Renewable Energy 2025 Comparisons

The proportions of renewable energy and new and renewable energy (NRE) in South Korea’s energy mix are gradually increasing. While the OECD defines “renewable energy” as energy derived from solar, wind, water, biomass, ocean sources and biodegradable waste – sources that are both renewable and environmentally friendly – Korea’s definition of NRE is broader and includes energy sources that may not be classified as renewable according to international standards, such as liquefied/gasified coal and heavy residual oil. 

According to the 2024 Korea Energy Agency (KEA) Energy Handbook, the proportion of NRE sources within total domestic power generation in South Korea has been continuously increasing (from 4.99% in 2018 to 10.6% in 2024). Furthermore, according to the working draft of the 11th Basic Plan for Electricity Supply published by the Ministry of Trade, Industry and Energy (MOTIE), the proportion of power generation by NRE sources is expected to reach 21.6% by 2030 and 32.9% by 2038. This trend signals the ongoing transition from fossil fuels to NRE sources in South Korea.

Meanwhile, with the inauguration of the Lee Jae-myung administration in June 2025, which is emphasising policies to expand renewable energy and actively promoting the development of “RE100 industrial complexes”, the proportion of renewable energy generation in Korea is expected to increase at an even faster pace.

Currently, solar power accounts for the largest share of NRE power generation in South Korea. According to the KEA’s NRE supply statistics for December 2024, the proportion of each NRE source in 2023 was as follows:

• solar power, 55%;
• biomass, 19.7%;
• fuel cells, 10.4%;
• hydropower, 6.2%;
• wind power, 5.6%;
• integrated gasification combined cycle, 1.6%;
• ocean energy, 0.7%; and
• renewable waste, 0.7%.

Offshore wind power is expected to become a more important NRE source in South Korea because of its potential for large-scale energy supply. Due to the increasing importance of NRE, the industry is focusing on developing larger wind turbines with expanded rotors and enhanced generator capacities.

With the inauguration of the Lee Jae-myung administration in June 2025, which has emphasised the expansion of renewable energy policies and increased the budget for the renewable energy sector (KRW168.2 billion for renewable energy deployment support and KRW426.3 billion for renewable energy financial support), the renewable energy market is expected to experience further growth.

Additionally, South Korea’s focus is shifting from solar to offshore wind. The 2024 fixed-price competitive auction results from KEA illustrate this trend: although 1,000 MW was offered for solar power, only 80 MW was bid for, and 72 MW was awarded. Meanwhile, 1,500 MW was offered for offshore wind, 2,513.85 MW was bid for, and 1,886 MW was awarded.

The principal laws governing the South Korean energy market in general are:

• the Energy Act; and
• the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis (the “Carbon Neutrality Act”).

In addition, there are laws governing the licensing and operation of electric power businesses, such as the Electric Utility Act, the Integrated Energy Supply Act, the Electrical Safety Management Act, the Electric Power Source Development Promotion Act and the Electric Power Technology Management Act, as well as regulations issued by MOTIE, including the Detailed Criteria for Licensing Generation Projects, Standards for Electricity Tariff Calculation, Permissible Error for Watt-Hour Meters and Regulations on Power System Operation. There is also a separate law, the Hydrogen Economy Promotion and Hydrogen Safety Management Act, aimed at developing hydrogen as a major energy source.

The Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy (the “NRE Act”) is the principal law regulating NRE, based on which a number of related regulations are promulgated by MOTIE to promote the distribution of NRE, namely:

• the Guidelines on the Management and Operation of the Renewable Portfolio Standard and Renewable Fuel Standard (the “RPS Guidelines”);
• the Guidelines on the Subsidy for the Cluster Creation Projects; and
• the Regulations on the Subsidy for New and Renewable Energy Facilities.

In line with the NRE Act, the KEA has established the following:

• the Guidelines on the Subsidy for New and Renewable Energy Facilities; and
• the Rules on the Issuance of Renewable Energy Certificates and Operation of the REC Market.

Furthermore, pursuant to the aforementioned laws, the government has announced “master plans” such as the National Carbon Neutrality and Green Growth Basic Plan, the Basic Energy Plan, the Basic Plan for Electricity Supply and Demand, and the Basic Plan for New and Renewable Energy. These plans clearly set forth the principles for the promotion and expansion of NRE.

In respect of upcoming changes in law and regulations, MOTIE is currently considering potential changes to the Renewable Portfolio Standard (RPS) system, which was established under the NRE Act and the RPS Guidelines. Currently, the RPS system requires operators with generation facilities of 500 MW or more to supply an annual quantity of NRE. However, potential changes include:

• phasing out the RPS system and transitioning to a government auction system (ie, shifting the supply obligation from RPS obligators to the government); and
• phasing out the renewable energy certificate (REC) spot market due to concerns about price volatility and market uncertainty.

The primary regulator for NRE activities in South Korea is MOTIE, which oversees NRE legislation, budget allocation, directives, regulations, guidelines and the licensing of electric businesses (although local governments are in charge of issuing licences for power generation under 3 MW).

The Electricity Regulatory Commission (ERC) under MOTIE reviews electric business licences (EBLs), promotes competition, regulates unfair practices, protects consumer rights, regulates abuse of market power in monopoly sectors, and monitors the power market and power system operations.

While the KEA, Korea Power Exchange (KPX) and Korea Electric Power Corporation (KEPCO) are not regulatory authorities, they are parties that a developer must closely co-ordinate with in relation to their electric business operations.

The main regulated activities regarding NRE in South Korea involve the construction and operation of power generation facilities. The applicable regulations vary depending on the scale of the facility and the type of renewable energy.

For power generation businesses with a capacity exceeding 3 MW, the following process applies (and in cases where the generation facility capacity is 3 MW or less, the head of the relevant local government, instead of MOTIE, serves as the licensing authority):

• the applicant must submit an application for EBL to MOTIE;
• MOTIE receives technical feasibility reviews and grid connection reviews from KPX and KEPCO;
• the ERC conducts a final review; and
• MOTIE grants the EBL.

