New Government of South Korea Lowers Renewable Energy Target

In June 2022, the new President of South Korea, Yoon Seok-Youl, announced that he would revive nuclear power and reduce the renewable energy target by 2030 from 30.2% to 21.5%. Yoon Seok-Youl is also investigating the renewable energy projects promoted by Moon Jae-in to find out the illegal activities between politicians and developers. Banks in Korea have begun to reduce the financing scale of solar and wind projects. The new government also plans to overhaul the solar subsidy program. According to the new renewable policy announced on November 3, the government plans to cancel the higher REC multiples of small-scale projects to promote the construction of utility-scale projects.

In the first half of 2022, solar energy tenders held twice every year by the Korea Energy Agency has been under subscribed for the first time since its launch in 2017. Of the 2.2GW of total capacity, 1.4GW was allocated at an average price of KRW 155,270 ($117)/MWh. Power prices and the prices of Renewable Energy Certificate (REC) hit new highs, leaving developers with little incentive to compete for long-term contracts awarded through tenders.

High commodity prices and rising inflation have slowed the development of new projects in South Korea. In addition, for developers, strict land laws and regulations, together with the opposition of local communities have increased the difficulty of siting solar projects. We believe that the deployment of solar energy in South Korea will decline significantly to 2-3GW in 2022 and 2023.