The amendment to the Regulation on the Support of New and Renewable Energy Facilities (“Regulation”) announced by the Ministry of Trade, Industry, and Energy of Korea (“MOTIE”) became effective on January 1, 2021. This amendment was enacted as a governmental measure to promote the use of renewable energy by companies and general consumers as part of the Korean RE100 initiative (“K-RE100”), which stems from the global RE100 initiative focused on facilitating and accelerating the global transition to carbon neutrality by 2050 by securing voluntary commitments from companies to transition to 100% renewable energy to fuel their operations.
Consumers of electricity (both industrial and general consumers) can participate in K-RE100 by registering with the Korea Energy Agency, and participants of the K-RE100 initiative will be recognized for reducing greenhouse emissions under updated guidelines provided by the Ministry of Environment.
The key aspects of the amendment to the Regulation (i.e., the addition of Chapter 7 “Use and Verification of Electricity Sourced from Renewable Energy),” are as follows:
Use of electricity sourced from renewable energy and supporting documents (Article 55)
Providing a system that promotes the use and distribution of renewable energy by consumers, and provides verification of such use
A consumer of electricity sourced from renewable energy may be issued a “confirmation of renewable energy use”
Designation of agencies to support renewable energy use and verification system (Article 56)
New and Renewable Energy Center (“NREC”):
- operates a system related to renewable energy use and confirmation.
- issues certificates, operates management systems, and manages statistics.
- installs self-consumption renewable energy facilities and operates renewable energy certificate (“REC”) purchase system
Korea Electric Power Corporation (“KEPCO”):
- manages green premium and power purchase agreements (“PPA”)
Introduction of ways to use renewable energy and procedure for issuance of “confirmation of renewable energy use” (Articles 57 – 63)
5 primary ways to use electricity sourced from renewable energy:
(1) Payment of green premium: consumer pays KEPCO a price higher than the normal electric charge to for electricity sourced from renewable energy on which green premium is imposed
(2) Execution of a PPA: consumer purchases electricity sourced from renewable energy from renewable energy producer by executing a PPA through KEPCO
(3) Purchase REC: consumer purchases a REC from the trade market established by the executive agency
(4) Equity participation: consumer invests in a renewable power generation business by purchasing its shares and executes a PPA or certificate purchase agreement to purchase electricity sourced from renewable energy
(5) Installment of self-consumption facility: consumer installs its own facility within its business site to use electricity sourced from renewable energy
*The Ministry of Environment is considering other ways to use renewable energy, which may be added at a later time
Issuance of “confirmation of renewable energy use”
- Record of use of electricity sourced from renewable energy must be submitted to be issued a “confirmation of renewable energy use”
Renewable energy usage records recognized as greenhouse gas mitigation records (Article 64)
Use of electricity sourced from renewable energy by using methods (2) through (5) above recognized as greenhouse gas mitigation under the Greenhouse Gas Emission Trading System
Utilization of green premium resources and establishment of Renewable Energy Deliberation Committee (Articles 65 and 66)
Utilization of green premium resources
- Upon approval from the Deliberation Committee (as defined below), the NREC may utilize green premium profits from sales by reinvesting in renewable power generation businesses (installment support, financial support, welfare support, infrastructure construction, etc.)
Renewable Energy Deliberation Committee (“Deliberation Committee”)
- reviews and deliberates suitability of green premium investment plan
- composed of 10 members from MOTIE, NREC, KEPCO, industry, academic, and research experts
This amendment is part of the Korean government’s efforts to promote active participation of Korean companies in the RE100 initiative. An amendment of the Enforcement Decree of the Electric Utility Act, which will enable renewable power generation businesses, KEPCO, and electricity consumers to execute PPAs is also expected to take effect by June of 2021.
Yoon & Yang’s ESG Group continues to monitor the changing regulatory landscape concerning ESG and will continue to provide timely updates for educational and informational purposes. In the event that you have any specific questions or would like further clarification regarding any aspect of this newsletter, please do not hesitate to contact us.