Additional requirements include:

• for generation facilities with a capacity of 10 MW or more, an environmental impact assessment (EIA) will typically be required; and
• when installing a power plant with a capacity of 10 MW or more, a construction plan must be submitted to MOTIE for approval.

Different types of renewable energy projects may require additional permits depending on the energy source or asset location.

• A solar power facility requires:
1. a permit for development activities under the National Land Planning and Utilisation Act because it is a type of structure; or
2. a permit to divert farmland under the Farmland Act, a permit to divert mountainous districts under the Mountainous Districts Management Act, or permission to occupy and use a road under the Road Act, depending on the location.
• Offshore wind power facilities require:
1. a permit to occupy or use public waters;
2. authorisation of an implementation plan for occupancy or use under the Public Waters Management and Reclamation Act; or
3. additional processes including: (i) surface inspection for underwater cultural heritage under the Enforcement Decree of the Act on Protection and Inspection of Buried Heritage; (ii) a marine traffic safety examination under the Maritime Safety Act; (iii) a review of military operability (including electric wave impact assessment) under the Protection of Military Bases and Installations Act; and (iv) consultation on the utilisation of sea areas, marine geophysical surveys and sea area utilisation impact assessments under the Marine Environment Management Act.

Restrictions on ownership and transfer of NRE assets in South Korea are primarily governed by MOTIE, with oversight from the ERC. The following cases require approval from MOTIE after review by the ERC (except when the licensing authority is a municipality, which does not require ERC review):

• transfer of all or part of an electric business;
• division or merger of a corporation that is an electric business; and
• acquisition of shares with the purpose of substantially controlling the management rights of an electric business (excluding developers with capacity less than 20 MW), which would result in a dominant influence on major management decisions.

When granting such approvals, MOTIE evaluates:

• compliance with the criteria for an EBL;
• absence of significant harm to the public interest, such as disruption to or lowered quality of power supply; and
• commencement of operations during the business preparation period (limited to solar power generation businesses, unless there are justifiable reasons such as difficulties in business operations).

Notably, as of 1 August 2023, the Detailed Criteria for an Electric Business Licence were revised to strengthen the financial capacity for EBLs, requiring more robust thresholds with respect to the equity ratio and the reasonableness of the financing plan, as well as a higher credit rating requirement.

Under the Foreign Investment Promotion Act, the total capacity of solar, wind and other power generation facilities acquired by foreigners from KEPCO or its subsidiaries may not exceed 30% of the total domestic power generation capacity. In addition, in the case of transmission, distribution and electricity sales businesses, foreign investment is permitted only if the foreign investment ratio is less than 50% and the foreign investor’s holdings of voting shares or similar interests do not exceed those of the largest domestic shareholder.

Furthermore, when foreign capital invests in the domestic renewable energy market, it is required to file a report in accordance with the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act.

Key Features

Electricity production/generation from renewable sources in South Korea has the following key features.

Market structure

Currently, domestic power production is handled by six power generation companies, private power generators and district electricity operators.

Applicable rules and regulations

These include the following.

• The Renewable Energy 3020 Roadmap: This roadmap aims to increase NRE’s proportion to 20% by 2030. The main goal is to achieve a cumulative installed capacity of 64 GW of clean energy, with over 95% of new installed capacity to be supplied by clean energy sources such as solar and wind power.
• The RPS: This standard requires power generators with over 500 MW capacity to supply a certain amount from renewable sources. The target businesses are the six KEPCO generation subsidiaries, including Korea Hydro & Nuclear Power Co, Ltd (KHNP), and private power generation companies. RECs are used as a means to certify compliance with RPS obligations. RECs are issued by the government to obliged entities, who can obtain them through their own facilities, the facilities of external NRE developers or the certificate trading market. The government then determines compliance based on these certificates and imposes penalties for non-compliance.
• The Electric Utility Act, Electrical Technology Management Act, NRE Act, and Regulations on the Subsidy for New and Renewable Energy Facilities and Guidelines on the Subsidy for New and Renewable Energy Facilities.
• The Strategy for Expanding the Deployment of Renewable Energy and Strengthening the Supply Chain, announced by the government on 16 May 2024: This strategy focuses on establishing an offshore wind industry ecosystem through government-led deployment plans and enhancement of supply chain competitiveness, expanding solar energy based on the identification of optimal sites and stabilisation of the supply chain, and reforming the RPS/power purchase agreement (PPA) systems to maximise strengths in each market segment.

Biogas

Market structure

Biogas, produced from organic waste, is a primary renewable gas source in South Korea. More widely used gas types in South Korea are liquefied natural gas (LNG) and liquefied petroleum gas (LPG). In the case of LNG, domestic production is minimal, and the country relies almost entirely on imports (approximately 46.33 million tonnes as of 2024). Korea Gas Corporation imports about 74% of the total volume, while the remaining 26% is imported by private companies such as SK E&S and GS Energy, limited to industrial and power generation purposes (as of 2024). In contrast, with respect to LPG, around 60–70% of domestic demand is met by imports from private operators, while the remaining 30–40% is supplied through direct production, such as from crude oil refining processes (as of 2023, approximately 73% was imported and about 27% directly produced and supplied).

Korea is actively developing technology to upgrade its biogas capabilities, including purifying biogas generated during the treatment of organic waste such as food waste, sludge (sewage residue) and livestock manure for reuse as fuel.

In Korea, coal gasification technology is actively utilised, with Korea Western Power engaging in related power generation projects.

Meanwhile, in June 2024, the government formulated the Biogas Production and Utilisation Promotion Strategy, aiming to produce up to 500 million Nm³ of biogas annually by 2026. Through this initiative, 5.57 million tonnes of organic waste per year are expected to be treated in an eco-friendly manner, with projected annual benefits including KRW230 billion in fossil fuel substitution and a reduction of 1 million tonnes of greenhouse gas emissions.

