Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 210
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projects in the pipeline, including several
large-scale floating offshore wind projects
off the coast of Ulsan being developed by
(among others) Equinor, Korea National Oil
Corporation, Korea East-West Power, Shell,
Green Investment Group, CoensHexicon, SK
E&S, Copenhagen Infrastructure Partners
(CIP), EDP Renewables, Wind Power Korea,
and Aker Solutions, which recently obtained
EBLs. Developers such as POSCO Energy, Korea Midland Power, SK E&S, CIP, Hanwha E&C,
and Korea South-East Power are developing
several other offshore projects, including a
400 MW project near Woo-yi Island and a
350 MW project near Yeonggwang Nak-wal
Island in Jeonnam Province, and a 300 MW
project in Tongyeong Yok-ji Island, Kyungnam Province and Sinan County in Jeonnam
Province respectively. Although the market
continues to progress, it is expected for
the time being that the Government will
emphasize more on distribution to be made
in an orderly and organized manner by way
of tightening EBL requirements (such as
financial capacity and residence acceptance
standards) rather than focusing on supply
and quantitative expansion.
1.1 Renewable Portfolio Standard system
As to the regulatory features, Korea‘s RPS
provides key support (replacing the previous
FIT system effective until 2012) by requiring
the country‘s largest power generators
(i.e., those with installed power generation
capacity of over 500 MW (RPS Participants)) to progressively increase, on a yearly
basis, the proportion of their power that is
produced using renewable energy. In 2023,
RPS Participants are required to source 13%
of their total generation from renewable
Republic of Korea
sources. This requirement will increase to
25% from 2030 onwards. RPS Participants
can meet these quotas through the generation of power using renewable sources or
by purchasing renewable energy certificates
(RECs) from renewable energy independent
power producers (IPPs). If an RPS Participant
fails to meet its RPS targets, it will be liable
to pay a penalty in an amount of up to 150%
of the average REC price for its REC shortfall.
Penalties vary depending on the nature (and
frequency) of non-compliance.
An IPP is generally required to sell the
electricity it has produced at the system
marginal price (SMP) via Korea‘s wholesale
electricity cost-pool market administered by
the Korea Power Exchange (KPX). The SMP is
calculated by the KPX for each trading hour
to meet that hour‘s electricity demand and
is based on the variable production cost for
the marginal supply of power required at the
relevant hour that is produced by the most
expensive generating unit in the cost-based
pool. Korea Electric Power Corporation (KEPCO) is the sole purchaser of electricity from
IPPs and has a monopoly on the retail sale
of electricity in Korea (as well as on transmission and distribution).
The sale of RECs creates revenue streams for
IPPs that complement the revenues received from the sale of electricity at the SMP.
One REC nominally represents one MWh
of electricity, but different multipliers (i.e.,
weightings) are applied to the issuance of
RECs depending on a number of factors, including the type of renewable energy used.
Offshore wind has a higher weighting value
