Author Sam Lin
Updated August 29, 2022

Last year, South Korea passed two important policies concerning renewable energy—the amendment to the Act on the Promotion of the Development, Use, and Spread of New and Renewable Energy and Green Growth National Strategy— both boosted the development of renewables. However, the offshore wind industry still faces headwinds, including political risks coming along with the new administration under President Yoon Suk-yeol, the belated Special Act for Promotion of Wind Power Distribution, which the country originally planned to pass by the end of 2021, and current electricity market that fails to reflect renewable prices correctly. As a result, developers are worried about the profitability of wind farms. The future of offshore wind energy in South Korea looks grim. The following paragraphs will discuss the three challenges facing the development of offshore wind energy in South Korea.

Hidden political risks: Policy trajectory turns back to nuclear power

Denouncing the Green New Deal proposed by his predecessor, Moon Jae-in, President Yoon Suk-yeol, does not deny the importance of renewable energy but calls for right mix of renewables and nuclear power. He embraces nuclear power in a bid to achieve net-zero and will follow the previously proposed nationally determined contribution (NDC). The Yoon administration introduced a new energy strategy policy in July, reconsolidating the dominance of nuclear power in the country’s energy mix, planning to increasing nuclear power’s share in its energy mix from the current 27.1% to 30% by 2030. It re-initiates the construction of nuclear power plants, Shin Hanul-3 and Shin Hanul-4 and postpones the retirement of operating nuclear power plants. Additionally, the new government focuses on overseas markets, aiming to build ten export channels of equipment and O&M service of small modular reactors (SMR), a new form of nuclear power technology, by 2030. To attain this goal, South Korea launched a committee and resumed the High-Level Bilateral Commission (HLBC) with the U.S. to boost SMR technology exchanges. 

Basic Plan for Power Supply and Demand – 2030 goals_EN01

Conversely, there is no clear target for the share of renewables in the energy mix. The new policy only mentions that the government will reduce share of renewables in 2030 under the 10th Basic Plan for Power Supply and Demand. InfoLink estimates South Korea to cut the share of renewables from the current 30.2% to 20-25% by 2030 and will only achieve the 30% goal by around 2035. The Ministry of Trade, Industry and Energy (MOTIE) also announced possible adjustments of the renewable portfolio standard (RPS) policy in the second half of the year, as the government shifts resources from grid upgrades to nuclear power developments. This is a huge risk for the grid-dependent offshore wind power and solar projects in remote areas. 

During an election campaign, Yoon delivered a speech in Ulsan, implying hidden issue of corruption of the offshore wind industry. His transition committee also announced that it will re-assess the economic feasibility of the offshore wind project in Sinan County, South Jeolla Province. The new minister of the MOTIE, Lee Chang-yang, later reaffirmed that the project will continue as scheduled, but the episodes still reflect the uncertain attitude of the Yoon administration towards offshore wind power.

Inertia continues: Special Act for Promotion of Wind Power Distribution

Proposed by the Democratic Party of Korea in May 2021, the Special Act for Promotion of Wind Power Distribution puts the government in the driving seat of developing onshore and offshore wind power. Under the act, the government assign certain regions as potential wind farm sites and form the wind energy development committee. The committee is entitled to decide the approvement process of wind farm development, allowing developers to skip the environment impact assessment, saving at least three years of time. The act was originally scheduled to take effect at the end of 2021 to help streamline administrative procedures, eliminating uncertainties for developers, reducing financing difficulties, and achieving compensation transparency. It could be one of the most decisive acts for the development of offshore wind power in South Korea. 

One stop shop _Comparison of procedures EN02

However, right after the draft act is published, associations related to the fishing industry went all the way to block the act. They believe that the act fails to ensure the right of the fishing community, which demand for acceptance survey, ocean protection, and navigation safety. All the three major appeals are not elaborated in the act, which is therefore, unjust and neglecting the environment and the fishing industry. To add to that, the Ministry of Oceans and Fisheries and other departments wanted to make further revisions, while the act had been sent to the MOTIE. As a result, the act has seen no progress ever since.