Key parties and assets

These include:

• public and private sector entities involved in organic waste management and biogas production; and
• companies developing biogas upgrading technologies to produce RNG.

Applicable rules and regulations

The Act on the Promotion of the Production and Use of Biogas Using Organic Waste Resources (the “Biogas Act”) promotes biogas production from organic waste. The key features of the Act are as follows:

• the Ministry of Environment must establish and manage biogas production targets for public and private mandatory producers to promote biogas production;
• local municipalities must understand how organic waste resources are treated in their jurisdictions and install and operate biogas production facilities;
• businesses that discharge or treat organic waste resources should actively participate in biogas production; and
• the Biogas Production Target Scheme applies to both public and private mandatory biogas producers, including (i) all local governments nationwide responsible for managing organic waste; (ii) livestock manure generators with more than 25,000 pigs; (iii) operators of livestock manure treatment facilities with a processing capacity of at least 200 ㎥/day that have received support from the government or local governments; and (iv) generators of more than 1,000 tonnes of food waste annually.

The public sector will be subject to the Biogas Production Target Scheme from 1 January 2025, and the private sector from 1 January 2026. Based on the nationwide biogas production levels in 2024, the government has set production targets for 2034 at 50% of organic waste resources for the public sector and 10% for the private sector. It is planned that these targets will be gradually increased up to 80% in the future.

The legal framework governing Korea’s gas industry mainly includes the Petroleum and Alternative Fuel Business Act, the High-Pressure Gas Safety Control Act, the Urban Gas Business Act, and the Liquefied Petroleum Gas Safety Control and Business Act. These laws respectively regulate the manufacture, storage, sale and other aspects of natural gas, petroleum gas, high-pressure gas, city gas and LPG.

Market Structure 

According to Korea District Heating Corporation, domestic renewable energy heat production in 2023 was 165,128 Gcal, an increase from 142,988 Gcal in 2022 but still below the 2020 level of 180,979 Gcal.

There is currently no mandatory supply target system for the heat supply sector. However, in February 2025, the government finalised the 6th Basic Plan for District Energy Supply, which includes the introduction of a certification system for heat energy from clean sources (renewable heat certificates; RHCs). The key contents of the plan are as follows:

• establishment of a certification framework and standards for the supply of heat from clean sources, and the launch of pilot programmes to match demand-side companies (such as ASML) with supply-side companies (such as Korea District Heating Corporation);
• a legal basis for the development of a national heat map (under the Energy Use Rationalization Act), provision for acquiring information on unused heat energy and transfer of the responsible agency (from Korea District Heating Corporation to the KEA); and
• preparation of guidelines for heat trading, including cost-based heat pricing and setting out conditions for both long- and short-term heat trading.

Applicable Rules and Regulations

These are as follows:

• the Carbon Neutrality Act;
• the Energy Act;
• the Energy Use Rationalisation Act;
• the NRE Act;
• the Green Buildings Construction Support Act;
• the Integrated Energy Supply Act;
• the Special Act on Promotion of Distributed Energy;
• Technical Criteria for Integrated Energy Facilities; and
• Inspection Criteria for Heat Supply Facilities.

Market Structure

In May 2024, MOTIE announced pioneering plans to establish the world’s first Clean Hydrogen Power Bidding Market. The Clean Hydrogen Power Bidding Market is a system in which electricity generated using clean hydrogen as a fuel is purchased and supplied. The aim is to contribute to greenhouse gas reduction by generating electricity from clean hydrogen sources (including zero-carbon hydrogen, low-carbon hydrogen and low-carbon hydrogen compounds), which are carbon-free power sources, while also procuring clean hydrogen at economically viable prices through cost competition among clean hydrogen suppliers. The hydrogen power bidding market is divided into the general hydrogen power market and the clean hydrogen power market, depending on the type of fuel used. Only power generation facilities that use fuel meeting the domestic clean hydrogen certification standard (greenhouse gas emissions of 4 kg CO₂e or less per 1 kg of hydrogen) are eligible to participate in the clean hydrogen power bidding market.

The results of the 2024 competitive bidding for the clean hydrogen power market are as follows: a total offer volume of 6,500 GWh, submitted volume of 6,171.68 GWh (five companies, six projects), and a successful bid (contracted) volume of 750.48 GWh. Actual power generation must commence by 2028, following a three-year project preparation period (with an additional one-year grace period in consideration of this being the first market). The content of the 2025 competitive bidding announcement, released in May 2025, is broadly the same as that of the 2024 clean hydrogen power market bidding process.

Key Parties and Assets

Currently, 116 companies are registered as hydrogen-specialised enterprises.

Applicable Rules and Regulations

NRE is a concept that is uniquely defined in Korea. Within Korea’s definition of NRE, the category of “new energy” includes sources such as energy produced by gasifying or liquefying coal, petroleum or other fossil fuels, which would not be classified as renewable energy under international standards.

The NRE Act

Under the NRE Act, new energy is defined as energy converted from existing fossil fuels or derived from chemical reactions of hydrogen and oxygen. This includes hydrogen energy, fuel cells, energy from liquefied or gasified coal, energy from gasified heavy residual oil (heavy fuel oil; HFO) and other non-conventional energy sources (excluding petroleum, coal, nuclear power and natural gas). Renewable energy, under the NRE Act, refers to energy produced by converting renewable resources such as sunlight, water, geothermal heat, precipitation and biological organisms. This includes solar energy, wind power, hydropower, ocean energy, geothermal energy, bioenergy generated from the conversion of biological resources and waste-to-energy (excluding energy produced from non-renewable waste), as well as other forms of energy that are not derived from petroleum, coal, nuclear or natural gas sources.

The Hydrogen Economy Promotion and Hydrogen Safety Management Act

This Act fosters the development of hydrogen-related industries. It covers companies involved in hydrogen production, storage, transportation, charging and sales, as well as manufacturers of fuel cell-related products, parts, materials and equipment. It offers “hydrogen-specialised enterprises” certification for companies meeting specific criteria in hydrogen-related business sales or R&D expenditure.

