Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 218
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to obtain a stable income stream, and thus
facilitates the financing for development
and construction of new renewable power
projects. This system was available for solar
power projects only until September last
year when the Government introduced a
similar competitive bidding system for wind
power projects in order to promote more
cost effective wind power generations. The
first competitive bidding for wind power
projects has been conducted recently.
PPAs between IPPs and KEPCO (direct PPAs)
are not currently allowed in Korea because
IPPs are required to sell electricity on the
KPX and, in principle, only KEPCO is permitted to purchase electricity wholesale from
IPPs through the KPX and retail it to electricity consumers. In March 2021, Korea‘s National Assembly passed an amendment to the
Electric Utility Act that will enable companies to enter into PPAs directly (Direct PPAs)
for electricity generated from renewable
energy projects and details of Direct PPAs
are going to emerge soon. Moreover, the
MOTIE introduced indirect PPA arrangements where IPPs and electricity consumers
enter into back-to-back PPAs with KEPCO in
June 2021. Direct PPAs and indirect PPAs are
key developments of the K-RE100 program
which is implemented to encourage the
use of electricity generated from renewable
energy.
3.2 Consequences of a Project Delay
Offshore wind developers who obtain EBLs
are granted a four-year "preparation period"
within which they are required to achieve
COD. If a project is delayed beyond this
preparation period, the developer will need
Republic of Korea
to obtain an extension of the preparation
period in order to retain its required EBL.
An IPP will typically negotiate a long-term
fixed-price contract with an RPS Participant
in advance of COD, and the consequences
of a project delay under this agreement are
a matter for bilateral negotiation. Delays
will necessarily subject the developer to
the risk that the REC multiplier applicable to
the project may be revised down, since the
REC multiplier is not fixed until the KNREC
inspects the project facilities following
construction.
The MOTIE reviews and recalibrates REC
multipliers every three years to optimize the
supply and demand of different types of
renewable energy, and it stands to reason
that, with time, REC multipliers for OWFs
will gradually decline as construction costs
fall. The recent recalibration was conducted
in July 2021, and with this amendment, the
multipliers for OWF are changed to take into
account water depth, as well as distance
from shoreline.
3.3 Examples of Actual and Future Tariffs
Feed in tariffs are not applicable to new
projects in Korea‘s renewable energy market
since the advent of the RPS scheme in 2012.
Market pricing for both SMP and RECs is
in constant flux, which is why utility-scale offshore wind IPPs negotiate long-term
fixed-price contracts with RPS Participants
to ensure long-term predictable cash flows.
Combined SMP plus REC prices reflected in
long-term fixed-price contracts are negotiated on a case-by-case basis and are not
publicly available.