The likelihood of the act being enacted is even lower as Yoon took office. When the draft act was published, the opposing party, the People Power Party, was strongly against it. Now that it has come into power, the Yoon administration will not continue to work on the act. In the 110 key policy tasks, the government gives the helm to the Ministry of Oceans and Fisheries, introducing the “ocean impact assessment system” to realize the co-existence of offshore wind power and other maritime activities. This could be an alternative Yoon takes in replace of the Special Act for Promotion of Wind Power Distribution. Cho Seung-hwan, the new Minister of Oceans and Fisheries, said that he recognizes the importance of renewable energy, but the current way of offshore wind development is not appropriate, and the opinions and rights of the fishing industry shall be prioritized. It is clear that the new government will not be running by the old policy roadmap.

Electricity market fails to reflect price of renewables accurately

In South Korea, the government requires power plants to increase production of electricity from renewable energy through the Renewable Portfolio Standard (RPS) and adjusts spot price with REC. Therefore, the revenue of a renewable power plant equals: (REC price + electricity wholesale price, which is also known as system marginal price or SMP) x the volume of power generation. Usually, the government signs long-term PPAs with the 23 power plants that are imposed with the RPS. However, the current market structure favors neither the offshore wind industry nor the entire renewable energy development. Under normal market mechanism, power plants under the RPS may transfer some cost pressures to the retail market and consumers. However, the monopoly of the Korea Electric Power Corporation (KEPCO) over the retail market makes it difficult for power suppliers to transfer pressures to downstream sectors.

Relation between power plants and electricity market in South Korea 03

To raise financing funds for projects, renewable power plants must secure long-term PPAs with state-owned power plants. However, since 2016, under the advice of the Board of Audit and Inspection, state-owned power plants must become a stake holder of the contract to sign the PPA. As a result, it has been a custom for the two parties co-establish special purpose companies (SPC) to sign PPAs. To add to that, current regulation mandates that contracts of state-owned power plants joining renewable project must be reviewed by the Korea Power Exchange (KPX), the Korea Institute of Energy Research, MOTIE, and the Ministry of Strategy and Finance. The process will take eight months, providing the government greater chance to intervene and push down the price at which long-term PPAs are signed by renewable power plants and state-owned power plants, squeezing the revenue of the former.

During the long-term PPA review, the KPX decides the electricity price of the contract. It uses levelized cost of electricity (LCOE) as a reference, but developers think the use of LCOE is too strict and not transparent. It is unreasonable to use the 4.6% LCOE of coal-fired power generation to calculate the weighted average capital cost (WACC). Also, the government uses this LCOE as the standard for all wind farms, without detailed consideration of factors such as water depth, offshore distance, and wind conditions. There is a reason behind the government’s intervention on electricity price of the contracts. According to a sample survey, 58.3% of the South Korean people cannot accept the increase in electricity prices brought about by wind power generation. In order to tame public backlash, the government is likely to try its best to lower the contract price.

Therefore, under the current RPS system and industry custom, the government can intervene and lower the price of long-term PPAs. In early 2022, the amendment to the Electric Utilities Law was passed, allowing renewable energy suppliers and consumers to sign PPAs, rectifying the monopoly of KEPCO over sales channels. However, signing long-term PPAs with state-owned power plants is still one of the important options for wind farms. Therefore, to the offshore wind industry, it is utmost importance to reform of the electricity market.


The recent development of offshore wind energy in South Korea is very concerning. The Yoon administration wants to slow down the development of renewable energy and use nuclear power instead. Such a measure decelerates the entire renewable market. The Special Act for Promotion of Wind Power Distribution, which the one-stop review process is based on, will continue to be mired in inertia, prolonging developing time and increasing uncertainties. Meantime the monopolized electricity market reduces economic incentives for developers. Against these backdrops, it is urgent for South Korea to create a coordinating mechanism for offshore wind energy and other maritime activities and reform electricity market to mitigate uncertainties and raise economic incentives.