There is a growing trend towards decentralised electricity generation in South Korea, characterised by increased adoption of privately installed solar panels for electricity production and proliferation of energy co-operatives managing community-based solar power generation projects.

Rules and regulations for small-scale renewable energy production in South Korea include:

• the Electric Utility Act – this Act governs electrical installation for private use; and
• local government initiatives – provision of subsidies to encourage the adoption of mini solar power generation systems.

Generally, electricity produced from these installations cannot be traded in the power market. Exceptions include:

• solar power facility owners trading surplus electricity after meeting their own needs; and
• owners of non-solar renewable facilities trading up to 50% of their annual total power production.

In July 2025, the Cabinet approved an amendment to the Enforcement Decree of the Electric Utility Act to relax PPA eligibility for renewable energy. The 1-MW generation capacity threshold to directly supply electricity to end users via PPAs has been abolished, allowing smaller renewable facilities to participate directly, including on-site (rooftop or idle land) installations, without routing through transmission and distribution facilities. This expands direct participation in PPAs and reduces space constraints for solar photovoltaic (PV) projects.

Market Structure

Generation

Electricity is produced by six public power companies, private power companies and district electricity providers. KEPCO purchases electricity from the KPX and distributes it to general customers via the grid.

Transmission

The two main transmission types are overhead and underground. Overhead uses transmission towers and utility poles, and underground is increasingly popular in urban areas due to aesthetic benefits and higher stability, despite higher installation costs.

Geographical challenges

In Korea, electricity production and consumption areas are unevenly distributed. Most power generation facilities are located along the coastline, while 40% of the electricity is consumed in Seoul and the Gyeonggi area. This necessitates long-distance power transmission networks. To reduce power loss, high-voltage and high-capacity grids are required. To this end, KEPCO operates a “multi-loop” transmission and substation system that connects the entire country like a web.

NRE distribution

Currently, Korea’s NRE generation facilities are geographically concentrated, with 75% of the capacity coming from Jeollanam-do, Jeollabuk-do, Chungcheongnam-do, Gangwon-do, Gyeongsangbuk-do and Jeju. In terms of regional renewable energy generation in 2023, Jeollabuk-do recorded the highest amount, at 10,205 GWh, followed by Chungcheongnam-do (8,621 GWh), Jeollanam-do (8,248 GWh), Gangwon-do (6,511 GWh), Gyeongsangbuk-do (5,805 GWh), Gyeonggi-do (5,672 GWh), Gyeongsangnam-do (3,381 GWh), Chungcheongbuk-do (3,262 GWh) and Jeju (3,006 GWh).

However, these regions have small industrial complexes, necessitating transmission of the generated energy to areas with high industrial power demand like Gyeonggi-do or Gyeongsangnam-do. Currently, there is a shortage of grid facilities to support this. To this end, the Special Act on Expansion of National Backbone Power Grid Facilities was proposed and passed the plenary session of the National Assembly on 27 February 2025. The main provisions are as follows:

• the establishment of a National Backbone Power Grid Expansion Committee under the Prime Minister’s Office;
• for development projects that have obtained approval of implementation plans under the Power Grid Expansion Act, the application of deemed approvals and special exemptions for impact assessments; and
• differentiated compensation and support measures to ensure that citizens’ property rights are not adversely affected.

Key Parties and Assets Involved

These include the following.

• Power generators: public and private power companies, district electricity providers.
• The market operator, KPX, which:
1. predicts the demand for the next day and receives bids for available capacity from power generation companies; and
2. issues power supply instructions to the power generation companies that won the bids, which operate their generators based on those instructions.

• The grid operator, KEPCO, which:

1. operates and maintains the grid connections;
2. implements grid expansion and modernisation projects;
3. develops and operates smart grid systems; and
4. purchases electricity from the power market through the KPX and supplies it to consumers through the grid connection.
• Assets such as:

1. transmission lines (overhead and underground);
2. substations (step-up and step-down);
3. distribution networks;
4. smart grid components (energy storage systems (ESS), smart meters, energy management systems); and
5. renewable energy generation, which is geographically concentrated, with about 75% of domestic renewable generation capacity located in six regions – Jeollanam-do, Jeollabuk-do, Chungcheongnam-do, Gangwon-do, Gyeongsangbuk-do and Jeju.

Applicable Rules and Regulations

The Electric Utility Act regulates transmission and distribution businesses, the Smart Grid Construction and Utilisation Promotion Act promotes and facilitates smart grid adoption, and the Special Act on Expansion of Grid Facilities (proposed) addresses the need for improved transmission facilities in areas with high renewable energy generation.

Batteries and Storage Solutions

Smart grids, which fuse information technology with power grids to optimise energy use, are viewed as the next-generation power grid. They can reduce reliance on the current ~15% reserve margin, and the need for extra generation, by improving energy efficiency through building-level controls (heating/cooling), energy storage, smart meters, energy management systems and advanced transmission/distribution, thereby cutting wasted energy and CO₂ emissions.

The intermittent nature of NRE sources presents unique challenges to power grid stability. When combined with existing grid limitations, this intermittency can lead to grid congestion, potentially resulting in financial losses for NRE developers. To address these challenges, South Korea has implemented a multi-faceted approach.

Legal Framework

The main legal bases for addressing grid congestion and curtailment in South Korea include:

• the Electric Utility Act;
• the Criteria for Maintenance of Credibility of the Electric Power System and Quality of Electricity;
• the Rules on Operating the Electricity Market; and
• the Regulations on the Use of Transmission and Distribution Facilities.

Curtailment System

South Korea has a system of compulsory curtailment. Article 18 of the Electric Utility Act allows MOTIE to order necessary measures, including equipment repair and modification or improvement of operation methods if electricity supply services are not adequately maintained, or if consumers’ interests are harmed. Additionally, Article 17 of the Criteria for Maintenance of Credibility of Electric Power System and Quality of Electricity obliges the KPX and transmission/distribution operators to monitor, predict, evaluate and control the output of NRE developers (who should comply with these curtailment measures when implemented) to maintain grid stability.

