Kim Sung-woo is the head of Environment & Energy Research Institute at Kim & Chang.
Special thanks to Distributed Energy Act
Kim Sung-woo
On the 27th of last month, the International Institute for Environment and Development released heat-wave data in 20 large cities around the world. Not surprisingly for those who are in Seoul now, the data showed that Seoul has seen the sharpest increase in the number of heat wave days in the past 30 years. The number increased four times faster than Tokyo. This is why the city, which used to have four distinct seasons throughout the year, is now becoming more tropical than ever.
For those of you who are in Seoul now, think about the past few nights. If you ever woke up in the middle of the night, I bet it probably took at least a few minutes of patience to fall back to sleep after turning on — or lowering further down the target temperature of — your air conditioner. A fan will not do a quick fix. At such a moment, imagine your air conditioner stays silent even after you pushed power button. Isn’t it a nightmare?
This is why in Korea, the country with the eighth-highest electricity consumption in the world, we have extra multiple power plants on standby these days. We want to be able to ensure a seamless electricity supply even when a number of energy consumers rush to their air conditioners to cool down their bedrooms, offices, libraries and shopping malls. The issue is, that the cities where the electricity is consumed are significantly different from those cities where the electricity is generated. Most power plants are located near the coastline, whereas electricity demand comes largely from inland Seoul metropolitan areas or the southeastern areas. Seoul supplies only 9 percent of the electricity consumed in the city, whereas the Chungcheong provinces supply 215 percent of what they need.
Challenges in building electricity transmission grids across the nation aggravate the inequity between consumer cities and supplier cities. Building the electricity transmission grids often requires taking private properties and providing compensation for doing so, as well as persuading local communities affected by the often-disfavored electricity infrastructure. Without well-supported transmission grids, it takes huge costs to supply electricity to places far away from the power plant or to store it for later use. In some sense, electricity is just like food that can go bad quickly. This is why we want to see more “distributed energy” in the future, the energy generation located right at the consumer’s side.
To facilitate more distributed energy, Korea enacted the Special Act on Promotion of Distributed Energy (the Distributed Energy Act) in June 2023. The Distributed Energy Act, along with its subordinate enforcement regulations that the government fleshed out over the year since the act was passed into law, took effect as of June 14 this year. The Distributed Energy Act defines “distributed energy” as electric energy generated by power generation facilities of 40MW or less among electric facilities for electric businesses, power generation facilities among the other electric facilities, combined heat and power generation facilities of 500MW or less that meet relevant requirements prescribed by the Enforcement Rule, or thermal energy of 430GCal or less per hour. The Distributed Energy Act further requires the following persons to install distributed energy facilities: owners of a building within the meaning of Article 2 of the Building Act if the building is expected to use more than 200,000 MWh of energy annually and is newly built or repaired, project managers of any housing site development project or industrial complex managers who are also project managers of a development project that covers an area of 1 million square meters or more.
On the other hand, a business entity that intends to use electricity of at least 10MW by entering into an electricity use contract with an operator of electric sales business or a person who intends to add up to 10MW after conducting a grid impact assessment shall conduct a grid impact assessment in an area subject to grid impact assessment designated and publicly notified by the Minister of Trade, Industry and Energy. In addition, the Distributed Energy Act also aims to designate “special areas for distributed energy” and formulate regulatory exemptions for such special areas.
By converting the traditional centralized power supply system into a decentralized type, distributed energy is expected to signal proper locations for large-scale electricity users such as power generation companies and data centers. Distributed energy will also diversify the way companies will procure their electricity, since some of them are now required to draw a certain percentage of electricity they need from distributed energy. Affected companies thus need to stay tuned to follow-up announcement of the government's policy initiatives and relevant administrative notifications, as well as steps to be taken by local governments, such as introducing local electricity rates.
Adair Turner, the chairman of the Energy Transitions Commission, a global think tank, suggested that the world's transmission network should be extended from 70 million kilometers to 200 million kilometers by 2050, to meet carbon neutrality and power supply. This sounds remote for Korea, where we have power-generating cities located far away from power-consuming cities and have traditionally experienced challenges in eliciting local communities’ acceptance of new transmission infrastructure in their front yard. In addition, Korea cannot even resort to any neighboring countries for electricity shortages. The Distributed Energy Act is, therefore, as much welcomed as well-functioning air conditioners on these tropical nights.
Kim Sung-woo is the head of the Environment & Energy Research Institute at Kim & Chang and a member of the Presidential Commission on Carbon Neutrality and Green Growth.