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To meet corporate demand and bring down renewable energy prices, the current deployment target for new and renewable energy must be raised from 21.6% to at least 33% 

Expanding corporate PPAs by making the rules more reasonable and removing the barriers is a 'win-win' option that can grow renewable energy without public spending

Research findings show that under the government's current energy policy, the supply of renewable energy in 2030 will cover only half of what companies need. This runs counter to the government's position that companies will have no difficulty meeting their RE100 targets even if the renewable energy supply target is lowered, and it suggests that the government's renewable energy supply target needs to be raised substantially for Korean companies to stay competitive.

On Monday the 20th, the Corporate Renewable Energy Initiative (CoREi), launched jointly in 2020 by the Korea Sustainability Investing Forum (KoSIF, CDP Korea), the UN Global Compact Network Korea and WWF-Korea, released the ‘Renewable Energy Demand in South Korea: A 2030 Forecast and Policy Recommendations' together with the climate and environment organization Plan 1.5. The report estimates the medium to long term renewable energy demand of Korean companies. It is the first study to analyze companies' future renewable energy demand based on data.

Even as the number of Korean companies joining RE100, the initiative to source 100% of electricity used from renewables, has grown sharply, including Samsung Electronics, the country's largest electricity consumer, the government lowered the share of the new and renewable energy supply as of 2030 from 30.2% to 21.6% in the 10th Basic Plan for Long-term Electricity Supply and Demand (hereinafter the BPLE). Concerns about a shortage of renewable energy supply have since been raised repeatedly not only by civil society but also by the business community, yet the Ministry of Trade, Industry and Energy has maintained that even the lowered renewable energy supply target has no problem for meeting corporate demand.

According to the report, Korean companies' renewable energy demand in 2030 is estimated to reach as much as 172.3 TWh (terawatt-hours). The government's projection for new and renewable generation in the 10th BPLE is 136.1 TWh, but once so-called 'new energy' is excluded, meaning fossil fuel-based fuel cells and integrated gasification combined cycle (IGCC), which cannot be counted toward RE100 or toward compliance with the Renewable Portfolio Standard (RPS), the renewable energy available from solar and wind comes to only 97.8 TWh as of 2030. Contrary to the ministry's claim that the current target is sufficient to meet corporate demand, this amounts to only about 56% of what companies will need.

Kyungrak Kwon, the Plan 1.5 activist who carried out the analysis, stressed: "When the future renewable energy demand of Korean companies is analyzed on the basis of data, the 21.6% renewable deployment target for 2030 set out in the 10th Basic Plan falls far short, and it should be raised back up to at least 33%." He added: "Bringing renewable energy prices down to a competitive level in fact requires supply to exceed demand, so the government needs to set an ambitious renewable energy target of around 40%."

The study projected the future renewable energy demand of Korean companies using the CDP response data, which companies submit voluntarily. On that basis, it examined whether the 2030 renewable energy deployment target presented by the Korean government in the current 10th Basic Plan is sufficient in light of corporate renewable energy demand, and whether it needs to be strengthened. Launched in 2003, CDP is a global sustainability assessment body that, on behalf of investors, calls on major companies to disclose greenhouse gas-related information and uses the disclosed information to identify each company's greenhouse gas-related risks for use in investment decisions. As of last year, 424 Korean companies responded to CDP.

Most of the key data needed to estimate companies' future renewable energy demand, including electricity consumption, renewable energy procurement targets and short to medium term reduction targets for indirect emissions from electricity use (Scope 2), was drawn from CDP responses, and companies that did not report data such as electricity consumption were excluded from the analysis. For K-RE100 companies that were not required to respond to CDP but have declared 100% renewable energy use over the medium to long term, data provided through the office of Rep. Yang Yi Won-young was used.

The report divided 2030 renewable energy demand broadly into 1) demand arising from companies' voluntary initiative activities and 2) demand arising from the RPS, and added the two together. It then calculated 2030 renewable energy demand by excluding the 'green premium' demand that would otherwise be double counted across the two categories.