Grid Expansion

To address potential congestion, the government announced, in the 11th Long-Term Transmission and Substation Facility Plan, that – by 2038 – the total length of transmission lines to be constructed is expected to reach 25,587 C-km, representing an approximately 1.72-fold increase compared to 2023. The total capacity of substation facilities to be constructed by 2038 is projected to be 187,560 MVA, about 1.52 times higher than in 2023.

Dispersion Energy

The Special Act on the Promotion of Distributed Energy, effective from 14 June 2024, aims to enhance grid stability by promoting dispersion energy systems. Key features include:

• mandating a portion of energy consumption in certain areas to be supplied by dispersion energy;
• designation of specialised dispersion energy zones; and
• enabling dispersion energy operators to supply electricity directly to consumers within these zones and trade surplus or deficit power with electricity sellers.

The ESS market is expected to grow as a solution for storing renewable energy. However, due to fire incidents caused by batteries occurring since late 2017, ensuring safety through technological development is crucial for wider adoption.

As for off-grid solutions, the Special Act on the Promotion of Distributed Energy allows for more localised energy production and distribution, which could be considered a form of off-grid solution for transporting and supplying NRE to end users within specialised zones.

Market Structure

Biogas is produced from organic waste resources and upgraded for injection into urban gas pipelines. It is used for urban gas and compressed natural gas vehicles.

Key Parties and Assets Involved

Biogas producers include waste treatment facilities and sewage plants.

Applicable Rules and Regulations

The High-Pressure Gas Safety Control Act and the Urban Gas Business Act stipulate the obligations, safety standards and transportation standards that must be complied with regarding gas transportation and storage.

Market Structure

The transportation and storage of heat produced from renewable energy is organised and regulated through a district energy system, in which heat is centrally produced for an entire region and supplied collectively through a pipeline network rather than on a building-by-building basis.

Meanwhile, the development of smart heat grids that incorporate information and communication technology (ICT) is currently at the demonstration stage, going beyond the conventional centralised heat grid. Through these systems, heat producers and users can exchange information in real time to optimise energy efficiency. Representative examples follow.

Agricultural Republic Project

This project is part of the government’s Smart ZEC (Smart Zero Energy City) development (R&D) project, implemented by the Seoul Energy Corporation, a subsidiary of Seoul since May 2018. It features a “smart heat grid” integrating AI and the internet of things (IoT) with the power grid for real-time monitoring of heating supply and consumption, thereby facilitating information exchange between heat producers and users.

Busan Eco Delta City

This project was designated as a “national smart city pilot complex” under the Act on the Promotion of Smart City Development and Industry. Residential occupancy was completed in March 2022, and it is currently in the demonstration phase. The entire complex is equipped with building-integrated solar panels and receives thermal energy through a hybrid system of hydrothermal and geothermal energy.

Applicable Rules and Regulations

These include the Integrated Energy Supply Act and the Public Notice on Heat Pipe Safety Inspection.

Market Structure

The hydrogen sector is being built through a government-led public-private partnership that includes public enterprises and large private firms. Since 1 July 2020, the Hydrogen Economy Committee has served as the central policymaking body. The committee aims to foster 500 specialised hydrogen companies by 2030 to strengthen the ecosystem’s competitiveness. The Hydrogen Convergence Alliance Promotion Group is designated for industry development, Korea Gas Corporation for distribution and Korea Gas Safety Corporation for safety.

Currently, technological limitations constrain the transport of gaseous hydrogen in high-pressure tanks or pipelines. However, long-distance and large-scale transportation is expected to utilise liquefied hydrogen or chemical transport technologies.

Korea’s hydrogen transportation and storage technology is considered to be less advanced and at a lower level of commercialisation compared to that of major countries overseas, making the development of core technologies and greater competitiveness in this area an urgent priority.

Accordingly, the Committee is currently discussing various initiatives to promote the growth of the hydrogen industry, including:

• designation and support measures for hydrogen-specialised industrial complexes;
• strategies to lead the development of next-generation liquefied hydrogen carriers; and
• the implementation strategy for Hydrogen City 2.0.

In addition, with respect to hydrogen grids, Korea’s first Jeju Haengwon-ri Green Hydrogen Demonstration Complex began trial operations in August 2023. Eleven organisations and companies, including Jeju Energy Corporation, participated in developing green hydrogen production and storage system technology at the Haengwon-ri Green Hydrogen Demonstration Complex. Electricity from a nearby wind farm is used to produce green hydrogen by water electrolysis, with a maximum production capacity of 55 kg of hydrogen per hour. Currently, hydrogen produced at the Haengwon electrolysis demonstration complex is supplied to nine hydrogen buses via the Hamdeok hydrogen charging station.

Key Parties and Assets

These include:

• Jeju Haengwon-ri Green Hydrogen Demonstration Complex (see the following);
• wind power plants for electricity generation;
• hydrogen production facilities;
• storage tanks; and
• hydrogen refuelling stations (eg, Hamdok-ri charging station).

Applicable Rules and Regulations

The Act on Promoting the Hydrogen Economy and Ensuring Hydrogen Safety, along with its Enforcement Decree and Enforcement Rules, has been implemented to establish a foundation for the transition to a hydrogen economy, facilitate the systematic development of the hydrogen industry and regulate matters related to hydrogen safety.

The Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy, the Petroleum and Alternative Fuel Business Act, and the Electric Utility Act set forth provisions regarding biofuels and other forms of renewable energy.

The Power Market

In Korea, developers, district electricity businesses and large-scale consumers (direct buyers) participate in the power market to determine the price and volume of electricity. The KPX operates the power market by overseeing bidding, settlement, measurement, market supervision, disclosure of information and dispute resolution in accordance with the Rules on the Operation of the Power Market.

