South Korea Plans Major Renewable Energy Market Reform With New Auction-Based System

The Korea Energy Agency (KEA) has unveiled a major proposal to transform South Korea’s renewable energy sector as part of the country’s efforts to achieve 100 GW of renewable energy capacity by 2030. The agency plans to gradually replace the existing Renewable Portfolio Standard (RPS) system with a government-led contract market that will operate through competitive and technology-specific auctions.

According to the KEA, the current RPS framework has faced several challenges in recent years. Under the existing mechanism, large electricity producers are required to meet renewable energy obligations. However, many companies have chosen to purchase Renewable Energy Certificates (RECs) instead of directly investing in new renewable energy projects. This trend has resulted in increased dependence on smaller-scale developments, slower renewable energy expansion, and rising compliance costs for market participants.

To address these issues, the agency is proposing an auction-based model. Under the new system, renewable energy developers will compete in government-organized auctions. Successful bidders will be awarded long-term power contracts with the state-owned Korea Electric Power Corporation (KEPCO). These long-term agreements are expected to provide stable revenue streams, making it easier for developers to secure financing and invest in larger renewable energy projects.

The proposed reforms also introduce changes for small-scale and community-based renewable energy projects. The threshold for small-scale project participation will be increased from 100 kilowatts to less than 1 megawatt. Community-owned renewable energy projects will receive dedicated purchasing channels to encourage local participation and investment. Meanwhile, projects larger than 1 megawatt will be encouraged to collaborate through virtual power plant systems to improve efficiency and grid integration.

In addition, the KEA plans to impose stricter requirements on both public and private power generation companies. Under the proposed framework, generators will need to meet renewable energy obligations through direct ownership or financial investment in renewable energy projects rather than relying solely on certificate purchases.

A significant aspect of the reform is the gradual elimination of the tradable REC market. After 2026, no new Renewable Energy Certificates will be issued. From 2027 onward, all new renewable energy projects will be required to participate in the auction-based system. Existing certificates will be renamed Generation Information Certificates and will be used only for tracking and verifying renewable energy generation, including for companies pursuing RE100 commitments.

The KEA aims to complete the necessary legal amendments during 2026 and launch the new auction market in 2027. The agency believes the reforms will help reduce renewable energy costs, encourage greater community participation, and support the growth of South Korea’s domestic solar and wind manufacturing industries.