Enhanced Electricity Business License Review Criteria

On August 1, 2023, the notification on detailed review criteria for electricity business licenses was amended (the “Amended Notification”), enhancing various standards related to obtaining an electricity business license (“EBL”) and clarifying the criteria for granting priority to wind farms.

The key details of the Amended Notification are summarized as follows:

Key Amendments¹

Classification		Previous Standards	Current Standards
Financial Capability	Its own equity capital ratio in financing plan	10% of the total project cost	15% of the total project cost
	Minimum paid-in capital to apply for an EBL	None	1% of the total project cost
	Minimum credit rating	Project owner with Grade B, unless financing capability is established	Applicant with Grade B (without any exception)
Preparation Period	Preparation period (the date of the EBL - commencement of project)	Four years for wind power	Six years (onshore wind) and eight years (offshore wind)
	Construction plan approval period (the date of the EBL - commencement of construction)	None	Two years for solar and fuel cells Four years for onshore wind Five years for offshore wind
	Requirements for extension	[Preparation period] If there is an unavoidable circumstance	[Preparation period] In case of a long term contract for the sale of electricity or REC In case of a reasonable circumstance (only limited to cases where a necessary development permit is or could be obtained)
	Requirements for extension	[Construction plan approval period] If there is an unavoidable circumstance	[Construction plan approval period] In case of a long term contract for the sale of electricity or REC In case of a reasonable circumstance (only limited to cases where environmental impact assessment is completed)
Wind Data Measurement	Effective area (i.e., the area to which the EBL can be issued)	[Flat areas, public waters] Within a 5km radius (no overlapping effective areas, with consent of other project owners, or area of up to 100km²) [Complex areas such as mountains] Within a 2km radius	[Onshore measurement] Onshore area within a 2km radius [Offshore measurement] Offshore area within a 7km radius, provided that the area of the entire power complex may be up to 80km² within the effective area
	Validity period (i.e., the period during which the EBL can be applied for the effective area)	None	Within three years from the issuance of the installation permit (excluding amended permit), provided that any period where unavoidable circumstances (e.g., natural disaster, large-scale fire) occur will be excluded for up to one year
	Priority criteria in case there are multiple project owners in the same effective area	Priority is given to the project owner who obtained an installation permit earlier and installed the wind measuring instrument within six months from the issuance of the installation permit (with a potential extension for unavoidable circumstances) Priority period: within four years from the date of the installation permit	Priority is given to the project owner, who obtained an installation permit earlier and installed the wind measuring instrument within six months (onshore) or 12 months (offshore) from the issuance of the installation permit (with a potential extension for unavoidable circumstance)
	Measurement period	One year	At least 365 days (not necessarily consecutive days) with at least 90% availability
Transitional Provisions	The amended criteria will apply to EBLs applied after August 1, 2023 (for applications previously filed but still pending, the amended criteria will apply starting from August 1, 2024); provided, however, that the criteria for wind data measurement and priority will be separately prescribed. For EBLs issued before August 1, 2023, the amended criteria will apply starting from February 1, 2024, when an application is made to (i) amend such EBLs or (ii) obtain approval for a business transfer or acquisition of shares; provided, however, that the application must involve (x) a change of investors or (y) an increase in existing investors’ investment amount.

Implications

The Amended Notification aims to address a rampant installation of wind measuring instruments for the purpose of pre-occupying or selling potential sites and to resolve the controversy over effective areas by (i) strengthening the financial requirements to apply for an EBL and (ii) simplifying effective areas for wind data measurement and clarifying the priority criteria. Now that the government’s policy, announced in November 2022 to promote renewable energy in an orderly manner, is reflected in the Amended Notification, we expect that renewable energy projects will be pursued by more financially capable businesses, and potential disputes over effective areas and priority rights will be reduced among project owners.

Moreover, previously a request to extend the preparation period used to be made as a mere formality and often granted without any issue. However, as the Amended Notification prescribes specific conditions for grating such a request, a dispute may arise as to who should be held accountable if a preparation period is not extended due to a reason not attributable to the project owner (e.g., complaints from local residents).

In addition, while the Amended Notification sets forth detailed transitional provisions in connection with the preparation period, the timing for applying the new review criteria, and the validity period for wind measuring instruments, project owners may have diverse interests regarding how these transitional provisions should be applied. Therefore, it will be necessary to closely monitor how relevant authorities will interpret the transitional provisions and the specific scope of their application.

¹ This table summarizes the key amendments which may differ in the context of specific facts.

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