Wholesale

The wholesale power market was established in Korea in April 2001 pursuant to the Basic Plan for Reorganisation of the Power Industry of 1999. At that time, six developers were split off from KEPCO – Korea Electric Power Corporation (KE), KHNP, Korea Midland Power Co, Ltd (KOMIPO), Korea Southern Power Co, Ltd (KOSPO), Korea Western Power Co, Ltd (KWP) and Korea East-West Power Co, Ltd (EWP) – to introduce competition to the wholesale market. Only the government and private developers with a generation capacity of 20 MW or more can participate in this market, and KEPCO is still managing the sale of electricity.

Market price

Korea’s power market operates as a day-ahead market. One day before a transaction, KPX forecasts demand, solicits bids to supply the required volume and establishes a generation plan to meet that demand. Prices are determined by the cost of supplying electricity from operating plants, ordered from cheapest to most expensive; the marginal (most expensive) plant sets the system marginal price (SMP), which becomes the market price.

Retail price

On the other hand, the price of electricity used in households is the retail price, which is fixed by KEPCO after it buys electricity from a number of developers at fluctuating prices.

In the “day-ahead market”, it is difficult to precisely incorporate the volatility of generation with NRE into the market price. To address this, and in line with advanced overseas electricity markets, a pilot project was launched in Jeju on 1 June 2024 to accurately reflect the real-time fluctuations in supply and demand resulting from the variability in renewable energy generation. The real-time market is divided into the day-ahead market and the real-time market. In the day-ahead market, contracted quantities are settled at day-ahead prices, while real-time deviations are settled at real-time prices. Once the Jeju pilot project has been stabilised, it is planned that the scheme will be expanded nationwide starting in 2025.

Excluding hydrogen, the renewable gas market in Korea is primarily centred around biogas. Green gas remains at the research and development stage, and there is no commercial market yet. Biogas is characterised by its ability to be supplied to end users utilising the existing natural gas (LNG) infrastructure.

Concerning biogas, the total usage volume was 326 million cubic metres as of 2023, including “own use” (56.1%), “power generation” (12.6%), and ”urban gas supply” (4.5%) categories according to the Ministry of Environment.

Under the Biogas Act, local governments may recommend that urban gas businesses use biogas in order to promote its use. To ensure stable implementation of the Biogas Production Target Scheme, which will take effect on 1 January 2025, the Minister of Environment has finalised five notifications detailing the specific operational procedures of the system. With the subordinate legislation for the Act on the Promotion of the Production and Use of Biogas Utilising Organic Waste coming into effect on 31 December 2023, the scheme will apply to the public sector from 1 January 2025, and to the private sector from 1 January 2026. Based on the nationwide scale of biogas production, the production targets for 2034 have been set at 50% of organic waste for the public sector and 10% for the private sector, with future plans to gradually increase the target up to 80%.

In addition, in June 2024, the Ministry of Environment reported its Biogas Production and Utilisation Promotion Strategy, which aims to convert organic waste into biogas in a more carbon-neutral and value-added manner, and to establish infrastructure and improve systems for the efficient use of the biogas produced. Through this strategy, the government expects to produce up to 500 million Nm³ of biogas annually by 2026, enabling the eco-friendly treatment of 5.57 million tonnes of organic waste per year, substitution of fossil fuels worth KRW23 billion per year and a reduction in greenhouse gas emissions of 1 million tonnes per year.

Most heat produced from renewable energy sources is traded and supplied to end users through the district energy system under the Integrated Energy Supply Act. In other words, there is no separate, independent market exclusively for renewable heat; instead, it is integrated into existing district heating and industrial complex energy supply networks. Accordingly, a business entity that is designated as an integrated energy business, pursuant to the Integrated Energy Supply Act, may supply heat and electricity to users.

An integrated energy business refers to the business of supplying (selling) energy (heat, or heat and electricity) generated from integrated energy facilities (eg, combined heat power plant, heat-only boiler or resource recovery facility), constructed on a regional scale, to users within residential/commercial areas or industrial complexes rather than within individual buildings.

Under the Integrated Energy Supply Act, a “heat producer” is defined as a person who produces or generates heat, and a “business entity” is defined as a person who engages in the supply of integrated energy. Since integrated energy businesses require large-scale investment in pipeline networks, operators are granted regional monopolies over specific supply areas to prevent redundant investments in facilities and to ensure the security of energy supply.

A heat producer cannot supply heat directly to users. In other words, a heat producer must supply heat to business entities by entering into a supply agreement, and is prohibited from refusing to supply such heat, without just cause, upon execution of the supply agreement.

Business entities are also prohibited from refusing to supply integrated energy to users within the permitted service area without just cause, and they must report the rules on the supply to MOTIE – including the amount of money to be collected from users and available discounts, as well as any amendments thereto.

Hydrogen supply is broadly divided into “mobility use” and “power generation use”. For mobility use, producers transport hydrogen by tube trailer or tanker truck to hydrogen fuelling stations, where end consumers purchase it. For power generation use, producers supply hydrogen to power plants via pipeline or ship, and power generation companies use it as fuel to produce electricity, which is then sold on the power market.

For power generation, the hydrogen market is expected to become fully established in the future under the Clean Hydrogen Portfolio Standard (CHPS), where power generation companies will purchase hydrogen through bidding and long-term contracts in the newly created market.

The biofuel market has been operated stably through the Renewable Fuel Standard (RFS), which was implemented on 31 July 2015. Under this system, oil refiners are required to blend a certain minimum percentage of biodiesel into diesel fuel, thereby establishing a stable transaction structure based on individual supply contracts between biodiesel producers and refiners.

Also, electricity generated from hydrogen, waste or other sources is supplied as explained in 5.1 Electricity, and heat generated from hydrogen, waste or other sources is supplied to ultimate users as explained in 5.3 Heat.

A business entity that owns facilities with a generation capacity of 500 MW or more (“mandatory supplier”) is obliged to directly supply certain electricity generated from NRE, or to purchase RECs pursuant to the RPS, as prescribed under the NRE Act. An REC is similar to an issued security corresponding to the volume of power generation by NRE and is used to demonstrate that a mandatory supplier fulfilled its obligations.

