Why South Korean companies lag in RE100: Analyzing green energy challenges from mix, pricing, and procurement


Only 4% of South Korean companies have joined RE100, a percentage significantly lower than in other East Asian countries. South Korea's limited renewable energy supply, monopolized electricity market, and perverse pricing regime make it challenging for local companies to procure green electricity. This article analyzes four corporate green power procurement options and explains South Korea's unique REC mechanism and Green Premium plan, helping companies avoid greenwashing risks and providing in-depth analysis and recommendations.

Wind turbines in Taegisan, South Korea. (Photo: iStock)

25%, 13%, 8%, and 30% - these are the respective shares of RE100 companies that purchase 100% RE in Japan, Singapore, Taiwan, and China. In comparison, the number for South Korea is merely 4%, partly due to the limited supply of renewable energy (see Figure 1).

Yet 7 of the 10 largest new RE100 members last year are headquartered in South Korea, with one with an annual electricity consumption upward to 28 TWh. These statistics paint a picture of a challenging market landscape for corporate green power procurement. The South Korean government has been called out on its less-than-ambitious renewable target and renewable energy development planning policies. At the same time, the lack of renewable power supply is a byproduct of the country’s power market structure. This article aims to discuss the pricing structure’s impact on renewable energy demand in South Korea’s green power market and analyze the currently available corporate green power procurement options in the country.

Figure 1. South Korea Energy Mix (2022)

An undersupplied market with a perverse pricing regime 

High cost and limited supply are at the foreground of challenges for RE100 members in the country. The government has attempted to liberalize the electricity market in 1999 to encourage renewable energy development and market-driven pricing, but progress has been suboptimal. Today Korea Electricity Power Corporation (KEPCO) still holds monopoly over power sector. Due to the lack of competition in a vertically integrated market as such, electricity prices do not response well to market supply and demand, restricting the full development of renewables and limiting market supply. 

After initial market liberalization six generation subsidiaries were created under KEPCO, but competition is still constrained by KEPCO’s natural monopoly in price setting. The retail market should in theory be driven by the market but in South Korea it is controlled/retailed by KEPCO with state-subsidized prices. This design effectively eliminates the essential functions of a competitive market. Normally, retail price should be above or equal to wholesale price as the latter represents the base cost of electricity. But as the figure below shows, retail prices could abnormally drop lower than wholesale price, failing to capture the true costs of carbon emissions, power generation, and distribution. 

Artificially low retail prices from subsidies not only undermine KEPCO’s ability to profit and finance renewable energy developments, they also weaken the economic competitiveness of small-scale PV/self-generation solar. When retail prices are low, rational consumers would opt for market supply instead of installing their own solar device, all while the government’s decision to discontinue feed-in-tariff (FIT) for small-scale solar last year. Undoubtedly, low market prices and the absence of FIT are unideal for the development of small-scale solar. 

The cautious way out 

There are mainly four ways for companies to acquire green power: 1) self-generation, 2) corporate PPA (CPPA), 3) unbundled renewable energy certificates (RECs), and 4) the Green Premium scheme. For the first two options, the contract and product transfer structures are the same as elsewhere. This section focuses on the mechanisms of South Korea’s unbundled REC and the Green Premium scheme and then compares the characteristics, barriers, and advantages of all four mechanisms.

The mechanism of RECs in Korea is different from that of I-RECs or TIGRs. In South Korea, each REC is given a differentiated weight based on the technology used. For example, self-consumption solar has a certificate weight of 1 while maritime offshore wind has a weight of 2.5. For the developer of offshore power, 1 MWh is rewarded with 2.5 RECs. Using the example of maritime offshore wind, REC transaction price should be converted as shown in the table below.

The Green Premium scheme is the most used mechanism in South Korea but is facing backlash from greenwashing claims. The scheme is much the same as its counterparts in other markets. Consumers pay an additional cost (premium) for the environmental attribute of renewable energy on top of existing utility electricity tariff.

What separates the Korean scheme from the others and warrants caution is the source of RECs. In South Korea, RECs in a green premium are sourced from renewable energy generators built to satisfy the Renewable Portfolio Standard (RPS)[1] . Since these generators were mandated to be built, the RECs produced in the process have very low environmental additionality and are susceptible to be double counted in both the RPS and the Green Premium scheme. There is also the concern of whether the premiums are used to fund more renewable energy projects.

It has become clear that more and more enterprises are preferring to enter PPAs to lock in price and to avoid greenwashing risks. According to a CDP report, the number of PPA agreements grew from zero to 16 between 2022 and 2023. The government has taken supportive action to mitigate the difficulties in a PPA. Before 2023, enterprises are charged with two transmission and distribution fees – one from their existing utilities and one from their new PPA supplier. This has been removed. At the same time, KEPCO is also proposing a pricing scheme for that may incur costs as high as 1.5 times of the standard industrial utility rate, cutting the cost competitiveness even more for renewables.


Stuck between a lackluster national renewable energy target and ever-growing power decarbonization pressure, corporates in South Korea need a strategy that helps them trek through deep water. In the short term, the Green Premium scheme may present itself as the low-hanging fruit for scope 2 decarbonization but the scheme’s inherent design warrants greenwashing risks, rendering it a temporary fix for power decarbonization. Despite undergoing discussions, PPAs appear to be a sounder solution for mid to long term operation. Its relatively higher costs also seem to be within a reasonable range.

In 2023, tariff rate was USD 120 per MWh for brown power while PPAs could cost some USD 30 to 60 higher per MWh, or arguably a premium to attain higher climate credentials. Price gap between traditional source of power and renewable energy will narrow over time as levelized costs for the latter lower and KEPCO raises retail price to balance its deficits. 

In sum, RECs may be the least-cost and least-risky procurement option for corporates. While Green Premium is more economic, especially for those without specific client requirements, going forward we recommend that businesses seek procurement options of higher environmental additionality, such as PPA, to avoid reputational cost.

[1]RPS is a system some governments adopt to mandate a certain proportion of the energy produced to be renewable. Korea’s RPS required power producers with installed capacity of over 500 MW to have 10% of their production be renewable.

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