Korean firms' RE100 adrift amid KEPCO's power monopoly

Solar panels on the roofs / gettyimagesbank

By Nam Hyun-woo

Korean firms' plans to join the RE100 campaign, meaning running their companies on 100 percent renewable energy, have been stalled as politicians have failed to make progress on introducing rules ending the state-run Korea Electric Power Corp.'s (KEPCO) monopoly over domestic power distribution.

Vendors and suppliers to global companies are facing growing demand to join the RE100 campaign, but their efforts are not picking up speed due to difficulties in securing electricity generated only from renewable sources because KEPCO collects electricity generated by its subsidiaries and independent power companies, and sells it as a single source.

To allow more firms to go 100 percent renewable, industry officials say Korea needs to have the legal grounds allowing power purchase agreements (PPA) connecting consumers to renewable energy source providers, but discussions to introduce a PPA here have failed to pick up speed due to the opposition party's concerns of a “market disturbance.”

According to the National Assembly, Monday, a revision to the Electric Utility Act tabled by Rep. Kim Sung-whan of the ruling Democratic Party of Korea is under review at the Assembly Trade, Industry, Energy, SMEs and Startups Committee.

The bill is aimed at adding articles separating renewable energy providers from existing power providers, thus allowing them to sign PPAs with consumers.

The bill was proposed in July, but is yet to pass the committee, which is the first step of legislation. A similar bill was tabled during the previous 20th National Assembly, but was scrapped as the Assembly ended.

The revision is not picking up speed as opposition lawmakers have raised concerns over short-term market disturbances and potential “cherry picking” practices by consumers.

During the committee's Nov. 26 meeting, Rep. Lee Joo-hwan of the main opposition People Power Party (PPP) said “the revision will sprout unregulated electricity markets which do not go through the Korea Power Exchange,” as well as allowing companies to exploit the price difference between day and night.

Current electricity rates are expensive during the daytime and cheaper at night, thus companies can use renewable energy purchased directly from power plants during the daytime and then shift to KEPCO as a source at night. Since renewable energy, mostly solar power, are expected to be more expensive during the nighttime, companies can exploit price differences, shifting to cheaper sources.

PPP Rep. Lee Chul-gyu said this will shrink KEPCO's sales, thus triggering hikes in public electricity rates.

The government, which is pushing the revision, said it is preparing measures to prevent such practices, but the committee demanded the government come up with further details on introducing a PPA system in Korea.

While lawmakers are facing difficulties in reaching an agreement, the companies which announced their pursuit of RE100 are experiencing slow progress.

According to a Monday report by the Climate Group and CDP Worldwide, Korea was picked as one of the 10 most difficult geographies cited by RE100 members for sourcing renewable energy, along with Australia, mainland China, Indonesia, Japan, Singapore and Taiwan. The Climate Group is an international environmental organization leading the RE100 campaign.

The members said Korea's main challenges include corporate sourcing of renewable energy is not yet available, meaning the country's lack of PPA is one of the main problems.

“Global companies are increasingly demanding their suppliers join RE100 or other climate actions, and they suggest PPA as the cleanest and most desirable way of achieving the goal,” an industry official said. “But it is difficult for domestic companies to come up with plans because of domestic regulations and rules.”

During the National Assembly audit in October, Samsung Electronics Executive Vice President Kim Seok-ki said Samsung Electronics is pursuing RE100 at its overseas plants and offices, and the company wants to do so in Korea “when the domestic rules and infrastructure are ready,” adding it preferred securing renewable energy through PPAs.

Earlier this week, LG Chem said it had signed a PPA with China's Jiangsu Runfeng New Energy to get 140 gigawatt-hour of renewable electricity annually to power its cathode plant in the province.

This marked the first case of a Korean company in China to sign a PPA with a Chinese power firm.

In its press release, LG Chem said “PPAs are more effective and stable in securing renewable energy at reasonable costs compared to other measures such as purchasing renewable energy credits.”

The company also said it is considering an additional energy PPA deal for its precursor plant in Quzhou province within next year, so it can become over 90 percent carbon neutral within its electric battery materials market in China.

“Recently, Sony warned the Japanese government it may have to move its plants out of the country unless rules on renewable energy are eased,” the official said. “This could not be the case for the Korean companies, but it is clear that continued delay in rules on PPAs or other renewable energy options is making firms lose interest in building more plants and creating jobs here.”