Government to regulate renewable energy market to provide stability

Korea Energy Agency headquarters in Ulsan, South Gyeongsang Province, South Korea [Courtesy of KEA]

The Korean government is seeking measures to stabilize renewable energy certificate (REC) market on concerns that the recent surge in spot prices to 70,000 won ($52.32) could put additional burden on the state power company that is already struggling from huge losses.

The Maeil Business Newspaper learned on Thursday that the Korea Energy Agency (KEA), in charge of renewable portfolio standards (RPS) and the issuer of RECs, is considering to put in place criteria for the issuance of RECs at the national level for supply-demand control and to stabilize prices in the REC market. National RECs are issued by the KEA in proportion to the government support provided to power generators at the installation of renewable energy facilities, which have not been issued for a while.

The energy authority’s recent move is believed to come following concerns over potential hikes in electricity rates. Korea Electric Power Corp. (KEPCO) settles the costs for its purchase of RECs at its subsidiaries and other energy generators that need to meet RPS requirement. As KEPCO’s settlement for the costs is regarded as the state power company’s spending on power purchases, any price hike in RECs is likely to lead to rate hikes.

According to the Korea Power Exchange, the REC spot price hit 71,900 won at the close on Tuesday. The average REC spot price for the entire month is estimated to stand in the 70,000 won range, the highest since March 2019. KEA forecasts that additional price hikes are likely for RECs, as small private power generators, hoping for higher prices, may be unwilling to sell at the moment, potentially leading to a supply side issue, despite there being a sufficient volume of RECs currently available in the market.

KEA plans to establish clear criteria to define market imbalances so that it could use national RECs as useful vehicles to stabilize the market when it faces any imbalance between supply and demand. The authority is also considering measures to enhance flexibility in the RPS system, including partial resale of RECs among RPS-obligated entities, which is currently not allowed.