NRE developers may earn profits by selling RECs to mandatory suppliers in the REC market operated by the KPX. In addition, a long-term fixed-price agreement scheme is in effect, whereby an NRE developer enters into a long-term (ie, around 20 years) agreement with a mandatory supplier to sell RECs at a price that is predetermined upon execution of such agreement regardless of fluctuations in the market price, allowing stable development.

In the past, electricity trading in Korea was only possible through the power market. However, in response to corporate demand for renewable energy and RE100 compliance, the PPA system has recently been reformed, and PPA contracts have become increasingly active. Specifically, both direct PPAs – ie, contracts in which power is transferred directly between renewable energy generators with a capacity exceeding 1 MW, renewable energy electricity suppliers and electricity users – and third-party PPAs – ie, contracts involving renewable energy generators, KEPCO and electricity users – are now widely utilised. Relevant regulations include the Notification on Direct Electricity Transactions by Renewable Energy Electricity Suppliers. For details on the relaxation of capacity limits for direct PPAs, please refer to 3.5 Local and Domestic Production.

Among onshore renewable energy projects in Korea, wind power projects are relatively slow (with respect to supply) and small in scale due to limited location and civil complaints, while solar power projects comprise a significant portion of the aggregate generation capacity (accounting for 29.13% of NRE as of February 2025). A summary of the general stages of onshore renewable energy project development in Korea follows.

Development Stages

These are as follows:

• business entity and site:
1. incorporation or acquisition of a business entity to engage in NRE development;
2. site selection after the investigation of energy generated from sunlight (for solar power projects) or measurement of wind resources (for wind power projects, which may also require a temporary use permit pursuant to the Mountainous Districts Management Act or the Farmland Act if the measuring device is installed on a field or a farm); and
3. procurement of the project site through land purchase, auction or lease.
• EBL:
1. relevant laws include the Electric Utility Act and the Public Notice on the Detailed Criteria for the Electric Business Licence, together with criteria for electricity costs, the margin of error permitted for electric meters and management of the power system;
2. for facilities with a capacity of 3 MW or less, the mayor or provincial governor is the licensing authority, whereas for those exceeding 3 MW, MOTIE is the licensing authority (in the latter case, subject to prior review by the Electricity Regulatory Commission);
3. the ERC reviews the licensing criteria, including business feasibility (such as the applicant’s financial capacity, technical competency and ability to execute the project), after which MOTIE grants approval; and
4. resident receptiveness (consent) needs to be secured (in the case of resident participatory projects where the residents will make a certain investment in, and share profits from, the NRE project, additional RECs may be awarded and distributed to residents).
• transaction documentation:
1. performance under the EPC agreement and construction documents; and
2. terms of use of electric transmission and distribution facilities for grid connection (KEPCO).
• development permit:
1. relevant laws include the National Land Planning and Utilisation Act and other ordinances or guidelines issued by individual municipalities;
2. the municipality will review the adequacy of the site, infrastructure plan, surrounding environment and protection of the landscape before making the final decision;
3. whether an EIA is required to obtain the development permit must be determined in advance; and
4. it is also necessary to confirm whether a military operational review by the Ministry of National Defense is required.
• approval of a construction plan (by MOITE for projects of 10 MW or more) or notification (to MOTIE or the mayor/provincial governor for projects less than 10 MW);
• construction of the power plant;
• pre-use inspection (Korea Electrical Safety Corporation, KESCO): inspection of the installation, construction of the electrical facilities and confirmation of their compliance with the construction plan and the technical criteria for electrical facilities are required;
• trial run and completion of construction; and
• commercial operation.

Operational Stages

These are as follows:

• confirmation of facilities subject to the issuance of a REC (KEA), and application for the issuance and sale of a REC:
1. REC purchase agreement – the NRE developer (the “seller”) and mandatory supplier (the “buyer”) engage in transactions on the KPX trading system; and
2. REC spot market – the buyer and seller may participate in transactions in the KPX spot market by bilateral bidding.
• power purchaser:
1. direct PPA – direct sale and purchase of electricity among the NRE developer, supplier and user;
2. third-party PPA – sale and purchase between the NRE developer and user, mediated by KEPCO; and
3. power market – power supply agreement entered into with the KPX.
• auction for fixed price agreement – KEA solicits bidding for purchase agreements at a REC price fixed for 20 years; and
• facility maintenance:
1. appointment of safety manager pursuant to the Electric Utility Act; and
2. operations and maintenance (O&M).

Wind energy is the second largest source of renewable power generation in Korea after solar energy (accounting for 8.87% as of February 2025). The aggregate generation capacity of the offshore wind power projects that obtained EBLs as of December 2024 is approximately 30 GW, but the total capacity of the commercial offshore wind farms that have actually been installed is only about 124.5 MW. The principal reasons for the delay in development include delays in permitting, residents’ complaints and difficulty in procuring grid connection. However, the practical notes for the 11th Basic Plan for Electric Supply suggested a projected capacity of 74.8 GW for solar power and 40.7 GW for wind power by 2038, compared with 21.1 GW for solar power and 1.9 GW for wind power in 2022. Accordingly, offshore wind power projects are expected to take up a larger portion of NRE development in Korea.

A summary of the general stages of offshore renewable energy projects in Korea follows.

Development Stages

These are as follows.

• Business entity and site:
1. incorporation or acquisition of a business entity to engage in NRE development; and
2. measurement of wind resources (along with the occupancy and use permit described in the following to install the measuring device), followed by site selection.
• EBL (see 6.1 Onshore Project Development).
• Transaction documentation:
1. wind turbine supply agreement (WTSA);
2. performance under the EPC agreement and related construction documents; and
3. terms of use of electric transmission and distribution facilities for grid connection (KEPCO);
• Occupancy and use permit for public waters for the construction of the power plant:
1. relevant laws include the Public Waters Management and Reclamation Act and other ordinances or guidelines issued by individual municipalities;
2. permit authority – the Ministry of Oceans and Fisheries, relevant cities and municipalities; and
3. for more detailed requirements, see 2.3 Regulated Activities.
• Approval of the plan for occupancy and use.
• Construction of the power plant.
• Pre-use inspection (KESCO): see 6.1 Onshore Project Development.
• Trial run and completion of construction.
• Commercial operation.

