South Korea to replace 15-year-old renewable support scheme with auctions

South Korea has revealed plans to scrap its certificate-based RPS system, which has underpinned renewable energy support since 2012, in favor of competitive auctions and long-term fixed-price power purchase agreements starting Jan. 1, 2027.

South Korea’s National Assembly passed an amended renewable energy law on Aug. 20 that replaces the country’s 15-year-old RPS with a new auction-based “contract market” system, the Ministry of Climate, Energy and Environment (MCEE) said. The ministry promulgated the revised law on Sept. 15, with the new framework taking effect Jan. 1, 2027.

Under the outgoing RPS, introduced in 2012, large power generators were required to source a rising share of their electricity from renewables, largely by purchasing Renewable Energy Certificates (RECs) issued per megawatt-hour of qualifying generation. MCEE said the system had helped expand renewable deployment but left developers exposed to volatile REC prices on the Korea Power Exchange spot market, complicating project financing.

According to The Korea Herald and Seoul-based law firm Shin & Kim, the government will publish a five-year capacity forecast and run competitive auctions by power source and facility capacity, with bids capped at a government-set ceiling price. Winning bidders will sign long-term, fixed-price power purchase agreements with state utility Korea Electric Power Corp. (Kepco), replacing REC sales as the main support mechanism for new projects.

The MCEE said the shift is intended to give developers more predictable revenue and improve access to project financing, though the ministry’s rationale has not been independently tested against market outcomes.

The transition includes several distinct deadlines. Local media reports indicate that projects must qualify for new REC issuance by Dec. 31, 2026, after which newly built facilities will no longer receive certificates and must instead compete in the auction-based contract market. Separately, the REC spot market itself will continue operating for a three-year grace period before closing on Dec. 31, 2029.

Existing operators can continue receiving RECs for up to 20 years under legacy rules, according to the MCEE. Background reporting indicates that the MCEE also plans to set up a separate, smaller-scale contract market for community and resident-participatory renewable projects, with priority grid-access provisions, although this detail was not confirmed in the ministry’s own Sept. 15 statement.

Subordinate regulations needed to operationalize the auction and power purchase agreement (PPA) framework are still being finalized. The MCEE said it developed the reform through 82 stakeholder consultation sessions and a formal public comment period, Public Consultation No. 2/2026, and will hold a public hearing on the overhaul on Sept. 30 in Seoul before completing the implementing rules by the end of the year.

The ministry said it expects to announce the first solar and wind auction rounds under the new system sometime in 2027.

Lee Kyung-soo, MCEE director general for renewable energy policy, said in a statement that the reforms aim to increase the stability of renewable energy project revenue while expanding deployment in a systematic way.

South Korea’s shift mirrors similar transitions in other major renewable energy markets. The United Kingdom moved from its renewables obligation certificate scheme to auction-based contracts for difference, while India has largely replaced feed-in tariffs with competitive, fixed-price renewable auctions. Both reforms were presented by policymakers as mechanisms to provide greater long-term revenue certainty and reduce exposure to market-price volatility.

The promulgation caps a legislative process that began in May, when a substitute bill to abolish the RPS cleared a key National Assembly committee, followed by the Korea Energy Agency opening what was expected to be one of the final solar tenders under the outgoing certificate-based system ahead of the transition. South Korea’s cumulative installed solar capacity stood at approximately 29.5 GW as of the end of 2024, with renewables supplying 11.4% of the country’s electricity in 2025.