Offshore Wind Worldwide 2022 edition - Flipbook - Page 157
Offshore Wind Worldwide 2022
II. The Offshore Wind Promotion
System
A. R
enewable Portfolio Standard
system
As to the regulatory features, Korea’s
Renewable Portfolio Standard (“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 500MW (“RPS
Participants”)) to progressively increase, on
a yearly basis, the proportion of their power
that is produced using renewable energy. In
2022, RPS Participants are required to
source 12.5% of their total generation from
renewable sources. This requirement is
scheduled to increase to 25% from 2026
onwards. RPS Participants can meet these
quotas through generation using renewable
sources or by purchasing renewable energy
certificates (“RECs”) from renewable energy
independent power producers (“IPP”s). 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 noncompliance.
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
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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 1MWh 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 high weighting value
compared to other types of renewable energy
(including solar PV or onshore wind) to
accommodate the higher investment cost.
RECs are issued by the Korean New and
Renewable Energy Center (“KNREC”) of the
Korean Energy Agency to certified eligible
facilities. KNREC will determine (upon
inspection) whether a facility complies with
the standards to be certified and registered
to receive RECs (and also determines the
applicable REC multiplier). RECs can be
traded on the spot market or under longterm contracts.