Lawmakers debate expanding carbon-free PPA for traditional industries
A parliamentary discussion, co-hosted by lawmaker Park Jung and others, explored expanding Korea's current PPA system, which is centered on renewable energy, to include other carbon-free power sources like nuclear energy, to enhance the competitiveness and decarbonization efforts of power-intensive traditional industries such as steel and petrochemicals.
Our take
How would expanding carbon-free PPA beyond renewables impact Korea's heavy industries?
The proposed expansion of Korea's PPA system to include carbon-free sources like nuclear power aims to provide power-intensive traditional industries with stable, long-term electricity supply for decarbonization, potentially requiring companies to prepay 10-15 years of electricity fees and share generation risks.
The current PPA framework, focused on intermittent renewable energy, is insufficient for the continuous, high-load power demands of industries like steel, which operate 24/7. Expanding PPA to include baseload carbon-free sources like nuclear power, potentially through a long-term prepayment model similar to France's CAPN, would shift some of the financial and operational risk to industrial consumers in exchange for price stability and guaranteed clean energy supply, thereby accelerating their decarbonization efforts and maintaining global competitiveness. This also addresses the need for a diversified clean energy portfolio beyond just renewables.
What the source says
- The current PPA system, primarily focused on renewable energy, is proposed to expand to include other carbon-free power sources like nuclear energy.
- Power-intensive companies would prepay 10-15 years of electricity fees under the proposed expanded PPA system.
- Under a proposed model similar to France's CAPN, companies would share a portion of the generation costs and risks of nuclear power.
- Lawyer Kang Min-gu Lawyer Kang Min-gu emphasized that carbon-hard-to-abate traditional industries require 24/7 stable carbon-free power and proposed including nuclear power in PPAs, suggesting amendments to the Electricity Business Act or the enactment of a 'Nuclear Power Plant Restart Special Act'.
- Lawyer Hwang Jae-hoon Lawyer Hwang Jae-hoon introduced France's 'Nuclear Power Allocation Contract (CAPN)' model, where companies prepay for 10-15 years of nuclear power in exchange for sharing generation costs and risks.
- Son Byung-soo Son Byung-soo of POSCO Holdings urged for pathways to allow the steel industry to utilize the proposed system for carbon reduction, given its significant share in the National Greenhouse Gas Reduction Target.
- Jung Eun-mi Jung Eun-mi of the Korea Institute for Industrial Economics & Trade advocated for actively promoting the expansion of carbon-free PPAs, including SMRs, nuclear, and hydrogen, to maintain the competitiveness of traditional industries.
- Lawmaker Park Jung Lawmaker Park Jung stated his intention to lead legislative and policy alternatives to diversify and expand carbon-free PPAs beyond renewables.
For investors — For investors and operators in Korean DER, the proposed expansion of PPA to include nuclear and other carbon-free sources could create new long-term off-take opportunities for stable, baseload clean energy, but may also introduce requirements for prepayment and risk-sharing from industrial consumers.
Watch: Monitor legislative progress on amendments to the Electricity Business Act or the introduction of a 'Nuclear Power Plant Restart Special Act' to enable carbon-free PPAs.
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