Operational Stages

These are as follows.

• Confirmation of facilities subject to the issuance of a REC (KEA), and application for the issuance and sale of a REC: see 6.1 Onshore Project Development.
• Power purchase: see 6.1 Onshore Project Development.
• Auction for fixed price agreement: see 6.1 Onshore Project Development.
• Facility maintenance:
1. appointment of a safety manager pursuant to the Electric Utility Act;
2. a long-term service agreement (LTSA) for the main equipment; and
3. O&M.

The key characteristic of project financing for NRE assets is that the repayment term for the principal and interest of the loans is long term (more than 10 years) due to the relatively low profitability of NRE compared with other assets. Another key feature that distinguishes this from other project financing structures is that, as previously discussed, if the revenue structure is linked to government schemes such as the RPS, feed-in tariff (FIT) or REC system, it becomes vulnerable to policy changes.

Accordingly, lenders typically review whether NRE facilities are constructed in a timely manner, operated in an ordinary manner and generate stable profits from generation, while they also tend to consider security (including credit or guarantee by the developer or its parent) as an important factor.

The following are reviewed for timely completion of construction of the NRE facilities:

• the legitimacy of all permits issued for the NRE business, including the EBL;
• the existence of resident receptiveness and any residents’ complaints;
• the procurement of the grid connection; and
• the credit and completion guarantee issued by the EPC contractor.

The following are reviewed for ordinary operation of NRE facilities and stable profits:

• the location of the project site on which the NRE facilities are installed;
• the REC for each source of NRE;
• the execution of a fixed price (SMP plus REC) agreement; and
• the expertise, track record and adequacy of the operational costs of the O&M contractor for maintenance of the facilities.

The FIT system is a representative subsidy and incentive scheme in Korea. Under this system, if the electricity trading price of power supplied from NRE generation is lower than the reference price announced by the Minister of Trade, Industry and Energy, the difference between the reference price and the trading price is preferentially compensated to the renewable energy generator from the Electric Power Industry Infrastructure Fund, pursuant to Article 48 of the Electric Utility Act.

With regard to hydrogen power generation, the (Clean) Hydrogen Energy Portfolio Standard ((C)HPS), pursuant to the Hydrogen Economy Promotion and Hydrogen Safety Management Act, requires “electric sales businesses” and “district electric businesses”, as defined under the Electric Utility Act, to purchase a certain volume of hydrogen, while a separate bidding market (the hydrogen power bidding market) exists for hydrogen power generation.

On 1 January 2021, Korea implemented K-RE100 under MOTIE to align with the global RE100 and ease the government’s financial burden related to expanding renewable energy. Consumers who register on KEA’s RE100 system and meet targets (via NRE generation, REC purchases, green premiums or direct/indirect PPAs) may receive a KEA certificate for NRE use, which can count towards reducing indirect greenhouse gas emissions or be used in marketing.

Meanwhile, a small or medium-sized company that imports machinery necessary for the production or use of NRE, as well as for improvement of grid connection, may be entitled to customs benefits until 31 December 2026 pursuant to Article 118(1)(iii) of the Act on Restriction on Special Cases Concerning Taxation, if it is not feasible to produce such machinery in Korea.

Small and medium-sized companies that engage in NRE generation may be entitled to tax credits (up to KRW100 million) on the income tax or corporate tax accrued by the power plants, at a prescribed percentage up to the tax year that ends before 31 December 2025 pursuant to Article 7 of the Act on Restriction on Special Cases Concerning Taxation.

Since the adoption of the Solar Panel Waste Management Plan on 5 January 2023, solar panels have been included under the extended producer responsibility (EPR) system. As a result, solar panel manufacturers and sellers are now obligated to collect and recycle a certain quantity of waste panels, and according to the Ministry of Environment’s public notice, the total volume of mandatory solar panel recycling for 2024 is set at 801 tonnes.

In addition, pursuant to the Act on Resource Circulation of Electrical and Electronic Equipment and Vehicles, the Minister of Environment may establish future waste resource collection centres for the collection, storage and recycling of waste solar panels. The costs necessary for the establishment and operation of such centres may be fully or partially covered within the budget. The functions that may be undertaken by these collection centres are as follows:

• collection, storage and recycling of waste batteries, etc;
• performance evaluation and sale of waste batteries, etc; and
• statistical research and R&D to promote the recycling of waste batteries, etc.

On the other hand, unlike solar and battery waste, there is currently no legislation that directly regulates the disposal and resource circulation of wind turbine blades as waste. Such waste must be disposed of in accordance with the general Waste Control Act and other relevant laws.

The energy policy under the Lee Jae-myung administration prioritises accelerating the energy transition through NRE. Key initiatives include building RE100 industrial complexes and a west coast energy highway to transmit 20 GW of offshore wind by 2030 via submarine cables to major industrial zones, along with a solar and wind annuity programme. Anticipating stronger support for renewables, the government plans to expedite projects by establishing a Ministry of Climate and Energy and centralising permitting authority therein.

On the legislative front, the Special Act on Planned Offshore Wind Power Siting and Industry Promotion – proposed by the 22nd National Assembly (term: 30 May 2024 to 29 May 2028) – is scheduled to take effect on 26 March 2026. Under the Act, the emphasis is shifting from developers individually managing the entire project process to a government-led, planned “one-stop system” that systematically promotes offshore wind projects. The Act provides for the establishment of an Offshore Wind Power Committee under the Prime Minister, which will support all aspects of offshore wind projects including co-ordination, permitting and approvals for environmentally friendly project zones with confirmed community acceptance.