RE100, power purchase contract (PPA) performance sluggish… Renewable energy generation cost should fall

It was found that only 4 cases of Power Purchase Agreement (PPA), one of the means of implementing RE100, were performed. Although PPA has established itself as one of the representative means to implement the global RE100, it is evaluated that incentives to utilize the system are still insufficient in Korea, where the unit cost of renewable energy generation is high. The government is analyzing that the company’s interest will increase as the PPA system is directly implemented this month. Energy experts point out that participation in the PPA system will continue to be sluggish unless the unit price of renewable energy is lowered in the long term.

According to the government and related organizations on the 18th, there are 4 PPA contracts in Korea. As for the direct PPA, SK E&S signed two contracts with Amorepacific in March and SK Specialty last month, and is expected to sign a contract in the second half of this year. As for the third-party PPA, Hyundai Elevator, a solar power generation company, and Amorepacific and Eco Network signed two cases each through the brokerage of Korea Electric Power Corporation. One year and three months have passed since the first implementation of the system in June last year, but the contract performance is insignificant.

PPA refers to a contract method between the parties in which electricity sellers and electricity users directly trade electricity without going through the electricity market. It is divided into ‘third-party PPA’ that must go through KEPCO brokerage and ‘direct PPA’ that does not need to go through KEPCO brokerage. It is being used as a major means of implementation of RE100, which aims to convert 100% of used electricity to renewable energy by 2050.

Global companies are gradually expanding the use of PPAs to implement RE100. According to the Climate Group and CDP Committee, 28% of members using PPA as a means of implementing the global RE100 in 2020 more than doubled from 13% in 2016. Samsung Electronics, which declared global RE100 on the 15th, also announced that it would directly expand PPA in the US, China and Europe. Overseas, where renewable energy resources are abundant, it plans to directly use PPA as a main means to achieve RE100.

Since Korea implemented the PPA system last year, some point out that it is still too early to evaluate the system. The government expects that the PPA system will be activated in the future as the direct PPA system will be implemented from this month. The Ministry of Trade, Industry and Energy enacted the ‘Notice on Direct Electricity Transactions of Renewable Energy Electricity Providers’ for direct PPA implementation on the 1st. In the past, only third-party PPAs through KEPCO intermediary were implemented, but now electricity sellers can directly sell electricity to electricity consumers without KEPCO intermediary.

An official from the Ministry of Trade, Industry and Energy said, “The third-party PPA system has many disadvantages due to its rigid and inconvenient system.

Energy experts believe that it will be difficult for the PPA system to be activated immediately unless the unit price of renewable energy in Korea falls. The Ministry of Trade, Industry and Energy said that the monopoly sales structure would be gradually resolved by expanding the permitted range of PPA in the ‘New Government Energy Policy Direction’, but it is analyzed that this effect will be limited at the current state.

Kim Seung-wan, a professor of electrical engineering at Chungnam National University, said, “PPA can become the dominant means only when the unit price of renewable energy (in Korea) falls a little further. . The government should make efforts (to lower the unit price of renewable energy),” he said.

Professor Kim added, “(The current PPA) is limited to renewable energy, and since we have not yet discussed opening up the PPA to other power sources, (the effect of opening the market) will be limited.”

Byun Sang-geun, staff reporter [email protected]

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