Gov't Mandate Requiring More Renewable Energy Shows Poor Understanding of Market | Be Korea-savvy

Gov’t Mandate Requiring More Renewable Energy Shows Poor Understanding of Market


The RPS requires energy producers with annual production capacities at or above a threshold of 500 MW to either allocate a certain portion of energy production to renewable energy sources or to purchase renewable energy credits (REC) to make up the difference. (Image: Korea Bizwire)

The RPS requires energy producers with annual production capacities at or above a threshold of 500 MW to either allocate a certain portion of energy production to renewable energy sources or to purchase renewable energy credits (REC) to make up the difference. (Image: Korea Bizwire)

SEOUL, Nov. 14 (Korea Bizwire) – The Moon Jae-in administration’s renewable portfolio standard (RPS) has come under fire from experts for what is being criticized as an insufficient understanding of market dynamics.

The RPS requires energy producers with annual production capacities at or above a threshold of 500 MW to either allocate a certain portion of energy production to renewable energy sources or to purchase renewable energy credits (REC) to make up the difference. 

According to a review conducted by the Board of Audit and Inspection of Korea last December and data derived from published industry figures, the cost of investment for renewable energy plants are as follows (all costs per MW basis, ex: 1 billion won/MWH):

Mixed fuel biomass (1 billion won), solar power (1.7 billion won), land-based wind energy (2.7 billion won), wood pellet biomass (3 billion won), offshore wind energy (5.1 billion won) and fuel cells (5.5 billion won).

Despite the formidable costs associated with investment in offshore wind energy compared to mixed fuel biomass, under the conditions decided by the government’s RPS, REC purchases from the former are costlier than from the latter.

This is because RECs, normally weighted as one credit per 1MWH of energy produced, are weighted using a ratio system dependent on the type of renewable energy source in the South Korean government’s RPS. For example, for 100 MWH of energy produced, the equivalent in RECs for mixed fuel biomass would be 100 credits (1.0) and 200 credits (2.0) for offshore wind energy. 

The government has set in motion “Renewable Energy 3020”, a policy requiring 20 percent of all energy to be produced from renewables by the year 2030. (Image: Korea Bizwire)

The government has set in motion “Renewable Energy 3020”, a policy requiring 20 percent of all energy to be produced from renewables by the year 2030. (Image: Korea Bizwire)

As a result, the majority of coal-burning power plants are reportedly purchasing RECs from mixed fuel biomass producers.

Energy from mixed fuel biomass is generated from combustion and fermenting of a combination of different materials, including wood pellets. As allegations questioning whether wood pellets are truly an environmentally-friendly energy source are being raised, critics have pointed out that the government may in fact be doing little more than closing one door and opening another under the guise of pursuing a green energy policy.

National Assemblyman Lee Chan-yeol called for restrictions to be placed on the required amount of energy supplied by the burning of lumber, citing data that revealed five power plants had fulfilled 47.9 percent of their renewable energy requirements by purchasing RECs from mixed fuel biomass producers.

The government has set in motion “Renewable Energy 3020”, a policy requiring 20 percent of all energy to be produced from renewables by the year 2030.

 

S.B.W. (sbw266@koreabizwire.com)

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