South Korea details auction market to replace renewable quota system
South Korea’s Ministry of Climate, Energy and Environment has published draft rules for an auction-based renewable energy contract market to replace the quota system starting January 1, 2027, with details on pricing, obligations, and transition mechanisms.
South Korea’s Ministry of Climate, Energy and Environment unveiled draft rules for an auction-based renewable energy contract market, replacing the existing quota system from January 1, 2027. The draft enforcement decree outlines that Korea Electric Power Corporation (Kepco) will sign long-term fixed-price contracts with winning projects on behalf of obligated entities, including local suppliers and large consumers. Kepco will settle price differences monthly and recover costs via electricity tariffs. The ministry plans to hold two to four tenders annually, with volumes increasing under five-year roadmaps aligned with the 12th Basic Plan for Electricity Supply and Demand.
The draft rules introduce ceiling prices set annually by a public-private committee, reflecting generation costs plus a reasonable return. Bids will be scored on price and non-price factors such as community acceptance, domestic industry contribution, and grid impact. Renewable Energy Certificate (REC) multipliers will convert into preferential prices, with examples including floating solar, agrivoltaics, and rooftop projects. Projects under 500 kW will compete in a separate contract market, while portfolios of at least 1 MW could receive incentives for bidding into the main market.
Large public generators with at least 500 MW of conventional or 100 MW of renewable capacity face capacity-based deployment obligations, meeting them through direct projects or equity stakes, with penalties up to 150% of a government-set unit price for shortfalls. Private generators with at least 500 MW and selected public institutions face deployment targets with fines of KRW 10 million ($7,500) for non-compliance. Up to 20% of obligations can be met via alternative compliance payments, rising to 30% for the first three years.
The ministry will publish a detailed implementation plan in November, finalize regulations by the end of 2026, and launch the first contract-market tender in the first quarter of 2027. The outgoing quota system had 210,000 plants totaling 35.4 GW registered as of September, with the last solar tender seeking 1 GW at a ceiling price of KRW 147,686/MWh and additional premiums for low-carbon modules. Battery storage remains outside the new scheme and is procured separately.