Korea confirms shift to competitive bidding for new renewables
The Climate and Energy Environment Ministry announced that the revised 'Renewable Energy Development, Utilization, and Supply Promotion Act' was promulgated on September 15 and will take effect on January 1, 2027, fundamentally reforming the Renewable Portfolio Standard (RPS) system into a competitive bidding-based contract market.
Our take
How will Korea's RPS reform impact new renewable energy projects and market dynamics?
The shift from the Renewable Energy Certificate (REC) spot market to a competitive bidding-based long-term fixed-price contract system aims to reduce price volatility and investment uncertainty for renewable energy developers, while simultaneously driving down power purchase prices for Korea Electric Power Corporation (KEPCO) through competition and incorporating non-price factors to strengthen the domestic supply chain.
The previous RPS system, reliant on a fluctuating REC spot market, exposed renewable energy developers to significant revenue uncertainty, hindering project financing and investment. By transitioning to a competitive bidding framework with long-term fixed-price PPAs directly with KEPCO, the government establishes a new exception to the general requirement for power market trading (Electricity Business Act Article 31), aiming to de-risk projects for developers, making financing more accessible and potentially lowering capital costs. Simultaneously, the competitive nature of the bidding, coupled with non-price criteria, is designed to reduce overall power purchase costs and strategically bolster Korea's domestic renewable energy supply chain and energy security.
What the source says
- The existing Renewable Portfolio Standard (RPS) system will be fully reorganized into a competitive bidding-based 'contract market system'.
- New renewable energy facilities will be selected through competitive bidding within a government-set price ceiling.
- Successful bidders will sign long-term fixed-price power purchase agreements (PPAs) with Korea Electric Power Corporation (KEPCO).
- Non-price factors, including contribution to domestic industry/supply chain and energy security, will be evaluated in the bidding process.
- Public and private power generation companies will be assigned supply obligations or target management based on facility capacity.
- A separate contract market will be established for small-scale renewable energy facilities to minimize market impact on existing projects.
- The previous RPS system led to significant fluctuations in Renewable Energy Certificate (REC) prices, increasing business uncertainty for developers.
- Lee Kyung-soo, Renewable Energy Policy Officer at the Climate and Energy Environment Ministry, stated that the reform aims to increase stability of renewable energy project profits while promoting systematic expansion and price reduction.
For investors — Investors and operators in the Korean DER market should anticipate greater revenue predictability for new renewable energy projects due to long-term fixed-price PPAs, but also face increased competition and the need to demonstrate value beyond just price, particularly regarding domestic supply chain contributions.
Watch: Announcement of the first competitive bidding for solar and wind power under the new contract market system on January 1, 2027.
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