On July 11, 2019, the Ministry of Trade, Industry and Energy (“MOTIE”) announced in a press release (the “MOTIE Press Release” – see the attached Annex for an unofficial English translation) that it will launch a green pricing pilot program (the “Pilot Program”) in October that will enable Korean companies to participate in the RE100 initiative for the first time.  Until now, companies operating in Korea had no way to purchase energy generated solely from renewable sources since all generated capacity (conventional and renewable) is aggregated on the Korea Power Exchange (“KPX”) and then sold to electricity consumers through the Korea Electric Power Company (“KEPCO”) without any certificates of origin.   

The MOTIE Press Release is a public manifestation of ongoing behind-the-scenes governmental research and deliberation on how best to support the continued growth of new and renewable energy in Korea.  It is also a reflection of the growing importance of the RE100 initiative globally and the pressure RE100 companies are putting on their Korean suppliers to source their electricity needs from renewables (and on the government to create a framework for them to do so).   

The MOTIE Press Release is a public manifestation of ongoing behind-the-scenes governmental research and deliberation on how best to support the continued growth of new and renewable energy in Korea.  It is also a reflection of the growing importance of the RE100 initiative globally and the pressure RE100 companies are putting on their Korean suppliers to source their electricity needs from renewables (and on the government to create a framework for them to do so).   

RE100 Globally and in Korea 

The RE100 is a voluntary global initiative led by The Climate Group in partnership with CDP where influential global companies commit to rely 100% on electricity generated from renewable sources for their global operations.¹  Already 185 of the world’s most influential companies across a spectrum of diverse industries have committed to the RE100 initiative.  The MOTIE Press Release specifically mentions Google, Apple and BMW as representative examples of the importance of RE100 members in global commerce.  When a company joins the RE100, it is required to set a target date (before 2050) for sourcing 100% of the electricity it uses in its global operations from renewable energy.  RE100 companies have made significant progress on this ambitious target, as it is reported that a quarter of RE100 companies have achieved at least 95% renewables as of July 2019.   

In practice, RE100 companies seek to achieve their renewables targets through a variety of means, including: 

i. self-generation of electricity through renewable power production;
ii. entering into PPAs directly with renewable power producers;
iii. entering into indirect PPAs or “green tariffs” (PPAs with utility companies for the purchase of renewable energy that such utility companies source through corresponding PPAs with renewable power producers);
iv. purchasing electricity through “green pricing” schemes, whereby “certificates of origin” (sometimes referred to as renewable energy guarantee of origin or “REGO” certificates) are issued for electricity derived solely from renewable sources and certified green energy can be purchased at a mark-up to electricity lacking REGO certification (such mark-up often referred to as a “green premium”); and
v. pressuring their suppliers to provide evidence of having sourced their electricity needs through renewable energy via one of the above methods.

The Green Path Forward 

The MOTIE Press Release does not provide any details on the scale of the Pilot Program, which companies will be eligible to participate or what the green premium will be for the purchase of electricity generated solely from renewable sources.  But although the details of this Pilot Program (and future permanent RE100-enabling policies) are yet to be formally announced, it is clear that the government is committed to creating a path for local companies to participate in RE100 if they so choose.  The MOTIE Press Release also mentions that the government will be encouraging equity investment in renewable power generation and self-generation of renewable energy. 

If the Pilot Program is successful, we would expect that a green pricing system (whereby certificates of origin are issued for renewable energy and certified green energy can be purchased at a premium) will be available for general consumption by early next year.  We are also aware of an ongoing policy debate regarding whether green pricing alone is sufficient to meet Korea’s ultimate energy policy objectives.  The government may consider allowing indirect PPAs or green tariffs, which would allow renewable power generators to enter into long term PPAs with KEPCO and for KEPCO to then enter into corresponding PPAs with electricity consumers wishing to indirectly purchase such renewable energy.  A further step to catalyzing the growth of renewable energy in Korea would be for the amendment of the Electric Business Act to allow for renewable power generators to enter into direct PPAs with electricity consumers.  Direct PPAs would generally be favored by renewable power generators and large-scale electric consumers (although KEPCO would likely oppose their introduction).  Both indirect PPAs and direct PPAs would require significant change to the existing regulatory regime.  But the government is carefully considering all available options and the next two years may see significant changes in Korea’s existing power regulations.