A total of 236 companies (excluding duplicates) were covered by the analysis of voluntary renewable energy demand. Alongside the 29 Korean companies participating in RE100 (as of March 2023), the analysis covered ▲119 foreign companies that have joined the RE100 initiative and operate in Korea, ▲13 companies that separately specified renewable energy procurement targets in their CDP responses, ▲67 companies that separately submitted reduction targets for indirect emissions (Scope 2), and ▲4 K-RE100 member companies.

Drawing on in-depth interviews with two SMEs that face real pressure to cut carbon emissions within their production chains, the report suggests that renewable energy demand among SMEs is also likely to grow rapidly over the medium to long term. Sun-mi Lee, Team Leader at the UNGC Network Korea, said: "Even companies that join the renewable energy transition relatively late because of their circumstances, such as SMEs, are increasingly facing pressure to use renewable energy, including requests to cut carbon emissions from within the supply chain." She added: "It is still difficult to quantify precisely, but as the global renewable energy transition accelerates and becomes a matter of corporate survival, the potential demand of companies that do not use renewable energy today but plan to procure it over the long term also needs to be taken into account."

An official at Bluebird, a company specializing in industrial mobile solutions, said in an interview: "More than 90% of our customers are from overseas, mostly based in Europe, so for the past two to three years almost all of them have been strongly demanding ESG and carbon reduction performance. We have therefore set a target of cutting carbon emissions by 2.5% a year by 2030, and from at least three years from now we have in mind procuring around 2% renewable energy each year." The official added: "Because most of the overseas front-runners have set 2030 as their near-term target, we expect renewable energy demand to grow explosively around 2030, and we are concerned about whether enough renewable energy can be secured going forward, including for SMEs."

Separately, the report identified the reform of barriers to expanding corporate PPAs as the government's top policy priority. The 'green premium' scheme, currently the most widely used option in Korea, offers low renewable energy additionality and cannot be recognized as a greenhouse gas reduction achievement from a company's point of view. Because it "has limited impact to help companies that have to reduce indirect emissions from electricity use (Scope 2)," the report expects it to attract relatively little preference over the long term.

PPAs, by contrast, were described as "a policy option under which both government and companies can win," since they "not only have high additionality but can address electricity price volatility and greenhouse gas reduction at the same time, and allow the government to expand renewable energy without additional national funding." The report recommended reforming the barriers that currently stand in the way of expanding corporate renewable energy PPAs and providing institutional support, including improvements to PPA settlement methods and contract structures, the introduction of a public-private one-stop project for corporate PPAs, and greater reasonableness in PPA costs.

Tae-han Kim, Lead Researcher at the KoSIF, CDP's partner in Korea, said: "Worldwide, beyond RE100, around7,000 companies that have declared net zero are setting net zero targets that include supply chain emissions (Scope 3), and mandatory corporate disclosure of supply chain emissions is gaining momentum in the United States, Europe and elsewhere. The pressure on supply chain companies to switch to renewable energy is bound to grow stronger. For Korea, with its export-oriented economic structure, industry as a whole cannot avoid demands from overseas customers and investors to expand renewable energy." He stressed: "Just as Korea once nurtured its industries through state-led, low-cost energy supply, it is now time for a 'supply surge’ of renewable energy from the standpoint of industrial competitiveness."

Yun-jin Cho, Team Leader at WWF-Korea, said: "Major countries abroad are pursuing renewable energy policies under a clear direction. Korea government, too, must present concrete targets and strategies rather than only general positions on expanding renewable energy. Adopting renewable energy is no longer a matter for the distant future; it is directly tied to companies’ activities. Government energy policy should be pursued with concrete strategies grounded in analysis of actual demand and supply."

[Attachment] 2030 Renewable Energy Demand in South Korea

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