To take care of the government’s renewable energy… REC Value Soaring 20% ​​in 3 Weeks From Hankyung

The price of new and renewable energy supply certificate (REC) has soared by more than 20% in the past three weeks. REC is a kind of power generation certificate that can be recognized as having supplied electricity with renewable energy if a large power generation company purchases it from a solar power company without producing electricity with renewable energy. Analysts say that the recent government’s decision to significantly increase the ‘renewable energy supply requirement (RPS)’ ratio of large power generation companies from next year has caused a surge in REC prices.

According to the Korea Power Exchange on the 31st, the average spot price of REC per MW on the 28th was 38,930 won, up 20.5% from the 32,297 won on the 5th. On the previous trading day, the 26th, the intraday high of 41,000 won was recorded, and the trade was made at the price of over 40,000 won for the first time since February 25. The REC price, which stayed at the level of 30,000 to 32,000 won for a while since May of this year, is showing a recent surge.

This is because of the government policy that artificially raises the RPS target to expand the supply of new and renewable energy and raise the REC price. The REC purchase ratio, which was 9% of the total power generation this year alone, was originally scheduled to be maintained at 10% next year, but it was suddenly raised to 12.5% ​​next year due to the revision of the Enforcement Decree of the Renewable Energy Act on the 6th. This is in line with the government’s goal of raising the RPS rate to 25% by 2026. The intention is to improve the profitability of solar power generation companies, which have deteriorated as the REC price, which reached 80,000 won in October 2018, fell to 20,000 won at the beginning of this year. An official from the Ministry of Trade, Industry and Energy said, “The RPS ratio has been raised in consideration of the REC market situation, where prices have dropped excessively due to oversupply.”

As a result, large power generation companies had to urgently secure additional RECs. REC prices also rose as the increased demand was reflected. According to the Ministry of Trade, Industry and Energy, as of this year, 23 power generation companies are required to secure RECs. Public power generation companies such as Korea Hydro & Nuclear Power and Korea South-East Power, as well as private power generation companies such as POSCO Energy and SK E&S are included.

As the government’s policy to expand new and renewable energy has rapidly increased the burden of REC costs on large power generation companies, the pressure to increase electricity rates is expected to increase. In particular, there are concerns that the cost burden of KEPCO will increase rapidly. Although KEPCO does not directly produce electricity, according to the Enforcement Decree of the Renewable Energy Act, if public power generation companies such as KHNP or private power generation companies cannot meet the RPS ratio, they must purchase RECs instead. According to Senator Choi Seung-jae of People’s Strength, KEPCO’s RPS implementation settlement amount increased by 59.3% in four years from 1.40.4 trillion won in 2016 to 2.247 trillion won last year. In the first half of this year alone, 1.6773 trillion won was spent on RPS related expenses.

By Jung Eui-jin, staff reporter justjin@hankyung.com

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