Offshore wind power cost 7 times higher than nuclear power: Data

The selling price of offshore wind power in South Korea has reached an all-time high in the first quarter, surpassing the selling price of nuclear power by more than seven times, data showed Wednesday.

According to data obtained by Representative Han Moo-gyeong of the People Power Party from the Korea Electric Power Corp. (KEPCO), the unit price of electricity generated from wind farms off the southwest coast of the country stood at 357 won ($0.27) per kilowatt-hour in the first quarter, up 52 percent from 234 won in 2020 when the power production first began.

Korea Offshore Wind Power Co., the operator of the southwest offshore wind farms, saw earnings grow significantly to 52.5 billion won last year from 26.8 billion won in 2020.

The company’s first-quarter revenue at 14.6 billion won exceeded half of the revenue for the entire year of 2020.

The southwest offshore wind farms, located in Gochang and Buan in North Jeolla Province have a capacity of 60 megawatts (MW), making it the largest among the three offshore wind power facilities operating in the country.

Apart from the southwest offshore wind farms, Korea has two other offshore wind farms in Yeonggwang, South Jeolla Province, and Jeju Island, with a capacity of 34.5 MW and 30 MW, respectively.

The unit price of electricity from the southwest offshore wind farms is notably higher compared to other sources of power generation.

According to KEPCO, the unit cost of electricity from nuclear power in the first quarter of this year was only 46 won per kWh, which is nearly twice as high as other base power generation sources such as coal (160 won), liquefied natural gas (LNG) (279 won), and even renewable energy sources such as solar and wind power combined (197 won).

The reason offshore wind power is significantly more expensive than other power sources is because it is heavily weighted with renewable energy certificates (RECs).

RECs are certificates that prove the supply of energy from renewable sources. They are mostly purchased by companies that are subject to the renewable portfolio standard (RPS) policy.

[Image source: Gettyimagesbank]

Companies participating in the RE100 program, which aims to source 100 percent of their electricity from renewable sources by 2050, are purchasing RECs to meet their goal.

The basic REC weight for offshore wind power is 2.5, with additional weight based on distance and water depth. In the case of southwest offshore wind power, the REC weight is 2.8, which is more than double the REC weight of 1.2 for small-scale solar power under 100 kilowatts (kW).

Typically, one REC is issued for every megawatt of renewable energy generated. Given that the current price of 1 REC is about 74,000 won, the RECs can generate about 207,000 won in additional revenue for southwest offshore wind power which is worth 2.8 RECs.

In July 2021, the then-Moon Jae-in government expanded the REC weight to promote the spread of renewable energy.

The problem is that offshore wind power farms are expected to expand rapidly in the future, which may weigh on cost burden.

According to the government plan announced in January, renewable energy is expected to account for 108 GW, or 45 percent, of the entire energy mix in 2036.

The industry expects about 30 GW of this to come from offshore wind power. Given that the current offshore wind power capacity stands at 124.5 MW, it will increase 240 times by 2036.

The growth of offshore wind power will inevitably lead to a cost burden for KEPCO.

For example, if KEPCO was to purchase all of the average monthly electricity consumption (322 kWh) of a household of four people from offshore wind power, it would have to pay about 115,000 won. However, the actual amount sold to consumers would be only around 50,000 won. Without an additional increase in electricity prices, this could result in a significant loss of around 65,000 won.

Experts suggest that the current system of assigning excessive weight to RECs for offshore wind power needs to be overhauled to take into account the pace of renewable energy expansion.

“Until now, we have focused on promoting solar and wind power generation by raising the weight of RECs,” said Son Yang-hoon, a professor of economics at Incheon National University. “As a result, renewable energy has increased rapidly, and now it has reached a level where costs are unsustainable.”