporation (KEPCO) through government competitive bidding. The existing renewable energy certificate (REC) spot market will continue to operate until the end of 2029 to mitigate the impact of this system change.
The Ministry of Climate, Energy and Environment announced on the 15th that the revised law promoting the development, utilization, and dissemination of renewable energy will be enacted, transitioning the Renewable Portfolio Standard (RPS) to a competitive bidding-based contract market. The revised law, which passed the National Assembly on August 20, will take effect on January 1, 2027.
Introduced in 2012, the RPS has contributed to the expansion of renewable energy, but it has faced criticism for revenue uncertainty due to fluctuations in REC prices and a complex trading structure. The ministry noted that it also limited the ability to lower generation costs and foster domestic industries.
Under the new system, new facilities will compete within a contract market based on generation sources, adhering to a government-set price cap. Winning bidders will enter into long-term fixed-price contracts with KEPCO. The ministry expects that this will facilitate easier financing and lower financial costs for operators, as they will be able to predict long-term revenues. The price competition during the bidding process is also anticipated to reduce electricity purchasing costs, thereby alleviating the burden of electricity rates.
In selecting operators, factors beyond price will be considered, including contributions to domestic industry, supply chains, and energy security, aiming to strengthen the domestic industrial base. Public institutions, such as power generation public enterprises and private power companies, will be designated as supply obligation and target management entities based on capacity, encouraging the expansion of facilities in line with national supply goals.
Transitional measures for existing operators will also be implemented. The RPS will be phased out gradually, considering existing contracts, but RECs for current operators will continue to be issued for up to 20 years. The REC spot market will have a three-year grace period after the law takes effect, operating until December 31, 2029. A separate contract market for small-scale facilities will also be established.
In relation to this, the ministry will hold a public hearing on the 30th at the Eliena Hotel in Gangnam, Seoul, to explain the operation of the contract market and the phase-out plan for the existing system. The hearing will include expert discussions and a Q&A session. Anyone can register online through the ministry and the Korea Energy Agency's websites.
The ministry plans to finalize amendments to subordinate regulations by the end of the year, incorporating feedback from stakeholders gathered during the public hearing and legislative notice. Next year, the first competitive bidding for solar and wind contracts will be announced alongside the implementation of the revised law.
Lee Kyung-soo, Director of Renewable Energy Policy at the Ministry of Climate, stated, "We will prepare subordinate regulations after sufficient discussions and aim to enhance the stability of renewable energy project revenues while systematically expanding renewable energy deployment and lowering prices, ushering in an era of transition to renewable energy."
* This article has been translated by AI.
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