South Korea plans to allow renewable power producers to compete in the electricity market, starting with a pilot project in Jeju province from February 2024.
These amendments are finalised after discussions with state-owned utility Kepco, with changes to be implemented after 29 August, according to the country's ministry of trade, industry and energy on 28 August.
The current power market currently establishes power generation plans for any given day on the previous day. This limits the market's ability to respond to volatility in renewable energy sources, such as wind and solar, that occurs during the day itself. South Korea consequently reformed the power market so that the power system is more flexible, starting with the Jeju region that has a high renewable energy mix. Jeju recently issued a tender for battery energy storage.
The Jeju pilot project includes the introduction of a renewable energy bidding system, a real-time market and an auxiliary service market. Jeju will first carry out a trial in October before the pilot project starts in February 2024, with the project to subsequently roll out nationwide.
The bidding system aims to centralise the bidding process by allowing bids for the price and predicted power generation volume of renewable energy, which is currently purchased first without separate bidding.
A 15-minute real-time market will also be opened to raise the accuracy of power transactions by reflecting real-time demand and supplies. The auxiliary services market will allow for the trade of reserve power, which can complement renewable energy sources with high volatility.
The ministry expects this to "strengthen the price function of the electricity market", allow for more efficient and stable power supplies using renewable power as a main resource, while promoting competition by allowing renewable sources without fuel costs to bid.
Revised guidelines
The ministry also on 28 August announced plans to revise guidelines to third-party power purchase agreements (PPAs) for new and renewable energy, to make such agreements easier to participate in and ease the burden on power users.
The direct PPA system trades renewable energy through renewable power suppliers. But the third-party PPA is a system where electricity producers, Kepco and power users sign contracts through Kepco's intermediary to trade power.
This revision is aimed at aligning the standards and conditions with that of the direct PPA. Power users were initially required to have a capacity of over 1MW to participate in third-party PPAs but the standard will now be lowered to 300kW and above. Multiple power users can also now jointly sign a contract, and power producers can sell excess electricity to the market when generation exceeds use if there is such an agreement between participants.
